<PAGE>
Exhibit 10.12
STOCK PURCHASE AGREEMENT
AMONG
PF MANAGEMENT, INC.,
THE PF MANAGEMENT, INC. SHAREHOLDERS,
DAVID R. CLARK (AS SHAREHOLDERS' AGENT)
AND
PIERRE HOLDING CORP. (BUYER)
MAY 11, 2004
<PAGE>
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
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1. PURCHASE AND SALE OF
SHARES...........................................
1
2. PURCHASE PRICE -
PAYMENT..............................................
1
2.1
Purchase
Price..................................................
1
2.2
Preliminary
Purchase Price......................................
2
2.3
Certain Closing
Deliveries......................................
2
2.4
Payment of
Purchase Price Adjustment............................
2
2.5
Determination of
Final Purchase Price...........................
3
3. JOINT AND SEVERAL
REPRESENTATIONS AND WARRANTIES OF THE
SHAREHOLDERS..........................................................
5
3.1
Shareholder
Authority, Validity, Ownership......................
5
3.2
PFMI
Organization, Ownership, Liabilities.......................
6
3.3
Company
Organization, Qualification, Subsidiaries,
Investments, Etc................................................
7
3.4
Capital
Stock...................................................
8
3.5
Non-Contravention...............................................
9
3.6
Reports and
Financial Statements; No Undisclosed
Liabilities.....................................................
9
3.7
Absence of
Material Differences.................................
11
3.8
Employees.......................................................
12
3.9
Employee Benefit
Plans..........................................
13
3.10
Assets and
Facilities...........................................
15
3.11
Licenses and
Permits............................................
15
3.12
Litigation......................................................
15
3.13
Compliance with
Laws............................................
16
3.14
Environmental...................................................
16
3.15
Intellectual
Property...........................................
17
3.16
Title to Real and
Personal Property; Leasehold Interests........
18
3.17
Material
Contracts..............................................
19
3.18
Insurance.......................................................
20
3.19
Product
Liability...............................................
21
3.20
Affiliate
Transactions..........................................
21
3.21
Customers.......................................................
21
3.22
Suppliers.......................................................
22
3.23
Bank
Accounts...................................................
22
3.24
Brokerage.......................................................
22
3.25
Limitation of
Representations and Warranties....................
22
4. REPRESENTATIONS AND
WARRANTIES OF BUYER...............................
22
4.1
Organization and
Power..........................................
22
4.2
Authority.......................................................
23
4.3
No Brokers or
Finders...........................................
23
4.4
Compliance......................................................
23
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4.5
Litigation......................................................
23
4.6
Approvals.......................................................
23
4.7
Financing.......................................................
24
4.8
Investment
Intent...............................................
24
4.9
No Knowledge of
Breach..........................................
24
4.10
No
Reliance.....................................................
24
4.11
Access to
Information...........................................
25
5.
COVENANTS.............................................................
25
5.1
HSR Act
Filings.................................................
25
5.2
Access to
Information and Records...............................
25
5.3
Conduct of
Business Pending the Closing.........................
25
5.4
Negative
Covenants..............................................
27
5.5
Consents........................................................
28
5.6
Satisfaction of
Conditions Precedent............................
28
5.7
Employees.......................................................
29
5.8
Books, Records
and Information..................................
29
5.9
Obligation to
Update............................................
30
5.10
Indemnification and
Insurance...................................
31
5.11
Other
Agreement.................................................
31
5.12
Tax
Matters.....................................................
31
5.13
Exclusivity.....................................................
31
5.14
Non-Competition.................................................
32
5.15
Non-Solicitation................................................
33
5.16
Confidentiality.................................................
33
5.17
Offering
Materials..............................................
34
6. CONDITIONS PRECEDENT
TO BUYER'S OBLIGATIONS...........................
34
6.1
Representations
and Warranties True on the Closing Date.........
34
6.2
Compliance With
Agreement.......................................
35
6.3
No
Litigation...................................................
35
6.4
Third Party
Consents and Approvals..............................
35
6.5
Governmental
Approvals..........................................
35
6.6
Material Adverse
Effect.........................................
35
6.7
Certain
Payoffs.................................................
36
6.8
Opinion of
Counsel..............................................
36
6.9
Affiliated
Transactions; Shareholders Agreement.................
36
6.10
FIRPTA..........................................................
36
6.11
Financing.......................................................
36
6.12
Audited Financial
Statements....................................
36
6.13
280G
Payments...................................................
37
6.14 Tender Offer.
..................................................
37
6.15
Closing
Deliveries..............................................
37
7. CONDITIONS PRECEDENT TO THE
SHAREHOLDERS' OBLIGATIONS.................
37
7.1
Representations
and Warranties True on the Closing Date.........
37
7.2
Compliance With
Agreement.......................................
38
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7.3
No
Litigation...................................................
38
7.4
Governmental
Consents...........................................
38
7.5
Closing
Deliveries..............................................
38
8.
INDEMNIFICATION.......................................................
38
8.1
By
Shareholders.................................................
38
8.2
By
Buyer........................................................
39
8.3
Manner of
Payment...............................................
40
8.4
Indemnification
of Third-Party Claims...........................
40
8.5
Tax
Effect......................................................
41
8.6
Insurance
Effect................................................
42
8.7
Limitations on
Indemnification..................................
42
8.8
Exclusive
Remedy................................................
44
8.9
Limitations on
Claims by Shareholders...........................
44
9.
CLOSING...............................................................
45
9.1
Documents to be
Delivered by Company and Shareholder............
45
9.2
Documents to be
Delivered by Buyer..............................
46
10.
TERMINATION...........................................................
46
10.1
Termination Without
Breach......................................
46
10.2
Termination for
Breach..........................................
47
10.3
Effect of
Termination...........................................
47
11.
MISCELLANEOUS.........................................................
48
11.1
Further
Assurance...............................................
48
11.2
Disclosures and
Announcements...................................
48
11.3
Assignment; Parties in
Interest.................................
48
11.4
Law Governing
Agreement; Forum..................................
48
11.5
WAIVER OF JURY
TRIAL............................................
49
11.6
Amendment and
Modification......................................
49
11.7
Notice..........................................................
49
11.8
Shareholders'
Agent.............................................
50
11.9
Expenses........................................................
51
11.10 Specific
Performance............................................
52
11.11
Entire Agreement................................................
52
11.12
Counterparts....................................................
52
11.13
Headings........................................................
52
11.14
Glossary of Terms...............................................
52
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EXHIBITS
EXHIBIT A Voting Trust Agreement
EXHIBIT B Escrow Agreement
EXHIBIT C Earn-Out Warrant
EXHIBIT D Debt Financing Commitment
Letter
EXHIBIT E [Intentionally Omitted]
EXHIBIT F Equity Commitment Letter
EXHIBIT G Opinion of Foley &
Lardner LLP
EXHIBIT H Tax Sharing Agreement
EXHIBIT I Confidentiality
Agreement
EXHIBIT J Shareholders Agent
Agreement
EXHIBIT K Asset Distribution Letter
Agreement
SCHEDULES
Schedule 2.1
Average Working Capital
Schedule 3.1(c)
Ownership
Schedule 3.1(e)
Brokerage
Schedule 3.3(e)
Subsidiaries
Schedule 3.5
Non-Contravention
Schedule 3.6(e) Company
Liabilities
Schedule 3.6(f)
Liabilities
Schedule 3.7
Absence of Material Differences
Schedule 3.8
Employees
Schedule 3.9
Employee Benefit Plans
Schedule 3.9(g) ERISA
Non-Contravention
Schedule 3.11(a) Licenses and
Permits - No Defaults
Schedule 3.11(b) Licenses and
Permits
Schedule 3.12
Litigation
Schedule 3.13(a) Compliance with
Laws - Exceptions
Schedule 3.13(b) Compliance with
Laws - Exceptions
Schedule 3.14(a)
Environmental
Schedule 3.14(b)
Environmental
Schedule 3.14(c)
Environmental
Schedule 3.14(d)
Environmental
Schedule 3.14(e)
Environmental
Schedule 3.14(f)
Environmental
Schedule 3.15
Intellectual Property
Schedule 3.16(a) Owned Real
Property
Schedule 3.16(b) Leased Real
Property
Schedule 3.17
Material Contracts
Schedule 3.18
Insurance
Schedule 3.19
Product Liability
Schedule 3.20
Affiliate Transactions
Schedule 3.21
Customers
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Schedule 3.22
Suppliers
Schedule 3.23
Bank Accounts
Schedule 3.24
Brokerage
Schedule 5.4(j)
Distribution Transactions
Schedule 6.4
Third Party Approvals
Schedule 9.1(e)
Resignations
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<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated May 11, 2004
among
Pierre Holding Corp., a Delaware
corporation ("Buyer"), James C. Richardson,
Jr., David R. Clark, James M. Templeton and
Brian D. Davis, as Trustee under
that certain Voting Trust Agreement for the
shareholder participants thereof
identified on Exhibit A hereto (each a
"Shareholder" and collectively the
"Shareholders"), PF Management, Inc., a
North Carolina Corporation ("PFMI"), and
David R. Clark, as designated agent on
behalf of the Shareholders (the
"Shareholders' Agent").
RECITALS
A. The Shareholders collectively own all of the issued and
outstanding shares of capital stock (the
"Shares") of PFMI.
B. PFMI owns all of the issued and outstanding capital stock of
Pierre Foods, Inc., a North Carolina
corporation (the "Company").
C. Buyer desires to purchase the Shares from the Shareholders,
and
the Shareholders desire to sell the Shares
to Buyer, upon the terms and
conditions herein set forth.
NOW, THEREFORE, in consideration of the foregoing and the
respective
representations, warranties, covenants,
agreements and conditions hereinafter
set forth, and intending to be legally
bound hereby, the parties hereto agree as
follows.
1. PURCHASE AND SALE OF
SHARES
Subject to the terms and conditions of this Agreement, on the
Closing Date (an index of the defined terms
used herein being set forth in
Section 11.14), the Shareholders shall sell
to Buyer, and Buyer shall purchase
from the Shareholders, all of the Shares,
free and clear of all Liens.
2. PURCHASE PRICE -
PAYMENT
2.1
Purchase
Price.
The purchase price for the Shares (the "Purchase Price") shall be
an
amount equal to (i) Four Hundred Two
Million Dollars ($402,000,000) (the "Cash
Portion"); plus (ii) the amount, if any, by
which the Closing Working Capital as
shown on the Closing Balance Sheet is
greater than the Average Working Capital
Amount; minus (iii) the Closing
Indebtedness Amount; minus (iv) the Executive
Bonus Payments; minus (v) the Grigg Fee;
minus (vi) Shareholder Transaction
Expenses; minus (vii) the Non-Compete
Payments; minus (viii) the Crawford Fee;
minus (ix) the amount, if any, by which the
Closing Working Capital as shown on
the Closing Balance Sheet is less than the
Average Working Capital Amount;
provided that, if at the end of any fiscal
quarter during the fiscal year ending
March 5, 2005, the EBITDA of the Company
for the trailing four fiscal quarters
then ended is $56,000,000 or greater, the
Cash Portion shall be increased by
$13,000,000 (the "Cash Increase"), to
$415,000,000, and Buyer
<PAGE>
shall promptly pay such amount by wire
transfer of immediately available funds
to an account designated in writing to
Buyer by Shareholders' Agent. The Cash
Increase shall be allocated 10% as an
increase in the Executive Bonus Payments
(subject to required withholding taxes) and
90% as an increase in the Purchase
Price. For purposes of the proviso to this
Section 2.1, if the Company or any
Subsidiary acquires any Person after the
Closing Date, such other Person and the
results of its operations shall be
disregarded and not combined with the results
of operations of the Company and any
Subsidiary in calculating EBITDA hereunder.
2.2
Preliminary
Purchase Price.
For purposes of this Agreement, the "Preliminary Purchase
Price"
shall be equal to the Purchase Price as
calculated in accordance with Section
2.1 above and as estimated by the
Shareholders' Agent on the basis of a
projected consolidated balance sheet for
the Company and its Subsidiaries as of
the close of business on the Closing Date
(the "Estimated Closing Balance
Sheet"), prepared in good faith by the
Shareholders' Agent and delivered to
Buyer not less than five (5) days prior to
the Closing, which Estimated Closing
Balance Sheet shall be reasonably
acceptable to Buyer. The Preliminary Purchase
Price shall not include any amount which
may become payable by Buyer pursuant to
the proviso in Section 2.1 above (unless
such amount is achieved during the
first quarter of the fiscal year ending
March 5, 2005).
2.3
Certain Closing
Deliveries.
Subject to the conditions set forth in this Agreement, at the
Closing, Buyer shall make the following
payments:
2.3.(a) on behalf of the Shareholders and Executives, Buyer
shall
deposit 5%
of the sum of the Preliminary Purchase Price and the amount set
forth in
item (iv) in Section 2.1 as estimated under Section 2.2 (the
"Escrowed
Amount") with the Escrow Agent to be held in an escrow account
(the
"Escrow Account") and released by the Escrow Agent in accordance
with
the terms
and conditions of this Agreement and of the Escrow Agreement
substantially in the form attached hereto as Exhibit B (the
"Escrow
Agreement") (subject to such administrative changes as may be
required to
be made by
the Escrow Agent);
2.3.(b) on behalf of PFMI and the Company, Buyer shall pay the
amounts
owed by PFMI, the Company and its Subsidiaries pursuant to the
Payoff
Letters delivered to Buyer pursuant to Section 6.7 as set forth
in
such
Payoff Letters, which amounts shall represent the Closing
Indebtedness Amount and the Shareholder Transaction Expenses;
2.3.(c) on behalf of the Company, Buyer shall pay the Grigg
Fee;
2.3.(d) on behalf of the Company, Buyer shall pay the
Non-Compete
Payments;
2.3.(e) on behalf of the Company, Buyer shall pay to
Shareholders'
Agent on
behalf of each Executive such Executive's Executive Bonus
Payment,
less (i) the amount of any required withholding taxes subject
to
such
payments, (ii) such Executive's Rollover Amount (if any), and
(iii)
such
Executive's pro rata share of 10% of the
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Escrowed
Amount, to not more than four accounts which have been
designated
by the
Shareholders' Agent not less than (2) business days prior to
the
Closing
Date; and
2.3.(f) Buyer shall pay an amount equal to the Preliminary
Purchase
Price less
90% of the Escrowed Amount to an account which has been
designated
by the Shareholders' Agent not less than (2) business days
prior to
the Closing Date.
2.4
Payment of
Purchase Price Adjustment.
On or before the fifth business day following the final
determination of the Purchase Price in
accordance with Section 2.5 below, either
(i) the Shareholders shall pay to Buyer the
amount, if any, by which the
Preliminary Purchase Price exceeds the
Purchase Price, together with simple
interest on the amount being paid from the
Closing Date to the date of the
payment at a rate per annum equal to 5.0%;
or (ii) Buyer shall pay to
Shareholders' Agent the amount, if any, by
which the Purchase Price exceeds the
Preliminary Purchase Price, together with
simple interest on the amount being
paid from the Closing Date to the date of
payment at a rate per annum equal to
5.0% (either of which being a "Purchase
Price Adjustment"). In addition, if the
Preliminary Purchase Price is greater than
the Purchase Price, Buyer shall have
the right, but shall not be obligated, to
obtain payment of the difference out
of the Escrow Account pursuant to the terms
and conditions of this Agreement and
the Escrow Agreement.
2.4.(a) Method of Payment. All payments under Section 2.3 and
this
Section
2.4 shall be made in U.S. Dollars by wire transfer of
immediately
available
funds to an account designated by the recipient not less than
48
hours
prior to the time for payment specified herein.
2.4.(b) Shareholder Indemnification. The Shareholders jointly
and
severally
agree to indemnify, defend and hold harmless the Buyer
Indemnified Parties from any Losses (as defined in Section 8.1)
arising in
connection
with any claims by any Shareholder or Executive that such
Person did
not receive such Person's Executive Bonus Payment or such
Person's
allocable portion of the Purchase Price to which such Person
was
entitled
pursuant to this Agreement and the Escrow Agreement; provided
that Buyer
has made the payments required under Section 2.3 and the
required
payment of the Cash Increase, if any.
2.5
Determination of
Final Purchase Price.
2.5.(a) Closing Working Capital. The "Closing Working Capital"
shall
mean (i)
the sum of all assets of the Company and its Subsidiaries on a
consolidated basis which would, in accordance with GAAP, be
classified on
a
consolidated balance sheet of the Company and its Subsidiaries
as
current
assets (excluding Cash), minus (ii) the sum of all liabilities
of
the Company and
its Subsidiaries on a consolidated basis which would, in
accordance
with GAAP, be classified on a consolidated balance sheet of the
Company
and its Subsidiaries as current liabilities (excluding accrued
Income
Taxes, Income Tax refunds and any other Income Tax assets and
the
Closing
Indebtedness Amount), in each case determined as of the close
of
business
on the Closing Date. The Closing Working Capital shall be
determined
in accordance with GAAP from the books and records of the
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Company
and its Subsidiaries using the same accounting principles,
policies,
practices and procedures theretofore followed by the Company in
the
preparation of the Audited Financial Statements and in the
calculation
of the
Average Working Capital Amount as reflected on Schedule 2.1.
2.5.(b) Purchase Price
Adjustment.
(i) Not later than 90 days after the Closing Date, Buyer shall
deliver to Shareholders' Agent (A) an unaudited consolidated
balance
sheet of the Company and its Subsidiaries as of the close of
business on the Closing Date (the "Closing Balance Sheet"), and
(B)
a statement setting
forth in reasonable detail its calculation of
Closing Working Capital, the Closing Indebtedness Amount and
the
Purchase Price and the other components thereof. The Closing
Balance
Sheet shall be prepared in accordance with GAAP consistently
applied
and shall include all accounting entries and adjustments required
in
a year-end closing of the books as of the close of business on
the
Closing Date. Buyer's calculation of Closing Working Capital,
the
Closing Indebtedness Amount and the Purchase Price shall be based
on
the Closing Balance Sheet.
(ii) The Closing Balance Sheet and Buyer's determination of
the Purchase Price shall become final and binding upon the
parties
30 days after Shareholders' Agent's receipt thereof unless
Shareholders' Agent or a firm of independent accountants engaged
by
Shareholders' Agent (the "Shareholders' Accountants") object
prior
to such date (an "Objection"). Such an Objection shall be made
in
writing to Buyer, shall set forth a specific description of the
basis of the Objection (including Shareholders' Agent's
calculation
of the Purchase Price) and the items in dispute and shall only
include disagreements based upon mathematical errors or based
upon
the Purchase Price not being calculated in accordance with
Sections
2.1, 2.5.(a) and Schedule 2.1. Shareholders' Agent will be deemed
to
accept any items not specifically disputed in the Objection.
(iii) In the event Buyer and Shareholders' Agent are unable to
resolve the Objection within thirty days thereafter, the
Objection
shall be resolved by Pricewaterhouse Coopers LLP (the "Neutral
Accounting Firm"). Buyer shall promptly forward a copy of the
Closing Balance Sheet and calculation of the Purchase Price
delivered pursuant to Section 2.5.(b)(i), and Shareholders'
Agent
shall promptly forward a copy of the Objection delivered pursuant
to
Section 2.5.(b)(ii), to the Neutral Accounting Firm. The
Neutral
Accounting Firm, acting as experts in accounting and not
arbitrators, shall determine on a basis consistent with the
requirements of this Section 2.5, and only with respect to the
specific accounting related differences properly submitted, the
Closing Working Capital, Closing Indebtedness Amount and the
Purchase Price. The Neutral Accounting Firm's determination will
be
conclusive and binding on all parties. Determination by the
Neutral
Accounting Firm shall be evidenced by a written report delivered
to
the parties addressing the items in dispute. The Neutral
Accounting
Firm shall be instructed to use reasonable efforts to perform
its
services within thirty days of submission of the Objection to
it
and, in any case, as soon as practicable after
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such submission. The fees and expenses for the services of the
Neutral
Accounting Firm shall be paid by Buyer and Shareholders'
Agent as follows:
Shareholders' Agent shall pay a percentage of such fees and
expenses
equal to A/(A+B), and Buyer shall pay a percentage of such fees
and
expenses equal to B/(A+B), where A is equal to the absolute value
of
the difference (in dollars) between the Purchase Price as
finally
determined by the Neutral Accounting Firm and the Purchase
Price
proposed by Shareholders' Agent as reflected in the Objection
prepared and delivered by Shareholders' Agent in accordance
with
Section 2.5(b)(ii), and where B is equal to the absolute value
of
the difference (in dollars) between the Purchase Price as
finally
determined by the Neutral Accounting Firm and the Purchase Price
as
reflected in the report prepared and delivered by Buyer in
accordance with Section 2.5(b)(i).
(iv) Buyer agrees to permit Shareholders' Agent, the
Shareholders' Accountants and their respective representatives,
during normal business hours, to have reasonable access to, and
to
examine and make copies of, all books and records of Company,
including but not limited to the books, records, schedules,
work
papers and audit programs of Buyer and Buyer's independent
accountants ("Buyer's Accountants"), related to the preparation
of
the
Closing Balance Sheet and Buyer's determination of the Purchase
Price and components thereof; provided that such information
shall
remain subject to the confidentiality obligations set forth in
Section 5.16 herein.
3. JOINT AND SEVERAL
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
As a material inducement to Buyer to enter into this Agreement,
each
of the Shareholders, jointly and severally,
makes the following representations
and warranties to Buyer. "Knowledge", as
used herein with respect to the
Shareholders means the actual knowledge or
awareness of any of the Shareholders
or the actual knowledge or awareness after
reasonable inquiry of any Executive
where "reasonable inquiry" means that such
Executive has made inquiries
regarding the substance of the
representations to Gary Sluss, Sam Patton, Joe
Meyers, Jeff Harris and Ted Karre.
3.1
Shareholder
Authority, Validity, Ownership.
3.1.(a) Each Shareholder has full power, legal capacity, right
and
authority
to enter into, execute and deliver this Agreement, and the
Escrow
Agreement, the Shareholders Agent Agreement, the Tax Sharing
and
Indemnification Agreement and all other agreements identified
herein and
delivered
in connection herewith (collectively, the "Ancillary
Agreements") to which such Shareholder is a party, and to carry out
the
transactions contemplated hereby and thereby and to perform his
obligations hereunder and thereunder.
3.1.(b) This Agreement and the Ancillary Agreements have been
duly
and
validly executed and delivered by the Shareholders and the
Shareholders' Agent and are legal,
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<PAGE>
valid and binding obligations of
each Shareholder and the Shareholders'
Agent,
enforceable against each of them in accordance with their
respective
terms, except as such may be limited by bankruptcy, insolvency,
reorganization, or other similar Laws affecting creditors'
rights
generally,
and by general equitable principles.
3.1.(c) Each Shareholder holds of record and owns beneficially
the
Shares set
forth opposite his name on Schedule 3.1(c) attached hereto. The
delivery
to Buyer of such Shares at Closing pursuant to this Agreement
will
transfer to Buyer good and valid title to such Shares, free and
clear
of all
liens, restrictions on transfer (other than any restrictions
under
the
Securities Act of 1933, as amended, and applicable state
securities
laws),
mortgages, security interests, pledges, charges, claims,
equities,
reservations, options, warrants, rights, calls, commitments,
adverse
claims or
other encumbrances of any kind (collectively, "Liens"). No
Shareholder is a party to any option, warrant, right, contract,
call, put
or other
agreement or commitment providing for the disposition or
acquisition of any capital stock of PFMI (other than this
Agreement).
Except for
the Voting Trust Agreement, no Shareholder is a party to any
voting
trust, proxy or other agreement or understanding with respect
to
the voting
of any capital stock of PFMI.
3.1.(d) Neither the execution and the delivery of this
Agreement,
the
Ancillary Agreements and the other documents contemplated hereby
and
thereby to
which the Shareholders and the Shareholders' Agent are a party,
nor the
consummation of the transactions contemplated hereby and
thereby,
shall (a)
conflict with, result in a breach of any of the provisions of,
(b)
constitute a default under, (c) result in the violation of, (d)
give
any third
party the right to terminate or to accelerate any obligation
under, (e) result in the creation
of any Lien upon the Shares owned by
such
Shareholder, or (f) require any authorization, consent,
approval,
execution
or other action by or notice to any court or other governmental
body,
under the provisions of any indenture, mortgage, lease, loan
agreement
or other contract, agreement or instrument to which any
Shareholder or the Shareholders' Agent is bound or affected, or
any
statute,
regulation, rule, Order or other restriction of any government,
governmental or administrative agency or court to which any
Shareholder or
the
Shareholders' Agent is subject. No notice to, filing with or
authorization, consent or approval of any government or
governmental or
administrative agency by the Shareholders or the Shareholders'
Agent is
necessary
for the consummation of the transactions contemplated by this
Agreement,
the Ancillary Agreements and the other documents contemplated
hereby to
which the Shareholders and the Shareholders' Agent are a party,
except
such filings and notices as may be required under the HSR Act.
3.1.(e) Except as set forth on Schedule 3.1(e), there are no
claims
for
brokerage commissions, finders' fees or similar compensation in
connection
with the transactions contemplated by this Agreement based on
any
arrangement or agreement made by or on behalf of any
Shareholder.
3.1.(f) There are no actions, suits, proceedings or orders
pending
or, to
Shareholders' Knowledge, threatened against or affecting
Shareholders at law or in equity, or before or by any federal,
state,
municipal
or other governmental department, commission, board, bureau,
agency or
instrumentality, domestic or foreign, which would
-6-
<PAGE>
adversely
affect Shareholders' performance under this Agreement and the
Ancillary
Agreements or the consummation of the transactions contemplated
hereby or
thereby.
3.1.(g) Each Shareholder understands the term "accredited
investor"
as used in
Regulation D promulgated under the Securities Act of 1933 and
represents
and warrants to Buyer that he or it is an "accredited investor"
as defined
therein.
3.2
PFMI
Organization, Ownership, Liabilities.
3.2.(a) PFMI is a corporation duly organized, validly existing
and
in good
standing under the Laws of the State of North Carolina and has
the
requisite
corporate power and authority to conduct its business as
conducted
on the date hereof and as of the Closing Date. PFMI is duly
qualified
to do business, and is in good standing, in each jurisdiction
where the
character of the properties owned or leased by it, or the
nature
of its
activities, is such that qualification to do business in that
jurisdiction is required by law, except for jurisdictions in which
the
failure to
be so qualified has not had and is not reasonably likely to
have,
individually or in the aggregate, a Material Adverse Effect.
3.2.(b) The authorized capital stock of PFMI consists of
100,000
shares of
common stock, no par value (the "PFMI Common Stock"). Each
share
of PFMI
Common Stock is validly issued and outstanding. All such
outstanding shares of PFMI Common Stock are fully paid and
nonassessable,
are not
subject to, nor were they issued in violation of, any
preemptive
rights or
rights of first refusal, and are owned of record and
beneficially by the respective Shareholders as set forth on
Schedule
3.1(c),
free and clear of all Liens. The respective Shareholders have
owned all
issued and outstanding shares of PFMI Common Stock since the
dates set
forth on Schedule 3.1(c). No shares of PFMI Common Stock are
reserved
for issuance, nor are there outstanding any options, warrants,
puts,
calls, rights to subscribe, convertible securities or other
rights
(including, without limitation, preemptive rights or stock
appreciation
rights),
agreements or commitments to issue, dispose of or acquire
shares
of PFMI
Common Stock (other than this Agreement). There are no
outstanding
or
authorized stock appreciation, phantom stock or similar rights
with
respect to
PFMI. Except for the Voting Trust Agreement and the
Shareholders Agreement, there are no voting trusts, proxies or any
other
agreements
or understandings with respect to the voting of the capital
stock of
PFMI. PFMI is not subject to any obligation (contingent or
otherwise)
to repurchase or otherwise acquire or retire any shares of its
capital
stock. PFMI has not violated any applicable federal or state
securities
laws in connection with the offer, sale or issuance of any of
its
capital stock; provided that the foregoing representation shall
not
apply with
respect to the offer and sale of the Shares contemplated by
this
Agreement.
3.2.(c) PFMI owns all of the issued and outstanding capital stock
of
the
Company. PFMI has no
assets other than the outstanding capital stock
of the
Company.
3.3 Company Organization, Qualification, Subsidiaries,
Investments,
Etc.
3.3.(a) Each of the Company and its Subsidiaries is duly
organized
or formed,
validly existing and in good standing under the Laws of the
State of
North Carolina and
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<PAGE>
has the
requisite corporate or limited liability company power and
authority
to carry on its respective businesses as now being conducted.
3.3.(b) Each of the Company and the Subsidiaries is duly
qualified
to do
business, and is in good standing, in each jurisdiction where
the
character
of the properties owned or leased by it, or the nature of its
activities, is such that qualification to do business in that
jurisdiction
is
required by law, except for jurisdictions in which the failure to
be so
qualified
has not had and is not reasonably likely to have, individually
or in the
aggregate, a Material Adverse Effect.
3.3.(c) The Company has made available to Buyer true and
accurate
copies of
the charter and bylaws of the Company and PFMI and the
organizational documents of all of the Subsidiaries reflecting
all
amendments
made thereto at any time prior to the date of this Agreement.
3.3.(d) None of PFMI, the Company or any of the Subsidiaries is
in
violation
of any of the provisions of its charter, bylaws or other
organizational documents.
3.3.(e) Schedule 3.3(e) sets forth the identity, jurisdiction
of
organization, foreign qualifications and outstanding equity
capitalization
of each of
the Subsidiaries.
3.3.(f) Except for the entities set forth on Schedule 3.3(e)
(the
"Subsidiaries"), none of PFMI, the Company or any Subsidiary owns
(of
record or
beneficially) or holds any shares of stock or any other
security
or
interest in any other Person or any rights to acquire any such
stock or
other
security or interest. Each of the Company and PFMI owns (of
record
and
beneficially) and has valid title to all of the outstanding
capital
stock of
its respective Subsidiaries, free and clear of all Liens.
3.3.(g) No limited liability company interests or other equity
interest
in any Subsidiary, any securities convertible into limited
liability company interests or
other equity interests of any Subsidiary,
or any
other rights to acquire limited liability company interests or
other
equity interests of any Subsidiary is or may become required to
be
issued,
sold or transferred by reason of any option, warrant, put,
call,
subscription or other agreement or right relating to the equity of
the
Subsidiary. There is no contract, arrangement or understanding by
which
any
Subsidiary is bound to issue any of its limited liability
company
interests
or any other equity interest or any option, warrant or other
right
relating thereto or by which the Company is or may be bound to
sell
or
transfer any part of the equity interest in any Subsidiary. There
is no
contract,
arrangement or understanding relating to the right of the
Company to
vote, transfer or otherwise dispose of any of the equity
interest
in any Subsidiary. All of the outstanding limited liability
company
interests of each Subsidiary are duly authorized and validly
issued,
were not issued in violation of any law or any charter or other
provision
regarding pre-emptive, anti-dilution or similar rights of
member
and is
owned free and clear of all Liens. No Subsidiary is subject to
any
obligation
(contingent or otherwise) to repurchase or otherwise acquire
any of its
limited liability company interests or any of its equity
interests.
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<PAGE>
3.3.(h) The board of directors of PFMI has unanimously, on the
terms
and
conditions set forth herein, approved this Agreement and the
transactions contemplated hereby.
3.4
Capital
Stock.
The authorized capital stock of the Company consists of 100,000
shares of common stock, no par value (the
"Company Common Stock"). Each share of
the Company Common Stock is validly issued
and outstanding. All such outstanding
shares of Company Common Stock are validly
owned (beneficially and of record) by
PFMI, fully paid and nonassessable, free
and clear of all Liens (other than
Liens securing Indebtedness, which Liens
shall be discharged at or prior to
Closing) and are not subject to, nor were
they issued in violation of, any
preemptive rights or rights of first
refusal or similar rights. No shares of the
Company Common Stock are reserved for
issuance, nor are there outstanding any
options, warrants, calls, puts, rights to
subscribe, convertible securities or
other rights (including, without
limitation, preemptive rights or stock
appreciation rights), agreements or
commitments to issue, dispose of or acquire
shares of the Company Common Stock. There
are no outstanding or authorized stock
appreciation, phantom stock or similar
rights with respect to the Company.
Except for the Shareholders Agreement,
there are no voting trusts, proxies or
any other agreements or understandings with
respect to the voting of the capital
stock of the Company. The Company is not
subject to any obligation (contingent
or otherwise) to repurchase or otherwise
acquire or retire any shares of its
capital stock. The Company has not violated
any applicable federal or state
securities laws in connection with the
offer, sale or issuance of any of its
capital stock.
3.5
Non-Contravention.
Except as disclosed in Schedule 3.5, the execution, delivery
and
performance of this Agreement and the
Ancillary Agreements and the consummation
of the transactions contemplated hereby and
thereby by PFMI, the Company, the
Subsidiaries and the Shareholders do not
and will not: (a) result in a breach of
any provision of the charter, bylaws or
other organizational documents of the
Company, any of the Subsidiaries or PFMI;
(b) violate any Order of any court or
other authority having jurisdiction over
the Company, any of the Subsidiaries or
PFMI, or any of their properties, or cause
the suspension or revocation of any
authorization, consent, approval or license
presently in effect that affects or
binds the Company, any of the Subsidiaries
or PFMI or any of their material
properties; (c) result in a breach of or
default, or give a third party the
right to accelerate, terminate or suspend
any obligations, under any agreement
or instrument to which PFMI, the Company or
any of the Subsidiaries is a party
or by which any of them or any of their
material properties is bound or
affected; (d) require the authorization,
consent, approval, permit or license of
any Person, any notice to be given to,
filing to be made with or other action to
be taken with or by any Person (other than
filings and actions to be made and
taken under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended
(such act, together with the rules and
regulations promulgated thereunder, being
the "HSR Act")); (e) result in the creation
of any Lien upon the Shares or the
material assets of PFMI, the Company or any
Subsidiary; or (f) constitute
grounds for the loss or suspension of any
material permit, license or other
authorization used by PFMI, the Company or
any of the Subsidiaries.
-9-
<PAGE>
3.6
Reports and
Financial Statements; No Undisclosed Liabilities.
3.6.(a) PFMI has made available to Buyer each of the following:
(i) the
Company's Annual Report on Form 10-K filed with the
SEC on March 9, 2004 for its fiscal year ended March 1, 2003
(the
"Annual Report");
(ii) the Company's Quarterly Reports on Form 10-Q, each filed
with the SEC on March 9, 2004, for its fiscal quarters ended May
31,
2003, August 30, 2003 and November 29, 2003 (the "Quarterly
Reports");
(iii) the Company's consolidated audited financial statements
for its fiscal year ended March 1, 2003, included in the Annual
Report, together with its audited financial statements for its
fiscal year ended March 2, 2002 (collectively, the "Audited
Financial Statements");
(iv) PFMI's unaudited consolidated financial statements for
its fiscal years ended March 2, 2002, March 1, 2003 and March
6,
2004 (the "PFMI Unaudited Financial Statements"); and
(v) the Company's unaudited consolidated financial statements
for its fiscal year ended March 6, 2004 (the "Company Unaudited
Financial Statements", and together with the PFMI Unaudited
Financial Statements, the "Unaudited Financial Statements").
3.6.(b) To the Knowledge of the Shareholders, each of the
Annual
Report and
Quarterly Reports did not, at the time it was filed with the
SEC, and
all such documents taken together do not, contain an untrue
statement
of a material fact or omit to state a material fact necessary
in
order to
make the statements therein, in the light of the circumstances
under
which they were made or are made, respectively, not misleading.
The
financial
statements contained in the Annual Report and in the Quarterly
Reports
were prepared in accordance with GAAP from the books and
records
of the
Company and its consolidated Subsidiaries, except in the case
of
the
unaudited interim financial statements contained in the
Quarterly
Reports,
the absence of footnotes and subject to customary year end
adjustments for recurring accruals.
3.6.(c) The Audited Financial Statements were prepared in
accordance
with GAAP
and fairly and accurately reflect the financial condition and
results of
operations of the Company and its consolidated Subsidiaries at
the dates
and for the periods indicated.
3.6.(d) The Unaudited Financial Statements were prepared from
the
books and
records of PFMI and its consolidated Subsidiaries and the
Company
and its consolidated Subsidiaries, as applicable, and fairly
and
accurately
reflect in all material respects the financial condition and
results of
the operations of PFMI and its consolidated Subsidiaries and
the
Company and its consolidated Subsidiaries, as applicable, at the
dates
and for
the periods indicated.
-10-
<PAGE>
3.6.(e) When delivered pursuant to Section 6.12, the Recent
Audited
Financial
Statements will have been prepared in accordance with GAAP and
will
fairly and accurately reflect in all material respects the
financial
condition
and results of operations of the Company and its consolidated
Subsidiaries and PFMI and its consolidated subsidiaries, as
applicable, at
the dates
and for the periods indicated.
3.6.(f) None of PFMI, the Company or any Subsidiary has any
material
liability
or obligation (whether absolute, accrued, contingent,
unliquidated or otherwise, whether or not known to Shareholders,
whether
due or to
become due and regardless of when or by whom asserted) other
than those
liabilities or obligations (i) reflected in the Company's
audited
financial statements for the fiscal year ended March 1, 2003
included
in the Annual Report (including the footnotes thereto), (ii)
arising
under contracts or commitments described on Schedule 3.17 or
under
contracts
and commitments entered into in the ordinary course of business
which are
not required to be disclosed thereon due to specified dollar
thresholds
(but not liabilities for breaches thereof occurring on or prior
to the
Closing Date), (iii) arising out of the matters reflected on
Schedule
3.12, (iv) reflected in the PFMI Unaudited Financial Statements
for its
fiscal year ended March 6, 2004 or the Company Unaudited
Financial
Statements
for its fiscal year ended March 6, 2004, (v) incurred after
March 6,
2004 in the ordinary course of business consistent with past
practices
of the Company and its Subsidiaries (none of which is a
liability
for breach of contract, tort, infringement, claim, lawsuit or
breach of
warranty), or (vi) set forth in Schedule 3.6(f).
3.6.(g) The Company has made all required filings with the SEC
and
the form
and content of all such filings complied in all material
respects
with the
rules and regulations of the SEC.
3.7
Absence of
Material Differences.
Since November 29, 2003, there has been no Material Adverse
Change.
Without limiting the generality of the
foregoing, except as disclosed in
Schedule 3.7, since November 29, 2003,
PFMI, the Company and the Subsidiaries
have conducted their respective businesses
in the ordinary course consistent
with past practices, and without limiting
the generality of the foregoing since
that date there has been no:
3.7.(a) (i) disposition of any material items of real or
personal
property
(other than sales of inventory in the ordinary course of
business)
by PFMI, the Company or any Subsidiary; or (ii) capital
investment
in, any loan to, or any acquisition of the securities or assets
of, any
other Person (or series of related capital investments, loans,
or
acquisitions);
3.7.(b) change in the accounting methods or practices
(including
assumptions underlying estimates of reserves for inventory and
accounts
receivable
and accruals for liabilities) of PFMI (provided, that PFMI is
currently
in the process of adopting GAAP standards for the preparation
of
its
financial statements), the Company or any of the Subsidiaries
which
has had a
material effect on the financial results reported by PFMI, the
Company or
the Subsidiaries;
-11-
<PAGE>
3.7.(c) satisfaction or discharge of any material claim, Lien
or
liability
(whether accrued, contingent or otherwise and whether due or to
become
due) of PFMI, the Company or any of the Subsidiaries outside
the
ordinary
course of business and consistent with past practice;
3.7.(d) sale, lease, mortgage, encumbrance or other disposal of
or
grant of
any interest in, or attachment of any Lien upon, any of the
material
assets or properties of PFMI, the Company or any of the
Subsidiaries, except for (i) sales, leases, encumbrances and
other
dispositions and grants in the ordinary course of business and
consistent
with past
practice and (ii) Liens for taxes not yet due (provided,
however,
that adequate accruals, consistent with GAAP, are maintained
for
all such
Liens for taxes not yet due) and Liens not material in amount
or
effect
that do not impair the use of the asset or property subject to
such
Lien;
3.7.(e) declaration or set asides for dividends, distributions
or
redemptions of securities of PFMI, the Company or any of the
Subsidiaries;
any split,
combination or reclassification of any of the equity interests
or other
securities thereof or agreement or commitment to make any
exchange
for or redemption of any such equity interests or other
securities
(whether payable in cash, stock or property);
3.7.(f) material damage, destruction, or loss (whether or not
covered by
insurance) to the tangible assets of PFMI, the Company or any
Subsidiary;
3.7.(g) (i) adoption of, entry into or amendment of any Benefit
Plan,
including any bonus, profit sharing, compensation, stock
option,
warrant,
pension, retirement, deferred compensation, employment,
severance,
termination, change in control or other employee benefit plan,
agreement,
trust fund or arrangement for the benefit or welfare of any
officer,
director, employee or consultant, (ii) agreement to any
increase
in the
compensation payable or to become payable to, or any increase
in
the
contractual term of employment of, any officer, director or
consultant
or
salaried employee (other than in the ordinary course of business
and
consistent
with past practice) or (iii) payment of any benefit not
required
by any Benefit Plan or other plan or agreement;
3.7.(h) incurrence, assumption or guarantee of any indebtedness
for
borrowed
money;
3.7.(i) issuance of, or agreement to issue, any equity interests
in
PFMI, the
Company or in any of the Subsidiaries, or options, warrants or
other
rights of any kind to acquire any such equity interests, whether
by
purchase
or conversion or exchange of other equity interests or other
securities;
3.7.(j) amendment to or restatement of any of the
organizational
documents
of PFMI, the Company or any of the Subsidiaries;
3.7.(k) delay or postponement of the payment of accounts payable
and
other
liabilities of PFMI, the Company or any Subsidiary outside the
ordinary
course of business; or
-12-
<PAGE>
3.7.(l) agreement, commitment or understanding, whether in
writing
or
otherwise, with respect to any of the matters referred to in
subsections (a) through (n) of this Section 3.7.
3.8
Employees.
Except as disclosed in Schedule 3.8, none of PFMI, the Company
or
any of the Subsidiaries is bound by any
express or implied contract or agreement
to employ, directly or as a consultant or
otherwise, any individual for any
specified period of time or until any
specific age. No employee of PFMI, the
Company or any Subsidiary is represented by
any labor organization. To the
Knowledge of the Shareholders, there are no
proposals by employees of PFMI, the
Company or any Subsidiary for organizing
activities or collective bargaining
arrangements or any organized labor
slowdown, work interruption or work stoppage
by employees. To Shareholders' Knowledge,
except for Pamela Witters and the
North Carolina Employees, no key employee
and no group of employees has any
plans to terminate his or her employment
with such entity (including upon
consummation of the transactions
contemplated hereby). Except as set forth on
Schedule 3.13(a), PFMI, the Company and its
Subsidiaries have complied in all
material respects with all applicable laws
relating to the employment of labor,
including, without limitation, provisions
thereof relating to wages, hours,
equal opportunity, collective bargaining
and the payment of social security and
other taxes. Except as set forth on
Schedule 3.8, there are no material claims,
actions, proceedings or investigations
pending or, to Shareholders' Knowledge,
threatened against PFMI, the Company or any
Subsidiary with respect to or by any
employee or former employee of PFMI, the
Company or any Subsidiary. None of
PFMI, the Company or any Subsidiary has
experienced any strikes, collective
bargaining disputes, material labor
grievances or material unfair labor
practices claims within the last three (3)
years prior to the date hereof.
3.9
Employee Benefit
Plans.
3.9.(a) The Company has made available to Buyer, except for the
items
described in the side letter agreement, dated the date hereof by
and
between
Buyer and Shareholders' Agent on behalf of the Shareholders
(the
"Benefits
Side Letter Agreement"), true and accurate copies of all
pension,
retirement, profit-sharing, deferred compensation, retention,
change-in-control, severance pay, vacation, bonus and other
incentive
plans, all
other written employee programs, arrangements and agreements,
all
medical, vision, dental and other health plans, all life
insurance
plans and
all other employee benefit plans and fringe benefit plans,
including,
without limitation, "employee benefit plans" as that term is
defined in
Section 3(3) of the Employee Retirement Income Security Act of
1974, as
amended (such act, together with the rules and regulations
thereunder, being "ERISA"), currently or previously adopted,
maintained
by,
sponsored in whole or in part by or contributed to by PFMI, the
Company or
any Subsidiary for the benefit of employees, retirees,
dependents, spouses, directors, independent contractors and
other
beneficiaries of PFMI, the Company and the Subsidiaries (as used in
this
Section
3.9, collectively, "employees") and under which employees are
or
were
eligible to participate (collectively, "Benefit Plans");
provided
that the
Company has not made available to Buyer those insurance
policies
set forth
on Part A of Schedule 3.9 maintained by PFMI and covering the
Shareholders, all of which are to be retained by the
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<PAGE>
Shareholders pursuant to the Asset Distribution Letter Agreement
(the
"Shareholder Insurance Policies"). All of the Benefit Plans (other
than
the items
described in the Benefits Side Letter Agreement) are listed on
Part B of
Schedule 3.9. Each Benefit Plan may be amended or terminated at
any time
after the Closing Date.
3.9.(b) None of PFMI, the Company or any Subsidiary maintains or
is
required to contribute to or has
any liability with respect to any plan,
fund
(including, without limitation, any superannuation fund) or
other
similar
program established or maintained outside the United States of
America,
which fund or similar program provides or results in retirement
income, a
deferral of income in contemplation of retirement, payments to
be made
upon termination of employment, and which plan is not subject
to
ERISA or
the Internal Revenue Code of 1986 (the "Code").
3.9.(c) No Benefit Plans (other than qualified retirement plans
and
the items
described in the Benefits Side Letter Agreement) provide any
benefits
or coverage to any employee following retirement or termination
of service, except as
required under Section 4980B of the Code.
3.9.(d) Each Benefit Plan and any related trust, insurance
contract
or fund
has been maintained, funded and administered in compliance with
its
respective terms and with ERISA, the Code and all other state,
federal
and local
Laws applicable thereto in all material respects, and no
action,
suit,
proceeding, hearing, investigation with respect to the
administration or investment of assets of any Benefit Plan (other
than
routine
claims for benefits) is pending or, to the Knowledge of the
Shareholders, threatened.
3.9.(e) None of the Benefit Plans is or was a multiemployer
plan
(within
the meaning of Section 3(37)(A) of ERISA) or an "employee
pension
benefit
plan" (as such term is defined in Section 3(2) of ERISA) that
is
subject to
Section 302 of ERISA, Title IV of ERISA or Section 412 of the
Code. No
asset of PFMI, the Company or any Subsidiary is subject to any
Lien under
ERISA or the Code, and none of PFMI, the Company or any
Subsidiary
has incurred any liability under Title IV of ERISA or to the
Pension
Benefit Guaranty Corporation.
3.9.(f) Each Benefit Plan that is intended to be qualified
within
the
meaning of Section 401(a) of the Code has received a GUST
determination from the Internal Revenue Service (the "IRS") that
such
Benefit
Plan is qualified under Section 401(a) of the Code, and nothing
has
occurred since the date of such determination that could
adversely
affect the
qualification of such Benefit Plan.
3.9.(g) Except as disclosed in Schedule 3.9(g), neither the
execution
and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (A) result in any payment
(including, without limitation, severance, unemployment
compensation,
golden
parachute or otherwise) becoming due to any employee from PFMI,
the
Company or
any of the Subsidiaries (otherwise than pursuant to the health
coverage
continuation requirements of Code Section 4980B or Part 6 of
Title I of
ERISA, (B) increase any benefits otherwise payable under any
Benefit
Plan or (C) result in any acceleration in the time of payment
or
vesting of
any such benefit.
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<PAGE>
3.9.(h) Neither the Company, PFMI nor any other "disqualified
person"
(within the meaning of Section 4975 of the Code) or "party in
interest"
(within the meaning of Section 3(14) of ERISA) has taken any
action
with respect to any of the Benefit Plans which could subject
any
such
Benefit Plan (or its related trust) or PFMI or the Company or
any
Subsidiary, or
any officer, director or employee of any of the foregoing,
to any
penalty or tax under Section 502(i) of ERISA or Section 4975 of
the
Code.
3.9.(i) None of PFMI, the Company or the Subsidiaries has any
liability
(potential or otherwise) with respect to any "employee benefit
plan" (as
defined in Section 3(3) of ERISA) solely by reason of being
treated as
a single employer under Section 414 of the Code with any other
entity.
3.9.(j) With respect to each Benefit Plan, the Company has made
available
to Buyer true, complete and correct copies of (to the extent
applicable) (i) all documents pursuant to which the Benefit Plan
is
maintained, funded and administered, (ii) the most recent annual
report
(Form 5500
series) filed with the IRS (with applicable attachments), (iii)
the most
recent financial statements, (iv) the most recent summary plan
description provided to participants, and (v) the most recent
determination letter received from the IRS.
3.9.(k) With respect to each Benefit Plan (other than with
respect
to the
items described in the Benefits Side Letter Agreement), all
required
or recommended (in accordance with historical practices)
payments,
premiums, contributions, reimbursements or accruals for all
periods
(or partial periods) ending prior to or as of the Closing Date
shall have
been made or properly accrued on the Audited Financial
Statements. None of the Benefit Plans has any unfunded liabilities
which
are not
reflected on the Audited Financial Statements.
3.10
Assets and
Facilities.
The food processing facilities, fixtures, improvements,
equipment
and other tangible property owned or leased
by PFMI, the Company and the
Subsidiaries or otherwise used by them in
connection with the operation of their
respective businesses (the "Facilities and
Equipment") are in operating
condition and repair (reasonable wear and
tear excepted) adequate for the uses
to which they are being put. To
Shareholders' Knowledge, there are no material
structural deficiencies affecting any of
the Facilities and Equipment and there
are no facts or conditions affecting any of
the Facilities and Equipment which
would, individually or in the aggregate,
interfere in any material respect with
the use or occupancy of the Facilities and
Equipment or any portion thereof in
the operation of the business of PFMI, the
Company or the Subsidiaries. Except
as described in Schedule 3.10, PFMI, the
Company or Subsidiary (as the case may
be) has good and marketable title to the
Facilities and Equipment, free and
clear of all Liens, except Permitted Liens.
The assets and properties (whether
real or personal, tangible or intangible)
owned or leased by PFMI, the Company
or any Subsidiary constitute all of the
assets and properties necessary to
operate the business of PFMI, the Company
and the Subsidiaries as currently
conducted.
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<PAGE>
3.11
Licenses and
Permits.
The Company and the Subsidiaries hold all of the material
licenses,
permits, certificates, accreditations,
grants of inspection, registrations and
other franchises and authorizations of
foreign, federal, state and local
governmental agencies, including without
limitation the United States Food and
Drug Administration (the "FDA"), the United
States Department of Agriculture
(the "USDA") and similar state agencies,
required for the conduct of their
businesses and are not in default under any
such license, permit or franchise,
except as set forth in Schedule 3.11(a).
Schedule 3.11(b) sets forth a list of
all USDA grants of inspection and FDA
registrations of PFMI, the Company and the
Subsidiaries.
3.12
Litigation.
Except as described in Schedule 3.12: (i) there is no action,
suit,
claim, proceeding or investigation pending
against PFMI, the Company or any of
the Subsidiaries or affecting the Shares;
(ii) to the Knowledge of the
Shareholders, no action, suit, claim,
proceeding or investigation against PFMI,
the Company or any of the Subsidiaries or
affecting the Shares is threatened;
(iii) there have been no such actions,
suits, proceedings, claims or
investigations pending or, to Shareholders'
Knowledge, threatened within the
last three years against PFMI, the Company
or any Subsidiary or affecting the
Shares where the costs associated with any
such action, suit, proceeding, claim,
order or investigation (including
settlement payments, judgment awards and legal
fees and expenses) exceeded $250,000; and
(iv) none of PFMI, the Company or any
Subsidiary has any material actions, suits
or claims pending against any other
Person, in the case of clauses (i), (ii),
(iii) and (iv), at law or in equity,
or before or by any federal, state,
municipal or other governmental department,
commission, board, bureau, agency or
instrumentality, domestic or foreign. None
of PFMI, the Company, any Subsidiary or the
Shares is subject to any outstanding
Order directed at PFMI, the Company, any
Subsidiary or the Shares (as
distinguished from Orders of general
applicability).
3.13
Compliance with
Laws.
3.13.(a) Except as described in Schedule 3.13(a), each of PFMI,
the
Company
and the Subsidiaries comply, and have complied during the three
years
prior to the date hereof, in all material respects with all
Laws,
and no
written notices have been received by, and no written claims
have
been filed
against, PFMI, the Company or any Subsidiary alleging a
violation
of any such Laws. Except for orders of the SEC regarding the
effectiveness of registration statements for the Company Notes,
none of
PFMI, the
Company and the Subsidiaries, or any of their respective
material
properties, are subject to any judgment, order, decree, writ,
ruling,
charge or injunction (collectively, "Orders") issued by any
court
or
governmental or administrative body or agency, including
without
limitation
the FDA, USDA and the United States Federal Trade Commission
(the
"FTC"), and directed at PFMI, the Company or a Subsidiary (as
distinguished from Orders of general applicability).
3.13.(b) Except as described in Schedule 3.13(b), PFMI, the
Company
and the
Subsidiaries, and their manufacturing facilities and processes
and
all Foods,
packaging, and food contact substances used in or with all
Foods,
comply, and have complied during
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the three
years prior to the date hereof, in all material respects with
all
applicable USDA, FDA, FTC, other federal agency and any relevant
state
agency
regulations related to the regulation of Foods, packaging, and
food
contact
substances. Except as described in Schedule 3.13(b), during the
three
years prior to the date hereof and as of the date hereof, PFMI,
the
Company
and the Subsidiaries have secured a written guarantee from
their
material
third party ingredient and raw material suppliers adequate to
assure
that the ingredients and/or raw materials purchased from these
suppliers
complies in all material respects with all applicable USDA,
FDA,
FTC, other
federal agency and any relevant state agency regulations.
Except as
described in Schedule 3.13(b), during the three years prior to
the date
hereof and as of the date hereof, PFMI, the Company and the
Subsidiaries have conducted investigations, audits, and/or
on-going
monitoring
of third party co-packers, labelers, or distributors of the
Food and,
based on such activities, PFMI, the Company and the
Subsidiaries
are not
aware of any information to indicate that such third party
co-packers, labelers, or distributors have not materially complied
with
and are
not in material compliance with all applicable USDA, FDA, FTC,
other
federal agency and any relevant state agency regulations that
pertain to
the Food co-packed, labeled, or distributed by those entities
including
but not limited to FDA's current Good Manufacturing Practices
regulations.
3.13.(c) PFMI has furnished to Buyer (i) all written USDA
Noncompliance Records and inspectional observations, FDA
inspectional
observations and warning letters, and written notices from the
FTC,
received
by Shareholders, PFMI, the Company or any Subsidiary during the
last three
(3) years from the USDA, FDA, FTC, or other similar federal
agencies or
state authorities relating to legal or regulatory
non-compliance, (ii) PFMI's and/or the Company's or any
Subsidiary's
written
response to such items identified in clause (i) which have been
submitted
to such regulatory agency or authority (except for such
responses
which are immaterial), and (iii) any further written
correspondence from such regulatory agency or authority related to
the
items
identified in clause (i).
3.14
Environmental.
3.14.(a)
Except as set forth on Schedule 3.14(a), no amounts of
Hazardous
Materials have been spilled, discharged, released, pumped,
disposed
of or allowed to escape or migrate into (each, a "Release") the
environment or on or to any real property (including the soil
and
subsurface
thereof) owned or leased by PFMI, the Company or any of the
Subsidiaries in such a manner as to give rise to any material
liability
under any
Environmental Law.
3.14.(b) Except as set forth on Schedule 3.14(b) PFMI, the
Company
and the
Subsidiaries have obtained and complied, and are in compliance,
in
all
material respects with, all material permits or authorizations
required
under Environmental Laws to operate their facilities, assets
and
business;
and PFMI, the Company and the Subsidiaries (and their
respective
predecessors) comply, and have complied in all material respects
with all
Environmental Laws.
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<PAGE>
3.14.(c) Except as set forth on Schedule 3.14(c), no claim or
legal
or
administrative proceeding is pending or, to Shareholders'
Knowledge,
threatened
and, to the Knowledge of the Shareholders, there is no
investigation pending or threatened, with respect to (A) the
presence or
alleged
presence of any Release or threatened Release of Hazardous
Materials
or (B) any material violation or alleged violation of, or any
material
liability or alleged liability under, any Environmental Laws,
in
either
case relating to (a) any real property currently or formerly
owned
or leased
by PFMI, the Company or any of the Subsidiaries (or any of
their
respective
predecessors) or (b) any of their operations thereon.
3.14.(d) Except as set forth on Schedule 3.14(d), none of the
following
exists at any property or facility currently owned or operated
by PFMI,
the Company or any of the Subsidiaries: (1) underground storage
tanks; (2) asbestos-containing
material in any form or condition; (3)
materials
or equipment containing polychlorinated biphenyls or
ozone-depleting substances; or (4) landfills, surface impoundments,
or
disposal
areas.
3.14.(e) Except as set forth on Schedule 3.14(e), none of PFMI,
the
Company or
any of the Subsidiaries, or any of their respective
predecessors have treated, stored, disposed of, arranged for or
permitted
the
disposal of, transported, handled, manufactured, marketed, exposed
any
persons to
or released any Hazardous Materials, or owned or operated any
property
or facility so as to give rise to any material liabilities
under
any
Environmental Laws for fines or penalties, for personal injury,
nuisance,
property damage or damage to natural resources, or for related
costs of
environmental investigation or cleanup.
3.14.(f) Except as set forth on Schedule 3.14(f), none of PFMI,
the
Company or
any of the Subsidiaries have, either expressly or by operation
of law,
assumed or undertaken any liability of any other Person
relating
to
Environmental Laws, including without limitation any obligation
for
corrective
or remedial action.
3.14.(g) All written environmental audits, reports and other
material
environmental documents relating to the past or current
properties, facilities or operations of PFMI, the Company, any of
the
Subsidiaries, or their respective predecessors, which are in
their
possession
or under their reasonable control, have been made available to
Buyer.
3.15
Intellectual
Property.
PFMI, the Company and the Subsidiaries own and possess all
right,
title and interest in and to all of the
Intellectual Property set forth on
Schedule 3.15 and own and possess all
right, title and interest in and to, or
have a license to use pursuant to a written
license agreement listed on Schedule
3.17, all other Intellectual Property that
is used in the conduct of the
businesses of PFMI, the Company and the
Subsidiaries as currently conducted
(collectively, "Company Intellectual
Property"). Schedule 3.15 lists all of the
following that are owned by PFMI, the
Company or one of the Subsidiaries: (a)
patented or registered Intellectual
Property
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<PAGE>
and pending patent applications or
applications for registrations of other
Intellectual Property; and (b) material
unregistered trademarks, material
unregistered service marks, trade names,
corporate names and Internet domain
names. Except as described in Schedule
3.15, the Company Intellectual Property
is not subject to any Liens, except
Permitted Liens. Except as described in
Schedule 3.15, (x) the operation of PFMI's,
the Company's and the Subsidiaries'
businesses have not, do not and will not,
as currently conducted, infringe or
misappropriate any Intellectual Property of
any other Person, (y) there are no
facts that indicate a likelihood of the
foregoing, and (z) none of PFMI, the
Company or any of the Subsidiaries have
received any written notice regarding
any of the foregoing (including, without
limitation, any offers to license any
Intellectual Property from another Person)
during the three year period prior to
the date hereof. To the Knowledge of the
Shareholders, no Person is infringing
upon or misappropriating any Company
Intellectual Property, except as stated in
Schedule 3.15. Except as set forth in
Schedule 3.15, PFMI, the Company and the
Subsidiaries have taken commercially
reasonable action to maintain and protect
all material Company Intellectual Property.
Immediately subsequent to the
Closing, the Company Intellectual Property
will be owned by or available for use
by PFMI, the Company and the Subsidiaries
on terms and conditions identical to
those under which PFMI, the Company and the
Subsidiaries owned or used the
Company Intellectual Property immediately
prior to the Closing. To the Knowledge
of the Shareholders, all of the registered
or issued Company Intellectual
Property and all material unregistered
trademarks, material unregistered service
marks, trade names, corporate names and
Internet domain names listed on Schedule
3.15 is valid and enforceable, and none of
the Company Intellectual Property has
been misused. Except as stated in Schedule
3.15, no claim by any third party
contesting the validity, enforceability,
use or ownership of any Company
Intellectual Property is pending nor, to
the Knowledge of the Shareholders, are
there grounds for same.
3.16
Title to Real and
Personal Property; Leasehold Interests.
3.16.(a) Owned Real Property. Schedule 3.16(a) sets forth the
address
and description of each Owned Real Property. With respect to
each
Owned Real
Property: (i) except as set forth in Schedule 3.16(a), PFMI,
the
Company or Subsidiary (as the case may be) has good and
marketable
indefeasible fee simple title to such Owned Real Property, free and
clear
of all
Liens, except Permitted Liens, (ii) except as set forth in
Schedule
3.16(a),
PFMI, the Company or Subsidiary has not leased or otherwise
granted to
any Person the right to use or occupy such Owned Real Property
or any
portion thereof; (iii) other than the right of Buyer pursuant
to
this
Agreement, there are no outstanding options, rights of first offer
or
rights of
first refusal to purchase such Owned Real Property or any
portion
thereof or interest therein. None of PFMI, the Company or any
Subsidiary is a
party to any agreement or option to purchase any real
property
or interest therein.
3.16.(b) Leased Real Property. Schedule 3.16(b) sets forth the
address of
each Leased Real Property, and a true and complete list of all
Leases for
each such Leased Real Property. The Company has made available
to Buyer a
true and complete copy of each such Lease document. Except as
set forth
in Schedule 3.16(b), with respect to each of the Leases: (i)
such Lease
is legal, valid, binding, enforceable and in full force and
effect;
(ii) the sale of the Shares to Buyer pursuant to this Agreement
does not
require the consent of any other party to such Lease, will not
result in
a breach of or default
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<PAGE>
under such
Lease, or otherwise cause such Lease to cease to be legal,
valid,
binding, enforceable and in full force and effect on identical
terms
following the Closing; (iii) PFMI's, the Company's or
Subsidiary's
possession
and quiet enjoyment of the Leased Real Property under such
Lease has
not been disturbed, and to the Shareholders' Knowledge, there
are no
disputes with respect to such Lease; (iv) none of PFMI, the
Company
or
Subsidiary nor any other party to the Lease is in breach or
default
under such
Lease in any material respect, and no event has occurred or
circumstance exists which, with the delivery of notice, the passage
of
time or
both, would constitute such a breach or default, or permit the
termination, modification or acceleration of rent under such Lease;
(v)
the other
party to such Lease is not an affiliate of, and otherwise does
not have
any economic interest in, PFMI, the Company or any Subsidiary;
(viii)
none of PFMI, the Company or Subsidiary has subleased, licensed
or
otherwise
granted any Person the right to use or occupy such Leased Real
Property
or any portion thereof; and (ix) none of PFMI, the Company or
Subsidiary
has collaterally assigned or granted any other security
interest
in such Lease or any interest therein.
3.16.(c) Availability of Utility Services. All water, oil, gas,
electrical, steam, compressed air, telecommunications, sewer, storm
and
waste
water systems and other utility services or systems for the
Real
Property
have been installed and are operational and sufficient for the
operation
of PFMI's, the Company's or Subsidiary's business thereon, as
applicable, and all hook-up fees or other similar fees or charges
have
been paid
in full.
3.16.(d) Condemnation and Litigation. None of PFMI, the Company
or
any
Subsidiary has received written notice of any pending
condemnation,
expropriation or other proceeding in eminent domain affecting any
Real
Property
or any portion thereof or interest therein. There are no
outstanding Orders and none of PFMI, the Company or any Subsidiary
has
received
written notice of any pending claims, litigation,
administrative
actions or
similar proceedings, in either instance relating to the
ownership,
lease, use or occupancy of the Real Property or any portion
thereof.
3.17
Material
Contracts.
Except as listed in Schedule 3.17, none of PFMI, the Company or
any
of its Subsidiaries is a party to, or bound
by, any written or legally binding
oral: (i) contract, agreement or commitment
that (A) has a duration of twelve
months or more or (B) requires either party
thereto to pay, to the other,
$250,000 or more annually; (ii)
distribution, marketing, dealer, representative
or sales agency agreement, contract or
commitment; (iii) lease under which PFMI,
the Company or any of the Subsidiaries is
the lessor or permits any third party
to hold or operate any property, real or
personal, owned or controlled by PFMI,
the Company or any Subsidiary; (iv) note,
debenture, bond, equipment trust
agreement, letter of credit agreement, loan
agreement or other contract or
commitment for the borrowing or lending of
money or agreement or arrangement for
a line of credit or guarantee, pledge or
undertaking of the indebtedness of any
other Person or other Indebtedness (except
for certain immaterial items which in
the aggregate do not exceed One Hundred
Thousand Dollars ($100,000)); (v)
agreement relating to the ownership of or
investments in any Person (including
investments in joint ventures and minority
equity investments); (vi) agreement
under which PFMI, the Company or any
Subsidiary is a
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<PAGE>
lessee of
or holds or operates any personal property owned by any other
Person for
which the annual rental exceeds $100,000; (vii) agreement
relating
to the licensing of Intellectual Property by PFMI, the Company
or
any
Subsidiary to another Person or by any Person to PFMI, the Company
or
any
Subsidiary or any other agreement affecting PFMI's, the Company's
or
any
Subsidiary's ability to use or disclose any Company
Intellectual
Property
(other than licenses of off-the-shelf software for an aggregate
purchase
price of less than $10,000), and all other agreements affecting
PFMI's,
the Company's or any Subsidiary's ability to use or disclose
any
Intellectual Property; (viii) nondisclosure or confidentiality
agreement,
except for
agreements entered into during the past ninety (90) days with
other
potential bidders in connection with the possible sale of the
Shares
and other
agreements entered into in the ordinary course of business;
(ix)
contracts
with any labor union or any bonus, pension, profit sharing,
retirement
or any other form of deferred compensation plan or any stock
purchase,
stock option or similar plan or practice, whether formal or
informal,
or any severance agreement or arrangement; (x) agreements for
the
employment of any individual on a full time, part-time, consulting,
or
other
basis providing annual compensation in excess of $100,000; (xi)
agreement,
contract or commitment whereby it has agreed to indemnify any
other
Person, except for contracts with its customers entered into in
the
ordinary
course of business; or (xii) agreement, contract or commitment
limiting
or restraining PFMI, the Company, a Subsidiary, an Affiliate of
any of
them or an employee (other than noncompetition agreements
between
an
employee and the Company) of any of them or any of their businesses
or
successors
from engaging or competing in any manner or in any business.
With
respect to each agreement required to be listed in Schedule 3.17,
(a)
none of
PFMI, the Company or the Subsidiaries are in breach or default
in
any
material respect (nor, to the Knowledge of the Shareholders, is
any
counterparty thereto in material breach or default of such
agreement or
has any
event occurred which, with notice or lapse of time, would
constitute
a material breach or default, or permit termination,
modification, or acceleration under the agreement) under any
such
agreement;
(b) PFMI, the Company and the Subsidiaries have performed in
all
material respects all of their respective obligations required to
be
performed
by them to date under all such agreements, (c) the agreement is
legal,
valid, binding, enforceable, and in full force and effect,
except
as such
may be limited by bankruptcy, insolvency, reorganization, or
other
similar
Laws affecting creditors' rights generally, and by general
equitable
principles; (d) the agreement will continue to be legal, valid,
binding,
enforceable, and in full force and effect on identical terms
immediately following the consummation of the transactions
contemplated by
this
Agreement, provided that any consents necessary to undertake
such
transactions are obtained prior thereto, except as such may be
limited by
bankruptcy, insolvency, reorganization, or other similar Laws
affecting
creditors'
rights generally, and by general equitable principles; and (e)
to
Shareholders' Knowledge, no other party has repudiated any
provision of
the
agreement.
3.18
Insurance.
Copies of all
insurance policies covering PFMI, the Company and the
Subsidiaries and their owned and leased
properties and employees have been made
available to Buyer. Schedule 3.18
identifies each such insurance policy. All
premiums due prior to the date hereof under
such policies have been paid, there
are no retroactive premiums with respect to
such policies and no written notice
of cancellation or termination has been
received by PFMI, the Company or its
Subsidiaries with respect to such insurance
policies. PFMI, the Company and the
Subsidiaries have complied in all material
respects with the provisions of such
policies, the
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<PAGE>
policies are in full force and effect and
shall be in full force and effect as
of the Closing and none of PFMI, the
Company or any of the Subsidiaries has
received any written notice of cancellation
or non-renewal thereof. Except as
set forth on Schedule 3.18, none of PFMI,
the Company or any of its Subsidiaries
have any self-insurance or co-insurance
programs, and the reserves set forth on
the consolidated balance sheet of the
Company and its Subsidiaries as of
November 29, 2003 are adequate (and the
reserves to be set forth on the Closing
Balance Sheet will be adequate) to cover
all anticipated liabilities with
respect to any such self-insurance or
co-insurance programs. None of the rights
under PFMI's, the Company's and its
Subsidiaries' insurance policies for
pre-Closing occurrences will be affected by
the transactions contemplated by
this Agreement.
3.19
Product Liability.
Except as described in Schedule 3.19, no
claims related to the manufacture, sale
or supply of the Company's or any
Subsidiary's products (other than workman's
compensation or claims by federal or state
regulatory agencies arising in
connection with environmental matters) are
pending or, to the Knowledge of the
Shareholders, threatened against the
Company or any of the Subsidiaries, and
except for claims arising in the ordinary
course of business which have not,
individually or in the aggregate, resulted
in any material liability, there have
been no such claims within the past three
(3) years. Except as described in
Schedule 3.19, there have been no recalls
of products manufactured and/or
distributed by the Company for any reason
within the three (3) years prior to
the date hereof. The Company maintains
customer complaint files, records of any
potential defects in any Food, and records
of investigations and other steps
taken in response to complaints and/or
information relating to potential
defects.
3.20
Affiliate
Transactions.
Except as set forth on Schedule 3.20, no officer, director,
shareholder or Affiliate of PFMI, the
Company or any of its Subsidiaries or any
individual related by blood, marriage or
adoption to any such individual or any
entity in which any such Person or
individual owns any beneficial interest, is
currently a party to any contract or
agreement with PFMI, the Company or any of
its Subsidiaries or has any interest in any
property, asset or right used by
PFMI, the Company or any of its
Subsidiaries or necessary for their respective
businesses. Schedule 3.20 describes all
intercompany or affiliated services
currently provided to or on behalf of PFMI,
the Company or any Subsidiary by
Shareholders or their Affiliates and to or
on behalf of Shareholders and such
Affiliates by PFMI, the Company or any
Subsidiary and all intercompany
tr
