Flowers Industries, Inc

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IN THE MATTER OF FLOWERS INDUSTRIES, INC.

MODIFYING ORDER IN REGARD TO ALLEGED VIOLATION OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT AND SEC. 7 OF THE CLAYTON ACT Docket 9148. Consent Order Nov. 1983-Modifying Order April 1986 The Federal Trade Commission has modified a 1983 consent order with Flowers Industries, Inc. 1102 F. C. 1700), a Thomasvile, Ga. baker, by appointing a trustee to divest two bakeries and extending for six months the deadline for the divestitures. ORDER MODIFYING ORDER TO DIVEST On November 3 1983, the Commission issued its order in this matter requiring, inter alia that respondent Flowers Industries, Inc. Flowers divest itself absolutely and in good faith of the High Point Bakery Plant. . . (anda of the Gadsden Bakery Plant to an Eligible Person including, without limitation, land, buildings, fixtures attached thereto, machinery and equipment." As of the date of this order, neither plant has been divested by Flowers. Because it appeared that the public interest would be served by modifying the order to allow for the appointment of a trustee to accomplish divestiture, on March 19, 1986, the Commission issued its Order To Show Cause Why Order Requiring Divestiture Should Not Be Modified Corder to show cause ) pursuant to Section 3.72 of the Commission Rules of Practice. The order to show cause proposed the insertion of a new Paragraph VII ofthe order to appoint Graham Humes of Me Ion Bank (East) N.A. as trustee. On March 31, 1986, the order to show cause was served on Flowers, and Flowers answered on April 2, 1986 stating that it consents to the modifications. After reviewing Flowers s answer and the materials submitted with its compliance reports, the Commission has concluded that the public interest warrants modifying the order as proposed in the order to show cause. As the Commission observed in the order to show cause the appointment of the trustee appears likely to advance the remedial objectives of the order.

Accordingly, It is hereby ordered, That pursuant to 15 U. C. 45(b), and Section 72 of the Commission s Rules of Practice, 16 C.FR 3. , (1) Paragraphs VII, VII, IX, X and XI of the order in this matter be modified to renumber these Paragraphs VII, IX, X, XI, and XII respectively, and (2) a new Paragraph VII be added to the order, as follows: Modifying Order 107 FT.

VII The Commission hereby appoints Graham Humes, of Mellon Bank (East) N. , as Trustee to serve subject to all the terms and conditions specified herein.

A. Powers and Duties of Trustee; Conditions of Trusteeship 1. The Trustee shall have the duty and authority to effect the divestiture of the properties and assets of Flowers subject to divestiture pursuant to Paragraphs I and II of this order ("the Assets ) as quickly as possible in good faith to an Eligible Person who has represented in good faith that the Assets will, ifacquired, be used in accordance with subparagraphs I(B) and II(B) ofthe order. The Trustee may divest the plants separately or together.

2. The duty and authority of the Trustee to divest the Assets shall be at the most favorable price and terms available, but there shall be no minimum price therefor.

3. If requested by Flowers or the Commission, the Trustee shall furnish a surety bond, the cost of which may be included in the Trustee s expenses as provided in subparagraph VIID). 4. Except for cases of misfeasance, negligence, willful or wanton acts, or bad faith by the Trustee, the Trustee shall not be liable to Flowers for any action taken or not taken in the performance of the trusteeship. Flowers shall indemnify the Trustee and hold the Trustee harmless against any liabilities, claims, or expenses arising out of performance of the trusteeship, including all reasonable fees of co unsel and other expenses incurred in connection with the preparation for or defense of any claim, whether or not resulting in any liability, except to the extent that such liabilities, claims, or expenses result from misfeasance, negligence, willful or wanton acts, or bad faith by the Trustee.

5. Rule 2.41(1) of the Commission s Rules of Practice and Procedure shall apply to the Trustee in the same manner as it would be applicable to Flowers.

6. The Trustee may seek approval of a proposed acquirer at any time during the period specified in subparagraphs VII(B)(I) and VIIB)(2), and the Trustee may seek approval for more than one proposed acquirer. After the expiration of the time for seeking approval of a proposed acquirer, the Trustee shall have no duty or authority to seek approval of a proposed acquirer. 7. Each request to the Commission for approval of a proposed acquirer shall be in writing and shall include a definitive written agreement between the proposed acquirer and the Trustee. The agreement FLOWERS INDUSTRIES, j"-C. 405 403 Modifying Order shall be conditional upon approval of the transaction by the Commis- Slon.

8. The Trustee shall have the power (a) to retain the services of attorneys, appraisers, consultants, investment bankers, and such others as may be reasonably necessary to assist in the divestiture of the Assets; (b) to disclose confidential information and data respecting the Assets to any person who, in the opinion of the Trustee, shows a bona fide interest in acquiring the Assets or any portion thereof; (c) to enter into such contracts and execute such documents on behalf of Flowers as may be reasonable and necessary to effect divestiture in accordance with the terms ofthis order provided that such contracts and documents may include representations, warranties, covenants and indemnity agreements only as to clear title; and (d) to take such other actions as may be reasonable and necessary to effect divestiture in accordance with the terms of this order. 9. Within thirty days following appointment of the Trustee and every thirty days thereafter, until the Commission approves a proposed acquirer or the time for seeking approval of a proposed acquirer has expired, the Trustee shall submit a verified report in writing to the Commission, with a copy to Flowers, setting forth (a) the steps taken by the Trustee to make public the availability for purchase of the Assets, (b) a list of all persons or organizations to whom notice of availability for purchase has been given directly, (c) a summary of all discussions and negotiations together with the identities and addresses of all interested persons or organizations, and (d) copies of all internal memoranda, offers, counter-offers, communications, and correspondence concerning divestiture. The Trustee shall provide such other reports as may be required by the Commission. 10. The Trustee shall account for all monies derived from any divestiture. All funds received by the Trustee from a prospective acquirer shall be deposited immediately in a federally chartered bank in an interest-bearing account until settlement of the Trustee s account. 11. Within sixty days after divestiture or after expiration of the time for seeking approval of a proposed acquirer, the Trustee shall submit to the Commission a detailed final accounting, including all amounts received or paid by the Trustee and all unpaid amounts still owing to the Trustee or others. Upon approval of the accounting by the Commission, the Trustee shall pay the approved unpaid expenses and pay the balance of the funds, together with all interest earned to Flowers. Should the amount in the Trustee s account be insuffcient to pay the approved unpaid expenses and to compensate the Trustee Flowers, within 15 days after receiving notice thereof from the Commission, shall deliver to the Trustee an amount suffcient to corn pen. Modifying Order 107 F. sate the Trustee pursuant to subparagraph VU(DJ and to permit the Trustee to pay all approved unpaid expenses. 12. The Trustee may be removed by the Commission for failure to discharge the Trustee s obligations diligently or faithfully, or for other good cause. Upon the removal, death, or resignation of the Trustee, a successor Trustee shall be appointed by the Commission. Selection of such successor Trustee shall be subject to the consent of Flowers, which consent shall not be unreasonably withheld. B. Term of Trusteeship; Extension 1. The Trustee shall have 180 days from the date of appointment to submit requests for approval of a proposed acquirer to the Commission.

2. That time period may be extended by the Commission (a) upon the removal, death, or resignation of the Trustee, for an additional thirty days plus a period equal to the time during which there was no Trustee; (b) for a period necessary to remedy any delay in the submission of a request for approval of a proposed acquirer that has been substantially caused by any violation of this order by Flowers; or (c) for a period equal to such time as there exists any unresolved dispute with Flowers over the interpretation of this order. 3. The trusteeship shall terminate upon the Trustee s discharge of the obligations set forth in subparagraph VU(A)(ll). C. Additional Obligations of Flowers 1. Flowers shall cooperate fully with the Trustee in the Trustee efforts to effect divestiture of the Assets. Flowers will do nothing to impede or interfere with those efforts.

2. When requested to do so by the Trustee, Flowers shall promptly ,mpower the Trustee to perform, on Flowers' behalf, every act neces- ;ary to convey clear title to the Assets from Flowers to any Eligible erson in accordance with the terms of this order. All documents to 'e executed in compliance with this subparagraph shall first be subaitted to and approved by the Director ofthe Bureau of Competition. 3. When requested to do so by the Trustee, Flowers shall promptly rovide the Trustee and prospective acquirers with existing informaon relating to the Assets, including but not limited to, written inforlation and data, access to the Assets, access to records relating to the ssets, access to personnel for tours and inspections of the Assets :cess to knowledgeable personnel for answering questions about the ;sets, and information previously submitted to the Commission rerding Flowers s prior divestiture efforts. 4. Flowers shall not cause or permit the Assets to become subject 403 Modifying Order to any new lien or encumbrance, and no existing lien or encumbrance shall be increased.

D. Compensation and Expenses of Trustee 1. The Trustee s compensation shall be paid by Flowers, and the Trustee s reasonable expenses shall be reimbursed by Flowers. 2. The Trustee s compensation shall consist of a flat fee and contingent fee, as follows:

(a) The Trustee shall be paid a flat fee of $5000 per month from the date hereof until the first to occur of either; (i) divestiture of the Assets as provided for herein, or (iij the expiration of the time provided for seeking approval of a proposed acquirer.

(b) In addition to the flat fee specified in subparagraph VII(D)(2)(a), the Trustee shall be paid a fee contingent upon the consummation of the divestitures contemplated hereunder from the proceeds of the divestitures.

(c) Ifthe combined purchase price ofthe Assets is less than or equal to six millon dollars, the contingent fee shall be $IO OOO for the divestiture ofthe properties and assets subject to divestiture pursuant to Paragraph I of this order and $10 000 for the divestiture of the properties and assets subject to divestiture pursuant to Paragraph II of this order, plus an additional amount based on the combined purchase price of the Assets and calculated as follows: (i) 3% of that portion of the purchase price less than or equal to one milion dollars; plus (ii) 1 % ofthat portion of the purchase price greater than one milion dollars but less than or equal to two millon dollars; plus (iii) 2% of that portion of the purchase price greater than two milion dollars but less than or equal to three milion dollars; plus (iv) 3% of that portion of the purchase price greater than three milion dollars but less than or equal to four million dollars; plus (v) 4% of that portion of the purchase price greater than four million dollars but less than or equal to five millon dollars; plus (vi) 5% of that portion of the purchase price greater than five millon dollars but less than or equal to six milion dollars. (d) If the combined purchase price of the Assets is greater than six milion dollars, the contingent fee shall be based on the combined purchase price of the Assets and calculated as follows: (i) if the purchase price is greater than six million dollars but less Modifying Order 107 F. than or equal to seven milion dollars, 6% of the purchase price; (ii) if the purchase price is greater than seven million dollars hut less than or equal to eight milion dollars, 7% of the purchase price; (iii) if the purchase price is greater than eight millon dollars but less than or equal to nine millon dollars, 8% of the purchase price; (iv) ifthe purchase price is greater than nine milion dollars but less than or equal to ten millon dollars, 9% of the purchase price; (v) if the purchase price is greater than ten milion dollars, 10% of the purchase price.

3. Notwithstanding any other term of this order, Flowers shall not be obligated to reimburse the Trustee for any expenses in excess of $30 000 unless those expenses have been approved by the Commission.

4. Each month the Trustee shall present Flowers with a detailed written statement of the Trustee s expenses for the previous month. A copy of each monthly expense statement shall be sent to the Director of the Bureau of Competition. Subject to the condition set forth in subparagraph VII(D)(3), Flowers shall reimburse the Trustee for such expenses within five days of receipt of each monthly statement. E. Resolution of Disputes 1. If Flowers and the Trustee are unable to resolve any dispute arising out of the interpretation ofthis order, either party may notify the Commission thereof in writing.

2. The Commission shall resolve a dispute arising under subparagraph VII(E)(l) without unreasonable delay. With regard to any dispute arising out of the interpretation of subparagraphs VII(A)(8)(a), VIIA)(8)(b), VIIC)(3), or VIlD) ofthis order, the Commission s determination shall be final and binding upon Flowers and the Trustee. 3. For the purpose of subparagraph VIlB)(2)(c), an unresolved dispute shall exist as ofthe day the Commission (a) receives notice under subparagraph VII(E)(l), or (b) in the case of a dispute between it and Flowers, notifies Flowers in writing thereof F. Termination of Obligation To Divest Except upon a showing that any act or omission by Flowers in violation of the terms of this order has contributed substantially to the Trustee s inability to divest the Assets, Flowers s obligation to divest the Assets under this order shall terminate upon the expiration of the time for seeking approval of a proposed acquirer; provided however that Flowers shall proceed to accomplish any divestiture that has been approved by the Commission, or that is subsequently approved by the Commission ifthe request for approval was received 403 Modifying Order by the Commission before the expiration of the time for seeking approval of a proposed acquirer.

Commissioner Strenio was recorded as not participating. 410 FEDERAL TRADE cOMNnsSION DECISIONS Complaint 107 F.