Exhibit 10.2

 

MILNOT COMPANY

 

STOCK PURCHASE AGREEMENT

 

BY AND BETWEEN

 

MILNOT HOLDING CORPORATION

 

AND

 

EAGLE FAMILY FOODS, INC.

 

Dated as of December 23, 2004

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TABLE OF CONTENTS

 

     Page

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ARTICLE I.      DEFINITIONS    1

Section 1.1.

  

Definitions

   1

Section 1.2.

  

Accounting Terms and Determinations

   10 ARTICLE II.     

SALE AND PURCHASE

   11

Section 2.1.

  

Agreement to Sell and to Purchase

   11

Section 2.2.

  

Purchase Price.

   11

Section 2.3.

  

Purchase Price Adjustment

   11 ARTICLE III.     

REPRESENTATIONS AND WARRANTIES OF SELLER

   16

Section 3.1.

  

Authority of Seller

   16

Section 3.2.

  

Organization of the Company.

   16

Section 3.3.

  

Capitalization of the Company; Title to the Stock

   17

Section 3.4.

  

No Conflict or Violation; Consents

   17

Section 3.5.

  

Subsidiaries and Investments

   18

Section 3.6.

  

Financial Statements; Closing Date Liability to Seller.

   18

Section 3.7.

  

Undisclosed Liabilities

   18

Section 3.8.

  

Material Adverse Effect

   18

Section 3.9.

  

Accounts Receivable

   19

Section 3.10.

  

Inventory

   19

Section 3.11.

  

Real Property.

   19

Section 3.12.

  

Condition and Compliance of Property.

   20

Section 3.13.

  

Compliance with Legal Requirements.

   21

Section 3.14.

  

Affiliate Agreements and Liabilities

   21

Section 3.15.

  

Contracts.

   22

Section 3.16.

  

Intellectual Property.

   23

Section 3.17.

  

Labor Relations

   25

Section 3.18.

  

Employee Benefits.

   25

Section 3.19.

  

Insurance

   26

Section 3.20.

  

Litigation

   27

Section 3.21.

  

Environmental Matters

   27

Section 3.22.

  

Tax Matters.

   28

Section 3.23.

  

Interim Operations

   29

Section 3.24.

  

Brokers

   30

Section 3.25.

  

Product Liability

   30

Section 3.26.

  

Books and Records

   31

 

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Section 3.27.

  

Customers and Suppliers

   32

Section 3.28.

  

Certain Payments

   32

Section 3.29.

  

Accounts

   32

Section 3.30.

  

Universal Product Codes

   32

Section 3.31.

  

Slotting Allowances

   32 ARTICLE IV.      REPRESENTATIONS AND WARRANTIES OF PURCHASER    33

Section 4.1.

  

Authority of Purchaser

   33

Section 4.2.

  

No Conflict or Violation

   33

Section 4.3.

  

Litigation

   33

Section 4.4.

  

Brokers

   33

Section 4.5.

  

Investment Intent; Status

   34

Section 4.6.

  

Solvency

   34

Section 4.7.

  

Representations and Warranties Regarding the Company

   34 ARTICLE V.      CERTAIN COVENANTS AND AGREEMENTS    34

Section 5.1.

  

Transfer Taxes

   34

Section 5.2.

  

Obligation to File Tax Returns.

   34

Section 5.3.

  

Sale of Beech-Nut

   36

Section 5.4.

  

Nondisclosure; Noncompetition.

   36

Section 5.5.

  

Ongoing Tax Cooperation.

   37

Section 5.6.

  

Further Assurances

   38

Section 5.7.

  

Employees and Employee Benefits.

   38

Section 5.8.

  

Market Sensitive Information

   40

Section 5.9.

  

Commercially Reasonable Efforts

   40 ARTICLE VI.      CONDITIONS TO SELLER’S OBLIGATIONS    41

Section 6.1.

  

Representations and Warranties

   41

Section 6.2.

  

Compliance with Agreement

   41

Section 6.3.

  

Consents

   41

Section 6.4.

  

Corporate Documents

   41

Section 6.5.

  

No Adverse Proceeding

   41 ARTICLE VII.      CONDITIONS TO PURCHASER’S OBLIGATIONS    41

Section 7.1.

  

Representations and Warranties

   41

 

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Section 7.2.

  

Compliance with Agreement

   41

Section 7.3.

  

Consents

   41

Section 7.4.

  

Corporate Documents

   42

Section 7.5.

  

FIRPTA

   42

Section 7.6.

  

No Adverse Proceeding

   42

Section 7.7.

  

Resignations

   42

Section 7.8.

  

Transition Services

   42

Section 7.9.

  

Surveys

   42

Section 7.10.

  

Title Policies

   42

Section 7.11.

  

Non-Imputation Endorsements

   42

Section 7.12.

  

Payment of Seller Liabilities, Release of Liens

   42 ARTICLE VIII.      THE CLOSING    43

Section 8.1.

  

The Closing

   43

Section 8.2.

  

Deliveries by Seller at the Closing

   43

Section 8.3.

  

Deliveries by Purchaser at the Closing

   43 ARTICLE IX.      INDEMNIFICATION    44

Section 9.1.

  

Survival

   44

Section 9.2.

  

Indemnification Provisions for Benefit of Purchaser.

   44

Section 9.3.

  

Indemnification Provisions for Benefit of Seller.

   46

Section 9.4.

  

Matters Involving Third Parties.

   46

Section 9.5.

  

Indemnification Related to Sale of Chili Man Business.

   47

Section 9.6.

  

Certain Additional Provisions Relating to Indemnification.

   48 ARTICLE X.      MISCELLANEOUS PROVISIONS    49

Section 10.1.

  

Notices

   49

Section 10.2.

  

Amendments

   50

Section 10.3.

  

Assignment and Parties in Interest.

   50

Section 10.4.

  

Announcements

   50

Section 10.5.

  

Expenses

   51

Section 10.6.

  

Entire Agreement

   51

Section 10.7.

  

Descriptive Headings

   51

Section 10.8.

  

Counterparts

   51

Section 10.9.

  

Governing Law; Jurisdiction.

   51

Section 10.10.

  

Limited License

   52

Section 10.11.

  

Construction

   52

 

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Section 10.12.

  

Severability

   52

Section 10.13.

  

Specific Performance

   53

 

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TABLE OF CONTENTS

(continued)

 

SCHEDULE

NUMBER

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SCHEDULE NAME

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1.1    Bank Liens 3.2    Certificate and Foreign Qualifications 3.3   
Capitalization 3.4    Conflicts or Violations 3.6(a)    Financial Statements
3.6(b)    Interim Financial Statements 3.7    Undisclosed Liabilities 3.8   
Material Adverse Effect 3.9    Accounts Receivable Aging 3.10    Inventory
3.11(a)    Owned Real Property 3.11(b)    Lease Obligations 3.12(a)    Personal
Property; Liens 3.12(b)    Leased Personal Property 3.13(a)    Compliance with
Laws 3.13(b)    Permits 3.14    Affiliate Agreements 3.15    Contracts 3.16(a)
   Intellectual Property 3.16(b)    Intellectual Property Contracts 3.16(c)   
Marks and Patents 3.16(d)    Trade Secrets 3.16(e)    No Conflicts 3.16(g)    No
Breach 3.16(h)    Employee Interest 3.17    Collective Bargaining Agreements
3.18(a)    Employee Benefit Plans 3.18(d)    ERISA 3.18(e)    Claims 3.18(f)   
Tax Penalty 3.18(g)    Single Employer Liability 3.18(h)    Qualification
3.18(i)    Post-Retirement Benefits 3.18(j)    Benefits 3.19    Insurance 3.20
   Litigation 3.21(a)    Environmental Matters 3.21(b)    Environmental Permits
3.22    Tax Matters 3.23    Interim Operations 3.25    Products Liability 3.27
   Major Customers and Major Suppliers

 

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TABLE OF CONTENTS

(continued)

 

3.29    Accounts 3.30    Universal Product Codes 3.31    Slotting Allowances 4.2
   Conflicts and Violations 5.7(a)    Private Label Sales Person 5.7(c)   
Accrued Vacation 5.8    Market Sensitive Information 7.3    Consents 7.12   
Repayment of Indebtedness 9.2    Indemnification

 

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TABLE OF CONTENTS

(continued)

 

EXHIBIT

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EXHIBIT NAME

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A    Form of Subordinated Promissory Note B    [Reserved] C    Form of FIRPTA
Certificate D    [Reserved] E    Form of Transition Services Agreement

 

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STOCK PURCHASE AGREEMENT

 

THIS STOCK PURCHASE AGREEMENT (the “Agreement”) is made and entered into as of
December 23, 2004, by and between MILNOT HOLDING CORPORATION, a Delaware
corporation (“Seller”), and EAGLE FAMILY FOODS, INC., a Delaware corporation
(“Purchaser”).

 

PRELIMINARY STATEMENT

 

WHEREAS, Seller owns all outstanding shares (the “Stock”) of the common stock,
par value $0.01 per share, of Milnot Company, a Delaware corporation (the
“Company”); and

 

WHEREAS, Purchaser desires to purchase the Stock from Seller, and Seller desires
to sell the Stock to Purchaser, in each case upon the terms and subject to the
conditions set forth in this Agreement;

 

NOW, THEREFORE, in consideration of the premises, the mutual covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

 

ARTICLE I.

DEFINITIONS

 

Section 1.1. Definitions. In addition to the terms defined elsewhere herein, the
terms defined in the introductory paragraph and the Recitals to this Agreement
shall have the respective meanings specified therein, and the following terms
shall have the meanings specified below when used herein with initial capital
letters:

 

“Accounts Receivable” has the meaning set forth in Section 3.9.

 

“Actual Deficit” has the meaning set forth in Section 2.3(e).

 

“Actual Surplus” has the meaning set forth in Section 2.3(e).

 

“Affiliate” means “affiliate” as defined in Rule 405 promulgated under the
Securities Act of 1933, as amended.

 

“Agreement” has the meaning set forth in the preamble, and shall include all
Schedules and Exhibits hereto.

 

“Balance Sheet” has the meaning set forth in Section 3.6(a).

 

“Beech-Nut” has the meaning set forth in Section 5.3.

 

“Business Day” means a day, other than a Saturday or a Sunday, on which
commercial banks are not required or authorized to close in the City of New
York.

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“CERCLA” has the meaning set forth in this Section 1.1 in the definition of
“Environmental Laws.”

 

“Cap” has the meaning set forth in Section 9.2(a).

 

“Chili Asset Purchase Agreement” has the meaning set forth in this Section 1.1
in the definition of “Chili Business.”

 

“Chili Business” means the Company’s branded and private label chili
manufacturing business, including the product line known as “Chilli Man,”
previously divested pursuant to that certain asset purchase agreement, dated as
of August 14, 2003, between the Company and Faribault Foods Illinois, Inc. (the
“Chili Asset Purchase Agreement”).

 

“Closing” has the meaning set forth in Section 8.1.

 

“Closing Date” has the meaning set forth in Section 8.1.

 

“Closing Date Payment” has the meaning set forth in Section 2.2(b).

 

“Closing Net Working Capital” has the meaning set forth in Section 2.3(d).

 

“Closing Net Working Capital Statement” has the meaning set forth in Section
2.3(d).

 

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

 

“Company” has the meaning set forth in the preamble hereto.

 

“Contracts” as of any date means, collectively, all written or oral contracts,
agreements, commitments, instruments and guaranties to which the Company is a
party.

 

“Customer Trade Spending Obligations” means the Company’s spending obligations
under its customer programs, including coupon redemptions, trade allowances,
market development programs, distribution allowances, pick-up allowances,
bill-backs, discounts or other promotional incentives, rebates, volume
guaranties, performance bonuses or other customer commitments.

 

“Damages” means any losses, amounts paid in settlement, claims, damages,
liabilities, obligations, judgments and reasonable out-of-pocket expenses and
costs (including, without limitation, attorneys’ fees and other costs of
enforcement), including, without limitation, any special or punitive damages
solely to the extent assessed against an Indemnified Party as a result of an
unaffiliated third party action, but excluding any such claims, damages,
liabilities, obligations, judgments, settlements and reasonable out-of-pocket
expenses and costs to the extent reflected as a liability or contra-asset amount
in the determination of Final Closing Net Working Capital or the Final True-Up
Balance.

 

“Deductible Amount” has the meaning set forth in Section 9.2(a).

 

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“Dispute” has the meaning set forth in Section 10.9(b).

 

“Employee Benefit Plan” means an Employee Pension Benefit Plan or an Employee
Welfare Benefit Plan, where no distinction is required by the context in which
the term is used.

 

“Employee Pension Benefit Plan” has the meaning set forth in Section 3(2) of
ERISA.

 

“Employee Welfare Benefit Plan” has the meaning set forth in Section 3(1) of
ERISA.

 

“Employees” means the private label sales person set forth on Schedule 5.7(a)
and all current and former employees of the Company.

 

“Environmental Laws” means any law, statute, regulation, Order, ordinance or
obligation of common law with respect to worker safety, pollution or the
protection of the environment, including, without limitation, the pollution or
protection of drinking water, groundwater, wetlands, water, soil, air, natural
resources, plant and animal life, or waste management, regulation or control.
Without limiting the generality of the foregoing, the term shall encompass each
of the following statutes, and the regulations promulgated thereunder, in each
case as in effect as of Closing: (a) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (codified in scattered sections of 26
U.S.C., 33 U.S.C., 42 U.S.C. and 42 U.S.C. § 9601 et seq.) (“CERCLA”); (b) the
Resource Conservation and Recovery Act of 1976 (42 U.S.C. § 6901 et seq.); (c)
the Hazardous Materials Transportation Act (49 U.S.C. § 1801 et seq.); (d) the
Toxic Substances Control Act (15 U.S.C. § 2061 et seq.); (e) the Federal Water
Pollution Control Act (33 U.S.C. § 1251 et seq.); (f) the Clean Air Act and
Amendments (42 U.S.C. § 7401 et seq.); (g) the Safe Drinking Water Act (21
U.S.C. § 349; 42 U.S.C. § 201 and § 300 et seq.); (h) the Superfund Amendment
and Reauthorization Act of 1986 (codified in scattered sections of 10 U.S.C., 29
U.S.C., 33 U.S.C. and 42 U.S.C.); and (i) the Occupational, Health and Safety
Act (29 U.S.C. § 651 et seq.).

 

“Environmental Permits “ has the meaning set forth in Section 3.21(b).

 

“Equity Distributions” as of any date means all dividends, distributions,
forgiveness of debt, transfer of value or similar transactions, in each case
with respect to the Stock.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“Escrow Funds” has the meaning set forth in Section 5.3.

 

“Escrow Termination Date” has the meaning set forth in Section 5.3.

 

“Estimated Deficiency” has the meaning set forth in Section 2.3(a).

 

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“Estimated Net Working Capital” has the meaning set forth in Section 2.3(a).

 

“Estimated Net Working Capital Statement” has the meaning set forth in Section
2.3(a).

 

“Estimated Surplus” has the meaning set forth in Section 2.3(a).

 

“FD&C Act” has the meaning set forth in Section 3.25(d).

 

“Final Closing Net Working Capital” has the meaning set forth in Section 2.3.

 

“Financial Statements” has the meaning set forth in Section 3.6(a).

 

“Final True-Up Balance” has the meaning set forth in Section 2.3(h).

 

“Final True-Up Date” has the meaning set forth in Section 2.3(g).

 

“Generally accepted accounting principles” or “GAAP” has the meaning set forth
in Section 1.2.

 

“Governmental Agency” means (a) any international, foreign, federal, state,
county, local or municipal government or administrative agency or political
subdivision thereof, (b) any governmental agency, authority, board, bureau,
commission, department or instrumentality, (c) any court or administrative
tribunal, (d) any non-governmental agency, tribunal or entity that is vested by
a governmental agency with applicable jurisdiction, or (e) any arbitration
tribunal or other non-governmental authority with applicable jurisdiction.

 

“Gross A/R” has the meaning set forth in Section 2.3(g).

 

“Hazardous Materials” means each and every element, compound, chemical mixture,
pollutant, contaminant, material, waste or other substance which is defined,
designated, regulated, determined, classified or identified as of the Closing
Date as hazardous, radioactive, harmful or toxic under any Environmental Law.
Without limiting the generality of the foregoing, the term shall include any
“toxic substance,” “hazardous substance,” “hazardous waste,” or “hazardous
material” as defined in any Environmental Law as amended to date, and any
explosive or radioactive material, asbestos, asbestos-containing material, toxic
mold, waste water, sludge, untreated dye, other effluent, coal ash,
polychlorinated biphenyls, special waste, petroleum or any derivative or
byproduct thereof, and toxic waste.

 

“Indebtedness” means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person, (i) the principal,
premium, if any, and accrued interest in respect of any indebtedness of such
Person for money borrowed, (ii) the principal, premium, if any, and accrued
interest with respect to obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, including obligations incurred
in connection with the acquisition of property, assets or businesses (other than
(x) trade payables relating to purchases of milk and cans

 

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which are not overdue by more than one (1) day, (y) other trade payables which
are not overdue by more than ten (10) days and (z) accrued liabilities arising
in the Ordinary Course of Business), (iii) all obligations of such Person in
respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto) but only to the extent of
drawings thereunder, (iv) every obligation of such Person issued or assumed as
the deferred purchase price of property or services (other than (x) trade
payables relating to purchases of milk and cans which are not overdue by more
than one (1) day, (y) other trade payables which are not overdue by more than
(10) days and (z) accrued liabilities arising in the Ordinary Course of
Business), (v) every capital lease obligation (determined in accordance with
GAAP) of such Person, (vi) all Indebtedness of other Persons secured by a Lien
on any asset of such Person, whether or not such Indebtedness is assumed by such
Person; provided, however, that the amount of such Indebtedness shall be the
lesser of (A) the fair market value of such asset at such date of determination
and (B) the amount of such Indebtedness of such other Persons, (vii) the present
value (discounted using an interest rate of 6% per annum) as of the date of
determination of every obligation to pay rent or other payment amounts of such
Person with respect to any sale-leaseback transaction to which such Person is a
party, payable through the stated maturity of such sale-leaseback transaction,
and (viii) every obligation of the type referred to in clauses (i) through (vii)
of another Person to the extent the payment of which, in any case, such Person
has guaranteed or is responsible or liable, directly or indirectly, as obligor,
guarantor or otherwise.

 

“Indemnified Net Working Capital Shortfall” means the aggregate indemnity
payments made to Purchaser pursuant to Article IX that would not have been
required if the Final Closing Net Working Capital had been determined to be the
Final True-Up Balance and to include all adjustments to the components of Final
Closing Net Working Capital made in computing the Final True-Up Balance.

 

“Indemnified Party” has the meaning set forth in Section 9.4(a) and in the case
of Purchaser shall also include the Company.

 

“Indemnifying Party” has the meaning set forth in Section 9.4(a).

 

“Independent Accounting Firm” has the meaning set forth in Section 2.3(d).

 

“Institute” has the meaning set forth in Section 10.9.

 

“Insurance Policies” has the meaning set forth in Section 3.19.

 

“Intellectual Property” shall mean all of the following, owned, used or licensed
by the Company: (i) all fictional business names, trademarks and service marks
(registered or unregistered), trade dress, trade names and other names and
slogans embodying business or product goodwill or indications of origin, all
applications or registrations in any jurisdiction pertaining to the foregoing
and all goodwill associated therewith (collectively “Marks”); (ii) patents,
patentable inventions, discoveries, improvements, ideas, know-how, formula
methodology, processes, technology and all applications or registrations in any
jurisdiction pertaining to the foregoing, including all

 

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reissues, continuations, divisions, continuations-in-part, renewals or
extensions thereof (collectively “Patents”); (iii) trade secrets and other
confidential information, including recipes and formulas, in each case that
derive value from not being publicly known, and the right in any jurisdiction to
limit the use or disclosure thereof (collectively, “Trade Secrets”), (iv)
copyrights in writings, designs, mask works or other works, and registrations or
applications for registration of copyrights in any jurisdiction; (v) computer
programs, software and databases (including source code, object code,
development documentation, programming tools, drawings, specifications and
data), (vi) licenses, immunities, covenants not to sue and the like relating to
any of the foregoing; (vii) Internet Web sites, domain names and registrations
or applications for registration thereof; and (viii) claims or causes of action
arising out of or related to infringement or misappropriation of any of the
foregoing.

 

“Interim Balance Sheet” has the meaning set forth in Section 3.6(b).

 

“Interim Balance Sheet Date” means October 23, 2004.

 

“Interim Financial Statements” has the meaning set forth in Section 3.6(b).

 

“IRS” means the Internal Revenue Service of the Department of the Treasury.

 

“Knowledge” as applied to Seller, means the actual knowledge, after reasonable
inquiry, of Scott Meader, Alain Souligny, Connie Huck, Gordon Woosley and John
Hall.

 

“Leased Property” has the meaning set forth in Section 3.11(b).

 

“Leases” has the meaning set forth in Section 3.11(b).

 

“Legal Requirement” means any federal, state, local, municipal, foreign,
international, multinational, or other administrative Order, constitution, law,
rule, ordinance, permit, principle of common law, regulation, statute, or treaty
(including without limitation the Americans with Disability Act and similar
state and local laws and any health, fire, safety, zoning and building laws and
ordinances).

 

“Liability” means any liability or obligation (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated and whether due or to become due),
including, without limitation, any liability for Taxes.

 

“Lien” means any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, covenant, encroachment, encumbrance, easement, right of way, license,
grant, building or use restriction, zoning restriction, building code, other
land use law, exception, reservation, limitation or other imperfections in
title, or contractual restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.

 

“Major Customers” has the meaning set forth in Section 3.27.

 

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“Major Suppliers” has the meaning set forth in Section 3.27.

 

“Mark” has the meaning set forth in this Section 1.1 in the definition of
“Intellectual Property.”

 

“Market Sensitive Contracts” has the meaning set forth in Section 3.15.

 

“Market Sensitive Information” has the meaning set forth in Section 5.8.

 

“Material Adverse Effect” means a material adverse change in or effect with
respect to the business, results of operations, properties or financial
condition of the Company, excluding any change or effect arising from (i)
general economic conditions, (ii) changes in any laws and governmental
regulations affecting the industry in which the Company operates generally,
(iii) conditions affecting the industry in which the Company operates generally,
including, without limitation, any fluctuations in raw milk prices, (iv) the
competitive activity of Purchaser in the canned milk business, and (v) the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.

 

“Multiemployer Plan” has the meaning set forth in Section 3(37) of ERISA.

 

“Net Working Capital” means without duplication:

 

(a) the amount of all accounts receivable arising from transactions associated
with the Company’s canned milk business, less the amount of any reserve for
uncollectable accounts receivable applicable thereto including but not limited
to allowance for deductions, discounts, non-saleable products and doubtful
accounts (provided that, for purposes of this definition, accounts receivable
outstanding for more than sixty (60) days from the date of invoice and the
reserve associated therewith will be excluded from the calculation of Net
Working Capital), all as otherwise determined in accordance with GAAP; plus

 

(b) prepaid expenses as determined in accordance with GAAP; plus

 

(c) the amount of all inventory of the Company, less the amount of any
obsolescence reserve; provided that, for purposes of this definition, (i) such
obsolescence reserve will be in an amount sufficient to provide for
unrecoverable value from inventory that is obsolete, damaged, unusable or below
quality standards, and for finished goods inventory that has a shelf life of
less than five (5) months, (ii) no manufacturing or purchase price variances
(other than fluctuations in milk prices) shall be capitalized, and the standard
costs in effect as of June 27, 2004 shall be used, in calculating Net Working
Capital, (iii) inventory valuation for the Company’s Seneca plant fixed overhead
expenses and Capitalized Storage balances shall be consistent with the balances
as of June 26, 2004, and (iv) the amount of the Company’s inventory shall
otherwise be determined in accordance with GAAP; less

 

(d) the amount of all accounts payable of the Company associated with the
Company’s canned milk business; provided that, for purposes of this definition,
(i)

 

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accounts payable shall not include any accounts payable of any Seller Entity or
in respect of the Chili Business, (ii) trade payables shall not include payables
described in clause (ii)(x) or (ii)(y) of the definition of Indebtedness, and
(iii) accounts payable shall otherwise be determined in accordance with GAAP;
less

 

(e) current accrued liabilities to the extent that they represent valid current
obligations of the Company incurred in the Ordinary Course of Business prior to
the Closing Date, including, without limitation, (i) payroll related accruals,
and (ii) all Customer Trade Spending Obligations to the extent unpaid at the
Closing Date and for which the financial benefits of sales have been received by
the Company prior to the Closing Date, including without limitation any
outstanding obligation for any “off-invoice” pricing arrangement or promotional
accrual applied to sales of products shipped prior to the Closing Date and any
advertisements and/or in-store promotions which have occurred prior to the
Closing Date meeting such criteria; provided that, for purposes of this
definition, (i) such accrued liabilities shall not include any liability of any
Seller Entity or in respect of (A) the Chili Business, (B) workers’ compensation
payments, (C) income Taxes, (D) severance obligations with respect to
Transferred Employees, (E) the current portion of any Indebtedness, or (F) any
dispute, litigation, or similar claim (including any Product Claim), action or
proceeding, and (ii) for purposes of this definition, accrued liabilities shall
otherwise be determined in accordance with GAAP;

 

provided that, for the avoidance of doubt, the calculation of “Net Working
Capital” shall exclude cash and cash equivalent accounts, all milk hedging
account balances, current income tax receivables and payables, deferred income
tax receivables and payables, inter-company receivables and payables, revolving
credit balances and current maturities on long-term debt. Checks received and
not deposited or not claimed shall be considered as increases to cash and all
uncleared checks written and sent shall be considered as decreases to cash, with
corresponding decreases to accounts receivable and accounts payable,
respectively, in respect of the calculation of Net Working Capital.

 

“Order” means any award, decision, injunction, judgment, order, ruling, or
verdict entered, issued, made, or rendered by any court, administrative agency,
or other Governmental Agency.

 

“Ordinary Course of Business” means an action which is consistent with the past
practices of the Company and is taken in the ordinary course of the normal
day-to-day operations of the Company.

 

“Owned Real Property” has the meaning set forth in Section 3.11(a).

 

“Patent” has the meaning set forth in this Section 1.1 in the definition of
“Intellectual Property.”

 

“Permit” means any permit, approval, consent, authorization, license, variance,
or permission required by a Governmental Agency under any Legal Requirement.

 

“Permitted Liens” means, with respect to any asset, (i) Liens (other than a Lien
securing any Indebtedness) with respect to such asset which, individually or in
the

 

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aggregate, does not materially detract from the value of, or materially
interfere with the present occupancy or use of, such asset and the continuation
of the present occupancy or use of such asset; (ii) the matters set forth on
Schedule 1.1 hereto; (iii) unfiled mechanic’s, materialmen’s and similar Liens
with respect to amounts not yet due and payable or which are being contested in
good faith through appropriate proceedings and, for those existing on the
Interim Balance Sheet Date, for which reserves in accordance with GAAP are
reflected on the Interim Balance Sheet; (iv) Liens for Taxes not yet due and
payable or which are being contested in good faith through appropriate
proceedings and, for those existing on the Interim Balance Sheet Date, for which
reserves in accordance with GAAP are reflected on the Interim Balance Sheet; (v)
Liens securing rental payments under capital lease arrangements, which capital
lease arrangements existing as of the Closing Date are in accordance with GAAP
reflected as Indebtedness in the Company’s accounting records as of the Closing
Date; and (vi) Liens securing rental payments under operating Leases.

 

“Perpetual Representations” has the meaning set forth in Section 9.1.

 

“Person” means any individual, partnership, corporation, trust, association,
limited liability company, Governmental Agency or any other entity.

 

“Plan” has the meaning set forth in Section 3.18(a).

 

“Pre-Closing Tax Periods” has the meaning set forth in Section 5.2(a).

 

“Product” has the meaning set forth in Section 3.25.

 

“Product Claim” has the meaning set forth in Section 3.25.

 

“Property Taxes” has the meaning set forth in Section 5.2(b).

 

“Proposed Adjustments” has the meaning set forth in Section 2.3(d).

 

“Purchase Price” has the meaning set forth in Section 2.2(a).

 

“Purchase Order” means a Contract for the purchase of supplies or material.

 

“Purchaser” has the meaning set forth in the preamble hereto.

 

“Purchaser 401(k) Plan” has the meaning set forth in Section 6.8(b).

 

“Purchaser Prepayment” has the meaning set forth in Section 2.3(d).

 

“Recall” has the meaning set forth in Section 3.25(b).

 

“Salaried Employee” has the meaning set forth in Section 3.23.

 

“Schedules” means, collectively, the various Schedules attached hereto referred
to in this Agreement.

 

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“Seller” has the meaning set forth in the preamble hereto.

 

“Seller Entity” means Seller and its Affiliates (other than the Company).

 

“Seller Prepayment” has the meaning set forth in Section 2.3(d).

 

“Slotting Allowances” has the meaning set forth in Section 3.31.

 

“Stock” has the meaning set forth in the preamble hereto.

 

“Straddle Period” has the meaning set forth in Section 5.2(a).

 

“Straddle Tax Return” has the meaning set forth in Section 5.2(a).

 

“Subsidiary” means a “subsidiary” as defined in Rule 405 promulgated under the
Securities Act of 1933, as amended.

 

“Surveys” has the meaning set forth in Section 7.9.

 

“Target” means $5,890,000.

 

“Tax Return” means any report, return, information return, forms, declarations,
claims for refund, statements or other information (including any amendments
thereto and including any schedule or statement thereto) required to be supplied
to a Governmental Agency in connection with Taxes.

 

“Taxes” means all federal, state, local, foreign and other taxes and similar
assessments, including without limitation, income, gross receipts, excise,
employment, sales, use, transfer, license, payroll, franchise, severance, stamp,
withholding, Social Security, unemployment, real property, personal property,
property gains, registration, capital stock, value added, single business,
occupation, workers’ compensation, alternative or add-on minimum, estimated, or
other tax, including without limitation any interest, penalties or additions
thereto.

 

“Trade Secret” has the meaning set forth in this Section 1.1 in the definition
of “Intellectual Property.”

 

“Transferred Employee” has the meaning set forth in Section 5.7.

 

“True-Up Balance” has the meaning set forth in Section 2.3(g).

 

“True-Up Statement” has the meaning set forth in Section 2.3(g).

 

Section 1.2. Accounting Terms and Determinations. All references in this
Agreement to “generally accepted accounting principles” or “GAAP” shall mean
generally accepted accounting principles in effect in the United States of
America at the time of application thereof, applied on a basis consistent with
the preparation of (i) Seller’s audited financial statements at June 26, 2004
and for the period then ended and, (ii) in the case of the Interim Balance Sheet
and Net Working Capital determinations, the Balance Sheet. Unless

 

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otherwise specified herein, all accounting terms used herein shall be
interpreted, all determinations with respect to accounting matters hereunder
shall be made, and all financial statements and certificates and reports as to
financial matters required to be furnished hereunder shall be prepared, in
accordance with GAAP.

 

ARTICLE II.

SALE AND PURCHASE

 

Section 2.1. Agreement to Sell and to Purchase. On the terms and subject to the
conditions set forth in this Agreement, at the Closing, Purchaser shall purchase
from Seller, and Seller shall sell, transfer, assign, convey and deliver to
Purchaser, the Stock free and clear of all Liens. At the Closing, Seller shall
deliver to Purchaser or its designees certificates representing the Stock, duly
endorsed in blank for transfer or accompanied by appropriate stock powers duly
executed in blank.

 

Section 2.2. Purchase Price.

 

(a) The purchase price for the Stock, which is subject to adjustment pursuant to
Section 2.3, shall be equal to (i) cash in the amount of $15,000,000 (the “Cash
Purchase Price”) and (ii) a Subordinated Promissory Note (the “Seller Note”),
substantially in the form of Exhibit A attached hereto, in the aggregate
principal amount of $2,000,000 (together with the Cash Purchase Price, the
“Purchase Price”).

 

(b) At the Closing, Purchaser shall deliver to Seller (i) by wire transfer of
immediately available funds an amount equal to the Cash Purchase Price less the
amount of the Estimated Deficiency, if any, and plus the amount of the Estimated
Surplus, if any, as the case may be (the “Closing Date Payment”) and (ii) the
Seller Note.

 

Section 2.3. Purchase Price Adjustment. The Purchase Price shall be subject to
adjustment as follows:

 

(a) At the Closing, the Purchase Price will be adjusted on a dollar for dollar
basis as set forth in this Section 2.3. Prior to the Closing Date, Seller shall
deliver to Purchaser a statement (the “Estimated Net Working Capital Statement”)
of the estimated Net Working Capital as of the close of business on the Closing
Date (the “Estimated Net Working Capital”) prepared in good faith, using the
Company’s then available financial information as of such date. If the Estimated
Net Working Capital is less than the Target, the Purchase Price shall be
decreased on a dollar for dollar basis by the amount of such deficiency (the
“Estimated Deficiency”). If the Estimated Net Working Capital is greater than
the Target, the Purchase Price shall be increased on a dollar for dollar basis
by the amount of such surplus (the “Estimated Surplus”).

 

(b) Within two (2) Business Days after the Closing, Seller shall provide
Purchaser with:

 

(i) a detailed aged trial balance listing all accounts receivable of the Company
as of the Closing Date;

 

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(ii) a detailed report listing inventory of the Company by location, including
SKU number, product description, quantity, standard cost and extended cost as of
the Closing Date;

 

(iii) a detailed aged trial balance listing all accounts payable of the Company
as of the Closing Date; and

 

(iv) a report setting forth goods received but not yet invoiced by vendor,
including raw material description and amount, as of the Closing Date, to the
extent not reflected in clause (iii) above.

 

(c) Within one (1) calendar day after the Closing Date, Purchaser shall, at its
own expense, conduct a code-dated physical inventory in respect of the Company
at each of the Company’s locations; provided that, if the Closing Date is
December 23, 2004, December 24, 2004 or December 31, 2004, the Purchaser shall
conduct such inventory within three (3) Business Days after the Closing Date.
Representatives of Seller shall, at Seller’s expense, observe and obtain the
results of such physical inventory count, and Purchaser shall provide Seller
advance written notice regarding the timing and location of such physical
inventory count.

 

(d) Within fifteen (15) calendar days after the Closing Date, Seller shall
deliver to Purchaser a statement (the “Closing Net Working Capital Statement”)
setting forth the Net Working Capital as of the close of business on the Closing
Date (the “Closing Net Working Capital”), prepared in good faith in accordance
with GAAP and based on the physical inventory, collections and payments since
the Closing and other data, including detailed schedules supporting each
component of the Closing Net Working Capital. If the Closing Net Working Capital
provided by Seller exceeds the Estimated Net Working Capital by an amount
greater than $250,000, Purchaser shall make a partial settlement payment to
Seller in an amount equal to such excess over $250,000 (“Purchaser Prepayment”).
If the Closing Net Working Capital provided by Seller is less than the Estimated
Net Working Capital by an amount greater than $250,000, Seller will make a
partial settlement payment to Purchaser in an amount equal to the excess over
$250,000 (“Seller Prepayment”). Payment of the Purchaser Prepayment shall be
made by wire transfer of immediately available funds promptly after delivery by
Seller of the Closing Net Working Capital Statement. Payment of the Seller
Prepayment shall be made by wire transfer of immediately available funds
promptly after delivery by Seller of the Closing Net Working Capital Statement.
Each of Seller and Purchaser shall cooperate to the extent reasonably requested
by the other in connection with the preparation and evaluation of the Closing
Net Working Capital. The Closing Net Working Capital as presented by Seller in
the Closing Net Working Capital Statement shall be final and binding on the
parties hereto for the purpose of any Purchase Price adjustment pursuant to
Section 2.3(e), unless, not later than forty-five (45) calendar days after
receipt of the Closing Net Working Capital Statement, Purchaser provides Seller
with a list of those items, if any, to which Purchaser takes exception (the
“Proposed Adjustments”). Such Proposed Adjustments shall be final and binding on
the parties hereto for purposes of any Purchase Price Adjustment pursuant to
Section 2.3(e), unless Seller gives Purchaser notice of objections to the
Proposed Adjustments within

 

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fifteen (15) calendar days after receipt of the Proposed Adjustments. If
Purchaser and Seller are unable, within fifteen (15) calendar days after receipt
by Purchaser of the notice by Seller of objections, to resolve the disputed
exceptions, such disputed exceptions, together with a written summary of the
present dispute and a good faith proposal as to what the final determination
should be, will be referred to a nationally recognized firm of independent
certified public accountants mutually acceptable to Purchaser and Seller (the
“Independent Accounting Firm”). The Independent Accounting Firm shall, within
thirty (30) calendar days following its selection, deliver to Purchaser and
Seller a written report determining such disputed exceptions, and its
determinations will be conclusive and binding upon the parties hereto for the
purposes of any Purchase Price adjustment under Section 2.3(e) hereof. The
determinations of the Independent Accounting Firm shall be made and articulated
in accordance with the definition of Net Working Capital set forth in Section
1.1, and shall be final and binding on the parties hereto. The fees and
disbursements of the Independent Accounting Firm shall be shared equally by
Purchaser and Seller. In the event Purchaser and Seller agree in writing in the
time allotted on any Proposed Adjustments, such resolution will be binding on
the parties hereto for purposes of the Purchase Price adjustment pursuant to
Section 2.3(e).

 

(e) Within three (3) Business Days following the final determination, pursuant
to this Section 2.3, of the Closing Net Working Capital (the “Final Closing Net
Working Capital”), and based upon such final determination:

 

(i) If the Final Closing Net Working Capital exceeds the Estimated Net Working
Capital (the “Actual Surplus”), Purchaser shall pay to Seller by wire transfer
of immediately available funds an amount equal to the Actual Surplus, reduced by
the amount of the Purchaser Prepayment, if any, or increased by the amount of
the Seller Prepayment, if any.

 

(ii) If the Final Closing Net Working Capital is less than the Estimated Net
Working Capital (the “Actual Deficit”), Seller shall pay to Purchaser by wire
transfer of immediately available funds an amount equal to the Actual Deficit
reduced by the amount of the Seller Prepayment, if any, or increased by the
amount of the Purchaser Prepayment, if any.

 

(f) Seller shall have the exclusive right to take any reasonable actions to
recover for its own account, or donate and obtain the benefit of the charitable
deduction for, any accounts receivable or inventory excluded from the
calculation of the Final Closing Net Working Capital or the Final True-Up
Balance, including, without limitation, (i) all accounts receivable arising from
transactions associated with the Chili Business, (ii) all accounts receivable
outstanding for more than sixty (60) days from the date of invoice and (iii) all
inventory with a remaining shelf-life of less than five (5) months; provided
that Seller shall not sell any such inventory through accounts used by the
Company for sales of inventory prior to the Closing Date. In addition, if
Purchaser, the Company or any of their respective Affiliates receive any
proceeds from the collection of accounts receivable or the sale of inventory not
included in the calculation of the Final Closing Net Working Capital determined
in accordance with this Section 2.3, Purchaser shall pay or cause to be paid
such proceeds to Seller, and such proceeds, as

 

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well as all proceeds collected from the accounts receivable described in clauses
(i) and (ii), shall be deemed an adjustment to the Purchase Price. For the
period extending from Closing until the Final True-Up Date, (A) Purchaser shall
cause the Company to continue to sell its inventory on a first-in, first-out
basis, consistent with the past practice of the Company and (B) Purchaser shall,
and shall cause its Affiliates, including the Company to, offset cash received
from any customer of the Company against the earliest undisputed Company
accounts receivable for such customer. Further, if Purchaser, the Company or any
of their respective Affiliates after the Closing take possession of or otherwise
acquire any amounts treated as cash or cash equivalents of the Company as of
immediately prior to the Closing, including without limitation, any checks
received but not yet cleared as of the Closing, Purchaser promptly (and in any
case within two Business Days) shall pay or cause to be paid such cash or cash
equivalent amounts to Seller in immediately available funds.

 

(g) On the first Business Day that is at least six (6) months after the Closing
Date (the “Final True-Up Date”), the Net Working Capital as of the Closing Date
shall be recomputed by Purchaser with the following adjustments (in each case,
whether increases or decreases) to the amounts used to determine the Final
Closing Net Working Capital:

 

(i) Accounts Receivable.

 

(A) The gross accounts receivable outstanding for no more than 60 days as of the
Closing Date (i.e., without any reduction for any reserve, accrual or
contra-account amounts) (the “Gross A/R”) shall be adjusted to correct any
errors in the recording of the Gross A/R (e.g., removing any amounts included in
determining Final Closing Net Working Capital that are discovered not to be
amounts owed to the Company as of the Closing Date for goods supplied or
services rendered by the Company, and adding any amounts omitted in determining
Final Closing Net Working Capital that are discovered to be owed to the Company
as of the Closing Date for goods supplied or services rendered by the Company).

 

(B) The deductions reserve to accounts receivable shall be adjusted to reflect
only the amount of trade spending deductions authorized by the Company or by
Seller in writing prior to the Closing that are actually and properly taken
against the Gross A/R by customers after the Closing Date with respect to
products sold prior to the Closing Date.

 

(C) The discounts reserve to accounts receivable shall be adjusted to reflect
only the payment discounts actually and properly taken against the Gross A/R by
customers after the Closing Date with respect to products sold prior to the
Closing Date.

 

(D) The allowance for doubtful accounts shall be adjusted to reflect only the
actual amount of the Gross A/R net of the other reserves, accruals and
contra-accounts applicable thereto as adjusted hereby, that

 

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remains uncollected as of the Final True-Up Date, to the extent such accounts
are not reasonably expected to be collected thereafter.

 

(E) For the avoidance of doubt, the unsaleable products reserve to accounts
receivable shall not be adjusted.

 

(ii) Inventory. Inventory shall not be adjusted.

 

(iii) Prepaids. Prepaid amounts shall not be adjusted.

 

(iv) Accruals. Expenses for which accruals were included in computing Final
Closing Net Working Capital only shall be adjusted (A) to reflect any
over-accrual of the expenses based on actual experience, (B) to reflect any
under-accrual thereof based on supplier invoices received for services rendered
to the Company prior to the Closing Date (including without limitation, payroll
items) and (C) to reflect any under-accrual of Customer Trade Spending
Obligations relating to products shipped prior to the Closing Date.

 

(v) Payables. Accounts payable shall be adjusted to reflect all amounts due as
of the Closing Date pursuant to vendor invoices for supplies or products sold to
the Company prior to the Closing Date to the extent not excluded from Net
Working Capital pursuant to clauses (d)(i) or (d)(ii) of the definition thereof,
and to remove any accounts payable improperly recorded.

 

On the Final True-Up Date, Purchaser shall deliver to Seller a statement (the
“True-Up Statement”) that sets forth the Closing Net Working Capital as
determined based on the adjustments set forth above (the “True-Up Balance”),
prepared in good faith based on collections and payments since Closing,
including detailed schedules supporting each adjustment made to Final Closing
Net Working Capital in connection therewith. The True-Up Balance as presented by
Purchaser in the True-Up Statement shall be final and binding on the parties
hereto for the purpose of any Purchase Price adjustment pursuant to Section
2.3(h), unless, not later than forty-five (45) calendar days after receipt of
the True-Up Statement, Seller provides Purchaser with a written notice of
objection, detailing those items to which Seller takes exception. If Seller and
Purchaser are unable, within fifteen (15) calendar days after receipt by
Purchaser of the notice by Seller of objections, to resolve the disputed
exceptions, such disputed exceptions, together with a written summary of the
present dispute and a good faith proposal as to what the final determination
should be, will be referred to the Independent Accounting Firm. The Independent
Accounting Firm shall, within thirty (30) calendar days following its selection,
deliver to Purchaser and Seller a written report determining such disputed
exceptions, and its determinations will be conclusive and binding upon the
parties hereto for the purposes of any Purchase Price adjustment under Section
2.3(e) hereof. The determinations of the Independent Accounting Firm shall be
based upon Final Closing Net Working Capital as determined pursuant to this
Section 2.3 and otherwise shall be made and articulated in accordance with the
adjustments set forth above, and shall be final and binding on the parties
hereto. The fees and disbursements of the Independent Accounting Firm shall be
shared equally by Purchaser and Seller.

 

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(h) Within three (3) Business Days following the final determination, pursuant
to Section 2.3(g), of the True-Up Balance (the “Final True-Up Balance”), and
based upon such final determination:

 

(i) If the Final True-Up Balance plus the Indemnified Net Working Capital
Shortfall exceeds the Final Closing Net Working Capital, Purchaser shall pay to
Seller by wire transfer of immediately available funds an amount equal to such
excess.

 

(ii) If the Final True-Up Balance plus the Indemnified Net Working Capital
Shortfall is less than the Final Closing Net Working Capital, Seller shall pay
to Purchaser by (i) reducing the accrued interest and the outstanding principal
amount of the Seller Note and (ii) to the extent of any deficiency remaining
after such reduction, wire transfer of immediately available funds an amount
equal to such deficit.

 

(i) Purchaser and the Company shall give Seller reasonable access to the books,
records, facilities and employees of the Company and, to the extent reasonably
applicable to the estimates and determinations to be made by Seller pursuant to
this Section 2.3, of Purchaser and its Affiliates, during normal business hours
at Seller’s request.

 

(j) Except as otherwise provided in this Section 2.3, any payment made pursuant
to this Section 2.3 shall be made by wire transfer of immediately available
funds.

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller represents and warrants to Purchaser as set forth in this Article III:

 

Section 3.1. Authority of Seller. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Seller has all requisite corporate power and authority to execute and deliver
this Agreement, and the execution and delivery by Seller of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Seller, and this
Agreement constitutes the legal, valid and binding obligation of Seller
enforceable against Seller in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, moratorium, or
similar laws from time to time in effect which affect creditors’ rights
generally and by legal and equitable limitations on the enforceability of
specific remedies.

 

Section 3.2. Organization of the Company.

 

(a) The Company is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware. The Company has the requisite
corporate power and authority to own its properties and to conduct its business
as

 

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presently conducted. Schedule 3.2 includes true and correct copies of the
Certificate of Incorporation and By-Laws of the Company.

 

(b) The Company is duly qualified to do business and is in good standing in the
states listed in Schedule 3.2, such states being each jurisdiction in which the
ownership of its properties or the conduct of its business requires such
qualification, except where the failure to so qualify, individually or in the
aggregate, would not reasonably be expected to result in a Material Adverse
Effect.

 

Section 3.3. Capitalization of the Company; Title to the Stock. The authorized
capital stock of the Company consists of 100,000 shares of Class A common stock,
par value $0.01 per share, of which 69,350 shares are outstanding. The Stock has
been duly authorized and validly issued, and is fully paid and nonassessable.
The Stock is the sole outstanding shares of capital stock of the Company, and
except for this Agreement, there are no outstanding options, warrants,
agreements, conversion rights, preemptive rights or other rights to subscribe
for, purchase or otherwise acquire any of the Stock or any unissued or treasury
shares of capital stock of the Company. Seller has, except as set forth on
Schedule 3.3, and will have at the Closing valid and marketable title to the
Stock, free and clear of any Liens, except those arising under this Agreement.

 

Section 3.4. No Conflict or Violation; Consents. Except as set forth on Schedule
3.4, neither the execution and delivery of this Agreement nor the consummation
or performance of any of the transactions contemplated hereby will, directly or
indirectly (with or without notice or lapse of time):

 

(a) conflict with, or result in a violation of (i) any provision of the
Certificate of Incorporation or By-Laws of the Company or Seller, or (ii) any
resolution adopted by the board of directors or the stockholders of the Company
or Seller;

 

(b) conflict with, or result in a violation of any Legal Requirement to which
the Company or Seller, or any of the assets owned or used by the Company, may be
subject;

 

(c) conflict with, or result in a violation of any of the terms or requirements
of any Permit listed on Schedule 3.13(b);

 

(d) cause the Company to become subject to, or to become liable for the payment
of, any Tax;

 

(e) conflict with, or result in a violation or breach of any provision of any
Contract required to be listed on Schedule 3.15 or Lease required to be listed
on Schedule 3.11(b);

 

(f) result in the imposition or creation of any Lien upon or with respect to any
of the assets owned or used by the Company, except those arising under this
Agreement; or

 

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(g) require the consent, approval, or authorization of, or registration or
filing with, any Governmental Agency;

 

provided, however, that no representation or warranty is made hereby by Seller
with respect to the effect of antitrust laws or regulations.

 

Section 3.5. Subsidiaries and Investments. The Company does not own, directly or
indirectly through a Subsidiary, any stock of, or any equity participation in,
any Person.

 

Section 3.6. Financial Statements; Closing Date Liability to Seller.

 

(a) The unaudited balance sheet of the Company at June 26, 2004 (the “Balance
Sheet”), and related statements of income for the periods then ended
(collectively, the “Financial Statements”), (i) are included as Schedule 3.6(a),
and (ii) were prepared in accordance with GAAP and present fairly in all
material respects the financial condition and the results of operations of the
Company as of the dates and for the periods indicated thereon, except for the
absence of notes and related statements of retained earnings and cash flows.

 

(b) The unaudited balance sheet of the Company as of the Interim Balance Sheet
Date (the “Interim Balance Sheet”), and the related income statement for the
period then ended (collectively, the “Interim Financial Statements”), (i) are
included as Schedule 3.6(b), (ii) were prepared in accordance with GAAP and
present fairly in all material respects the financial condition and the results
of operations of the Company as of the dates and for the periods indicated
thereon, except for normal year-end adjustments (the aggregate effect of which,
except for adjustments with respect to income Taxes, are not material), and the
absence of notes and related statements of retained earnings and cash flows.

 

(c) The Interim Financial Statements have been prepared on a basis consistent in
all material respects with each of the monthly financial statements of the
Company for the twelve (12) calendar months ending immediately prior to the date
hereof, except for normal year-end adjustments.

 

Section 3.7. Undisclosed Liabilities. The Company has no material Liabilities
(including any Liability arising from any product shipped or manufactured, or
any services provided, by the Company prior to the Closing Date), except for
Liabilities: (a) reflected or reserved for on the Interim Balance Sheet, (b)
relating to performance obligations under Leases, Contracts and Permitted Liens
in accordance with the terms and conditions thereof that are not required by
GAAP to be reflected on the Interim Balance Sheet, (c) incurred in the Ordinary
Course of Business since the date of the Interim Balance Sheet or (d) as set
forth on Schedule 3.7.

 

Section 3.8. Material Adverse Effect. Except as set forth on Schedule 3.8, since
June 26, 2004, there has not been any Material Adverse Effect, nor, to the
Seller’s Knowledge, have any events occurred nor do any circumstances exist
which, individually or in the aggregate, would reasonably be expected to result
in a Material Adverse Effect.

 

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Section 3.9. Accounts Receivable. All accounts receivable of the Company that
are reflected on the Balance Sheet or the Interim Balance Sheet (collectively,
the “Accounts Receivable”) represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of Business.
Unless collected prior to the Closing Date, the Accounts Receivable shown on the
Interim Balance Sheet are current and collectible in accordance with GAAP net of
the accruals related to Customer Trade Spending Obligations and applicable
reserves shown on the Interim Balance Sheet (which reserves and accruals are
calculated in accordance with GAAP). Schedule 3.9 contains a complete and
accurate list of all Accounts Receivable as of the Interim Balance Sheet Date,
which list sets forth the aging of such Accounts Receivable.

 

Section 3.10. Inventory. Except as set forth on Schedule 3.10, the materials,
supplies and work-in-process included in the inventory of the Company as set
forth on the Interim Balance Sheet were (a) substantially equivalent in quality
to, and subject to seasonality, consistent in quantity with, the materials,
supplies and work-in-process, and additions thereto, included in such inventory
as of June 26, 2004; (b) suitable for the manufacture and distribution of the
Company’s products in a manner substantially equivalent in quality to that
achieved by the Company as of June 26, 2004; and (c) valued in accordance with
GAAP subject to all reserves reflected in the Interim Balance Sheet.

 

Section 3.11. Real Property.

 

(a) Schedule 3.11(a) lists all real property owned by the Company (the “Owned
Real Property”). The Company has good and marketable title in fee simple to the
Owned Real Property free and clear of any Liens other than Permitted Liens.
Other than the right of Purchaser pursuant to this Agreement, none of the Owned
Real Property is subject to any right or option of any Person to purchase, lease
or otherwise obtain title to such property.

 

(b) Schedule 3.11(b) contains a list of all leases and subleases, together with
any amendments thereto and any subordination, nondisturbance and attornment
agreements (the “Leases”), with respect to all real property leased by the
Company (the “Leased Property”). The Company has valid leasehold interests in
the Leased Property and the Company’s interest in the Leases are free and clear
of all Liens other than Permitted Liens. Each Lease is in full force and effect,
subject to proper authorization and execution of such Lease by the other party
thereto and the application of any bankruptcy or other creditor’s rights laws,
and the Company is not in breach or default under such Leases and, to Seller’s
Knowledge, no other party is in material default under any of the Leases (and no
event has occurred which, with due notice or lapse of time or both, would
constitute such a lapse or default) except to the extent such breach or default
would not have a Material Adverse Effect). Seller has made available to
Purchaser a true, correct an complete copy of each Lease, and all amendments
thereto, listed in Schedule 3.11(b), except to the extent otherwise noted
therein. Except as otherwise set forth on Schedule 3.11(b), the Company has not
assigned its interest under any Lease, or subleased all or any part of the space
demised thereunder, to any third party.

 

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(c) Seller is not a “foreign person” within the meaning of Section 1445 of the
Code.

 

(d) The Owned Real Property and the Leased Property constitute all of the real
property used by the Company in connection with the conduct of the business of
the Company as currently conducted. There are no pending, or to Seller’s
Knowledge, threatened condemnation or similar proceedings affecting the Owned
Real Property. There are no pending, or, to Seller’s Knowledge, threatened
condemnation or similar proceedings affecting the Leased Property.

 

(e) All brokerage commissions and other compensation and fees payable by reason
of the Leases or the Owned Real Property have been paid in full or are reflected
in the Interim Balance Sheet.

 

(f) To Seller’s Knowledge, Seller has not received any written notification of
any requirements or recommendations by any insurance company which has issued to
or for the benefit of the Company a policy covering the Owned Real Property, or
by any board of fire underwriters or other body exercising similar functions,
requiring or recommending any material repairs or material work to be done on
such property which are still outstanding.

 

(g) To Seller’s Knowledge, all public utilities required for the operation of
the Owned Real Property as currently conducted and necessary for the conduct of
the business of the Company are (i) installed from public rights of way or valid
easements for the benefit of the Company and (ii) operating.

 

(h) To Seller’s Knowledge, the plumbing, electrical, heating, air conditioning,
elevator and ventilating systems, the roof, basement and foundation walls, and
all other mechanical or structural systems of the buildings and improvements
located on the Owned Real Property are in good working order and condition (in
each case, taking into account the character and age of the foregoing) and are
free from defect, other than such defects that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.

 

Section 3.12. Condition and Compliance of Property.

 

(a) Schedule 3.12(a) contains a list of owned personal property of the Company
as of the Interim Balance Sheet Date with an original cost of $2,000 or more. As
of such date, the Company owned outright and had good and marketable title to
all such personal property subject to no Lien except Permitted Liens and except
as set forth on Schedule 3.12(a).

 

(b) The assets owned or leased by the Company in the aggregate are adequate to
conduct the operations of the Company (other than the operations listed on
Schedule 3.12(b)) in substantially the manner currently conducted.

 

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Section 3.13. Compliance with Legal Requirements.

 

(a) Except as set forth on Schedule 3.13(a), since December 30, 1993, the
Company has complied with and has not received any written notice of violation
of any Legal Requirements other than failures to comply or violations that,
individually or in the aggregate, would not be reasonably expected to have a
Material Adverse Effect. Since June 26, 2004, except as set forth on Schedule
3.13(a), neither Seller nor the Company has received any written notice or other
written communication from any Governmental Agency or any other Person regarding
(i) any actual, alleged, possible, or potential violation of, or failure to
comply with, any Legal Requirement, or (ii) any actual, alleged, possible, or
potential obligation on the part of Seller or the Company to undertake, or to
bear all or any portion of the cost of, any remedial action of any nature.

 

(b) Schedule 3.13(b) sets forth each Permit that is necessary for the operations
of the Company as currently conducted, including the issuing Governmental
Agency, the expiration date, and the permit number, other than Permits for which
the failure to be in full force and effect would not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect. All Permits
included on Schedule 3.13(b), except as noted therein, are in full force and
effect and no proceeding is pending or, to the Knowledge of Seller, threatened,
to revoke or limit any such Permit. Except as set forth in Schedule 3.13(b):

 

(i) the Company is, and at all times since June 26, 2004 has been, in full
compliance in all material respects with all of the terms and requirements of
each Permit listed in Schedule 3.13(b);

 

(ii) since June 26, 2004, neither Seller nor the Company has received any
written notice or other written communication from any Governmental Agency or
any other Person regarding (A) any actual, alleged, possible, or potential
violation of or failure to comply with any term or requirement of any Permit, or
(B) any actual, proposed, possible, or potential revocation, withdrawal,
suspension, cancellation, termination of, or modification to any Permit, which
actual, proposed, possible, or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to any Permit, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect;
and

 

(iii) all applications required to have been filed for the renewal of the
Permits listed on Schedule 3.13(b) have been duly filed on a timely basis with
the appropriate Governmental Agencies, and all other filings required to have
been made with respect to such Permits have been duly made on a timely basis
with the appropriate Governmental Agencies.

 

Section 3.14. Affiliate Agreements and Liabilities. Except as set forth on
Schedule 3.14:

 

(a) there are no written or oral Contracts between the Company and any Seller
Entity including, without limitation, any Contracts relating to the provision of
any

 

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services by the Company to any such Seller Entity, or by any such Seller Entity
to the Company; and

 

(b) since the Interim Balance Sheet Date, there have been no transactions,
agreements or arrangements between the Company and (x) any Seller Entity, (y)
any director or officer of the Company or (z) to Seller’s Knowledge, any member
of the immediate family of any individual described in clause (x) or (y) of this
sentence.

 

Section 3.15. Contracts.

 

(a) Except as set forth on Schedule 3.15 (and for Leases and Permitted Liens)
and except for any Contracts containing Market Sensitive Information (the
“Market Sensitive Contracts”), the Company is not a party to or bound by any:

 

(i) mortgage, indenture, note, or installment obligation, or other instrument
for or relating to Indebtedness;

 

(ii) guaranty of any obligation for borrowings or performance, or guaranty or
warranty of products or services, excluding endorsements or guaranties of
instruments made in the Ordinary Course of Business in connection with the
deposit of items for collection, and statutory warranties;

 

(iii) agreement or arrangement for the sale or lease of any of its assets other
than in the Ordinary Course of Business;

 

(iv) agreement or other arrangement for the purchase of any real estate,
machinery, equipment, or other capital assets in excess of $50,000;

 

(v) Contract, other than any Purchase Order, for the future purchase of
materials, supplies, services, merchandise, or equipment parts in excess of
$50,000;

 

(vi) Contract pursuant to which it is or may be obligated to make payments,
contingent or otherwise, on account of or arising out of prior acquisitions or
sales of businesses or stock of other companies;

 

(vii) license (other than in respect of Intellectual Property), distribution,
dealership, representative, broker, sales agency, advertising or consulting
Contract;

 

(viii) lease or other agreement for the use of real or personal property with
rent in excess of $10,000 per year;

 

(ix) any “blanket” Purchase Orders that obligate the Company to purchase
materials for longer than six (6) months after the date hereof;

 

(x) agreement imposing non-competition or exclusive dealing obligations on it;

 

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(xi) agreement providing for payments to or by any Person based on sales,
purchases, or profits, other than direct payments for goods;

 

(xii) Contract or agreement for the employment of any stockholder, director,
officer, consultant or key employee not terminable without penalty or Liability
arising from such termination or any severance or change-in-control contract or
arrangement;

 

(xiii) Contract relating to cleanup, abatement or other actions in connection
with environmental liabilities; or

 

(xiv) Contract, other than any Purchase Order, which involves future payment by
or to the Company in excess of $10,000 (or such higher threshold as applies to
Contracts of that type pursuant to the other provisions of this Section 3.15).

 

(b) Each Contract required to be listed on Schedule 3.15 and each Market
Sensitive Contract is valid, binding and enforceable against the Company, and,
to Seller’s Knowledge, the other parties thereto in accordance with its terms,
and is in full force and effect. The Company has performed all material
obligations required to be performed by it to date under each of such Contracts.
Except as set forth in Schedule 3.15, neither the Company, nor, to Seller’s
Knowledge, any other party thereto is in material breach of or default under any
Contract to which the Company is a party or by which it is bound or to which its
assets are subject that is material to the properties, conduct, operations or
financial condition of the Company (and no event has occurred which, with due
notice or lapse of time or both, would constitute such a lapse or default).
Seller has made available to Purchaser a copy of each written Contract or other
written evidence of the obligations, and all amendments thereto, listed or
required to be listed in Schedule 3.15, subject to the provisions of Section 5.8
with respect to Market Sensitive Information and except to the extent otherwise
noted thereon.

 

Section 3.16. Intellectual Property.

 

(a) Schedule 3.16(a) contains a list of all applications and registrations for
Intellectual Property, all material unregistered Trademarks and copyrights, in
each case owned by the Company, the jurisdictions in which such Intellectual
Property has been registered by the Company or in which a Patent has been issued
to the Company or in which an application for such registration or Patent has
been filed. Except as set forth on Schedule 3.16(a) and except for Intellectual
Property licensed to the Company, the Company is the owner of all right, title,
and interest in the Intellectual Property, free and clear of all Liens (other
than Permitted Liens) and other adverse claims.

 

(b) Schedule 3.16(b) contains a complete and accurate list of all Contracts
relating to the Intellectual Property (excluding off-the-shelf commercially
available software). Except as set forth on Schedule 3.16(b), there are no
outstanding and, to Seller’s Knowledge, no threatened disputes or disagreements
with respect to any such agreement.

 

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(c) Except as set forth on Schedule 3.16(c), (i) all of the Marks and copyrights
registered to the Company are currently in compliance with Legal Requirements
other than failures to comply that, individually or in the aggregate, would not
be reasonably expected to have a Material Adverse Effect, and are valid,
subsisting, unexpired, in proper form and enforceable, and all renewal fees and
other maintenance fees which have fallen due on or prior to the effective date
of this Agreement have been paid; (ii) all of the Patents issued to the Company
are currently in compliance with all Legal Requirements other than failures to
comply that, individually or in the aggregate, would not be reasonably expected
to have a Material Adverse Effect, and are subsisting, unexpired, in proper form
and enforceable, and to Seller’s Knowledge are valid, and all renewal fees and
other maintenance fees which have fallen due on or prior to the effective date
of this Agreement have been paid; (iii) the Company’s grants and registrations
for the Intellectual Property have not lapsed or expired or, in the case of
listed applications, been abandoned and no such application or registration is
the subject of any legal or governmental proceeding before any governmental,
registration or other authority in any jurisdiction; and (iv) all products and
materials containing a Mark registered to the Company bear the proper notice
where permitted by law.

 

(d) Trade Secrets. Except as set forth on Schedule 3.16(d),

 

(i) Seller and the Company have taken all reasonable precautions to protect the
secrecy, confidentiality, and value of the Trade Secrets; and

 

(ii) the Trade Secrets are not part of the public knowledge or literature, and,
to Seller’s Knowledge, have not been used, divulged, or appropriated either for
the benefit of any Person (other than the Company) or to the detriment of the
Company. No Trade Secret is subject to any adverse claim or has been challenged
or threatened in any way.

 

(e) Except as set forth on Schedule 3.16(e), to the Knowledge of Seller, there
are no conflicts with or infringements of any Intellectual Property owned by the
Company by any third party. Except as set forth on Schedule 3.16(e), no Patent
issued to the Company has been or is now involved in any interference, reissue,
reexamination, invalidation or opposition proceeding and, to Seller’s Knowledge,
no such action is threatened with respect to any of such Patents. Except as set
forth on Schedule 3.16(e), no Mark registered to the Company has been or is now
involved in any opposition, invalidation or cancellation and, to Seller’s
Knowledge, no such action is threatened with respect to any of such Marks. To
Seller’s Knowledge, the conduct of the Company’s business as currently conducted
does not conflict with or infringe in any way with any proprietary right of any
third party. Except as set forth on Schedule 3.16(e), there is no claim, suit,
action or proceeding pending or (to Seller’s Knowledge threatened) against the
Company (i) alleging any such conflict or infringement with any third party’s
proprietary rights or (ii) challenging the Company’s ownership or use of the
Intellectual Property, or the validity or enforceability of the Intellectual
Property or the Company’s ownership or use, as applicable, thereof.

 

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(f) Neither Seller nor the Company has entered into any material consent,
indemnification, forbearance to sue, settlement agreement or cross-licensing
arrangement with any person relating to the Intellectual Property or the
intellectual property of any third party other than as may be contained in the
agreements listed in Schedule 3.16(b).

 

(g) Except as set forth on Schedule 3.16(g), the Company neither is, nor will it
be as a result of Seller’s execution and delivery of this Agreement or Seller’s
performance of its obligations under this Agreement, in material breach of any
license, sublicense or other agreement relating to any Intellectual Property.
The validity and enforceability of the material Intellectual Property and the
registration thereof has not been and will not be impugned or otherwise affected
adversely as a result of the consummation of the transactions contemplated by
this Agreement.

 

(h) Except as set forth on Schedule 3.16(h), no former or present employees,
officers or directors of the Company hold any right, title or interest directly
or indirectly, in whole or in part, in or to any Intellectual Property.

 

Section 3.17. Labor Relations. The Company is in full compliance with all laws
regarding employment, wages, hours, equal opportunity, collective bargaining and
payment of social security and other taxes except to the extent that
noncompliance would not, in the aggregate, have a Material Adverse Effect. The
Company is not engaged in any material unfair labor practice or discriminatory
employment practice and no complaint of any such practice against the Company is
filed or, to Seller’s Knowledge, threatened to be filed with or by the National
Labor Relations Board, the Equal Employment Opportunity Commission or any other
administrative agency, federal or state, that regulates labor or employment
practices, nor is any material grievance filed or, to Seller’s Knowledge,
threatened to be filed, against the Company by any employee pursuant to any
collective bargaining or other employment agreement to which the Company is a
party or is bound. The Company is in compliance with all applicable foreign,
federal, state and local laws and regulations regarding occupational safety and
health standards except to the extent that noncompliance will not have a
Material Adverse Effect, and has received no complaints from any foreign,
federal, state or local agency or regulatory body alleging violations of any
such laws and regulations. Except as set forth on Schedule 3.17, the Company is
not a party to any collective bargaining agreement covering Employees, and to
Seller’s Knowledge, no organizational effort is presently being made or
threatened by or on behalf of any labor union.

 

Section 3.18. Employee Benefits.

 

(a) Schedule 3.18(a) sets forth all Employee Benefit Plans and all other
material employee benefit arrangements, including, without limitation, any such
arrangements providing severance pay, sick leave, vacation pay, salary
continuation for disability, retirement benefits, deferred compensation, bonus
pay, incentive pay, stock options, hospitalization insurance, medical insurance,
life insurance, scholarships or tuition reimbursements, maintained by the
Company or to which the Company is obligated to contribute for Employees. Each
of the employee benefit plans and arrangements set forth on Schedule 3.18(a)
shall hereafter be referred to as a “Plan” (or “Plans” as the context may
require).

 

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(b) Copies of the following documents, with respect to each of the Plans as
applicable, have been made available to Purchaser by Seller: (i) all plan and
related trust documents, and amendments thereto; (ii) the most recent IRS Form
5500; (iii) the last IRS determination letter; and (iv) summary plan
descriptions.

 

(c) None of the Plans is a Multiemployer Plan or is subject to Title IV of ERISA
and neither the Company, the Seller nor the Seller’s Subsidiaries have incurred
any liability due to a complete or partial withdrawal from a Multiemployer Plan,
and, to Seller’s Knowledge, no events have occurred and no circumstances exist
that could reasonably be expected to result in any such liability.

 

(d) Except as set forth on Schedule 3.18(d), each Plan complies with, and has
been established, operated and administered in accordance with, in all material
respects, its terms and the requirements of, ERISA, the Code and other
applicable laws.

 

(e) Except as set forth on Schedule 3.18(e), there are no material pending or,
to Seller’s Knowledge, threatened claims by, on behalf of or involving any plan
administrator or any plan trustee (other than routine claims for benefits) with
respect to any Plan.

 

(f) Except as set forth on Schedule 3.18(f), the Company has not incurred any
material liability for any tax or penalty imposed by Section 4975 of the Code or
Section 502(i) of ERISA with respect to any Plan.

 

(g) Except as set forth on Schedule 3.18(g), the Company has not incurred any
liability with respect to any Employee Benefit Plan solely by reason of being
treated as a single employer under Section 414 of the Code with any entity other
than the Company, and no facts exist which could reasonably form the basis for
such liability.

 

(h) Each Plan which is intended to qualify under Section 401(a) of the Code has
received an IRS determination letter concluding that such Plan so qualifies in
form, and, to Seller’s Knowledge, except as set forth on Schedule 3.18(h), no
event has occurred and no condition exists that would cause such Plan to lose
its qualified status.

 

(i) Except as set forth on Schedule 3.18(i) or as may be required under Section
4980B of the Code, Section 601 of ERISA or other applicable foreign, state or
local law, the Company does not have any Liability for post-retirement medical
or life insurance benefits or coverage for any Employee or any dependent of any
such employee.

 

(j) Except as set forth on Schedule 3.18(j), the consummation of the
transactions contemplated by this Agreement will not result in any increase in
the amount of compensation or benefits or accelerate the vesting or timing of
payment of any compensation or benefits payable by the Company to or in respect
of any Employee or the beneficiary or dependent of any such employee under any
Plan.

 

Section 3.19. Insurance. Schedule 3.19 sets forth a list of all insurance
policies and all material fidelity bonds or other insurance service contracts
(the “Insurance Policies”)

 

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providing coverage for the properties or operations of the Company, the type and
amount of coverage, and the expiration dates of the Insurance Policies. Except
as set forth on Schedule 3.19, there is no claim by the Company pending under
any of the Insurance Policies as to which coverage has been questioned, denied
or disputed by the underwriters of such policies. All premiums payable under all
Insurance Policies have been paid, and the Company has otherwise complied in all
material respects with the terms and conditions of all the Insurance Policies.
The Insurance Policies are valid and enforceable in accordance with their terms.
Except as set forth on Schedule 3.19, since June 26, 2004, neither Seller nor
the Company has received any written notice from any insurance carrier: (i)
threatening a suspension, revocation, modification or cancellation of any
Insurance Policy or a material increase in any premium in connection therewith,
or (ii) informing Seller or the Company, as the case may be, that any coverage
listed on Schedule 3.19 will or may not be available in the future on
substantially the same terms as now in effect.

 

Section 3.20. Litigation. Except as set forth in Schedule 3.20, there are no
claims, actions, suits or proceedings pending or, to Seller’s Knowledge,
threatened before any Governmental Agency brought (a) by or against the Company,
(b) against Seller with respect to the Company or (c) against any of the
Company’s Subsidiaries or greater than 20% direct or indirect beneficial owners,
or, to Seller’s Knowledge, any of the Company’s officers, directors, Employees
or agents, in each case with respect to any assets, properties or operations of
the Company or the transactions contemplated by this Agreement. Neither the
Company nor any of its assets or properties is subject to any Order that affects
its assets, properties, operations, net income or financial condition or which
would or would be reasonably expected to interfere with the transactions
contemplated by this Agreement.

 

Section 3.21. Environmental Matters. Except as set forth on Schedule 3.21(a):

 

(a) The Company is and has been in compliance with all applicable Environmental
Laws other than failures to comply that, individually or in the aggregate, would
not be reasonably expected to have a Material Adverse Effect.

 

(b) The Company is in compliance with all Permits required to be listed on
Schedule 3.13(b) that are required pursuant to Environmental Laws
(“Environmental Permits”) for the activities and operations of the Company other
than failures to comply that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. Schedule 3.21(b) lists
each such Environmental Permit, including its expiration date.

 

(c) The Company has not received any written notice of any actual or threatened
claim, notice of violation, request for information pursuant to CERCLA or any
analogous state law or other request arising under Environmental Laws and
relating to the Company that would reasonably be expected to result in material
liability.

 

(d) Neither the Company nor any entity whose liability may be imputed to the
Company has assumed or undertaken any material liability or corrective or
remedial obligation of any other Person relating to Environmental Laws.

 

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(e) None of the Owned Real Property (or any buildings, structures, fixtures or
materials on such real property): (i) has been the subject of any generation,
storage, accumulation or disposal of any Hazardous Material, except in the
Ordinary Course of Business and in compliance with Environmental Laws other than
failures to comply that, individually or in the aggregate, would not be
reasonably expected to have a Material Adverse Effect or (ii) contains or
includes any friable asbestos, polychlorinated biphenyls, or any underground
storage tanks (or other underground structures which contain Hazardous
Material).

 

(f) Neither the Company nor any entity whose liability may be imputed to the
Company has arranged, transported or otherwise caused to be disposed of any
Hazardous Material except in compliance with Environmental Laws other than
failures to comply that, individually or in the aggregate, would not be
reasonably expected to have a Material Adverse Effect and in a manner that will
not result in liability.

 

(g) Neither the execution of this Agreement nor the consummation of the
transactions contemplated herein will require any investigation or remediation
of any Hazardous Material, or notice to or consent of any Person, pursuant to
any applicable Environmental Law or Environmental Permit.

 

(h) The Company has made available to Purchaser true and accurate copies of all
material reports, investigations, internal audits, and material correspondence
in the Company’s possession or control related to the Company’s compliance with
and actual or threatened liability under Environmental Laws.

 

(i) Notwithstanding anything to the contrary in this Agreement, including,
without limitation, Section 3.7, Section 3.8, Section 3.11, Section 3.13, and
Section 3.20, this Section 3.21 contains the sole representations and warranties
of the Company with respect to matters arising under Environmental Laws.

 

Section 3.22. Tax Matters.

 

(a) Except as otherwise disclosed in Schedule 3.22, (i) the Company has filed
(or joined in the filing of) when due all Tax Returns required by applicable law
to be filed with respect to the Company and all Taxes shown to be due on such
Tax Returns have been paid; (ii) all such Tax Returns were true, correct and
complete as of the time of each such filing (provided that Purchaser
acknowledges and agrees that the representation set forth in this Section
3.22(a)(ii) shall not form the basis for any indemnification claim by Purchaser
under this Agreement with respect to Taxes attributable to periods (or portions
thereof) beginning after the Closing Date); (iii) all Taxes relating to periods
ending on or before the Closing Date owed by the Company (whether or not shown
on any Tax Return) at any time on or prior to the Closing Date, if required to
have been paid, have been paid (except for Taxes which are being contested in
good faith); (iv) any liability of the Company for Taxes not yet due and
payable, or which are being contested in good faith, has been provided for on
the financial statements of the Company in accordance with GAAP; (v) there is no
action, suit, proceeding, investigation, audit or claim now pending against, or
with respect to, the Company in

 

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respect of any Tax or assessment, nor is any claim for additional Tax or
assessment asserted by any Governmental Agency; (vi) since January 1, 2000, no
claim communicated specifically to Seller or to the Company, whether oral or
written, has been made by any Governmental Agency in a jurisdiction where the
Company does not currently file a Tax Return that it is or may be subject to Tax
by such jurisdiction, nor to Seller’s Knowledge is any such assertion
threatened; (vii) there is no outstanding request for any extension of time
within which to pay any Taxes or file any Tax Returns; (viii) the Company is not
a party to any agreement, whether written or unwritten, providing for the
payment of Taxes, payment for Tax losses, entitlements to refunds or similar Tax
matters; (ix) no ruling with respect to Taxes (other than a request for
determination of the status of a qualified pension plan) has been requested by
or on behalf of the Company; and (x) the Company has withheld and paid all
material Taxes required to be withheld in connection with any amounts paid or
owing to any employee, creditor, independent contractor or other third party.
Seller has made available to Purchaser copies of all Tax Returns filed by or on
behalf of the Company during the last three (3) years.

 

(b) (i) No property of the Company is “tax-exempt use property” within the
meaning of Section 168(h) of the Code; (ii) the Company is not a party to any
lease made pursuant to former Section 168(f)(8) of the Internal Revenue Code of
1954; and (iii) the Company has not filed any agreement or consent under Section
341(f) of the Code.

 

(c) Notwithstanding anything to the contrary in this Agreement, including,
without limitation, Section 3.7, Section 3.8, Section 3.11, Section 3.13,
Section 3.18 and Section 3.20, this Section 3.22 contains the sole
representations and warranties of the Company with respect to Taxes.

 

Section 3.23. Interim Operations. Except as set forth on Schedule 3.23, since
the Interim Balance Sheet Date, the Company has operated only in the Ordinary
Course of Business and has not:

 

(a) changed its authorized or issued capital stock; granted any stock option or
right to purchase shares of capital stock; issued any security convertible into
such capital stock; or made any Equity Distributions;

 

(b) incurred or become subject to, or agreed to incur or become subject to, any
material obligation or Liability, except in the Ordinary Course of Business;

 

(c) mortgaged or pledged any of its assets, tangible or intangible, except for
Permitted Liens;

 

(d) sold or transferred or agreed to sell or transfer any of its assets, or
canceled or agreed to cancel any debts owed to it or any of its claims except in
the Ordinary Course of Business;

 

(e) suffered any extraordinary losses (as that term is defined by GAAP) or,
except in the Ordinary Course of Business, waived any material rights;

 

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(f) terminated or agreed to terminate any material contract, agreement, license,
or other instrument to which it is a party, except in the Ordinary Course of
Business;

 

(g) increased or agreed to increase the rate of compensation payable by it to
any employee, whose compensation is determined other than by multiplying the
number of hours worked by an hourly rate (a “Salaried Employee”), over the rate
being paid or accrued to them as of the Interim Balance Sheet Date (other than
increases granted to individual Salaried Employees for merit, length of service,
change in position or responsibility or other reasons specific to individual
Salaried Employees and not generally to a class or group of Salaried Employees);

 

(h) made or agreed to make any accrual or arrangement for or payment of bonuses
or special compensation of any kind to any of its Salaried Employees or made any
general increase in the salary or bonus payable or to become payable by the
Company to any Employee other than Salaried Employees (other than increases
granted to individual Employees for merit, length of service, change in position
or responsibility or other reasons applicable to specific Employees and not
generally to a class or group thereof);

 

(i) entered into any agreement, written or oral, providing for the employment of
any Employee or any severance or termination benefits payable or to become
payable by the Company to any Employee;

 

(j) taken any action which would have constituted a breach of any negative
covenant of Seller set forth in Article V if such negative covenant had applied
since the Interim Balance Sheet Date; or

 

(k) suffered any shortages of materials or supplies or any casualty that
individually or in the aggregate has had or would reasonably be expected to have
a Material Adverse Effect.

 

Section 3.24. Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by Seller without the
intervention of any other Person acting on their behalf in such manner as to
give rise to any valid claim by any such Person against the Company or Purchaser
for a finder’s fee, brokerage commission or other similar payment based on an
arrangement with Seller.

 

Section 3.25. Product Liability. Except as disclosed in Schedule 3.25:

 

(a) there has not been during the past three (3) years and there is no demand,
claim, action, suit, inquiry, hearing, proceeding, or written notice of a
violation or investigation of a civil, criminal or administrative nature by or
before any Governmental Agency against or involving any product, substance or
material (collectively, a “Product”), or class of claims or lawsuits involving a
Product, in each case, manufactured, produced, distributed or sold by or on
behalf of the Company which is pending or, to Seller’s Knowledge, threatened,
against the Company or Seller resulting from an alleged defect in design,
manufacture, materials or workmanship of any Product

 

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manufactured, produced, distributed or sold by or on behalf of the Company, or
any alleged failure to warn, or from any breach of express or implied
specifications or warranties or representations (a “Product Claim”) on behalf of
the ultimate retail purchaser of any Product;

 

(b) there has not been during the past three (3) years, nor is there under
consideration or investigation by the Company, any Product recall (collectively
recalls are referred to in this Agreement as “Recalls”) conducted by or on
behalf of the Company concerning any Products manufactured, produced,
distributed or sold by or on behalf of the Company or, to the Knowledge of
Seller, any Recall conducted by or on behalf of any entity as a result of any
alleged defect in any Product supplied by the Company;

 

(c) there is no Product Claim pending or, to Seller’s Knowledge threatened, on
behalf of a customer of the Company or on behalf of any Governmental Agency
which individually or in the aggregate has had or would reasonably be expected
to have a Material Adverse Effect; and

 

(d) to Seller’s Knowledge, except as disclosed on Schedule 3.25 and except for
adulterations, misbranding and violations of the Federal Food, Drug & Cosmetic
Act, as amended (the “FD&C Act”), that would not have a Material Adverse Effect,
during the past three (3) years no shipment or other delivery of Products made
by the Company (i) adulterated or misbranded within the meaning of the FD&C Act;
(ii) an article which may not under the provisions of Section 404 of the FD&C
Act be introduced into interstate commerce; or (iii) adulterated or misbranded
within the meaning of any pure food laws or ordinances of any state, province or
city to which such articles are shipped or to be shipped. All finished goods
inventories of the Company labeled for sale in Puerto Rico are products which,
under the provisions of Puerto Rico’s pure food laws, can be shipped to and/or
sold in Puerto Rico, and which conform in all respects to the requirements of
such laws and the regulations issued pursuant thereto and all finished goods
inventories of the Company labeled for sale in Mexico are products which, under
the provisions of Mexico’s pure food laws, can be shipped to and/or sold in
Mexico, and which conform in all respects to the requirements of such laws and
the regulations issued pursuant thereto, except, in the case of both Puerto Rico
and Mexico, where noncompliance with such laws and regulations would not have a
Material Adverse Effect.

 

Section 3.26. Books and Records. The books of account, minute books, stock
record books, and other corporate records of the Company, all of which have been
made available, or in the case of any Market Sensitive Information, will be made
available pursuant to and subject to Section 5.8, to Purchaser, are complete and
correct in all material respects and accurately reflect in reasonable detail the
transactions to which the Company is a party or by which its properties are
bound. The minute books of the Company contain, in all material respects,
accurate and complete records of all meetings held of, and corporate action
taken by, the stockholders, the boards of directors, and committees of the board
of directors thereof, and no material meeting of any such stockholders, board of
directors, or committee has been held for

 

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which minutes have not been prepared and are not contained in such minute books.
At the Closing, all of those books and records will be provided to Purchaser.

 

Section 3.27. Customers and Suppliers. Schedule 3.27 lists the twenty-five (25)
largest milk customers (measured by gross sales dollars) and the twenty-five
(25) largest suppliers (measured by invoiced dollars) of the Company for the
fiscal year ended June 26, 2004 (“Major Customers” and “Major Suppliers,”
respectively) and the amount of business done with each Major Customer and Major
Supplier in such year. As of the date of this Agreement, except as set forth on
Schedule 3.27, (a) the Company is not engaged in a dispute with any Major
Customer or Major Supplier that is material to the Company’s relationship with
such Major Customer or Major Supplier, (b) there has been no adverse change in
the business relationship of the Company with any Major Customer or Major
Supplier since June 26, 2004 that is material to the Company’s relationship with
such Major Customer or Major Supplier, and (c) no Major Customer or Major
Supplier has threatened in writing any modification or change in the business
relationship with the Company that is material to the Company’s relationship
with such Major Customer or Major Supplier.

 

Section 3.28. Certain Payments. Since June 26, 2004, neither the Company nor any
of its directors, officers, agents, or Employees, or to Seller’s Knowledge, any
other Person associated with or acting for or on behalf of the Company, has
directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services in violation of any
Legal Requirement, or (b) established or maintained any fund or asset that has
not been recorded in the books and records of the Company.

 

Section 3.29. Accounts. Schedule 3.29 hereto correctly identifies each bank
account, brokerage account and safety deposit box maintained by or on behalf or
for the benefit of the Company and the name of each person with any power or
authority to act with respect thereto.

 

Section 3.30. Universal Product Codes. Schedule 3.30 contains a list of
universal product codes of Seller currently used by the Company. Seller is not
using any such universal product code in any business other than the business of
the Company.

 

Section 3.31. Slotting Allowances. Except as set forth on Schedule 3.31, (a)
since June 26, 2004, the Company has not paid, or committed to pay, any lump sum
payments to retailers in connection with product introductions or product
placements of limited duration (“Slotting Allowances”), (b) no Major Customers
have notified the Company of plans to change their policies with respect to
Slotting Allowances to take effect after the Closing Date which plans have not
been withdrawn and (c) to the Knowledge of Seller, the transactions contemplated
hereby will not result in any new or increased charges for Slotting Allowances
for the Company’s products after the Closing Date.

 

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ARTICLE IV.

REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

Purchaser represents and warrants to Seller as follows:

 

Section 4.1. Authority of Purchaser. Purchaser is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware.
Purchaser has all requisite corporate power and authority to execute and deliver
this Agreement and the Seller Note, the execution and delivery by Purchaser of
this Agreement and the Seller Note and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Purchaser, and each of this Agreement and the Seller Note
constitutes the legal, valid and binding obligation of Purchaser enforceable
against Purchaser in accordance with its terms, except as such enforcement may
be limited by applicable bankruptcy, insolvency, moratorium or similar laws from
time to time in effect which affect creditors’ rights generally, and by legal
and equitable limitations on the enforceability of specific remedies. Purchaser
has the requisite corporate power and authority to own its properties and to
carry on the business presently being conducted by it.

 

Section 4.2. No Conflict or Violation. Except as referenced in Schedule 4.2,
neither the execution and delivery of this Agreement by Purchaser, nor the
consummation or performance of any of the transactions contemplated hereby will,
(with or without notice or lapse of time):

 

(a) conflict with, or result in a violation of (i) any provision of the
Certificate of Incorporation or By-Laws of Purchaser, or (ii) any resolution
adopted by the board of directors or the stockholders of Purchaser;

 

(b) conflict with, or result in a violation of, any Legal Requirement to which
Purchaser may be subject;

 

(c) conflict with, or result in a violation or breach of any provision of any
material contract, lease, or permit of Purchaser; or

 

(d) require the consent, approval, or authorization of, or registration or
filing with, any Governmental Agency or any other Person on behalf of Purchaser;

 

provided, however, that no representation or warranty is made hereby by
Purchaser with respect to the effect of antitrust laws or regulations.

 

Section 4.3. Litigation. There are no actions, causes of action, claims, suits,
proceedings or Orders pending or, to the actual knowledge, after reasonable
inquiry, of the executive officers of Purchaser, threatened against Purchaser at
law, in equity, in admiralty or otherwise, or before or by any Governmental
Agency, which seeks to restrain or enjoin the consummation of the transactions
contemplated hereby.

 

Section 4.4. Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by Purchaser without the
intervention of any other Person acting on its behalf in such manner as to give
rise to any valid claim by any

 

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such Person against Seller or its Affiliates for a finder’s fee, brokerage
commission or other similar payment based on an arrangement with Purchaser.

 

Section 4.5. Investment Intent; Status. The Stock will be acquired hereunder
solely for the account of Purchaser for investment, and not with a view to the
resale or distribution thereof in violation of the Securities Act of 1933, as
amended, subject to the right of Purchaser to sell, assign, transfer or
distribute any or all of the Stock to any Person which is an Affiliate of the
Purchaser. Purchaser is an “accredited investor” within the meaning of
Regulation 501 promulgated under the Securities Act of 1933, as amended.

 

Section 4.6. Solvency. Immediately after giving effect to the transactions
contemplated by this Agreement, the Company shall be able to pay its debts as
they become due and shall own property that has a fair saleable value greater
than the amounts required to pay its debts (including a reasonable estimate of
all contingent liabilities). Immediately after giving effect to the transactions
contemplated by this Agreement, the Company shall have adequate capital to carry
on it business. No transfer of property is being made and no obligation is being
incurred in connection with the transactions contemplated by this Agreement with
the intent to hinder, delay or defraud either present or future creditors of the
Company and Purchaser.

 

Section 4.7. Representations and Warranties Regarding the Company. As of the
date of this Agreement, Purchaser has no knowledge (i) that any of the
representations and warranties of Seller in this Agreement and the Schedules are
not true in all material respects or (ii) of any material errors in, or
omissions from, the Schedules to this Agreement.

 

ARTICLE V.

CERTAIN COVENANTS AND AGREEMENTS

 

Section 5.1. Transfer Taxes. Any sales, recording, transfer, stamp, conveyance,
value added, use, or other similar Taxes, duties, excise, governmental charges
or fees imposed as a result of the sale of the Stock to Purchaser pursuant to
this Agreement shall be borne by Purchaser and Seller, equally. Each of
Purchaser and Seller shall promptly remit half of any refunds of such items to
Seller or Purchaser, as applicable. Seller and Purchaser, to the extent required
by Legal Requirements, shall prepare and file all Tax Returns on a timely basis
with respect to any such Taxes or fees.

 

Section 5.2. Obligation to File Tax Returns.

 

(a) Seller shall cause to be prepared and filed all Tax Returns with the
appropriate federal, state, local and foreign Governmental Agencies relating to
the Company for periods ending on or prior to the Closing Date and that are due
after the Closing Date and shall pay all Taxes due with respect to such Tax
Returns, except to the extent such Taxes are included in Final Closing Net
Working Capital. Purchaser shall prepare and file, or cause to be prepared and
filed, all Tax Returns required to be filed by the Company covering a Tax year
commencing prior to the Closing Date and ending after the Closing Date (a
“Straddle Tax Return”) and shall cause the Company to pay the Taxes shown to be
due thereon, provided, however, that Seller shall promptly reimburse Purchaser
for the portion of such Tax that relates to a Pre-Closing Tax Period (as defined

 

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below), except to the extent such Tax is included in Final Closing Net Working
Capital as a current liability. Seller will furnish to Purchaser all information
and records reasonably requested by Purchaser for use in preparation of any
Straddle Tax Returns. Purchaser shall allow Seller to review, comment upon and
reasonably approve without undue delay any Straddle Tax Return at any time
during the forty-five (45) calendar day period immediately preceding the filing
of such Tax Return. Purchaser and Seller agree to cause the Company to file all
Tax Returns for any Straddle Period (as defined below) on the basis that the
relevant taxable period ended as of the close of business on the Closing Date,
unless the relevant Governmental Agency will not accept a Tax Return filed on
that basis. For purposes of this Agreement “Pre-Closing Tax Period” shall mean
any taxable period ending on or before the Closing Date and the portion ending
on and including the Closing Date of any taxable period that includes (but does
not end on) the Closing Date (“Straddle Period”).

 

(b) In the case of any Straddle Period, (i) real, personal and intangible
property Taxes (“Property Taxes”) of the Company for the Pre-Closing Tax Period
shall be equal to the amount of such Property Taxes for the entire Straddle
Period multiplied by a fraction, the numerator of which is the number of
calendar days during the Straddle Period that are in the Pre-Closing Tax Period
and the denominator of which is the number of calendar days in the Straddle
Period; and (ii) the Taxes of the Company (other than Property Taxes) for the
portion of the Straddle Period that constitutes a Pre-Closing Tax Period shall
be computed as if such taxable period ended as of the close of business on the
Closing Date.

 

(c) With respect to Tax Returns to which this Section 5.2 applies, Purchaser and
Seller agree to report all items attributable to transactions not in the
Ordinary Course of Business occurring on the Closing Date after Purchaser’s
purchase of the Stock as arising on the day immediately following the Closing
Date and accordingly reflected on Purchaser’s consolidated income Tax Return to
the extent permitted by Section 1.1502-76(b)(1)(ii)(B) of the Treasury
Regulations (and any similar provision of state or local income Tax law).

 

(d) No Tax Return of the Company filed with respect to periods ending before, or
including, the Closing Date shall be amended after the Closing Date without
Seller’s consent, which consent shall not be unreasonably withheld.

 

(e) All Tax refunds received by Purchaser or the Company or any of their
respective Affiliates, and all amounts credited against Taxes to which Purchaser
and the Company become entitled, with respect to Taxes paid by Seller or the
Company for periods (or portions thereof, determined in accordance with Section
5.2(b) ending on or before the Closing Date shall be paid over to the Seller
within ten (10) calendar days after receipt or crediting by Purchaser or the
Company thereof.

 

(f) Purchaser shall waive any carryback of Tax attributes of the Company arising
in a period (or portions thereof, determined in accordance with the principles
set forth in Section 5.2(b)) beginning after the Closing Date into any
consolidated, combined or unitary Tax Return filed by the Seller.

 

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Section 5.3. Sale of Beech-Nut. If, during the eighteen (18) month period
following the Closing Date, Seller consummates the sale of all or substantially
all of the assets or of the outstanding capital stock of Beech-Nut Nutrition
Corporation (“Beech-Nut”) and the liabilities and obligations of Seller under
this Agreement are not assumed by the buyer thereof in connection with such
sale, then prior to or contemporaneously with the closing of such sale Seller
shall deliver an amount equal to (i) $3,000,000 less (ii) the amount of any
unpaid principal and interest outstanding under the Seller Note and less (iii)
the amount, if any, of any indemnification payments previously paid (including,
without limitation, by way of setoff against the Seller Note pursuant to Section
9.2(d)) to Purchaser or any of its Affiliates pursuant to Section 9.2 (the
“Escrow Funds”) in immediately available funds to a nationally recognized bank
mutually selected by Purchaser and Seller, as escrow agent, to be held and
disbursed by such escrow agent in accordance with the terms of an escrow
agreement reasonably acceptable to Seller and Purchaser to be entered into by
them and the escrow agent at the time of the creation of the escrow. The Escrow
Funds shall be available to Purchaser pursuant to the escrow agreement to
satisfy any claims pursuant to Sections 9.2 or 9.5 hereof. Except to the extent
otherwise provided in the escrow agreement with respect to unsatisfied
indemnification claims, such escrow shall terminate at the end of such eighteen
(18) month period (the “Escrow Termination Date”). Any Escrow Funds remaining as
of the Escrow Termination Date shall be released from escrow and promptly paid
over to Seller, except to the extent otherwise required by the escrow agreement
with respect to unsatisfied indemnification claims, which remaining amounts
shall be paid out pursuant to the escrow agreement. For the avoidance of doubt,
the parties acknowledge and agree that a merger of Seller with and into
Beech-Nut or of Beech-Nut with and into Seller or a sale of any or all of the
outstanding capital stock of Seller shall not result in any rights or
obligations pursuant to this Section 5.3.

 

Section 5.4. Nondisclosure; Noncompetition.

 

(a) From and after the Closing Date, Seller shall not use, divulge, furnish or
make accessible to anyone other than its stockholders, accountants, attorneys,
advisers and Purchaser any proprietary, material non-public, confidential or
secret information to the extent relating to the Company (including, without
limitation, customer lists, supplier lists and pricing and marketing
arrangements with customers or suppliers), and Seller shall cooperate reasonably
with Purchaser in preserving such proprietary, confidential or secret aspects of
the Company.

 

(b) For a period of five (5) years after the Closing Date, Seller shall not, and
shall cause its Subsidiaries not to, directly or indirectly, manufacture or sell
in North America or Puerto Rico any products manufactured or sold by the Company
as of the Closing, or own stock or otherwise have an equity interest in any
person or entity engaged in such business (except as a stockholder holding less
than 5% of the stock of a publicly held corporation). Seller shall not, for a
period of two (2) years from the Closing Date, solicit for hire any Employees
that are employees of the Company immediately following the Closing without the
prior written consent of Purchaser. Purchaser shall not, for a period of two (2)
years from the Closing Date, solicit for hire any employees of Seller or
Beech-Nut as of the Closing Date without the prior written consent of Seller.
For the avoidance of doubt, general solicitations of employment published in a
journal, newspaper or other publication of general circulation or listed on

 

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any internet job site and not directed towards employees of the Company, Seller
or Beech-Nut, as applicable, shall not be deemed to constitute solicitation for
purposes of this Section 5.4(b). Each of Seller and Purchaser agrees that a
violation of this Section will cause irreparable injury to Purchaser or Seller,
as applicable, and Purchaser or Seller, as applicable, shall be entitled, in
addition to any other rights and remedies it may have at law or in equity, to an
injunction enjoining and restraining Seller or Purchaser, as applicable, from
doing or continuing to do any such violation and any other violations or
threatened violations of this Section 5.4. Notwithstanding the foregoing,
nothing in this Section 5.4 shall be deemed to restrict any unaffiliated third
party purchaser of all or substantially all of the assets or of the outstanding
capital stock of Beech-Nut or Seller.

 

(c) Seller acknowledges and agrees that the covenants set forth in this Section
are reasonable and valid in scope and in all other respects. If any of such
covenants is found to be invalid or unenforceable by a final determination of a
court of competent jurisdiction (i) the remaining terms and provisions hereof
shall be unimpaired and (ii) the invalid or unenforceable term or provision
shall be deemed replaced by a term or provision that is valid and enforceable
and that comes closest to expressing the intention of the invalid or
unenforceable term or provision. In the event that, notwithstanding the first
sentence of this paragraph (c), any of the provisions of this Section relating
to scope of the covenants contained therein or the nature of the business
restricted thereby shall be declared by a court of competent jurisdiction to
exceed the maximum restrictiveness such court deems enforceable, such provision
shall be deemed to be replaced herein by the maximum restriction deemed
enforceable by such court.

 

Section 5.5. Ongoing Tax Cooperation.

 

(a) If the Closing occurs, Seller and Purchaser shall cooperate fully with each
other and make available or cause to be made available to each other in a timely
fashion such Tax data, prior Tax Returns and filings and other information as
may be reasonably required for the preparation by Purchaser or Seller of any Tax
Returns, elections, consents or certificates required to be prepared and filed
by Purchaser or Seller and any audit or other examination by any Governmental
Agency, or judicial or administrative proceeding relating to liability for
Taxes. Without limiting the generality of the foregoing, each of Purchaser and
Seller shall retain copies of all Tax Returns, supporting work schedules and
other records relating to tax periods or portions thereof ending prior to or
including the Closing Date until the later of (i) the expiration of the statute
of limitations for the taxable periods to which such Tax Returns and other
documents relate, without regard to extensions except for extensions executed by
that party or its Affiliates or extensions for which such party has received
written notice from another party, and (ii) six years following the due date
(without extensions) for such Tax Returns; provided, however, that no party will
dispose of its copies without first notifying the other parties and providing
such other parties with a reasonable period of time to assume possession of such
copies. In addition, without limiting the generality of the foregoing, each
party shall make its personnel and those of its Affiliates reasonably available
for deposition and testimony in any tax controversy or proceeding. Purchaser
shall cooperate with Seller to the extent reasonably necessary for Seller’s
preparation of its financial statements and Tax Returns and in the sharing of
financial and accounting information with respect

 

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thereto or with respect to any audit, examination, or other proceeding with
respect thereto. Any information or documentation provided pursuant to this
Section shall not be disclosed by the recipient thereof to any Person except its
accountants and relevant tax authorities or as required by applicable law (in
which case the disclosing party shall consult in good faith with the other party
prior to making any such disclosure).

 

(b) If, subsequent to the Closing, Purchaser or the Company receives notice of a
Tax Contest with respect to any Tax Return or Tax for a Pre-Closing Tax Period,
then within ten (10) days after receipt of such notice, Purchaser shall notify
the Seller of such notice. The Seller shall have the right to control the
conduct and resolution of such Tax Contest, provided, however, that if any of
the issues raised in such Tax Contest could reasonably be expected to have a
material impact on Taxes of the Company for a Tax period (or portion thereof,
determined in accordance with the principles set forth in Section 5.2(b)), then
(i) Seller shall afford Purchaser the opportunity to control jointly the conduct
and resolution of the portion of such Tax Contest with respect to such issues
which could reasonably be expected to have a material impact on Taxes of the
Company in any such Tax period or portion thereof and (ii) after the second
anniversary of the Closing Date, Seller shall not settle any such Tax Contest
without Purchaser’s prior written consent, which consent shall not be
unreasonably withheld or delayed. If the Seller shall have the right to control
the conduct and resolution of such Tax Contest but elects in writing not to do
so, then Purchaser shall have the right to control the conduct and resolution of
such Tax Contest, provided that Purchaser shall keep Seller informed of all
developments on a timely basis and Purchaser shall not resolve such Tax Contest
in a manner that could reasonably be expected to have an adverse impact on the
Seller’s indemnification obligations under this Agreement without Seller’s
written consent, which shall not be unreasonably withheld. Each party shall bear
its own costs for participating in such Tax Contest. “Tax Contest” means any
audit, other administrative proceeding or inquiry or judicial proceeding
involving Taxes. For the avoidance of doubt, with respect to any Tax matter for
which Seller has agreed to indemnify Purchaser pursuant to Section 9.2
(including, without limitation, as a result of a breach of any representation
set forth in Section 3.22), the provisions of this Section 5.5(b)), rather than
the provisions of Section 9.4, shall apply.

 

Section 5.6. Further Assurances. Upon the request of Purchaser or Seller at any
time after the Closing Date, Seller or Purchaser, as applicable, shall forthwith
execute and deliver such further instruments of assignment, transfer,
conveyance, endorsement, direction or authorization and other documents as
Purchaser or Seller, as applicable, may reasonably request in order to perfect
title of Purchaser and its successors and assigns to the Stock or otherwise to
effectuate the purposes of this Agreement.

 

Section 5.7. Employees and Employee Benefits.

 

(a) Immediately prior to the Closing Date, Seller shall transfer the employment
of the private label sales person set forth on Schedule 5.7(a) to the Company,
provided such sales person is then employed by Seller, the Company or any
Subsidiary of Seller and consents to such transfer (together with Employees who
are employed by the Company on the Closing Date, the “Transferred Employees”).

 

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Purchaser shall cause the Transferred Employees to continue employment with the
Company in the same or comparable positions, and with at least the same base
pay, and total compensation and benefits (taking into account base pay, bonus,
and other incentive compensation) substantially equivalent to compensation and
benefits provided to similarly situated employees of Purchaser. Purchaser shall
cause such employee benefit plans to take into account for all employment
related purposes such Transferred Employees’ service with Seller as if such
service were with Purchaser, except to the extent such service credit would
result in the duplication of benefits. Any restrictions on coverage for
pre-existing conditions or requirements for evidence of insurability under the
employee benefit plans of Purchaser shall be waived, but only to the extent
waived under the Plans, and Transferred Employees shall receive credit under the
employee benefit plans of Purchaser for co-payments and payments under a
deductible limit made by them and for out-of-pocket maximums applicable to them
during the plan year of the applicable Plan in accordance with the corresponding
employee benefit plans of Purchaser. In addition, Purchaser shall cause the
Company to provide to any Salaried Employee who is terminated within twenty-four
(24) months after the Closing Date one week of severance benefits for each year
of service as an employee of the Company and/or Seller. For all other Employees,
Purchaser shall cause the Company to provide any such Employees severance
benefits conditioned upon the successful shutdown of the Company’s Seneca plant;
provided that the amount of such severance benefits and whether or not the
Seneca plant has been shut down successfully shall be determined by Purchaser in
its sole discretion.

 

(b) Prior to the Closing Date, Seller shall cause the Company to transfer
sponsorship of the Milnot Holding Corporation Savings Plan (and any other Plan
that does not cover solely Employees) from the Company to Seller or one of its
other Affiliates. Subject to the terms and conditions of any collective
bargaining agreement which is currently in effect or which may be in effect at
any time in the future, each Transferred Employee who satisfies the eligibility
requirements of the Milnot Holding Corporation Savings Plan shall become
eligible on the Closing Date to participate in the Purchaser’s tax-qualified
defined contribution plan (the “Purchaser 401(k) Plan”). As soon as practicable
after the Closing Date, Seller shall cause the trustees of the Milnot Holding
Corporation Savings Plan to transfer to the trustees or other funding agent of
the Purchaser 401(k) Plan, the amounts representing the account balances of the
Transferred Employees (including the appropriate net investment return thereon),
said amounts to be established as account balances or accrued benefits of such
individuals under the Purchaser 401(k) Plan. Each such transfer shall comply
with Section 414(l) of the Code and the requirements of ERISA and the
regulations promulgated hereunder. Except with respect to notes evidencing plan
loans, all assets to be transferred pursuant to this Section 5.7(b) shall be in
cash, or to the extent mutually agreed upon by Seller and Purchaser, in kind. At
the time the assets that are held in the trust with respect to the Milnot
Holding Corporation Savings Plan are transferred to the trust under the
Purchaser 401(k) Plan pursuant to this Section 5.7(b), the Purchaser 401(k) Plan
shall assume all liabilities of the Milnot Holding Corporation Savings Plan for
account balances transferred to the trust under the Purchaser 401(k) Plan, and
such transfer shall be in full discharge of all obligations of the Milnot
Holding Corporation Savings Plan in respect thereof; provided, however, neither
Purchaser nor the Purchaser 401(k) Plan shall assume any liability for

 

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failing to properly value the accounts of Transferred Employees under the Milnot
Holding Corporation Savings Plan or for any other matter relating to the
administration or the investment of the assets of the Milnot Holding Corporation
Savings Plan. Except as expressly provided in the Transition Services Agreement
executed by the parties on the date hereof (the form of which is attached hereto
as Exhibit E), as of the Closing Date, Seller shall spin-off the health care and
dependent care account balances (and related assets and liabilities) and
participant elections under Seller’s flexible benefit plan with respect to the
Transferred Employees to the Purchaser’s flexible benefits plan. After the
Closing Date, the Company shall retain all liability with respect to any Plan
sponsored by the Company that covers solely Employees.

 

(c) On or after the Closing Date, Purchaser shall allow Transferred Employees to
receive paid time off for any unused vacation accrued prior to the Closing Date
in accordance with applicable law. Schedule 5.7(c) accurately sets forth the
unused vacation accrued by each Transferred Employee prior to the date hereof.
Seller and its Affiliates shall have no liability to Employees for the accrued
vacation described herein.

 

(d) Purchaser shall be responsible for satisfying all obligations under Part 6
of Title I of ERISA and Section 4980B of the Code to provide continuation
coverage to or with respect to (i) any Transferred Employee (and their eligible
dependants) and (ii) after the Closing Date, any Plan sponsored by the Company
that covers solely Employees.

 

(e) Seller shall be responsible for providing workers’ compensation payments to
any Employee who has made a compensation claim relating to any period occurring
prior to the Closing Date and, with respect to Transferred Employees, Seller
shall continue to make workers’ compensation payments after the Closing until
such time that the Transferred Employee is able to return to active employment
with the Company (regardless of whether such Transferred Employee actually
returns to active employment with the Company). Purchaser shall take all
reasonable steps, including providing reasonable accommodation, not to deny
employment and to assist such Transferred Employee in returning to work.
Purchaser shall provide Seller with monthly health status reports of any
Transferred Employee receiving workers’ compensation payments as of the Closing
Date. Seller shall be entitled to receive the benefit of any retroactive rate
adjustment in its favor with respect to any Employee described herein.

 

Section 5.8. Market Sensitive Information. Seller shall provide Purchaser and
its representatives access to any Company trade spending or other sensitive
competitive data, including, without limitation, (i) any customer pricing
information, (ii) any Customer Trade Spending Obligations and (iii) the
information set forth on Schedule 5.8 (collectively, the “Market Sensitive
Information”), within five (5) Business Days following the Closing Date.

 

Section 5.9. Commercially Reasonable Efforts. Upon the terms and subject to the
conditions of this Agreement, each of the parties hereto shall use commercially
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable consistent with
applicable law to consummate and make effective in the most expeditious manner
practicable the transactions contemplated hereby, including without limitation
satisfaction of conditions to the Closing set forth herein.

 

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ARTICLE VI.

CONDITIONS TO SELLER’S OBLIGATIONS

 

The obligation of Seller to consummate the transactions contemplated by this
Agreement is subject to the satisfaction (unless waived in writing by Seller) of
each of the following conditions on or prior to the Closing Date:

 

Section 6.1. Representations and Warranties. The representations and warranties
of Purchaser contained in this Agreement which are qualified as to materiality
shall be true and correct, and all other representations and warranties of
Purchaser contained in this Agreement shall be true and correct in all material
respects.

 

Section 6.2. Compliance with Agreement. Purchaser shall have performed and
complied in all material respects with all covenants to be performed or complied
with by it on or prior to the Closing Date.

 

Section 6.3. Consents. All consents, Permits, authorizations, approvals, waivers
and amendments which are listed on Schedule 7.3 hereto shall have been obtained.

 

Section 6.4. Corporate Documents. Seller shall have received from Purchaser
certified copies of the resolutions duly adopted by the board of directors of
Purchaser approving the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, and such resolutions shall
be in full force and effect as of the Closing Date.

 

Section 6.5. No Adverse Proceeding. There shall not have been instituted or be
pending any suit, action or other proceeding by any Governmental Agency or any
other Person in which it is sought to restrain or prohibit or question the
validity or legality of the transactions contemplated by this Agreement.

 

ARTICLE VII.

CONDITIONS TO PURCHASER’S OBLIGATIONS

 

The obligation of Purchaser to consummate the transactions contemplated by this
Agreement is subject to the satisfaction (unless waived in writing by Purchaser)
of each of the following conditions on or prior to the Closing Date:

 

Section 7.1. Representations and Warranties. The representations and warranties
of Seller contained in this Agreement, to the extent qualified as to materiality
or Material Adverse Effect shall be true and correct, and all representations
and warranties of Seller contained in this Agreement otherwise shall be true and
correct in all material respects.

 

Section 7.2. Compliance with Agreement. Seller shall have performed and complied
in all material respects with all covenants to be performed or complied with by
it on or prior to the Closing Date.

 

Section 7.3. Consents. All consents, Permits, authorizations, approvals, waivers
and amendments which are listed on Schedule 7.3 hereto shall have been obtained.

 

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Section 7.4. Corporate Documents. Purchaser shall have received from Seller
certified copies of the resolutions duly adopted by the board of directors of
Seller approving the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, and such resolutions shall
be in full force and effect as of the Closing Date.

 

Section 7.5. FIRPTA. Seller shall have delivered an affidavit, dated the Closing
Date, pursuant to Section 1445 of the Code (Foreign Investment in Real Property
Tax Act of 1980 affidavit) in substantially the form of Exhibit C.

 

Section 7.6. No Adverse Proceeding. As of the Closing Date, there shall not have
been instituted or be pending any suit, action or other proceeding by any
Governmental Agency or any other Person in which it is sought to restrain or
prohibit or question the validity or legality of the transactions contemplated
by this Agreement.

 

Section 7.7. Resignations. Each officer and director of the Company shall have
resigned from their positions as such effective as of the Closing.

 

Section 7.8. Transition Services. Purchaser and Seller shall have executed and
delivered a transition services agreement in the form of Exhibit E.

 

Section 7.9. Surveys. Purchaser, at Purchaser’s cost and expense, shall have
obtained current surveys (the “Surveys”) of all of the Owned Real Property
prepared by a surveyor or engineer licensed in the state or states in which the
Owned Real Property, as applicable, is located and prepared in accordance with
the Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys
adopted by the American Land Title Association and the American Congress on
Surveying & Mapping in 1999, certified to the Title Company, the Company,
Purchaser, Seller, any mortgagee of the Company and such other parties as the
Purchaser may designate. The Surveys shall not disclose any defect to the
Company’s title to the subject real property other than Permitted Liens unless
such matters are cured by Seller or insured over by the Title Company in each
case to Purchaser’s reasonable satisfaction prior to the Closing.

 

Section 7.10. Title Policies. Purchaser, at Purchaser’s cost and expense, shall
have obtained title insurance policies for each of the Owned Real Properties
from the Title Company in such amounts and with such customarily obtained
endorsements as are reasonably acceptable to Purchaser subject only to Permitted
Liens.

 

Section 7.11. Non-Imputation Endorsements. Seller shall, at Purchaser’s expense,
arrange at or prior to Closing for the issuance of a non-imputation endorsement
or similar title insurance coverage in favor of the Company and Purchaser with
respect to each title insurance policy relating to any of the Owned Real
Property. Seller shall undertake such efforts, including the execution of any
affidavits or other documents, as reasonably required by the Title Company, in
order to induce the Title Company to issue such endorsements or similar
coverage.

 

Section 7.12. Payment of Seller Liabilities, Release of Liens. Seller shall have
caused (a) all liabilities in respect of Indebtedness of the Company to be
satisfied and discharged or forgiven in full, including without limitation the
liabilities listed on Schedule 7.12, which, at Seller’s election and
notwithstanding any other provision of this Agreement, may be satisfied via

 

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a dollar for dollar offset of such Indebtedness against, and thus a dollar for
dollar reduction of, intercompany amounts due to the Company from Seller (e.g.,
with respect to intercompany cash balances), and (b) the release in full of all
Liens against the Stock and the properties and assets of the Company, other than
Permitted Liens that are not listed on Schedule 1.1. Seller shall deliver to
Purchaser prior to the Closing evidence of such satisfaction and discharge or
forgiveness and such release as is reasonably satisfactory to Purchaser.

 

ARTICLE VIII.

THE CLOSING

 

Section 8.1. The Closing. The Closing of the transactions contemplated hereby
(the “Closing”) shall be held on December 23, 2004 at the offices of Willkie
Farr & Gallagher LLP, 787 Seventh Avenue, New York, New York 10019, or at such
other place as the parties may mutually agree, and shall be effective as of the
close of business on such date (the “Closing Date”). At the Closing, all of the
transactions provided for in Article II hereof shall be consummated on a
substantially concurrent basis.

 

Section 8.2. Deliveries by Seller at the Closing. At the Closing, Seller shall
deliver, or cause to be delivered, to Purchaser, the following items:

 

(a) the certified resolutions referred to in Section 7.4;

 

(b) the consents listed on Schedule 7.3;

 

(c) certificates representing all of the Stock, duly endorsed for transfer,
pursuant to Section 2.1 free and clear of all Liens;

 

(d) written evidence of the resignations required pursuant to Section 7.7; and

 

(e) all other previously undelivered documents that Seller is required to
deliver to Purchaser pursuant to this Agreement.

 

Section 8.3. Deliveries by Purchaser at the Closing. At the Closing, Purchaser
shall deliver, or cause to be delivered, to Seller, the following items:

 

(a) the certified resolutions referred to in Section 6.4;

 

(b) the consents listed on Schedule 7.3;

 

(c) duly executed and acknowledged transfer tax and other required tax forms
reasonably required by Seller to consummate the transactions contemplated
hereby, all in the form required by applicable law;

 

(d) all other previously undelivered documents that Purchaser is required to
deliver to Seller pursuant to this Agreement;

 

(e) the Closing Date Payment; and

 

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(f) the Seller Note.

 

ARTICLE IX.

INDEMNIFICATION

 

Section 9.1. Survival. All of the representations and warranties of Seller
contained in Article III of this Agreement or in any certificate delivered by
Seller pursuant to this Agreement shall survive the Closing and continue in full
force and effect: (a) in the case of the representations and warranties of
Seller contained in Section 3.21 (Environmental Matters), until the four
(4)-year anniversary of the Closing Date, (b) in the case of the representations
and warranties of Seller contained in Section 3.22 (Tax Matters), until sixty
(60) days after the expiration of the statute of limitations with respect to the
matter to which the claim relates, and (c) in the case of any other
representation or warranty of Seller contained in this Agreement (other than the
representations and warranties of Seller contained in Sections 3.1 (Authority of
Seller), 3.2(a) (Organization of the Company), 3.3 (Capitalization), 3.5
(Subsidiaries), and Section 3.24 (Brokers) and in any certificate delivered by
Seller with respect to such representations (collectively the “Perpetual
Representations”)), until the date that is eighteen (18)-months after the
Closing Date. Notwithstanding the foregoing, any notice given in accordance with
Section 10.1 of this Agreement claiming in reasonable detail an alleged breach
of any representation or warranty hereunder shall without further action extend
the survival period for the representation or warranty alleged to have been
breached as applied to the circumstances set forth in such notice until
immediately after the final resolution of the matter. The Perpetual
Representations, all of the representations and warranties of Purchaser, and all
of the covenants of Seller and Purchaser contained in this Agreement shall
survive the Closing and continue in full force and effect forever thereafter in
accordance with their terms.

 

Section 9.2. Indemnification Provisions for Benefit of Purchaser.

 

(a) In the event Seller breaches any of its representations, warranties or
covenants contained in this Agreement or in any certificate delivered by Seller
pursuant to this Agreement and provided that, as to any claim for breach of
representations or warranties, Purchaser makes a written claim for
indemnification against Seller within the applicable survival period, if
applicable, then Seller agrees to indemnify Purchaser and its Affiliates from
and against all Damages Purchaser and its Affiliates suffer resulting from or
arising out of such event; provided, however, Seller shall not have any
obligation to indemnify Purchaser or any of its Affiliates pursuant to this
paragraph (a) from and against any Damages resulting from the breach of any
representation or warranty of Seller contained in Article III of this Agreement
(other than Perpetual Representations): (i) until and only to the extent that
Purchaser and its Affiliates have suffered aggregate Damages, by reason of all
such breaches in excess of $100,000 (the “Deductible Amount”) (in which case
Purchaser and its Affiliates shall be entitled to assert claims for only the
Damages in excess of the Deductible Amount) or (ii) notwithstanding anything to
the contrary contained in this Agreement, to the extent the aggregate amount
that Seller has actually indemnified Purchaser and/or its Affiliates for prior
breaches of representations and warranties of Seller contained in Article III of
this Agreement exceeds $3,000,000 (the “Cap”). Notwithstanding the foregoing,
Seller shall have no obligation to indemnify Purchaser or its Affiliates under
this Section 9.2(a) with respect

 

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to Damages amounting to less than $5,000 in the aggregate arising out of the
same occurrence or matter or series of related occurrences or matters. For the
avoidance of doubt, notwithstanding anything to the contrary, the Deductible
Amount and Cap shall not apply to any purchase price adjustments set forth in
Section 2.3 of this Agreement.

 

(b) Without limiting the generality or effect of the foregoing, Seller shall
indemnify, defend and hold harmless the Company, Purchaser and any of its
Affiliates from and against any and all Damages resulting from or arising out of
any of the following (without duplication):

 

(i) any Liability in respect of (A) any Indebtedness of the Company or Seller,
or (B) any Lien other than Permitted Liens not listed on Schedule 1.1;

 

(ii) any liability arising under any Plan transferred to Seller or one of its
other Affiliates;

 

(iii) except as attributable to any transactions engaged in by the Company
outside the Ordinary Course of Business on the Closing Date after Purchaser’s
acquisition of the Stock, (a) all liability for income Taxes of the Company for
Pre-Closing Tax Periods; (b) to the extent made an obligation of Seller pursuant
to Section 5.1, all liability for real estate transfer Taxes or real estate
gains Taxes arising as a result of the sale of the Stock under this Agreement;
(c) all liability for income Taxes resulting by reason of any item of income or
gain of a partnership reported by the Company as a partner, to the extent such
items are properly attributable to a Pre-Closing Tax Period of such partnership;
and (d) all liability for income Taxes of any other Person for which the Company
is liable pursuant to any contractual agreement entered into by the Company on
or before the Closing Date;

 

(iv) any matter listed on Schedule 9.2;

 

(v) any Liability of Seller or any of its Subsidiaries (other than the Company)
that is not also a Liability of the Company.

 

(c) The Indemnification provided for in this Section 9.2 shall survive any
investigation at any time made by or on behalf of Purchaser or any knowledge or
information that Purchaser may have.

 

(d) Purchaser and its Affiliates shall first recoup all Damages for which they
are entitled to indemnification under this Section 9.2 by reducing the accrued
interest and outstanding principal amount under the Seller Note. This shall
affect the timing and amounts of payment required under the Seller Note in the
same manner as if Purchaser had made a permitted prepayment (without penalty or
premium) thereunder.

 

(e) Notwithstanding anything to the contrary in this Agreement:

 

(i) Seller shall have no obligation to indemnify Purchaser or any of its
Affiliates with respect to any Damages which are caused by or occur as a result
of

 

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the construction, modification (other than ordinary maintenance) or demolition
after the Closing Date of structures or other improvements at the property set
forth on Schedule 3.11(a);

 

(ii) In the event that the property set forth on Schedule 3.11(a) is rezoned or
put to a materially different use after the Closing Date, Seller shall have no
obligation to indemnify Purchaser or any of its Affiliates with respect to the
incremental amount of Damages that arise from or relate to such rezoning or
change in use; and

 

(iii) Seller’s obligation to indemnify Purchaser and/or any of its Affiliates
for Damages for which Purchaser and its Affiliates are entitled to
indemnification absent this clause (iii) that arise from or relate to a breach
of the representations and warranties made by Seller in Section 3.21 shall be
limited to 80% of the amount of such Damages if any such breach or the basis
therefor is discovered in connection with any environmental investigation (other
than a phase I investigation required or requested by a transferee or a lender
in connection with a sale or transfer of the property) or cleanup that is not
required by Environmental Laws or that likely would not be undertaken by a
reasonably prudent business person in the absence of an indemnity.

 

Section 9.3. Indemnification Provisions for Benefit of Seller.

 

(a) In the event Purchaser breaches any of its representations, warranties or
covenants contained in this Agreement or in any certificate delivered by
Purchaser pursuant to this Agreement and provided that Seller makes a written
claim for indemnification against Purchaser, then Purchaser agrees to indemnify
Seller from and against the entirety of any Damages Seller or any of its
Affiliates suffer resulting from, arising out of, relating to or caused by such
breach.

 

(b) Purchaser shall indemnify, defend and hold harmless Seller and any of its
Affiliates from and against all Damages resulting from or arising out of any
liability for Taxes attributable to any transaction engaged in by the Company
not in the Ordinary Course of Business occurring on the Closing Date after
Purchaser’s acquisition of the Stock. In addition, Purchaser and the Company
agree and acknowledge that Seller and its Affiliates shall have no liability
under this Agreement to reimburse Purchaser, the Company, or any of their
respective Affiliates for Taxes of the Company (or any successor thereto) for
any periods (or portions thereof) beginning after the Closing Date.

 

Section 9.4. Matters Involving Third Parties.

 

(a) If any third party notifies any party hereto (the “Indemnified Party”) with
respect to any matter which may give rise to a claim for indemnification against
the other party hereto (the “Indemnifying Party”) under this Article IX, then
the Indemnified Party shall use reasonable efforts to notify the Indemnifying
Party thereof promptly and in any event within ten (10) calendar days after
receiving any written notice from a third party; provided, however, that no
delay on the part of the Indemnified Party in notifying the

 

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Indemnifying Party shall relieve the Indemnifying Party from any obligation
hereunder unless, and then solely to the extent that, the Indemnifying Party is
actually prejudiced thereby.

 

(b) Once the Indemnified Party has given notice of the matter to the
Indemnifying Party, the Indemnified Party may, subject to the Indemnifying
Party’s rights to assume the defense of such matter pursuant to paragraph (c)
below, defend against the matter in any manner it deems appropriate.

 

(c) The Indemnifying Party may at any point in time choose to assume the defense
of all of such matter, in which event:

 

(i) the Indemnifying Party shall defend the Indemnified Party against the matter
with counsel of its choice reasonably satisfactory to the Indemnified Party,

 

(ii) the Indemnified Party may retain separate counsel at its sole cost and
expense (except that the Indemnifying Party shall be responsible for the fees
and expenses of one separate co-counsel for all Indemnified Parties to the
extent the Indemnified Party is advised, in writing by its counsel, that either
(x) the counsel the Indemnifying Party has selected has a conflict of interest,
or (y) there are legal defenses available to the Indemnified Party that are
different from or additional to those available to the Indemnifying Party), and

 

(iii) the Indemnifying Party shall reimburse the Indemnified Party for the
reasonable costs of defense or investigation for the period prior to the
assumption of the defense.

 

(d) Assumption of the defense of any matter by the Indemnifying Party shall
without further action constitute an irrevocable waiver by the Indemnifying
Party of its right to claim at a later date that such third party action for
which the defense was assumed is not a proper matter for indemnification
pursuant to this Article IX.

 

(e) The Indemnified Party shall not consent to the entry of a judgment or enter
into any settlement with respect to any matter which may give rise to a claim
for indemnification without the written consent of the Indemnifying Party, which
consent may not be unreasonably withheld or delayed.

 

(f) The Indemnifying Party shall not consent to the entry of a judgment with
respect to any matter which may give rise to a claim for indemnification or
enter into any settlement which does not include a provision whereby the
plaintiff or claimant in the matter releases the Indemnified Party from all
liability with respect thereto, without the written consent of the Indemnified
Party (not to be unreasonably withheld).

 

Section 9.5. Indemnification Related to Sale of Chili Man Business.

 

(a) Seller shall cause the Company to use commercially reasonable efforts to
effect the assignment of the Chili Asset Purchase Agreement to Seller prior to
the

 

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Closing Date. In the event that Seller and the Company are unable to obtain the
requisite approval for assignment of such agreement prior to the Closing Date,
the Company shall retain the Chili Assets Purchase Agreement and shall enter
into an arrangement with Seller to provide Seller with the benefits of, and
Seller shall perform the Company’s obligations under, such agreement, other than
the Company’s non-compete obligations pursuant to Section 5.8 of the Chili
Assets Purchase Agreement. Neither Purchaser nor the Company shall amend or
supplement or agree to amend or supplement the Chili Asset Purchase Agreement
without the Seller’s prior written consent. To the extent the Chili Assets
Purchase Agreement is not assigned to Seller prior to the Closing Date,
Purchaser and the Company shall take all commercially reasonable actions to
assign such agreement to Seller as soon as practicable following the Closing
Date.

 

(b) In addition to the provisions of Section 9.2, Seller shall indemnify and
hold Purchaser and the Company harmless for Damages arising from the Company’s
operation of the Chili Business and the sale and transfer of the assets and
liabilities of the Chili Business to Faribault Foods Illinois, Inc., including
without limitation, any indemnification or purchase price adjustment claims
against the Company pursuant to the Chili Asset Purchase Agreement.

 

Section 9.6. Certain Additional Provisions Relating to Indemnification.

 

(a) Notwithstanding Section 10.13, after the Closing Date, the indemnification
provisions set forth in this Article IX shall constitute the sole and exclusive
recourse and remedy available to the parties hereto with respect to the breach
of any representation or warranty contained in, or in any certificate delivered
pursuant to, this Agreement or any covenant in this Agreement requiring
performance by Seller or Purchaser on or prior to the Closing Date, in each
case, except for actual fraud.

 

(b) Notwithstanding anything in this Agreement to the contrary, for purposes of
this Article IX, in determining the existence of a breach of any representation,
warranty, covenant or agreement and the amount of Damages, no effect shall be
given to any qualification as to materiality or Material Adverse Effect, except
for the representations and warranties set forth in Section 3.6 (Financial
Statements), Section 3.8 (Material Adverse Effect), Section 3.16(a)
(Intellectual Property), Section 3.26 (Books and Records) and Section 3.27
(Customers and Suppliers).

 

(c) All payments by an Indemnifying Party under Article IX shall be treated as
an adjustment to the Purchase Price, including, without limitation, for all
foreign, federal, state and local income tax purposes.

 

(d) Seller’s aggregate liability for indemnification pursuant to this Agreement,
including Section 9.2 (but excluding Section 9.2(b)(iii)), shall in no event
exceed an amount equal to the Purchase Price.

 

(e) In the event that Seller shall be obligated to indemnify any Indemnified
Party pursuant to this Agreement, Seller shall, upon payment of such indemnity
in full,

 

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be subrogated to all rights of such Indemnified Party with respect to the claim
to which such indemnification relates.

 

(f) The amount of any and all Damages under this Article IX shall be determined
net of any amounts recovered by the Indemnified Party under insurance policies
with respect to such Damages. The parties hereto shall, in their capacities as
Indemnified Parties, and shall use reasonable efforts to cause each Indemnified
Party with which it is affiliated, to seek full recovery under such Indemnified
Party’s insurance policies for any and all Damages to the same extent as they
would if such Damages were not subject to indemnification hereunder. In the
event that an insurance or other recovery is made by any Indemnified Party with
respect to any Damages for which any such Person has been indemnified hereunder,
then a refund equal to the aggregate amount of the recovery shall be made
promptly to the Person or Persons that provided such indemnity payments to such
Indemnified Party.

 

(g) The amount of any and all Damages under this Article IX shall be determined
net of the then net present value, using a discount rate of 6% and annual
compounding, of any net Tax benefit currently realized or reasonably anticipated
to be realized following the Closing by Purchaser arising from the deductibility
of any such Damages.

 

ARTICLE X.

MISCELLANEOUS PROVISIONS

 

Section 10.1. Notices. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given (a) when delivered personally to
the recipient, (b) when sent to the recipient by telecopy (receipt
electronically confirmed by sender’s telecopy machine) if during normal business
hours of the recipient, otherwise on the next Business Day, (c) one Business Day
after the date when sent to the recipient by reputable express courier service
(charges prepaid), or (d) seven Business Days after the date when mailed to the
recipient by certified or registered mail, return receipt requested and postage
prepaid. Such notices, demands and other communications shall be sent to Seller
and to Purchaser at the addresses indicated below:

 

If to Seller:   Milnot Holding Corporation     100 South Fourth Street, Suite
1010     St. Louis, MO 63102     Attention: President and CEO     Facsimile No.:
(314) 436-7679

 

With a copy to:   Kirkland & Ellis LLP (which shall not constitute notice)   200
E. Randolph     Chicago, IL 60601     Attention: Edward T. Swan, P.C.    
Facsimile No.: (312) 861-2200

 

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If to Purchaser:   Eagle Family Foods, Inc.     735 Taylor Road, Suite 200    
Gahanna, OH 43230     Attention: Craig Steinke     Facsimile No.: (614) 501-4423

 

With a copy to:   Willkie Farr & Gallagher LLP (which shall not constitute
notice)   787 Seventh Avenue     New York, NY 10019     Attention: Steven J.
Gartner, Esq.     Facsimile No. (212) 728-9222

 

or to such other address as either party hereto may, from time to time,
designate in writing delivered pursuant to the terms of this section.

 

Section 10.2. Amendments. The terms, provisions and conditions of this Agreement
may not be changed, modified or amended in any manner except by an instrument in
writing duly executed by both of the parties hereto.

 

Section 10.3. Assignment and Parties in Interest.

 

(a) Neither this Agreement nor any of the rights, duties, or obligations of any
party hereunder may be assigned or delegated (by operation of law or otherwise)
by either party hereto except with the prior written consent of the other party
hereto, provided, however, that (i) prior to or after the Closing, Purchaser may
assign all of its rights hereunder to any Affiliate of Purchaser and to any
party providing financing in connection with the transactions contemplated
hereby for collateral security purposes, provided that no such assignment shall
relieve Purchaser of its obligations hereunder, (ii) after the Closing, Seller
may assign all of its rights hereunder to any Affiliate of Seller, provided that
no such assignment shall relieve Seller of its obligations hereunder, (iii)
after the Closing, Seller may assign all of its rights and obligations hereunder
to any Affiliate of Seller by way of a merger with such Affiliate, (iv)
Purchaser (or the assignee pursuant to clause (i)) has a one-time right to
assign all of its rights hereunder to any other Person which acquires all or
substantially all of the assets of, or equity interest in, the Company and (iv)
Seller (or the assignee pursuant to clause (ii) or (iii)) has a one-time right
to assign all of its rights hereunder to any other Person which acquires all or
substantially all of the assets of, or equity interests in, Seller (or such
assignee).

 

(b) Except as provided in Article IX, this Agreement shall not confer any rights
or remedies upon any person or entity other than the parties hereto and their
respective permitted successors and assigns.

 

Section 10.4. Announcements. All press releases, notices to customers and
suppliers and similar public announcements with respect to this Agreement and
the transactions contemplated by this Agreement shall be approved by both
Purchaser and Seller prior to the issuance thereof; provided that either party
may make any public disclosure it reasonably believes in good faith is required
by law, regulation or rule of any stock exchange on which its

 

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securities are traded (in which case the disclosing party shall use reasonable
efforts to advise the other party prior to making such disclosure and to provide
the other party a reasonable opportunity to review the proposed disclosure).

 

Section 10.5. Expenses. Except as expressly set forth in this Agreement, each
party to this Agreement shall bear all of its legal, accounting, investment
banking, and other expenses incurred by it or on its behalf in connection with
the transactions contemplated by this Agreement, whether or not such
transactions are consummated.

 

Section 10.6. Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof, supersedes
and is in full substitution for any and all prior agreements and understandings
among them relating to such subject matter, and no party shall be liable or
bound to the other party hereto in any manner with respect to such subject
matter by any warranties, representations, indemnities, covenants, or agreements
except as specifically set forth herein. The Exhibits and Schedules to this
Agreement are hereby incorporated and made a part hereof and are an integral
part of this Agreement.

 

Section 10.7. Descriptive Headings. The descriptive headings of the several
sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.

 

Section 10.8. Counterparts. For the convenience of the parties, any number of
counterparts of this Agreement may be executed by any one or more parties
hereto, and each such executed counterpart shall be, and shall be deemed to be,
an original, but all of which shall constitute, and shall be deemed to
constitute, in the aggregate but one and the same instrument.

 

Section 10.9. Governing Law; Jurisdiction.

 

(a) This Agreement and the legal relations between the parties hereto shall be
governed by and construed in accordance with the laws of the State of New York,
applicable to contracts made and performed therein.

 

(b) The parties shall initially attempt to resolve by direct negotiation any
dispute, controversy or claim arising out of or relating to this Agreement or
its breach, interpretation, termination or validity (each, a “Dispute”). In
connection with any Dispute, each party shall promptly pay to the other in
immediately available funds the amounts, if any, as to which each party agrees
is due and payable to the other.

 

(c) Any Dispute (other than Disputes arising in connection with Proposed
Adjustments under Section 2.3) arising out of or relating in any way to this
Agreement or the transactions arising hereunder that cannot be resolved by
negotiation shall be settled exclusively by arbitration in the City of New York,
New York. Such arbitration shall be administered by the CPR Institute for
Dispute Resolutions (the “Institute”) in accordance with its then prevailing
Rules for Non-Administered Arbitration of Business Disputes (except as otherwise
provided herein), by three independent and impartial arbitrators, one of whom
shall be appointed by Purchaser and one of whom shall be appointed by Seller.
Notwithstanding anything to the contrary provided in Section 10.9(a) above, the
arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. §1
et seq.

 

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The fees and expenses of the Institute and the arbitrators shall be shared
equally by the parties and advanced by them from time to time as required;
provided that at the conclusion of the arbitration, the arbitrators shall award
costs, expenses (including the costs of the arbitration previously advanced and
the fees and expenses of attorneys, accountants and other experts) and interest
in accordance with the rules of the Institute to the parties based on the extent
they prevail in the Dispute. The arbitrators shall permit and facilitate such
discovery as they shall determine appropriate in the circumstances, taking into
account the needs of the parties and the desirability of making discovery
expeditious and cost effective. The Company, Purchaser and Seller shall keep
confidential any proprietary information, trade secrets or other non-public
information disclosed in discovery. The arbitrators shall render their award
within 90 days of the conclusion of the arbitration hearing. Notwithstanding
anything to the contrary provided in this Section 10.9(c) and without prejudice
to the above procedures, either party may apply to any court of competent
jurisdiction for temporary injunctive or other provisional judicial relief if
such action is necessary to avoid irreparable damage or to preserve the status
quo until such time as the arbitration panel is convened and available to hear
such party’s request for temporary relief. The award rendered by the arbitrators
shall be final and not subject to judicial review, and judgment thereon may be
entered in any court of competent jurisdiction.

 

Section 10.10. Limited License. Purchaser agrees that it shall cause the Company
to grant to Seller a limited, non-exclusive, royalty-free license to use the
MILNOT trade name and trademark on stationery, letterhead, business cards and
signage consistent with Seller’s prior practice for the two (2)-year period
immediately following the Closing; provided that the parties may mutually agree
to extend such period. Immediately upon expiration of such two (2)-year period,
or longer period if extended, Seller shall cease all use of the MILNOT trade
name and trademark, any derivatives thereof and any confusing similar mark.

 

Section 10.11. Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rule of strict construction will be applied against any party. Any references to
any federal, state, local or foreign statute or law will also refer to all rules
and regulations promulgated thereunder, unless the context requires otherwise.
Unless the context otherwise requires: (a) a term has the meaning assigned to it
by this Agreement; (b) including means “including but not limited to”; (c) ”or”
is disjunctive but not exclusive; (d) words in the singular include the plural,
and in the plural include the singular; and (e) “$” means the currency of the
United States of America.

 

Section 10.12. Severability. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument. Furthermore, in lieu of any such invalid
or unenforceable term or provision, the parties hereto intend that there shall
be added as a part of this Agreement a provision as similar in terms to such
invalid or unenforceable provision as may be possible and be valid and
enforceable.

 

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Section 10.13. Specific Performance. Without limiting or waiving in any respect
any rights or remedies of any party hereto under this Agreement now or
hereinafter existing at law or in equity or by statute, each of the parties
hereto shall be entitled to seek specific performance of the obligations to be
performed by the other in accordance with the provisions of this Agreement.

 

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IN WITNESS WHEREOF, Seller and Purchaser have executed and delivered this
Agreement as of the day and year first written above.

 

SELLER   MILNOT HOLDING CORPORATION     By:  

/s/ Alain Souligny

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    Name:   Alain Souligny     Title:   Chief Financial Officer PURCHASER  
EAGLE FAMILY FOODS, INC.     By:  

/s/ Craig Steinke

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    Name:   Craig A. Steinke     Title:   President and Chief Executive Officer