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EXHIBIT 2.2
CONTRIBUTION
AGREEMENT
BY AND AMONG
PROST PARTNERS, L.P.
A CALIFORNIA LIMITED PARTNERSHIP
AND
BWI-ST. STAN'S, INC.
A CALIFORNIA CORPORATION
IN THE FORMATION OF
BWI-PROST PARTNERS
A CALIFORNIA PARTNERSHIP
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TABLE OF CONTENTS
Page
RECITALS....................................................................1
SECTION 1 - CONTRIBUTION OF ASSETS BY PARTNERS........................1
1.1 CONTRIBUTION OF THE ASSETS BY PROST..............................1
1.2 EXCLUDED ASSETS..................................................4
1.3 CONVEYANCE INSTRUMENTS...........................................5
1.4 ASSUMED LIABILITIES..............................................5
1.5 EXCLUDED LIABILITIES.............................................5
1.6 CONTRIBUTION BY BWISS............................................5
1.7 CONTRIBUTION DATE................................................6
SECTION 2 - EVENTS OCCURRING ON THE CONTRIBUTION DATE.................6
2.1 DELIVERIES BY PROST..............................................6
2.2 EFFECT OF DELIVERIES.............................................6
2.3 EFFECT OF CONTRIBUTIONS..........................................6
2.4 DELIVERIES BY BWISS..............................................6
2.5 EFFECT OF CONTRIBUTIONS..........................................7
SECTION 3 - OTHER AGREEMENTS..........................................7
3.1 OTHER AGREEMENTS.................................................7
SECTION 4 - REPRESENTATIONS AND WARRANTIES OF PROST...................7
4.1 ORGANIZATION.....................................................7
4.2 QUALIFICATION....................................................8
4.3 AUTHORITY........................................................8
4.4 NO VIOLATIONS....................................................8
4.5 FINANCIAL STATEMENTS.............................................9
4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS.............................9
4.7 CERTAIN TAX MATTERS.............................................11
4.8 CONDITION OF FACILITIES.........................................11
4.9 UTILITIES; ACCESS...............................................11
4.10 CERTAIN CONDITIONS NOT PRESENT..................................11
4.11 CONDITION OF EQUIPMENT..........................................12
4.12 INVENTORY; RECEIVABLES..........................................12
4.13 TITLE TO PROPERTIES; ENCUMBRANCES...............................12
4.14 LEASES..........................................................13
4.15 PATENTS, TRADEMARKS, AND SIMILAR RIGHTS.........................13
4.16 INSURANCE.......................................................13
4.17 ERISA...........................................................14
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4.18 DOCUMENTS; COMMITMENTS..........................................15
4.19 LABOR MATTERS...................................................15
4.20 PERSONNEL.......................................................16
4.21 NO BREACH.......................................................16
4.22 CONSENTS, PERMITS, ETC..........................................16
4.23 LITIGATION......................................................16
4.24 COMPLIANCE WITH APPLICABLE LAW; ADVERSE RESTRICTIONS............17
4.25 ENVIRONMENTAL PROTECTION........................................17
4.26 ASSETS NECESSARY TO BUSINESS....................................18
4.27 CUSTOMERS, DISTRIBUTORS, AND SUPPLIERS..........................18
4.28 BROKERS.........................................................18
SECTION 5 - REPRESENTATIONS AND WARRANTIES ON BWISS..................18
5.1 ORGANIZATION....................................................18
5.2 AUTHORITY.......................................................19
5.3 NO VIOLATIONS...................................................19
5.4 BROKERS.........................................................19
SECTION 6 - COVENANTS................................................20
6.1 CONDUCT OF BUSINESS OF PROST PENDING THE CONTRIBUTION DATE......20
6.2 APPROVAL OF PARTNERS............................................21
6.3 THIRD PARTY CONSENTS............................................21
6.4 EMPLOYEE MATTERS................................................22
SECTION 7 - SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION.............23
7.1 SURVIVAL; INDEMNIFICATION.......................................23
7.2 LIMITATIONS OF INDEMNIFICATION..................................24
7.3 TAX INDEMNIFICATION WITH RESPECT TO TAX LIABILITY...............24
7.4 DEFINITIONS.....................................................27
7.5 CONTROL OF LITIGATION...........................................28
7.6 TRANSFER TAXES..................................................28
7.7 COOPERATION ON TAX MATTERS......................................29
7.8 ELECTIONS.......................................................29
7.9 TAX RETURNS OF PROST............................................29
7.10 CERTAIN DISPUTES................................................30
7.11 OTHER TAX MATTERS...............................................30
SECTION 8 - CONDITIONS TO CLOSING; TERMINATION.......................30
8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE CLOSING.....30
8.2 CONDITIONS TO OBLIGATION OF BWISS TO EFFECT THE CLOSING.........31
8.3 CONDITIONS TO OBLIGATION OF PROST TO EFFECT THE TRANSACTION.....33
8.4 TERMINATION.....................................................34
8.5 BREAK UP FEES...................................................34
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SECTION 9 - MISCELLANEOUS PROVISIONS.................................34
9.1 AMENDMENT AND MODIFICATION......................................34
9.2 WAIVER OF COMPLIANCE; CONSENTS..................................34
9.3 ASSIGNMENT......................................................35
9.4 FURTHER ASSURANCES..............................................35
9.5 GOVERNING LAW...................................................35
9.6 COUNTERPARTS....................................................35
9.7 PUBLICITY.......................................................35
9.8 NOTICES.........................................................36
9.9 SPECIFIC PERFORMANCE............................................36
9.10 HEADINGS........................................................36
9.11 ENTIRE AGREEMENT................................................37
9.12 SEVERABILITY....................................................37
9.13 INCONSISTENCY OR CONFLICT.......................................37
9.14 EXHIBITS AND SCHEDULES..........................................37
9.15 ARBITRATION.....................................................37
9.16 ATTORNEYS' FEES.................................................37
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This CONTRIBUTION AGREEMENT (this "Agreement") is entered into by and
between Prost Partners, L.P., a California limited partnership, and BWI-St.
Stan's Inc., a California corporation in the formation of BWI-Prost Partners, a
California partnership (the "Partnership"). This Agreement and the Agreement of
Partnership of BWI-Prost Partners, a California partnership (the "Partnership
Agreement") shall be effective as of the Contribution Date.
RECITALS
A. Prost Partners, L.P., a California limited partnership,
(hereinafter referred to as "Prost"), owns and operates a brewery and brewpub
located in Modesto, California doing business as St. Stan's Brewing Company (the
"Business"). BWI-St. Stan's, Inc. (hereinafter referred to as "BWISS"), a wholly
owned subsidiary of Beverage Works, Inc. (hereinafter referred to as "BWI"),
desires to enter into with Prost a partnership which will own and operate the
Business.
B. For the purpose set forth in Section 1.3 of the Partnership
Agreement, and as its Capital Contribution (as defined in Section 1.10 of the
Partnership Agreement), Prost wishes to contribute the Business (except the
"Excluded Assets," as defined in Section 1.2 of this Agreement) to the
Partnership in exchange for which Prost shall become a Partner in the
Partnership and shall receive the Percentage Interest in the Partnership
specified in Section 2.1 of the Partnership Agreement. BWISS wishes to assume
certain liabilities of the Business as its contribution in exchange for which
BWISS shall become a Partner in the Partnership and shall receive the Percentage
Interest in the Partnership specified in Section 2.1 of the Partnership
Agreement.
C. In order to accomplish the foregoing, simultaneously with the
execution of this Agreement and the Partnership Agreement, the parties shall
enter into the agreements identified in Section 3 hereof (collectively, the
"Other Agreements").
D. The foregoing contributions and assumption of liabilities by
the Partnership are all subject to the terms and conditions of this Agreement,
the Partnership Agreement and the Other Agreements.
In consideration of the foregoing and the mutual representations,
warranties, covenants, and agreements herein contained, Prost and BWISS agree as
follows:
SECTION 1
CONTRIBUTION OF ASSETS BY PARTNERS
1.1 CONTRIBUTION OF THE ASSETS BY PROST.
(a) Subject to the terms and conditions of this
Agreement, on the Contribution Date, Prost hereby assigns, transfers, and
delivers to the Partnership, as a contribution, free and clear of all title
defects, objections, liens, pledges, claims, rights of first refusal, options,
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charges, security interests, mortgages, or other encumbrances of any nature
whatsoever (collectively, "Encumbrances") other than "Permitted Encumbrances"
(as defined in Section 1.1(b) of this Agreement), all of the cash, assets,
properties, and business (excepting only the "Excluded Assets," as defined in
Section 1.2 of this Agreement) of every kind and description; wherever located;
real, personal, or mixed; tangible or intangible; owned or held; or used
primarily in the conduct of the Business by Prost as the same shall exist on the
Contribution Date including all assets and property shown on the "Contributed
Business Balance Sheet" (as defined in Section 4.5 of this Agreement) (and not
disposed of in the ordinary course of business) and all assets and property
thereafter acquired by Prost in respect of or used in the Business immediately
prior to the Contribution Date (collectively, the "Assets"), and including,
without limitation, all right, title, and interest of Prost in, to, and under:
(i) Those certain parcels of land described in
Schedule 1.1(a)(i) hereto (collectively, the "Fee Property") and all buildings,
fixtures, and improvements erected on the Fee Property (collectively,
"Improvements") (the Fee Property and Improvements hereinafter collectively
referred to as the "Subject Property");
(ii) The machinery, equipment, furniture, vehicles,
and other tangible property (including, without limitation, maintenance and
operating supplies, fuel, and spare parts for such machinery and equipment)
located on, or used at, the Subject Property or the "Excluded Facilities," as
defined in Section 1.2(a)(i) of this Agreement, or otherwise used in connection
with the Business (collectively, the "Equipment");
(iii) The raw materials, finished goods,
work-in-process, supplies, and inventories, with respect to the Business carried
on by Prost wherever located (collectively, the "Inventory");
(iv) Those patents, copyrights, trademarks, trade
names, technology, know-how, processes, trade secrets, inventions, proprietary
data, formulae, research and development data, computer software programs, and
other intangible property (excluding the Prost name and any derivative thereof),
and any applications for the same, used primarily in the portion of the Business
carried on by Prost, and all goodwill associated with such intangible property
(collectively, the "Intangible Property");
(v) The leases of real property (described in
Schedule 1.1(a)(v)) together with all fixtures, office equipment, furnishings,
furniture, and other tangible property located at such property (collectively,
the "Leased Property");
(vi) All of Prost's rights, claims, credits, causes
of action, or right of setoff against third parties relating to the Assets,
including, without limitation, unliquidated rights under manufacturers' and
vendors' warranties (collectively "Claims");
(vii) Those contracts, agreements, leases, licenses,
and other instruments, arrangements, and commitments being assumed by the
Partnership pursuant to Section 1.4 of
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this Agreement (collectively, "Rights");
(viii) All certificates of occupancy and other
transferable licenses, permits, registrations, authorizations, use agreements,
orders, or approvals of governmental or quasi-governmental agencies and
authorities (whether federal, state, local, municipal, or foreign) or private
parties relating to the construction, use, operation, or enjoyment of the Assets
(collectively, "Permits");
(ix) All accounts receivable arising out of sales of
beer and other inventory sold or otherwise in the ordinary and usual course of
the operation of the Business prior to the close of business on the Contribution
Date (collectively, "Receivables");
(x) All transferable bonds or deposits made by Prost
or its predecessors in title (or its agents) with any governmental agency or
authority or with any utility company or third party relating to the
construction, use, operation, or enjoyment of the Assets;
(xi) All prepaid rentals and other prepaid expenses
arising from payments made by Prost in the ordinary and usual course of the
operation of the Business related to the Assets prior to the close of business
on the Contribution Date for goods or services;
(xii) Originals or copies of all books, records,
files, and papers, whether in hard copy or computer format, used in the Business
since inception, including without limitation, engineering information, manuals
and data, sales and advertising materials, sales and purchase correspondence,
lists of present and former suppliers, and personnel and employment records and,
with respect to information relating to "Tax" (as defined in Section 7.4 of this
Agreement), only information that is necessary for the preparation of any Tax
returns to be filed by the Partnership after the Contribution Date or the
determination of the Tax basis of the Assets (collectively, "Files and
Records");
(xiii) All lists of present, and, to the extent
available, future customers and goodwill associated with the Assets.
(b) For purposes of this Agreement, "Permitted
Encumbrances" shall mean (i) the "Assumed Liabilities," as defined in Section
1.4 of this Agreement; (ii) Encumbrances which, individually or in the
aggregate, do not or would not have a material adverse effect on the business or
financial condition of the Business taken as a whole or materially interfere
with the present use of any Assets subject thereto; and (iii) easements,
rights-of-way, building or use restrictions, exceptions, variances,
reservations, or similar Encumbrances of record affecting, but not materially
interfering with the present use of, any Subject Property. For purposes of
Section 1.1(b), a "material adverse effect" shall include an individual
Encumbrance exceeding the principal amount of $500, and in the aggregate,
exceeding the principal amount of $2,500.
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1.2 EXCLUDED ASSETS.
(a) There shall be excluded from the Assets the following
assets and properties of Prost which are used in connection with the Business:
(i) That certain parcel of land described in Schedule
1.2(a)(i) hereto (the "Excluded Fee Property") and the buildings, fixtures, and
improvements erected on the Excluded Fee Property (collectively, "Excluded
Improvements") (the Excluded Fee Property and Excluded Improvements hereinafter
sometimes collectively referred to as the "Excluded Facilities");
(ii) All machinery, equipment, furniture, vehicles,
and other tangible property (including, without limitation, maintenance and
operating supplies, fuel, and spare parts of such machinery and equipment)
located on, or used at, the Excluded Facilities and the other machinery,
equipment, and other tangible property described in Schedule 1.2(a)(ii) ("Other
Excluded Equipment") (collectively, the "Excluded Equipment");
(iii) All of its right, title, and interest in and to
all patents, copyrights, trademarks, trade names, technology, know-how,
processes, trade secrets, inventions, proprietary data, and other intangible
property, and any applications for the same, not used primarily in connection
with the Assets and described in Schedule 1.2(a)(iii) hereto, and all goodwill
associated with such intangible property (collectively, the "Excluded Intangible
Property");
(iv) All of its claims against third parties relating
to the "Excluded Assets," as defined in Section 1.2(b) of this Agreement, and
the related unliquidated rights under manufacturers' and vendors' warranties,
including all amounts representing reimbursements for items paid by it and
described in Schedule 1.2(a)(iv);
(v) All of its right, title, and interest in and to
all Permits relating to the construction, use, operation, or enjoyment of the
Excluded Assets and described in Schedule 1.2(a)(v);
(vi) All of its right, title, and interest in and to
all transferable bonds or deposits made by it or its predecessors in title (or
its agents) with any governmental agency or authority or with any utility
company or third party relating to the construction, use, operation, or
enjoyment of the Excluded Assets and described in Schedule 1.2(a)(vi); and
(vii) All of its right, title, and interest in and to
all prepaid rentals and other prepaid expenses arising from payments made by it
in the ordinary and usual course of the operation of the Business in connection
with the Excluded Assets and described in Schedule 1.2(a)(vii).
(b) The Excluded Facilities, Excluded Equipment, Excluded
Intangible Property, and all of the rights, properties, and other assets with
respect to the Business not being
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contributed to the Partnership by Prost pursuant to this Agreement are herein
collectively referred to as the "Excluded Assets."
1.3 CONVEYANCE INSTRUMENTS. In order to effectuate the
contribution of the Assets as contemplated by Section 1.1, Prost has, or will
hereafter, execute and deliver, or cause to be executed and delivered, all such
documents or instruments of assignment, transfer, or conveyance, in each case
dated the Contribution Date (collectively, the "Conveyance Instruments"), as the
parties and their respective counsel shall reasonably deem necessary or
appropriate to vest in or confirm title to the Assets to the Partnership.
1.4 ASSUMED LIABILITIES. Subject to the terms and conditions of
this Agreement and of the Partnership Agreement, in reliance on the
representations, warranties, covenants, and agreements of the parties contained
herein, the Partnership hereby assumes and agrees to pay, discharge, or fulfill
the following liabilities and obligations relating to the Business: (a) all of
the liabilities and obligations in respect of the contracts, agreements,
licenses, and other instruments, arrangements, and commitments listed in
Schedule 1.4(a); (b) the leasehold obligations, including by assignment or
sublease, in respect of the Leased Property as described in Schedule 1.4(b); and
(c) the other liabilities listed in Schedule 1.4(c) (collectively, the "Assumed
Liabilities").
1.5 EXCLUDED LIABILITIES. Notwithstanding any provision of this
Agreement or any Conveyance Instrument to the contrary, the Partnership is
assuming only the Assumed Liabilities and is not assuming any other liability or
obligation of Prost (or any predecessor owner of all or part of its business and
assets) of whatever nature whether presently in existence or arising hereafter,
and all such other liabilities and obligations shall be retained by and remain
liabilities of Prost (all of such liabilities and obligations not being assumed
hereinafter referred to as the "Excluded Liabilities") and, notwithstanding
anything to the contrary in this Section 1.5, none of the following shall be
"Assumed Liabilities" for purposes of this Agreement:
(a) Any liability for "Tax" (as defined in Section 7.4 of
this Agreement) arising from or with respect to the Assets or the operations of
the Business, other than described in Section 1.5(b) hereof, which is incurred
in or attributable to the "Tax Indemnification Period" (as defined in Section
7.4 of this Agreement) (the "Excluded Tax Liabilities"); or
(b) Any liabilities relating to the Excluded Assets (it
being understood that any Tax Liability relating to the Excluded Assets shall be
an Excluded Tax Liability for purposes of this Agreement).
1.6 CONTRIBUTION BY BWISS. Subject to the terms and conditions of
this Agreement, on the Contribution Date, as its contribution, BWISS, in
reliance on the representations, warranties, covenants, and agreements of Prost
contained herein, BWISS hereby assumes and agrees to pay, discharge, or fulfill
the liabilities and obligations described in Schedule 1.6 ("Assumed Debts").
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1.7 CONTRIBUTION DATE. The Contribution Date shall immediately
follow fulfillment or waiver of the conditions specified in Sections 8.1 through
8.3 hereof and provided that this Agreement has not been terminated or abandoned
pursuant to Section 8.4 hereof. The parties shall use their best efforts to
effectuate the Contribution Date as soon as practicable.
SECTION 2
EVENTS OCCURRING ON THE CONTRIBUTION DATE
2.1 DELIVERIES BY PROST. On the Contribution Date, Prost will
deliver to the Partnership the following:
(a) The Conveyance Instruments to effect the contribution
of the Assets to the Partnership and the assumption of the Assumed Liabilities
of the Partnership, such Conveyance Instruments to be those reasonably deemed
necessary by, and to be in form and substance reasonably satisfactory to,
counsel to the parties;
(b) All special warranty deeds and other appropriate
instruments conveying to the Partnership the Subject Property;
(c) All other previously undelivered items required to be
delivered by Prost at or prior to the Contribution Date pursuant to the terms of
this Agreement, the Partnership Agreement, and the Other Agreements.
2.2 EFFECT OF DELIVERIES. All deliveries of information and
documents contemplated to be made by Prost to the Partnership pursuant to the
terms of this Agreement, the Partnership Agreement, and the Other Agreements
shall be deemed made to such other parties on its own behalf and on behalf of
Prost's General Partner, as appropriate.
2.3 EFFECT OF CONTRIBUTIONS. In exchange for its Capital
Contribution, as defined in Section 1.10 of the Partnership Agreement, (i) Prost
shall become a partner in the Partnership pursuant to the terms of the
Partnership Agreement; (ii) Prost will receive the Percentage Interest set forth
beside its name in Section 2.1 of the Partnership Agreement; and (iii) the
Capital Account of Prost will be credited with such amount as determined under
this Agreement and the Partnership Agreement.
2.4 DELIVERIES BY BWISS. On the Contribution Date, BWISS will
deliver to the Partnership the following:
(a) Instruments necessary to effect the assumption of the
liabilities and obligations reasonably deemed necessary by, and to be in form
and substance reasonably satisfactory to, counsel to the parties.
(b) All other previously undelivered items required to be
delivered by BWISS at or prior to the Contribution Date pursuant to the terms of
this Agreement, the Partnership
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Agreement, and the Other Agreements.
2.5 EFFECT OF CONTRIBUTIONS. In exchange for its Capital
Contribution, as defined in Section 1.10 of the Partnership Agreement, (i) BWISS
shall become a partner in the Partnership pursuant to the terms of the
Partnership Agreement; (ii) BWISS will receive the Percentage Interest set forth
beside its name in Section 2.1 of the Partnership Agreement; and (iii) the
Capital Account of BWISS will be credited with such amount as determined under
this Agreement and the Partnership Agreement.
SECTION 3
OTHER AGREEMENTS
3.1 OTHER AGREEMENTS. Contemporaneously with the execution of this
Agreement and the Partnership Agreement or at the Contribution Date, Prost,
Prost's General Partner, BWISS, BWI, and the Partnership shall enter into the
following Other Agreements:
(a) Employment Agreements between BWI and Garith Helm and
Romy Angle substantially in the form attached as Exhibit B to the Partnership
Agreement with such additional terms and conditions as may be mutually agreed to
by the parties thereto to be executed at the Contribution Date.
(b) Assignment Agreement substantially in the form
attached as Exhibit C to the Partnership Agreement with such additional terms
and conditions as may be mutually agreed to by the parties thereto to be
executed at the Contribution Date.
(c) Property Lease Agreement between the Partnership and
Romy Angle for the use of the warehouse located at 3454 Shoemake Avenue,
Modesto, substantially in the form attached as Exhibit D to the Partnership
Agreement with such additional terms and conditions as may be mutually agreed to
by the parties thereto to be executed at the Contribution Date.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF PROST
4.1 ORGANIZATION.
(a) Prost is a limited partnership which is duly
organized, validly existing, and in good standing under the laws of the State of
California with the power and authority to own, lease, and operate its
properties and to carry on its business as now being conducted. Prost's General
Partner is a corporation which is duly organized, validly existing, and in good
standing under the laws of the State of California, with the corporate power and
authority to own, lease, and operate its properties and to carry on its business
as now being conducted.
(b) The copy of the Certificate of Limited Partnership
and all amendments thereto of Prost, and the Limited Partnership Agreement, as
amended to date, of Prost, as
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certified by the Secretary of Prost's General Partner and delivered to BWISS,
copies of which are attached hereto at Schedule 4.1, are true, complete, and
correct copies of the Certificate of Limited Partnership and Limited Partnership
Agreement, as amended and presently in effect, of Prost.
(c) The copy of the Articles of Incorporation and all
amendments thereto of Prost's General Partner, and the Bylaws, as amended to
date, of Prost's General Partner, as certified by its Secretary and delivered to
BWISS, copies of which are attached hereto at Schedule 4.1, are true, complete,
and correct copies of the Articles of Incorporation and Bylaws, as amended and
presently in effect, of Prost's General Partner.
4.2 QUALIFICATION. Prost is licensed or qualified to do business
and is in good standing in the jurisdictions in which it conducts its business
(except where the failure to so qualify would not have a material adverse effect
on the business or financial condition of the Business taken as a whole) (the
"Material Jurisdictions"). Schedule 4.2 contains a complete list of all Material
Jurisdictions.
4.3 AUTHORITY. Prost has the power and authority to execute and
deliver this Agreement, the Partnership Agreement, and the Other Agreements and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery by Prost of this Agreement, the Partnership Agreement, and the
Other Agreements, as the case may be, and the consummation of the transactions
contemplated hereby and thereby, have been duly authorized by the Board of
Directors of Prost's General Partner, have been approved by the requisite vote
of the shareholders of Prost's General Partner, if necessary, and have been
approved by the requisite vote of the partners of Prost; no other proceedings on
the part of Prost or any other person or entity, whether pursuant to the
Certificate of Limited Partnership or Limited Partnership Agreement of Prost or
by law or otherwise, are necessary to authorize Prost to enter into this
Agreement, the Partnership Agreement, and the Other Agreements, as the case may
be, or to consummate the transactions contemplated hereby and thereby; and each
of this Agreement, the Partnership Agreement, and each Other Agreement will be
the legal, valid, and binding obligation of Prost.
4.4 NO VIOLATIONS. Except as set forth in Schedule 4.4, neither
the execution or delivery of this Agreement, the Partnership Agreement, or the
Other Agreements, nor the consummation of the transactions contemplated hereby
or thereby:
(a) Requires any filing or registration with, or consent,
authorization, approval, or Permit of, any governmental or regulatory authority
on the part of Prost;
(b) Violates or will violate (i) any order, writ,
injunction, judgment, decree, or award of any court or governmental or
regulatory authority or (ii) to the knowledge of Prost, violates or will violate
any "Law," as defined in Section 4.24 of this Agreement, of any governmental or
regulatory authority to which Prost or any of its respective properties or
assets are subject;
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(c) Violates or will violate, or conflicts with or will
conflict with, any provision of, or constitutes a default under, the Certificate
of Limited Partnership or the Limited Partnership Agreement of Prost; or
(d) Violates or breaches or constitutes a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, or give rise to a right to terminate, any mortgage, contract, agreement,
deed of trust, license, lease, or other instrument, arrangement, commitment,
obligation, understanding, or restriction of any kind to which Prost is a party
or by which its properties may be bound.
4.5 FINANCIAL STATEMENTS. Prost has heretofore delivered to BWISS
(i) the unaudited Statements of Assets and Liabilities to be Contributed to
BWI-Prost Partners as of April 30, 1996 (the "Contributed Business Balance
Sheet") and the unaudited related Statements of Historical Operations, Changes
in Equity, and Cash Flows for the Assets and Assumed Liabilities of the Business
taken as a whole for the four months ended April 30, 1996, (ii) the audited
Statements of Assets and Liabilities to be Contributed to BWI-Prost Partners as
of December 31, 1995, and the audited related Statements of Operations, Changes
in Equity, and Cash Flow for the Assets and Assumed Liabilities of the Business
taken as a whole for the year ended December 31, 1995, (iii) Statements of
Assets and Liabilities to be Contributed to BWI- Prost Partners as of December
31, 1994, the audited related Statements of Historical Operations, Changes in
Equity, and Cash Flows for the Assets and Assumed Liabilities of the Business
taken as a whole for the year ended December 31, 1994, copies of which are
annexed hereto as Schedule 4.5. The financial statements referred to in the
preceding sentence are hereinafter collectively referred to as the "Prost
Financial Statements." Each of Prost Financial Statements was prepared from the
books and records of Prost in conformity with U.S. Generally Accepted Accounting
Principles consistently applied and fairly present the financial condition and
results of operations and cash flows of the Assets and Assumed Liabilities of
the Business for the periods and as of the dates stated therein.
4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since April 30, 1996,
(the "Balance Sheet Date"), Prost has operated the Business in the ordinary
course consistent with past practice, and the Business taken as a whole has not:
(a) Suffered any material adverse change in its business
or any event or condition of any character, which, individually or in the
aggregate, has had or might reasonably be expected to have a material adverse
effect on the business or financial condition of the Business taken as a whole;
(b) Incurred any obligations or liabilities (absolute,
accrued, contingent, or otherwise) or entered into any transactions, other than
in the ordinary course of business;
(c) Paid, discharged, or satisfied any claims,
obligations, or liabilities (absolute, accrued, contingent, or otherwise),
except the payment, discharge, or satisfaction in the ordinary course of
business and consistent with past practice of any claims, obligations, and
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liabilities (i) which are reflected or reserved against in Prost Financial
Statements or (ii) which were incurred in the ordinary course of business and
consistent with past practice since the Balance Sheet Date;
(d) Permitted or allowed any of its properties or assets
to be subjected to any Encumbrances or other liabilities and obligations, except
(i) in the ordinary course of business and (ii) Permitted Encumbrances;
(e) Written off as uncollectible, or canceled or waived,
any accounts receivable or any portion thereof, or any debts or claims, except
in the ordinary course of business and consistent with past practice;
(f) Sold, conveyed, or otherwise disposed of any
properties or assets, except for fair consideration in the ordinary course of
business and consistent with past practice;
(g) Disposed of or permitted to lapse any item of
Intangible Property, or any license, Permit, or other form of authorization to
use any Intangible Property;
(h) Except for normal increases which are not material
and are consistent with past practice, granted or agreed to grant any increase
in the compensation of any Business Employee (including any such increase
pursuant to any bonus, pension, profit sharing or other plan or commitment), or
become a party to or instituted any new benefit programs for any Business
Employee;
(i) Made any capital expenditure, or commitment for a
capital expenditure, for additions to property, plant, equipment, or Intangible
Property, other than in the ordinary course of business;
(j) Made any change in any method of accounting or
accounting practice or in any Tax procedures or elections;
(k) Terminated or suffered a termination of (excluding a
termination in accordance with its terms) or amended, any material contract,
agreement, license, or lease;
(l) Declared, set aside or made any distribution, whether
in cash or property or otherwise;
(m) Agreed, whether in writing or otherwise, or made any
arrangement, whether or not legally binding, to take any action which, if taken
prior to the date hereof, would have been required to be disclosed on a Schedule
to clauses (a) through (l) of this Section 4.6.
For purposes of Section 4.6(a), a "material adverse change" shall be deemed to
include a decrease of $200,000 or more in the net assets of the Business from
the date of the Contributed Business Balance Sheet to the date of the Closing
Balance Sheet.
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4.7 CERTAIN TAX MATTERS.
(a) Except as set forth in Schedule 4.7(a), Prost and
Prost's General Partner (i) have filed or will file or furnish when due in
accordance with all applicable laws all Tax returns, statements, reports, and
forms (including information returns and reports) required to be filed or
furnished with respect to any Pre-Contribution Tax Period (collectively, the
"Returns"); (ii) have correctly reflected in all material respects on the
Returns (and, as to any Returns not filed as of the date hereof, will correctly
reflect) the facts regarding their respective income, business, assets,
operations, activities, and status of any other information required to be shown
therein; (iii) have timely paid, withheld, or made adequate provision for all
Taxes shown as due and payable on the Returns that have been filed; (iv) are not
subject to any liens for Taxes on their respective assets; (v) have not
participated in any Tax sharing or other arrangement whereby Prost or Prost's
General Partner, in determining their respective income, revenues, receipts,
gain, loss, or Tax Asset, have taken into account or included any income,
revenues, receipts, gain, loss, asset, liability, or Tax Assets of any other
person (or vice versa); (vi) are not currently under any contractual obligation
to pay the Tax obligations of, or with respect to transactions relating to, any
other person or to indemnify any other person with respect to any Tax; and (vii)
are not subject to any (A) claims, audits, actions, suits, proceedings, or
investigations with respect to any Tax or assessment for which Prost or Prost's
General Partner could be liable, which would be material, to the knowledge of
the directors or officers of Prost or Prost's General Partner, and (B) requests
for rulings in respect of any Tax or any proposed transaction pending before any
Taxing Authority.
(b) None of the directors or officers of Prost or Prost's
General Partner is aware of any state of facts which could give rise to any
claim, audit, action, suit, proceeding, or investigation with respect to any Tax
or assessment for which Prost or Prost's General Partner could be liable and
which would be material.
4.8 CONDITION OF FACILITIES. The manufacturing and other
facilities included in the Assets or owned by Prost are in adequate working
order for the continued conduct of the Business as it is presently conducted.
4.9 UTILITIES; ACCESS. The manufacturing and other facilities
included in the Assets have water supply, storm and sanitary sewer facilities,
access to telephone, gas, and electrical connections, fire protection, drainage,
means of ingress and egress to and from public highways and, without limitation,
other public utilities, all of which are adequate for the continued conduct of
the Business as it is presently conducted.
4.10 CERTAIN CONDITIONS NOT PRESENT.
(a) Except as set forth on Schedule 4.10, to the
knowledge of Prost, there are no liabilities of the Business of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable, or
otherwise, and there is no existing condition, situation, or set of
circumstances which could reasonably be expected to result in such a liability,
other than (i)
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liabilities disclosed or provided for in the Contributed Business Balance Sheet;
and (ii) liabilities incurred in the ordinary course of business consistent with
past practice since the Balance Sheet Date, which in the aggregate are not
material to the Business taken as a whole.
(b) Prost has not received notice of any pending, and has
no knowledge of any threatened or proposed, proceedings or governmental actions
to modify the zoning classification of, or to condemn, expropriate, or otherwise
take, or to purchase in lieu thereof, all or any material part of any Subject
Property.
(c) Prost has not received notice of any pending, and has
no knowledge of any threatened or proposed, reassessments or special assessments
or penalties or interest with respect to real estate taxes applicable to any
Subject Property which could, in the reasonable judgment of Prost, have any
material adverse effect on the business or financial condition of the Business
taken as a whole.
4.11 CONDITION OF EQUIPMENT. The machinery, equipment, furniture,
vehicles, and other tangible personal property of Prost which are included in
the Assets are in adequate operating condition for the continued conduct of the
Business as it is presently conducted.
4.12 INVENTORY; RECEIVABLES.
(a) Substantially all items of Inventory are of a good
and merchantable quality, usable and saleable in the ordinary course of
business. The inventory set forth on the Contributed Business Balance Sheet is
stated properly therein at the lower of cost or realizable market value,
determined in accordance with U.S. Generally Accepted Accounting Principles
consistently applied. The quantities of all items of Inventory are reasonable
and warranted in the present circumstances of the Business.
(b) All accounts and notes receivable relating to the
Business at the Balance Sheet Date have been included in the Contributed
Business Balance Sheet in accordance with U.S. Generally Accepted Accounting
Principles consistently applied. Since the Balance Sheet Date, no accounts or
notes receivable have been sold, transferred, or otherwise disposed of by Prost.
4.13 TITLE TO PROPERTIES; ENCUMBRANCES.
(a) Prost (i) has good and marketable title to each piece
of Fee Property listed in Schedule 1.1(a)(i) and to the Improvements thereon, in
each case free and clear of all Encumbrances, except for permitted Encumbrances,
and (ii) has title to all of the other Assets, free and clear of all
Encumbrances, except for Permitted Encumbrances. As a result of the delivery to
the Partnership of the Conveyance Instruments, all of the Assets are owned free
and clear of all Encumbrances, except Permitted Encumbrances and encumbrances
created by the Partnership (whether or not arising from the transactions
contemplated hereby).
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(b) Complete and accurate copies of all mortgages are
listed in Schedule 4.13(b) (the "Surviving Mortgages") which heretofore have
been furnished to BWISS. None of the Surviving Mortgages has been amended or
modified except as indicated in Schedule 4.13(b) and the aggregate amount of all
principal, interest, and other sums that is secured by each of the Surviving
Mortgages as of the Contribution Date does not exceed the amount reflected in
Schedule 4.13(b).
(c) Prost represents that (i) all principal, interest,
and other sums due and payable in accordance with the terms of the Surviving
Mortgages have been paid; and (ii) Prost has not received any notice of default
under any of the Surviving Mortgages, nor, to the knowledge of Prost, is any
such notice pending or do reasons exist for the giving of such notice.
4.14 LEASES. Schedule 4.14 sets forth a list of each lease pursuant
to which Prost leases real or personal property (collectively, the "Leases").
Prost heretofore has delivered to BWISS a true and complete copy of each such
Lease. Each of the Leases is in full force and effect in accordance with its
terms, no Lease has been modified or amended in writing, and Prost has not
received any notice of any breach or default with respect to a Lease the
consequences of which would result in such Lease being terminated by the Lessor
or which, individually or in the aggregate, would have a material adverse effect
on the business or financial condition of the Business taken as a whole.
4.15 PATENTS, TRADEMARKS, AND SIMILAR RIGHTS.
(a) Schedule 4.15(a) contains a list of all registered
Intangible Property owned by Prost and used primarily in the Business and all
licenses and other agreements relating to use of any such Intangible Property by
third parties in connection with any business which currently competes or, to
the knowledge of Prost, is reasonably likely to compete with the Business; and
Schedule 4.15(a) contains a list of all licenses and other agreements relating
to Intangible Property which Prost is licensed or authorized to use by others in
connection with the Business.
(b) Except as set forth in Schedule 4.15(b), (i) Prost
has the sole and exclusive right to use the Intangible Property which is
referred to in Schedule 4.15(a), and the consummation of the transactions
contemplated by this Agreement, the Partnership Agreement, and the Other
Agreements will not alter or impair any such rights and will result in the
Partnership having the sole and exclusive right to use all such Intangible
Property used primarily in the Business; (ii) no claims have been asserted by
any person or entity for the use of any such Intangible Property or challenging
or questioning the validity or effectiveness of any such license or agreement,
and Prost has no knowledge of any valid basis for any such claim; and (iii) to
the knowledge of Prost, the use of such Intangible Property by Prost does not
infringe on the rights of any person or entity.
4.16 INSURANCE. Prost has heretofore made available for inspection
by BWISS a true and complete copy of all material policies of fire, liability,
workers' compensation, and other forms of insurance owned or held by Prost as
described in Schedule 4.16. All such policies are
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in full force and effect, all premiums with respect thereto covering all periods
up to and including the Contribution Date have been paid, and no notice of
cancellation or termination has been received with respect to any such policy.
Such policies are in such amounts and insure against such losses and risks and
provide such coverage as, in the opinion of Prost, is adequate to protect the
Business as it is presently conducted.
4.17 ERISA.
(a) Except as described in Schedule 4.17, Prost, with
respect to any Business Employee, is not a party to or participates in or has
any liability with respect to (i) any "employee welfare benefit plan" or
"employee pension benefit plan" (as those terms are respectively defined in
Sections 3(1) and 3(2) of the Employee Retirement Income Security Act of 1974,
as amended (ERISA)), including a "multiemployer plan" (as defined in Section
3(37) of ERISA); (ii) any retirement or deferred compensation plan, incentive
compensation plan, stock plan, unemployment compensation plan, vacation pay,
severance pay, bonus or benefit arrangement, insurance or hospitalization
program, or any other material fringe benefit arrangements (herein referred to
collectively as "Employee Fringe Benefit Arrangements") for any employee, which
does not constitute an "employee benefit plan" (as defined in Section 3(3) of
ERISA); or (iii) any written employment agreement not terminable on thirty (30)
days or less written notice.
(b) A true and correct copy of each of the plans,
arrangements, and agreements listed in Schedule 4.17 heretofore has been
supplied or made available to BWISS by Prost. A true and correct copy of the
most recent annual report, actuarial report (with all attachments), summary plan
description, and Internal Revenue Service determination letter with respect to
each such plan or arrangement, to the extent applicable, heretofore has been
supplied to BWISS by Prost, and there have been no material changes in the
financial condition of any such plan from that stated in the annual report and
actuarial report supplied.
(c) All employee pension benefit plans listed in Schedule
4.17 which are subject to ERISA comply in form and in operation in all material
respects with the applicable requirements of Section 401(a) and 501(a) of the
Code. To the knowledge of Prost, no event has occurred which will or could give
rise to disqualification under the Code of any such employee pension benefit
plan listed in Schedule 4.17 that is subject to ERISA or to a tax under Section
511 of the Code; and no such plan which is subject to Part 3 of Subtitle B of
Title 1 of ERISA has incurred any "accumulated funding deficiency." Prost has
not otherwise engaged in any transaction with respect to any employee benefit
plan listed in Schedule 4.17 which could result in a tax under Section 4975 of
the Code. There are no prosecutions, claims, actions, suits, proceedings, or, to
the knowledge of Prost, investigations (collectively, "Actions") (other than
routine claims for benefits) pending or, to the knowledge of Prost, threatened
against such plans or the assets of such plans, and, to the knowledge of Prost,
no facts exist which could give rise to any such Actions (other than routine
claims for benefits). As to any employee pension benefit plan which is listed in
Schedule 4.17 and which is subject to Title IV of ERISA, there have been no
"reportable events" (as described in Section 4043 of ERISA), and no steps have
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been taken to terminate any such plan. All group health plans in which any
Business Employees participate (including any plans of current and former
affiliates of Prost which must be taken into account under Section 162(i) or
Section 162(k) of the Code) have been operated in all material respects in
compliance with the group health plan continuation coverage requirements of
Section 162(k) of the Code to the extent such requirements are applicable.
Accruals for all obligations, with respect to Business Employees under the
plans, arrangements, and agreements listed in Schedule 4.17, are reflected in
the Prost Financial Statements.
4.18 DOCUMENTS; COMMITMENTS.
(a) Prost has delivered or made available to BWISS the
following documents, each of which is true and complete:
(i) Copies of all documents in Schedule 4.18(a),
which is a list of every material contract, agreement, or other commitment,
written or oral, to which Prost is a party or has succeeded to a party by
assumption or assignment or in which it has a beneficial interest and excluding
documents listed in any other Schedule hereto (any contract or agreement shall,
for the purposes of this Agreement, be deemed material (A) if the Business taken
as a whole is substantially dependent upon it, (B) if it involves a financial
obligation of or benefit to the Business in excess of $25,000, (C) if the
contract is not made in the ordinary course, or (D) if it constitutes a
management contract or employment contract; and
(ii) Copies of all product bulletins, technical
bulletins, or other advertising or sales materials currently used in connection
with the Business.
(b) Prost does not have (i) any outstanding sales
contracts or commitments which are reasonably expected to result in any loss to
the Business upon completion of performance thereof or (ii) any outstanding bids
or sales or service proposals quoting prices which are not reasonably expected
to result in a profit consistent with past practice.
4.19 LABOR MATTERS.
(a) Prost is not a party to or is covered by any labor
agreement with any collective bargaining representative representing Business
Employees.
(b) To the knowledge of Prost, Prost is operating in
material compliance with all applicable law respecting employment and employment
practices, terms and conditions of employment, and wages and hours, and are not
engaged in any unfair labor practices.
(c) To the knowledge of Prost, there are no unfair labor
practice complaints, labor disputes, work stoppages, or union organization
efforts, or threats of the foregoing, directed against any of the operations of
the Business.
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4.20 PERSONNEL. Schedule 4.20 contains a true and complete list of:
(a) The names, titles, annual salaries, and other
compensation of each Business Employee whose annual base salary exceeds $30,000;
and
(b) The wage rates for nonsalaried Business Employees (by
classification).
(c) All bonuses or other benefits.
4.21 NO BREACH.
(a) Except as set forth in Schedule 4.21, each Permit,
contract, agreement, deed of trust, lease, policy, license, plan, commitment,
arrangement, and understanding (whether evidenced by a written document or
otherwise) referred to in this Agreement or in any Schedule hereto, under which
Prost has any right, interest, or obligation (i) is in full force and effect,
and (ii) is not subject to any threatened amendment, cancellation, or
outstanding dispute.
(b) Prost is not in breach of, and there does not exist
any default or event (including the execution and delivery of this Agreement,
the Partnership Agreement, and the Other Agreements and the consummation of the
transactions contemplated hereby or thereby) which, with the giving of notice or
the lapse of time or both, would become a breach or default, and there is no
basis for any valid claim of a default in any respect, under any thereof, and
Prost has used its best efforts to secure the consents (where such consents are
necessary) of the other parties thereto to the consummation of the transactions
contemplated by this Agreement, the Partnership Agreement, and the Other
Agreements.
4.22 CONSENTS, PERMITS, ETC. Except as set forth in Schedules 4.22,
or set forth in any applicable Schedule, no consent, approval, governmental
filing, authorization, or Permit from any person or entity is necessary to the
consummation of the transactions contemplated by this Agreement, the Partnership
Agreement, or the Other Agreements. Moreover, no other consent, approval,
permit, clearance, or audit is required under any federal law or the laws of the
states in which any member of Prost has real property or leasehold interests in
order to accomplish and complete the conveyance of real property and leasehold
interests contemplated hereunder.
4.23 LITIGATION. Except as set forth in Schedule 4.23, there are no
Actions pending or threatened by or against, or involving Prost or Prost's
General Partner or any directors or officers thereof in their capacity as such
or which question or challenge the validity of this Agreement, the Partnership
Agreement, or the Other Agreements or any action taken or to be taken by Prost
pursuant to this Agreement, the Partnership Agreement, or the Other Agreements
or in connection with the transactions contemplated hereby or thereby, which
would, if adversely decided, have a material adverse effect on the Business
taken as a whole or, after the Contribution Date, on the ability of the
Partnership to conduct the Business, and to the knowledge of Prost, there is no
valid basis for any such Action.
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4.24 COMPLIANCE WITH APPLICABLE LAW; ADVERSE RESTRICTIONS. Except
as and to the extent set forth in Schedule 4.24, the operations of Prost are
being conducted in material compliance with (a) all applicable Permits, orders,
writs, injunctions, judgments, decrees, or awards of all courts and governmental
and regulatory authorities, and (b) to the knowledge of Prost, all laws
(statutory or otherwise), ordinances, rules, regulations, bylaws, and codes of
all governmental and regulatory authorities, whether federal, state, or local
(individually, a "Law" and collectively, "Laws"), which are applicable to the
Assets of the Business (including, without limitation, those related to public
or occupational safety, pollution and protection of the environment, and
hazardous or other waste disposal). Except as and to the extent set forth in
Schedule 4.24, Prost has not received any notification of any asserted present
failure to comply with any Law, except for failures which in the aggregate are
not and were not material to the conduct of the Business as a whole and which
Prost has taken steps to correct or contest in good faith.
4.25 ENVIRONMENTAL PROTECTION. Except as set forth in Schedule
4.25:
(a) To the knowledge of Prost, Prost has obtained all
Permits relating to pollution or protection of health, safety, or the
environment which are required by Law ("Environmental Permits"), including,
without limitation, those regulating emissions, discharges, or releases of
Hazardous Substances (as defined in CERCLA, as amended by SARA "Hazardous
Waste," and "Regulated Substances" as defined by RCRA) into ambient air, surface
water, groundwater, or land, or resulting treatment, storage, or disposal of
Hazardous Substances. Prost has taken all actions necessary under applicable
requirements of Law to register any products or materials relating to the
Business, required to be registered thereunder. Prost is not aware of, nor has
Prost received notice of, any events, conditions, circumstances, activities,
practices, incidents, actions, or plans which Prost reasonably expects would
result in a claim of liability, based on or related to alleged on-site or
off-site contamination with respect to or affecting the Business and properties
related thereto. To the knowledge of Prost, there is not now on or in any of the
properties currently owned, leased, or rented by or otherwise used in the
Business any leaking underground storage tanks or surface impoundments which, if
determined by any court, governmental, or regulatory authority having
jurisdiction thereof, to be in violation of any law related to public or
occupational safety, pollution and protection of the environment, and hazardous
waste disposal, would have a material adverse effect on the Business taken as a
whole.
(b) Schedule 4.25 sets forth an accurate and complete
list of all currently pending Action, notices of any proposed or possible
Actions, relating to environmental, health, and safety matters, including
pollution and protection of the environment, and Hazardous Substances (as
defined in CERCLA) related to the Business.
(c) Prost is materially in compliance with all material
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables contained in any Environmental Permits or
Laws or contained in any code, order, decree, or judgment issued, entered,
promulgated, or approved thereunder;
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(d) Schedule 4.25 contains an accurate and complete list
of all corrective actions required by governmental authorities or instances of
noncompliance since January 1, 1992, under all Environmental Permits relating to
the Business.
4.26 ASSETS NECESSARY TO BUSINESS. As a result of the transactions
effected hereby, the Partnership (with respect to Assets owned prior to the
Contribution Date by Prost) (a) will have title to, or a valid leasehold
interest in, all tangible and intangible assets and properties relating to the
Business; (b) will possess valid consents, authorizations, approvals, and
Permits relating to the Business; and (c) will be party to all agreements, in
each case necessary to permit the Partnership to continue to carry on the
Business substantially as presently conducted.
4.27 CUSTOMERS, DISTRIBUTORS, AND SUPPLIERS.
(a) Schedule 4.27(a) sets forth a list of the twenty (20)
largest customers of the Business in the terms of revenue during the fiscal year
ended December 31, 1995, showing the approximate total revenue received by Prost
from each such customer during such fiscal year.
(b) Schedule 4.27(b) sets forth a list of the ten (10)
largest suppliers to the Business, in terms of purchases during the fiscal year
ended December 31, 1995, showing the approximate total purchases by Prost from
each supplier during such fiscal year.
(c) Since January 1, 1996, there has not been any adverse
change in the business relationship of Prost with any customer, distributor, or
supplier which is material to the business or financial condition of the
Business taken as a whole.
4.28 BROKERS. Prost has neither incurred nor will incur any
broker's, finder's, investment banking, or similar fee in connection with this
Agreement or the transactions contemplated by this Agreement.
SECTION 5
REPRESENTATIONS AND WARRANTIES OF BWISS
5.1 ORGANIZATION.
(a) BWISS is a corporation which is duly organized,
validly existing, and in good standing under the laws of the State of California
with the power and authority to own, lease, and operate its properties and to
carry on its business as now being conducted.
(b) The copy of the Articles of Incorporation and all
amendments thereto of BWISS, and the Bylaws, as amended to date, of BWISS, as
certified by its Secretary and delivered to Prost, are true, complete, and
correct copies of the Articles of Incorporation and Bylaws, as amended and
presently in effect, of BWISS. Copies are attached hereto as Schedule 5.1.
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5.2 AUTHORITY. BWISS has the power and authority to execute and
deliver this Agreement, the Partnership Agreement, and the Other Agreements and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery by BWISS of this Agreement, the Partnership Agreement, and the
Other Agreements, as the case may be, and the consummation of the transactions
contemplated hereby and thereby, have been duly authorized by the Board of
Directors of BWISS and have been approved by the sole shareholder of BWISS; no
other proceedings on the part of BWISS or any other person or entity, whether
pursuant to the Articles of Incorporation or Bylaws of BWISS or by law or
otherwise, are necessary to authorize BWISS to enter into this Agreement, the
Partnership Agreement, and the Other Agreements, as the case may be, or to
consummate the transactions contemplated hereby and thereby; and each of this
Agreement, the Partnership Agreement; and each Other Agreement will be the
legal, valid, and binding obligation of BWISS.
5.3 NO VIOLATIONS. Except as set forth in Schedule 5.3, neither
the execution or delivery of this Agreement, the Partnership Agreement, or the
Other Agreements, nor the consummation of the transactions contemplated hereby
or thereby:
(a) Requires any filing or registration with, or consent,
authorization, approval, or Permit of, any governmental or regulatory authority
on the part of BWISS;
(b) Violates or will violate (i) any order, writ,
injunction, judgment, decree, or award of any court or governmental or
regulatory authority or (ii) to the knowledge of BWISS, violates or will violate
any "Law," as defined in Section 4.24 of this Agreement, of any governmental or
regulatory authority to which BWISS or any of its respective properties or
assets are subject;
(c) Violates or will violate, or conflicts with or will
conflict with, any provision of, or constitutes a default under, the Articles of
Incorporation or Bylaws of BWISS; or
(d) Violates or breaches or constitutes a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, or give rise to a right to terminate, any mortgage, contract, agreement,
deed of trust, license, lease, or other instrument, arrangement, commitment,
obligation, understanding, or restriction of any kind to which BWISS is a party
or by which its properties may be bound.
5.4 BROKERS. BWISS has neither incurred nor will incur any
broker's, finder's, investment banking, or similar fee in connection with the
transactions contemplated by this Agreement.
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SECTION 6
COVENANTS
6.1 CONDUCT OF BUSINESS OF PROST PENDING THE CONTRIBUTION DATE.
Prost agrees that from the date hereof and prior to the Contribution Date or
earlier termination of this Agreement:
(a) Prost shall use its reasonable best efforts to carry
on the Business in the usual, regular and ordinary course in substantially the
same manner as heretofore conducted, maintain its current Licenses and Permits,
keep available the services of its present officers and key employees and
preserve its relationships with customers, suppliers and others having business
dealings with it to the end that its goodwill and on-going businesses shall be
unimpaired at the Contribution Date, except such impairment as would not have a
material adverse effect on the business, assets, operations or financial
condition of Prost. Prost shall use its reasonable best efforts to (i) maintain
insurance coverages and its books, accounts and records in the usual manner
consistent with prior practices; (ii) comply in all material respects with all
laws, ordinances and regulations of governmental entities applicable to Prost;
(iii) maintain and keep its properties and equipment in good repair, working
order and condition, ordinary wear and tear excepted; and (iv) perform in all
material respects its obligations under all contracts and commitments to which
it is a party or by which it is bound.
(b) Except as required or permitted by this Agreement,
Prost shall not and shall not propose to (i) amend its Certificate of Limited
Partnership or Limited Partnership Agreement, or except as required by court
order, hold any meeting of partners or (other than in opposition to a
solicitation by a third party) solicit any partner action by written consent,
(ii) issue or authorize or propose the issuance of partnership interests or any
other securities; (iii) declare, set aside or make any distribution payable in
cash or property or (iv) directly or indirectly redeem, purchase or otherwise
acquire or agree to redeem, purchase or otherwise acquire any partnership
interests of Prost.
(c) Prost shall not (i) except as required or permitted
by this Agreement, issue, deliver or sell or agree to issue, deliver or sell any
additional interests in Prost, or rights of any kind to acquire any interests in
Prost, or incur any liability in respect of (a) borrowed money, (b) capitalized
lease obligations, (c) deferred purchase price of property or services (other
than trade payables in the ordinary course) and (d) guarantees of any of the
foregoing ("Indebtedness") (other than pursuant to existing lines of credit for
use in the ordinary course of business and consistent with past practices) or
any option, rights or warrants to acquire, or securities convertible into,
partnership interests; (ii) except as required or permitted by this Agreement,
acquire, lease or dispose or agree to acquire, lease or dispose of any capital
assets or any other assets other than in the ordinary course of business; (iii)
incur additional Indebtedness or encumber or grant a security interest in any
asset or enter into any other transaction other than in each case in the
ordinary course of business (iv) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity interest in, or by any
other manner, any business or any corporation, partnership, association or other
business organization or division thereof; or (v) enter into any contract,
agreement, commitment or
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arrangement with respect to any of the foregoing.
(d) Prost shall not, except as expressly permitted by
this Agreement or required to comply with applicable law or this Agreement, (i)
adopt, enter into, terminate or amend any bonus, profit sharing, compensation,
severance, termination, stock option, pension, retirement, deferred
compensation, employment or other Benefit Plan, agreement, trust, fund or other
arrangement for the benefit or welfare of any director, officer or current or
former employee, (ii) increase in any manner the compensation or fringe benefits
of any director or officer or any employee (except, with respect to employees,
for normal increases in the ordinary course of business that are consistent with
past practice and that, in the aggregate, do not result in a material increase
in benefits or compensation expense to Prost relative to the level in effect
prior to such amendment), (iii) pay any benefit not provided under any existing
plan or arrangement, (iv) grant any awards under any bonus, incentive,
performance or other compensation plan or arrangement (including, without
limitation, the grant of stock options, stock appreciation rights, stock based
or stock related awards, performance units or restricted stock, or the removal
of existing restrictions in any Benefit Plan or agreements or awards made
thereunder), (v) take any action to fund or in any other way secure the payment
of compensation or benefits under any employee plan, agreement, contract or
arrangement other than in the ordinary course of business consistent with past
practice or (vi) adopt, enter into, amend or terminate any contract, agreement,
commitment or arrangement to do any of the foregoing.
(e) Between the date hereof and the Contribution Date,
(i) Prost shall provide BWISS within 25 days after the end of each month such
financial statements as are customarily prepared by Prost on a monthly basis;
(ii) Prost shall consult with BWISS on a regular basis with respect to all
operating decisions which could be expected to result in a material change in
the business of Prost as presently operated or which are not in the ordinary
course of business; and (iii) Prost shall permit representatives of BWISS and
prospective providers of information, documents, facilities and personnel as
they may from time to time request.
6.2 APPROVAL OF PARTNERS. Prost shall (a) cause a meeting of its
partners to be duly called and held in accordance with the laws of the State of
California and Prost's certificate of limited partnership and limited
partnership agreement as soon as reasonably practicable for the purpose of
voting on the adoption and approval of this Agreement, the Other Agreements and
the Partnership Agreement (the "Proposal"), (b) recommend to its partners
approval of the Proposal, (c) use its best efforts to obtain the necessary
approval of its partners, and (d) in cooperation with BWISS mail to partners a
transmittal letter in form and substance reasonably satisfactory to BWISS to be
used by such partners in forwarding their partnership interests certificates, if
any, for surrender and exchange. Except with the prior written consent of BWISS,
neither Prost nor Prost's General Partner shall distribute any materials to
Prost's partners in connection with the Proposal other than such information as
BWISS deems appropriate.
6.3 THIRD PARTY CONSENTS. Each party to this Agreement shall use
its best efforts to obtain, as soon as reasonably practicable, all permits,
authorizations, consents, waivers and
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approvals from third parties or governmental authorities necessary to consummate
this Agreement and the transactions contemplated hereby or thereby, including,
without limitation, any permits, authorizations, consents, waivers and approvals
required in connection with the Proposal.
6.4 EMPLOYEE MATTERS.
(a) The Partnership shall offer employment with the
Partnership to each employee of Prost engaged primarily in the Business (such
employees are hereinafter referred to as the "Business Employees") who on the
Contribution Date is actively employed by Prost or who was actively employed by
Prost but is on authorized leave of absence, military service, or layoff with
recall rights as of the Contribution Date, but shall exclude any other inactive
or former Business Employee, including any person who is on short-term or
long-term disability or who has terminated his or her employment, retired, or
died on or before the Contribution Date. All such Business Employees who are
offered employment by the Partnership and who accept such employment shall be
collectively referred to as the "Transferred Employees."
(b) The Partnership shall indemnify and hold Prost and
its Affiliates harmless from any liability, loss, damage, or expense Prost or
its Affiliates may incur as a result of any claims made subsequent to the
Contribution Date relating to severance and severance claims arising with
respect to any Business Employee because of the failure of the Partnership to
offer such Business Employee employment in accordance with Section 6.4(a) of
this Agreement. Prost shall retain all liabilities and obligations arising from
the termination or severance of any Business Employee solely as a result of such
Employee's failure to accept an offer of employment pursuant to Section 6.4(a)
of this Agreement which is made on terms and conditions which are in accordance
with the provisions of Section 6.4(d) of this Agreement.
(c) Prost covenants and agrees not to solicit or hire for
employment with Prost or any of its Affiliates any Transferred Employee without
the consent of BWISS, such covenant and agreement to terminate two (2) years
after the Contribution Date. Except as specifically provided for in this
Agreement, Prost covenants and agrees to retain all responsibility and liability
with respect to the vested accrued benefits (including any claims with respect
to any medical benefits that were incurred but not reported prior to the
Contribution Date as of the Contribution Date) of the Transferred Employees
(including any beneficiary or dependent thereof) under Prost employee welfare
benefit plans, employee pension benefit plans, and employee fringe benefit
arrangements and any other liabilities or obligations relating to Prost employee
benefits or compensation.
(d) Except for persons entering into the Employment
Agreements attached to the Partnership Agreement, the Partnership covenants and
agrees to pay to any Transferred Employee who accepts or continues, as the case
may be, at-will employment with the Partnership with a rate of base salary at
least equal to such Transferred Employee's rate of base salary on the
Contribution Date, and to provide such Transferred Employee with a title and
responsibilities comparable to those of such Transferred Employee on the
Contribution Date.
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For a period of one (1) year commencing on the Contribution Date, the
Partnership covenants and agrees to provide the Transferred Employees such
employee welfare benefit plans, employee pension benefit plans, and employee
fringe benefit arrangements which, in the aggregate, are at least as favorable
as the benefits presently provided to Business Employees under the plans and
arrangements listed on Schedule 4.17.
SECTION 7
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
7.1 SURVIVAL; INDEMNIFICATION.
(a) The covenants, agreements, representations, and
warranties of the parties hereto contained herein or in any certificate or other
writing delivered pursuant hereto or in connection herewith shall survive the
Contribution Date until December 31, 2001, except that (i) any covenants,
agreements, representations, or warranties relating to Tax matters shall extend
until the expiration of the applicable statutory period of limitations (giving
effect to any waiver or extension thereof) and (ii) the indemnity provisions set
forth in Sections 7.1(b)(ii), 7.1(b)(iii) and 7.1(b)(v) of this Agreement shall
extend without limit as to time. Notwithstanding the preceding sentence, any
covenant, agreement, representation, or warranty in respect of which indemnity
may be sought under this Section 7 shall survive the time at which it would
otherwise terminate pursuant to such sentence, if notice of the inaccuracy or
breach thereof giving rise to such indemnity shall have been given to the party
against whom such indemnity may be sought, prior to such time.
(b) Prost and its successors and assigns (each an
"Indemnitor"), jointly and severally, hereby agree to indemnify each Indemnitee
and Indemnitee Affiliate (as each is defined in Section 7.4 of this Agreement)
against and agree to hold it harmless from any and all damage, loss, liability,
and expense (including, without limitation, reasonable expenses of investigation
and attorney's fees and expenses in connection with any action, suit,
proceeding, claim, investigation, or other loss) (a "Loss") incurred or suffered
by such Indemnitee arising out of (i) any breach of any covenant or agreement or
of any inaccuracy or omission in any representation or warranty made by Prost
pursuant to this Agreement; (ii) the failure of Prost to perform any obligation
or liability of the Business not assumed by the Partnership pursuant to this
Agreement or relating to the Excluded Assets for which indemnification
provisions are set forth in Section 7.3 of this Agreement; (iii) or relating to
claims by third parties in connection with the contribution by Prost of the
Business to the Partnership; (iv) any and all losses, claims, demands,
penalties, fines, settlements, or damages arising under U.S. or any state or
local Environmental Laws and relating to conditions, events, actions,
violations, obligations, or circumstances that exist in whole or part prior to
the Contribution Date; and (v) any breach of any covenant or agreement or of any
inaccuracy or omission in any representation or warranty made by Prost pursuant
to this Agreement and at the time such representation or warranty was made,
Prost knew it was false with the intent to deceive Indemnitee or an Indemnitee
Affiliate.
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7.2 LIMITATIONS OF INDEMNIFICATION. Notwithstanding anything
contained in this Section 7 to the contrary, the Indemnitors shall be required
to indemnify each Indemnitee and Indemnitee Affiliate against and hold it
harmless from all Loss (other than relating to Taxes) with respect to Sections
7.1(b)(i) and 7.1(b)(iv) of this Agreement only to the extent that the aggregate
amount of such Loss exceeds Five Thousand Dollars ($5,000.00) (the "Liability
Threshold"). In the event that the aggregate amount of all Loss (other than
relating to Taxes) with respect to Sections 7.1(b)(i) and 7.1(b)(iv) of this
Agreement sustained by the Indemnitees or Indemnitee Affiliates exceeds the
Liability Threshold, and the Indemnitors are required to indemnify such
Indemnitees, the Indemnitors shall be responsible for payment for all Loss with
respect to Sections 7.1(b)(i) and 7.1(b)(iv) of this Agreement in excess of the
Liability Threshold; provided, however, that in no event shall the amount of
Loss (other than relating to Taxes) with respect to Sections 7.1(b)(i) and
7.1(b)(iv) of this Agreement payable by the Indemnitors exceed in the aggregate
the value of Prost's Capital Contribution.
7.3 TAX INDEMNIFICATION WITH RESPECT TO TAX LIABILITY.
(a) Except to the extent such Taxes are set forth in the
Contribution Date Balance Sheet and subject to Section 7.3(i) hereof, Prost
shall indemnify and hold harmless each Indemnitee from (i) any liability for Tax
of Prost which is incurred in or attributable to the Tax Indemnification Period;
and (ii) any liability, cost, expense (including, without limitation, reasonable
expenses of investigation and reasonable attorneys' fees and expenses), loss,
damages, assessment, settlement, or judgment arising out of or incident to the
imposition, assessment, or assertion of any liability described in subclauses
(i) and (ii) hereof, including those incurred in the contest in good faith of
appropriate proceedings for the imposition, assessment, or assertion of any tax
(subject to the provisions of Section 7.3(e) hereof), and any liability of any
Indemnitee by reason of being a transferee of the assets of Prost with respect
to any liability for Tax of Prost which is incurred or attributable to the Tax
Indemnification Period. The sum of (i) and (ii) above is referred to herein as a
"Tax Loss."
(b) In the case of any Taxes that are imposed, assessed,
or asserted on a periodic basis and are payable for a Taxable period that
includes (but does not end on) the Contribution Date, the portion of such Taxes
related to the portion of such Taxable period ending on the Contribution Date
and the portion of such Taxes that is incurred in or attributable to the
Pre-Contribution Tax Period shall (i) in the case of any Tax other than a Tax
imposed on, measured by, or related to revenues, gross or net income, receipts,
gains, or compensation, be deemed to be the amount of such Tax for the entire
Taxable period multiplied by a fraction, the numerator of which is the number of
days in the Pre-Contribution Tax Period and the denominator of which is the
number of days in the entire Taxable period, and (ii) in the case of any Tax
imposed on, measured by, or related to revenues, gross or net income, receipts,
gains, or compensation, be deemed equal to the amount of such Tax for the entire
Taxable period multiplied by a fraction, the numerator of which is the revenues,
gross or net income, receipts, gains, or compensation, as the case may be,
attributable to the Tax Indemnification Period and the denominator of which is
the total amount of revenues, gross or net income, receipts, gains, or
compensation for the entire Taxable period.
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(c) Upon the incurrence by any Indemnitee of any Tax Loss
or any Loss relating to an excluded Tax Liability (as defined in Section 1.5(i)
hereof), Prost shall discharge its obligations to indemnify such Indemnitee
against such Tax Loss or Loss by paying to the Indemnitee in U.S. dollars an
amount equal to the amount of such Tax Loss or Loss. Any payment pursuant to
this Section 7.3(c) or Section 7.1 hereof relating to an Excluded Tax Liability
shall be delivered no later than five (5) days prior to the first date on which
such Indemnitee is required (without incurring interest or penalties) under
applicable law to make any payment with respect to or as a result of such Tax
Loss or Loss. The Partnership shall deliver to Prost, upon the incurrence of a
Tax Loss or any Loss relating to an Excluded Tax Liability by any Indemnitee,
written notice describing such Tax Loss or Loss and stating the amount thereof,
the amount of the indemnity payment requested, and the first date on which such
Indemnitee is required (without incurring interest or penalties) to make any
payment with respect to or as a result of such Tax Loss or Loss. Any payment
required under this Section 7.3(c) or any Loss relating to an Excluded Tax
Liability and not made when due shall bear interest at the federal short-term
rate under Section 1274 of the Code for each day until paid.
(d) If any Indemnitee receives a refund or reduces its
Tax liability by using a credit of any Tax in respect of the Tax Indemnification
Period or any Excluded Tax Liability, such Indemnitee shall pay to Prost the
amount of such refund or credit within thirty (30) days of the date on which
such refund or credit is received or used by such Indemnitee. The Partnership
agrees that, upon the request of Prost, the Partnership shall file, or cause an
Indemnitee to file, a claim for refund in such form as Prost may reasonably
request of any Tax in respect of the Tax Indemnification Period or any Excluded
Tax Liability provided that the Partnership or an Indemnitee shall not be
required to file such a claim if such claim would adversely affect the Tax
liability of the Partnership, or any of its Affiliates or, after the
Contribution Date. Prost shall have the sole right to prosecute such claim for
refund (by suit or otherwise) at Prost's expense and with counsel of Prost's
choice. The Partnership agrees that it will cooperate, and cause each Indemnitee
to cooperate, fully with Prost and its counsel in connection therewith.
(e) The Partnership agrees to give prompt notice to Prost
of the assertion of any claim, or the commencement of any suit, action,
proceeding, audit, or assessment in respect of which indemnity may be sought
hereunder or under Section 7.1 of this Agreement relating to an Excluded Tax
Liability, and of any Loss, (specifying with reasonable particularity the basis
therefor) and will give Prost such information with respect thereto as Prost may
reasonably request. Prost may, at its own expense, participate in and, upon
notice to the Partnership, assume the defense of any such suit, action,
proceeding, or audit; Prost shall thereafter consult with the Partnership upon
the Partnership's reasonable request for such consultation from time to time
with respect to such suit, action, proceeding, or audit and shall not, without
Company's consent, agree to any settlement or assert any position with respect
to any Tax if such settlement or position could adversely affect the Tax
liability of the Partnership, any of its Affiliates, or, after the Contribution
Date, Prost. If Prost assumes such defense, the Partnership shall have the right
(but not the duty) to participate in the defense thereof and to employ counsel,
at its own expense, separate from the counsel employed by Prost provided that
ultimate control shall
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remain with Prost. Prost shall be liable for the fees and expenses of counsel
employed by the Partnership for any period during which Prost has not assumed
the defense thereof. Whether or not Prost chooses to defend or prosecute any
claim, all of the parties hereto shall cooperate in the defense or prosecution
thereof.
(f) Prost shall not be liable under this Section 7.3 or
Section 7.1 of this Agreement relating to an Excluded Tax Liability with respect
to any Tax resulting from a claim or demand the defense of which Prost was not
offered the opportunity to assume as provided under Section 7.3(e) of this
Agreement. No investigation by the Partnership or any of its Affiliates at or
prior to the Contribution Date shall relieve Prost of any liability hereunder.
(g) If any adjustments shall be made to any Tax return
relating to Prost in respect of the Business for any Pre-Contribution Tax Period
which result in any Tax detriment to Prost or any Affiliate thereof with respect
to such period and any Tax benefit to the Partnership or any Affiliate thereof
for any Taxable period ending after the Contribution Date, Prost shall be
entitled to the benefit of such Tax benefit, and the Partnership shall pay to
Prost the amount of such Tax benefit at such time or times as and to the extent
that the Partnership or any Affiliate thereof actually realizes such benefit
through a refund of Tax or reduction in the amount of Tax which the Partnership
or any Affiliate thereof otherwise would have had to pay if such adjustment had
not been made. If any adjustments (including any adjustment arising by reason of
a refund claim) shall be made to any Tax return relating to the Partnership or
Prost for any Taxable period after the Contribution Date which result in any Tax
detriment to the Partnership or any Affiliate thereof with respect to such
period and any Tax benefit to Prost or any Affiliate thereof for any
Pre-Contribution Tax Period, the Partnership shall be entitled to the benefit of
such Tax benefit, and Prost shall pay to the Partnership the amount of such Tax
benefit at such time or times as and to the extent that Prost or any Affiliate
thereof actually realizes such benefit through a refund of Tax or reduction in
the amount of Tax which Prost or any such Affiliate otherwise would have had to
pay if such adjustment had not been made.
(h) If the Partnership or any Affiliate thereof realizes
such a Tax benefit in a taxable period ending after the Contribution Date with
respect to a Tax Loss through a refund of Tax or reduction in the amount of Tax
which the Partnership or any Affiliate thereof otherwise would have to pay then,
(i) if such benefit is actually realized prior to the indemnity payment being
made, the amount of such benefit shall reduce the amount of the indemnity
payment otherwise required to be made hereunder, and (ii) if such benefit is
actually realized subsequent to the indemnity payment or contribution being
made, the Partnership or such Affiliate shall pay the amount of such benefit to
Prost at such time as such benefit is actually realized.
(i) With respect to liability for Tax of Prost incurred
in or attributable to the Pre-Contribution Tax Period in respect of any item
which gave rise to an amount included in the provision for deferred income taxes
on the Contribution Date Balance Sheet, Prost shall pay to an Indemnitee an
amount equal to the amount of such Tax liability, minus the present value of (i)
any deduction, amortization, exclusion from income, or tax credit allowable to
such
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Indemnitee which would not be allowable but for an adjustment with respect to
which Prost is obligated to indemnify such Indemnitee ("the Tax Benefit"),
multiplied (ii) by the maximum applicable tax rate in effect at such time or, in
the case of a credit, by 100 percent (the product of (i) and (ii) in the
preceding clause shall be referred to as "the Hypothetical Tax Benefit"). The
present value of the Hypothetical Tax Benefit shall be determined based on the
federal mid-term rate under Section 1274 of the Code in effect at the time the
indemnification payment is made, compounded annually for the number of years
between the year to which the adjustment relates and the year on which such Tax
Benefit would be allowable under law whether or not the Indemnitee could derive
any actual tax savings as a result thereof.
7.4 DEFINITIONS. For the purpose of this Agreement, the following
terms have the following meanings:
(a) "Affiliate" means, with respect to any person, any
person directly or indirectly controlling, controlled by, or under common
control with such other person.
(b) "Code" means the Internal Revenue Code of 1986, as
amended.
(c) "Indemnitee" means the Partnership, any of its
Affiliates, and BWISS.
(d) "Indemnitee Affiliate" means the employees,
successors, and assigns of each Indemnitee, and, with respect to each corporate
Indemnitee, its directors, officers, and shareholders.
(e) "Pre-Contribution Tax Period" means any Tax Period
ending on or before the close of business on the Contribution Date, or, in the
case of any Tax period which includes, but does not end on, the Contribution
Date, the portion of such period up to and including the Contribution Date.
(f) "Tax" means (i) any net income, alternative or add-on
minimum tax, gross income, gross receipts, sales, use, ad valorem, franchise,
capital, paid-up capital, profits, greenmail, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty, or other tax, governmental
fee, or other like assessment or charge of any kind whatsoever, together with
any interest or any penalty, addition to tax, or additional amount imposed by
any governmental authority (a "Taxing Authority") responsible for the imposition
of any such tax (domestic or foreign), and (ii) liability for the payment of any
amounts of the type described in (i) as a result of any express obligations to
indemnify any other Person.
(g) "Tax Asset" means any net operating loss or other Tax
loss, net capital loss, investment Tax credit, foreign Tax credit, charitable
deduction, or any other credit or Tax attribute of Prost which could reduce
Taxes (including, without limitation, deductions and credits related to
alternative minimum Taxes).
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(h) "Tax Indemnification Period" means (i) any
Pre-Contribution Tax Period, or (ii) with respect to any Tax described in clause
(ii) of Section 7.4(f), the survival period of the indemnification obligation
under the applicable contract.
7.5 CONTROL OF LITIGATION.
(a) The Indemnitees and Indemnitee Affiliates agree to
give prompt notice to the Indemnitors of the assertion of any claim, or the
commencement of any suit, action, or proceeding in respect of which indemnity
may be sought under Section 7.1(b) of this Agreement and of any Loss which any
such Indemnitee deems to be within Section 7.1(b) of this Agreement other than
relating to Taxes (specifying with reasonable particularity the basis therefor)
and will give the Indemnitors such information with respect thereto as the
Indemnitors may reasonably request. The Indemnitors may, at their own expense,
participate in and, upon notice to such Indemnitee, assume the defense of any
such suit, action, or proceeding; provided that the Indemnitors' counsel is
reasonably satisfactory to such Indemnitee, the Indemnitors shall thereafter
consult with such Indemnitee upon such Indemnitee's reasonable request for such
consultation from time to time with respect to such suit, action, or proceeding,
and the Indemnitors shall not, without such Indemnitee's consent, which consent
shall not be unreasonably withheld, settle or compromise any such suit, action,
or claim. If the Indemnitors assume such defense, such Indemnitees shall have
the right (but not the duty) to participate in the defense thereof and to employ
counsel, at their own expense, separate from the counsel employed by the
Indemnitors. For any period during which the Indemnitors have not assumed the
defense thereof, the Indemnitors shall be liable for the fees and expenses of
counsel employed by any Indemnitee; provided, however, that the Indemnitors
shall not be liable for the fees or expenses of more than one counsel employed
by any Indemnitee in any jurisdiction for all Indemnitees. If the Indemnitees
assume the defense thereof, the Indemnitees shall thereafter consult with the
Indemnitors upon the Indemnitors' reasonable request for such consultation from
time to time with respect to such suit, action, or proceeding and the
Indemnitees shall not, without the Indemnitors' consent, which consent shall not
be unreasonably withheld, settle or compromise any such suit, action, or claim.
Whether or not the Indemnitors choose to defend or prosecute any claim, all of
the parties hereto shall cooperate in the defense or prosecution thereof.
(b) The Indemnitors shall not be liable under Section
7.1(b) hereof with respect to any Loss resulting from a claim or demand the
defense of which the Indemnitors were not offered the opportunity to assume as
provided under Section 7.5(a) hereof to the extent the Indemnitors' liability
under Section 7.1(b) hereof is prejudiced as a result thereof. No investigation
by any Indemnitee or Indemnitee Affiliate prior to the Contribution Date shall
relieve any Indemnitor of any liability hereunder.
7.6 TRANSFER TAXES. Prost shall pay, or cause to be paid, all
Taxes or recording fees imposed on any transfers by Prost of real property and
tangible and intangible personal property, including without limitation
Intellectual Property, applicable to the transfers of the Assets contemplated by
this Agreement and all sales and use Taxes applicable to transfers by Prost of
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the Assets contemplated by this Agreement.
7.7 COOPERATION ON TAX MATTERS. Prost and the Partnership shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with any audit, litigation, or other proceeding with respect to
Taxes. Such cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are reasonably relevant
to any such audit, litigation, or other proceeding and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. The Partnership and Prost agree
(a) to retain all books and records which are relevant to the determination of
the Tax liabilities pertinent to the Assets and Prost relating to any
Pre-Contribution Tax Period until the expiration of the applicable statute of
limitations and to abide by all record retention agreements entered into with
any Taxing Authority, and (b) to give the other party reasonable written notice
prior to destroying or discarding any such books and records and, if the other
party so requests, the Partnership or Prost, as the case may be, shall allow the
other party to take possession of such books and records.
7.8 ELECTIONS. Prior to the Contribution Date, without the prior
written consent of BWISS, neither Prost nor any Affiliate of Prost shall make or
change any election, change an annual accounting period, adopt or change any
accounting method, file any amended Return, enter into any closing agreement,
settle any Tax claim or assessment relating to Prost, surrender any right to
claim a refund of Taxes, consent to any extension or waiver of the limitation
period applicable to an Tax claim or assessment relating to Prost, take any
other action, or omit to take any action, if any such election, adoption,
change, amendment, agreement, settlement, surrender, consent, or other action or
omission that had (or will have) the effect of increasing the Tax liability of
Prost, the Partnership, or any Affiliate of the Partnership.
7.9 TAX RETURNS OF PROST. With respect to any Tax return required
to be filed by Prost for its taxable period which includes (but does not end on)
the Contribution Date, the Partnership shall provide Prost and its authorized
representatives with copies of such completed Tax return and a statement (with
which the Partnership will supply supporting schedules and information) setting
forth the amount of Tax shown on such Tax return that is allocable to Prost
pursuant to Section 7.3(b) hereof (the "Statement") at least forty-five (45)
business days prior to the due date (including any extension thereof) for the
filing of such Tax return. Reasonable costs, fees, and expenses relating to the
preparation of such Tax return shall be borne equally by Prost and the
Partnership. Prost shall have the right at its own expense to review such Tax
return and Statement prior to the filing of such Tax return. If Prost, within
ten (10) business days after delivery of the Statement, notifies the Partnership
in writing that it objects to any items on such Statement, specifying with
particularity any such item and stating the specific factual or legal basis for
any such objection, the Partnership and Prost shall resolve in good faith and
use their best efforts to resolve such items. If the dispute is not resolved
within twenty (20) days after receipt by the Partnership of such notice, the
disputed items shall be resolved pursuant to Section 7.10 hereof and such Tax
return shall be filed consistently therewith. Not later than the later of five
(5) days before the due date for payment of Taxes with respect to such Tax
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return or, in the event of a dispute, five (5) days after notice to Prost of the
resolution thereof, Prost shall contribute to the Partnership or the Partnership
shall distribute to Prost, as the case may be, an amount equal to the difference
between (a) the Taxes shown on the Statement as being allocable to Prost
pursuant to Section 7.10 hereof or in such notice (as the case may be) and (b)
any payment made by Prost or any Affiliate thereof prior to the Contribution
Date in respect of such Taxes.
7.10 CERTAIN DISPUTES. To the extent provided in Section 7.9
hereof, disputes arising under such Section and not resolved by mutual agreement
as stated therein shall be resolved by an accounting firm with no affiliation or
relationship whatsoever with the Partnership, Prost, or its Affiliates (the
"Accounting Referee"), chosen and mutually acceptable to both the Partnership
and Prost within five (5) days of the date on which the need to choose the
Accounting Referee arises. The Accounting Referee shall resolve any disputed
items within thirty (30) days of having the item referred to it pursuant to such
procedures as it may require. The costs, fees, and expenses of the Accounting
Referee shall be borne equally by the Partnership and Prost.
7.11 OTHER TAX MATTERS. Any payment by Prost to the Partnership or
any other Indemnitee or Indemnitee Affiliate or any payment by the Partnership
or any other Indemnitee to Prost made under this Section 7 will be treated as
Capital Contributions to the Partnership or distributions from the Partnership
for federal income tax purposes, provided that such payments will not affect the
Capital Account of, any other contributions to be made by, or the distributions
or allocations to be made to Prost under the Partnership Agreement.
SECTION 8
CONDITIONS TO CLOSING; TERMINATION
8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE CLOSING.
The respective obligations of each party to effect the closing of the
transaction contemplated by this Agreement and the Partnership Agreement shall
be subject to the fulfillment of all of the following conditions precedent at or
prior to the Contribution Date:
(a) The closing of a public offering of BWI's common
stock realizing gross proceeds (before any deductions, including, but not
limited to, underwriters' compensation and expenses) of at least $8,000,000;
(b) This Agreement, the Partnership Agreement and the
Other Agreements shall have been approved and adopted by (i) the requisite vote
of the Board of Directors and shareholders of Prost's General Partner, (ii) the
requisite vote of the Board of Directors and sole shareholder of BWISS, and
(iii) the requisite vote of Prost partners;
(c) No governmental entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction or
other order (whether temporary, preliminary or permanent) which is in effect and
which materially restricts, prevents or prohibits consummation
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of the transactions contemplated by this Agreement; provided, however, that the
parties shall use their reasonable best efforts to cause any such decree,
judgment, injunction or other order to be vacated or lifted; and
(d) All licenses, permits, registrations, authorizations,
consents, waivers, orders or other approvals required to be obtained, and all
filings, notices or declarations required to be made, by Prost, BWISS, or the
Partnership in order to consummate the Proposal and the transactions
contemplated hereunder shall have been obtained from, and made with, all
required governmental entities, without any material condition thereto.
8.2 CONDITIONS TO OBLIGATION OF BWISS TO EFFECT THE CLOSING. The
obligation of BWISS to effect the closing of the transaction contemplated by
this Agreement and the Partnership Agreement is subject to fulfillment of all of
the following conditions precedent at or prior to the Contribution Date:
(a) The representations and warranties of Prost set forth
herein are true and correct in all material respects as of the date hereof and
as of the Contribution Date. Any matter which would otherwise constitute a
failure to comply with or conform to a representation or warranty by Prost
hereunder shall not be deemed to be such a failure if BWISS has consented to the
same in writing.
(b) Prost shall have performed, satisfied and complied
with all covenants, agreements, and conditions required to be performed by it.
(c) At the closing, Prost shall have delivered to, or
have made available to BWISS at the offices of Prost, all of the following:
(1) a certificate of Prost, executed by the
President and Chief Financial Officer of Prost's General Partner, to the effect
that each of the conditions specified in Sections 8.2(a), 8.2(b), 8.2(e) and
8.2(g) have been satisfied and that this Agreement and the transactions
contemplated hereby were approved by the requisite vote of the Prost partners;
(2) resolutions duly adopted by the Board of
Directors of Prost's General Partner's authorizing the transactions which are
the subject of this Agreement, certified by the Secretary of Prost's General
Partner;
(3) certificates issued as of the most recent
practicable date, by the appropriate governmental authorities with respect to
the good standing of Prost in the jurisdiction in which Prost is organized;
(4) certificates executed by the Secretary of
Prost's General Partner to the effect that there have been no amendments to the
charter documents attached as Schedule 4.1 hereof, since the date of this
Agreement;
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(5) the original books of account and other
records of Prost;
(6) a balance sheet of the assets and
liabilities to be contributed by Prost dated as of a date no more than ten (10)
business days before the Contribution Date ("Closing Balance Sheet"). The
Closing Balance Sheet shall be provided to BWISS at least five (5) business days
before the Contribution Date and shall be certified by the Chief Financial
Officer of Prost's General Partner that the Closing Balance Sheet was prepared
from the books and records of Prost in conformity with U.S. Generally Accepted
Accounting Principles consistently applied and fairly present the financial
condition of the assets and liabilities to be contributed by Prost as of the
date stated therein. If BWISS shall notify Prost within three (3) business days
after receipt of the Closing Balance Sheet that it disputes any matter with
respect to such Closing Balance Sheet, then any such matters (the "Disputed
Matters") shall be submitted to an arbitrator which shall be a certified public
accounting firm ("Arbitrator") mutually selected by BWISS and Prost within two
(2) business days after such notice unless the parties agree in writing to
extend such period in an attempt to negotiate a settlement. The Arbitrator shall
consider only the Disputed Matters. The Arbitrator shall act promptly to resolve
all Disputed Matters and its decision with respect to all Disputed Matters shall
be final and binding upon the parties hereto and shall not be appealable to any
court. The costs and expenses of the Arbitrator shall be shared equally by Prost
and BWISS, except that the Arbitrator shall have the authority to award the
reimbursement of such expenses to the prevailing party;
(7) such other documents, records and other
items as shall be necessary for the operation of the Business;
(d) The Other Agreements, substantially in the form
attached to the Partnership Agreement, shall be executed by Prost or its
Affiliates, as applicable.
(e) Prost shall have obtained and delivered to BWISS all
consents set forth in Schedules 4.4, 4.21 and 4.22 annexed hereto.
(f) From and after the date hereof, there shall have
occurred or be threatened no event relative to the assets or business of Prost
which is reasonably likely, individually or in the aggregate, to have a material
adverse effect on the business, assets, operations or financial condition of
Prost.
(g) There shall not be pending or threatened before any
governmental authority any action, suit or proceeding which, if adversely
determined, would (i) make the consummation of this Agreement illegal, (ii)
require the divestiture by the Partnership of all or a material portion of the
business or assets as a result of the transactions contemplated hereby, (iii)
impose limitations which adversely affect to a significant extent the ability of
the Partnership to exercise full rights of ownership of the assets of the
Business, as currently conducted by Prost, as a result of the transactions
contemplated hereby, (iv) prevent the consummation of this Agreement or (v)
cause this Agreement to be rescinded following consummation of this Agreement,
and no judgment with respect to any of the foregoing shall be in effect.
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(h) All proceedings in connection with the transactions
contemplated by this Agreement shall be in form and substance reasonable
satisfactory to BWISS and its Counsel, and BWISS shall have received all such
counterpart originals or certified or other copies of such documents and
proceedings in connection with such transactions as BWISS reasonably requests.
8.3 CONDITIONS TO OBLIGATION OF PROST TO EFFECT THE TRANSACTION.
The obligations of Prost and its General Partner to effect the Transaction are
subject to the fulfillment of all of the conditions precedent at or prior to the
Contribution Date:
(a) The representations and warranties of BWISS set forth
herein are true and correct in all material respects as of the date hereof and
the Contribution Date. Any matter which would otherwise constitute a failure to
comply with or conform to a representation or warranty by Prost hereunder shall
not be deemed to be such a failure if Prost has consented to the same in
writing.
(b) BWISS has or shall have performed, satisfied and
complied with all covenants, agreements and conditions required to be performed
by it.
(c) At the closing, BWISS shall deliver to Prost the
following:
(1) a certificate of BWISS executed by the
President and Chief Financial Officer of BWISS to the effect that each of the
conditions specified in Sections 8.3(a), 8.3(b), 8.3(e) and 8.3(f) have been
satisfied;
(2) resolutions adopted by the Board of
Directors of BWISS authorizing the transactions contemplated hereby, certified
by the Secretary of BWISS;
(3) certificates issued by appropriate
governmental authorities evidencing, as of the most recent practicable date, the
good standing of BWISS in its state of incorporation.
(d) The Other Agreements, substantially in the form
attached to the partnership Agreement, shall be executed by BWISS or its
Affiliates, as applicable.
(e) BWISS shall have obtained and delivered to Prost all
consents set forth in Schedules 5.3 and 5.5 annexed hereto.
(f) There shall not be pending or threatened before any
governmental authority any action, suit or proceeding which, if adversely
determined would (i) prevent the consummation of the transaction contemplated by
this Agreement, or (ii) cause such transaction to be rescinded following
consummation of the transaction contemplated by this Agreement, and no judgment
with respect to any of the foregoing shall be in effect.
(g) All legal and corporate proceedings in connection
with the transactions
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contemplated by this Agreement shall be in form and substance reasonably
satisfactory to Prost and Prost's Counsel, and Prost shall have received all
such counterpart originals or certified or other copies of such documents and
proceedings in connection with such transactions as Prost reasonably requests.
8.4 TERMINATION. This Agreement may be terminated at any time
prior to the Contribution Date, whether before or after approval by the partners
of Prost:
(a) by mutual consent of Prost and BWISS; or
(b) by either Prost or BWISS if (i) the Contribution Date
shall not have been consummated on or before March 31, 1997 (the "Termination
Date"), (ii) the requisite vote of the partners of Prost to approve this
Agreement and the transactions contemplated hereby and thereby shall not be
obtained at the meetings, or any adjournments thereof, called therefor, (iii)
any governmental or regulatory body, the consent of which is a condition to the
obligations of Prost or BWISS to consummate the transactions contemplated
hereby, shall have determined not to grant its consent and all appeals of such
determination shall have been taken and have been unsuccessful, or (iv) any
court of competent jurisdiction in the United States or any State shall have
issued an order, judgment or decree (other than a temporary restraining order)
restraining, enjoining or otherwise prohibiting the transactions contemplated
hereby and such order, judgment or decree shall have become final and
nonappealable.
(c) In the event of termination of this Agreement by
either Prost or BWISS, as provided in Section 8.4(a) or (b), this Agreement
shall forthwith become void and there shall be no liability on the part of
either BWISS, Prost or BWI or their respective officers or directors, except
that nothing in this Section 8.4 shall relieve any party from liability for any
breach of this Agreement.
8.5 BREAK UP FEES. In the event of termination of this Agreement
under Section 8.4, other than arising from the breach of this Agreement by a
party hereto, and each party hereto shall otherwise be responsible for their own
disbursements and expenses incurred in the transactions contemplated hereby,
except BWISS shall pay Prost's reasonable legal and accounting fees in
connection with negotiating the agreement contemplated hereby.
SECTION 9
MISCELLANEOUS PROVISIONS
9.1 AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified, or supplemented only by written agreement of Prost and BWISS.
9.2 WAIVER OF COMPLIANCE; CONSENTS. Any failure of a party to
comply with any obligation, covenant, agreement, or condition herein may be
waived by the other party; provided, however, that any such waiver may be made
only by a written instrument signed by the party granting such waiver, but such
waiver or failure to insist upon strict compliance with
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such obligation, covenant, agreement, or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of any party hereto, such
consent shall be given in writing in a manner consistent with the requirements
for a waiver of compliance as set forth in this Section 9.2, with appropriate
notice in accordance with Section 9.8 of this Agreement.
9.3 ASSIGNMENT. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. No party may assign any of its
rights hereunder without the written consent of the other party. Nothing in this
Agreement, expressed or implied, is intended or shall be construed to confer
upon any person other than the parties, any successors and permitted assigns,
any rights, remedy, or claim under or by reason of this Agreement or any
provisions herein contained.
9.4 FURTHER ASSURANCES. From time to time, at the request of Prost
or the Partnership and without further consideration, each party, at its own
expense, will execute and deliver such other documents, and take such other
action, as Prost or the Partnership may reasonably request in order to
consummate more effectively the transactions contemplated hereby and to vest in
the Partnership good and marketable title to the Assets. Prost hereby
constitutes and appoints, effective as of the Contribution Date, the Partnership
and its successors and permitted assigns as the true and lawful attorney of
Prost with full power of substitution in the name of the Partnership or in the
name of Prost, but for the benefit of the Partnership, to collect for the
account of the Partnership any items of Assets and to institute and prosecute
all proceedings which the Partnership may in its reasonable discretion deem
proper in order to assert or enforce any right, title, or interest in, to, or
under the Assets, and to defend or compromise any and all action, suits, or
proceedings in respect of the Assets. The Partnership shall be entitled to
retain for its own account any amounts collected pursuant to the foregoing
powers, including any amounts payable as interest in respect thereof.
9.5 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the Laws of the State of California without regard
to its conflicts of law doctrines.
9.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument and shall become a binding
Agreement when one or more of the counterparts have been signed by each of the
parties and delivered to the other party.
9.7 PUBLICITY. Neither of the parties will make any disclosure of
the transactions contemplated by this Agreement, the Partnership Agreement or
the Other Agreements, or any discussions in connection therewith, without the
prior written consent of the other party. The preceding sentence shall not apply
to any disclosure required to be made by Law or the regulations of any stock
exchange(s) as reasonably determined by counsel to the party determining that
such disclosure is required, except that such party, whenever practicable, shall
be required to consult with the other party concerning the timing and content of
such disclosure
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before making it.
9.8 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered by hand
or mailed by registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
If to Prost: with a copy to:
------------ ---------------
Prost Partners, L.P. Wild, Carter & Tipton
821 L Street 246 W. Shaw
Modesto, CA 95354 Fresno, CA 93704
Attn: Garith Helm Attn: Bruce Brown, Esq.
If to BWISS: with a copy to:
------------ ---------------
BWI - St. Stan's, Inc. Hecht & Steckman, P.C.
9800 S. Sepulveda Blvd., Suite 720 60 East 42nd Street, Suite 5101
Los Angeles, CA 90045 New York, NY 10165-5101
Attn: Frederik Rodenhuis Attn: James G. Smith, Esq.
If to the Partnership: with a copy to:
---------------------- ---------------
BWI-Prost Partners BWI - St. Stan's, Inc.
821 L Street 9800 S. Sepulveda Blvd., Suite 720
Modesto, CA 95354 Los Angeles, CA 90045
Attn: Garith Helm Attn: Frederik Rodenhuis
and with a copy to:
-------------------
Hecht & Steckman, P.C.
60 East 42nd Street, Suite 5101
New York, NY 10165-5101
Attn: James G. Smith, Esq.
9.9 SPECIFIC PERFORMANCE. Each of the parties acknowledge that
money damages would not be a sufficient remedy for any breach of this Agreement
and that irreparable harm would result if this Agreement were not specifically
enforced. Therefore, the rights and obligations of the parties under this
Agreement shall be enforceable by a decree of specific performance issued by any
court of competent jurisdiction, and appropriate injunctive relief may be
applied for and granted in connection therewith. A party's right to specific
performance shall be in addition to all other legal or equitable remedies
available to such party.
9.10 HEADINGS. The article and section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
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9.11 ENTIRE AGREEMENT. This Agreement, including the exhibits,
schedules, and other documents and instruments referred to herein, together with
the Partnership Agreement and the Other Agreements, embodies the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
9.12 SEVERABILITY. If any one or more provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such invalid, illegal, or unenforceable provision had never
been contained herein.
9.13 INCONSISTENCY OR CONFLICT. In the event of any inconsistency
or conflict between any provision of this Agreement and any provision of any of
the Other Agreements, the provisions of this Agreement shall govern. In the
event of any inconsistency or conflict between any provision of this Agreement
and any provision of the Partnership Agreement, the provision of the Partnership
Agreement shall govern. However, to the extent possible, the Agreement,
Partnership Agreement and Other Agreements shall be interpreted to give effect
to the provisions contained in each such document.
9.14 EXHIBITS AND SCHEDULES. All Exhibits and Schedules attached
hereto are hereby incorporated in and made a part as if set forth in full
herein.
9.15 ARBITRATION. Any dispute arising under this Agreement or the
transactions contemplated thereby shall be arbitrated before the American
Arbitration Association at its offices located in San Francisco, California.
9.16 ATTORNEYS' FEES. If any legal action, whether in court or
arbitration, arises under this Agreement or by reason of any asserted breach of
it, the prevailing party shall be entitled to recover all costs and expenses,
including reasonable attorneys' and expert witness fees, incurred in enforcing
or attempting to enforce any of the terms, covenants or conditions.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of _____________________, 1996.
PROST PARTNERS, L.P. BWI-ST. STAN'S, INC.
By:______________________________ By:______________________________
Garith Helm, President of Frederik G.M. Rodenhuis, President and
Stanislaus Brewing Company, Inc., Chief Executive Officer
General Partner
42
AGREEMENT OF PARTNERSHIP
OF
BWI-PROST PARTNERS,
A CALIFORNIA PARTNERSHIP
43
TABLE OF CONTENTS
Page
SECTION 1 - THE PARTNERSHIP
1.1 FORMATION................................................. 1
1.2 NAME...................................................... 1
1.3 PURPOSE................................................... 1
1.4 PLACE OF BUSINESS......................................... 2
1.5 TERM...................................................... 2
1.6 STATUTORY COMPLIANCE...................................... 2
1.7 TITLE TO PROPERTY......................................... 2
1.8 PAYMENTS OF INDIVIDUAL OBLIGATIONS........................ 2
1.9 INDEPENDENT ACTIVITIES; TRANSACTIONS WITH AFFILIATES...... 2
1.10 DEFINITIONS............................................... 3
SECTION 2 - PARTNERS' CAPITAL CONTRIBUTIONS
2.1 INITIAL CAPITAL CONTRIBUTIONS............................ 12
2.2 ADDITION CAPITAL CONTRIBUTIONS........................... 12
2.3 LOANS BY PARTNERS TO THE PARTNERSHIP..................... 14
2.4 OTHER MATTERS............................................ 14
SECTION 3 - ALLOCATIONS
3.1 PROFITS.................................................. 14
3.2 LOSSES................................................... 15
3.3 SPECIAL ALLOCATIONS...................................... 15
3.4 CURATIVE ALLOCATIONS..................................... 16
3.5 OTHER ALLOCATION RULES................................... 16
3.6 TAX ALLOCATIONS: CODE SECTION 704(C).................... 17
SECTION 4 - DISTRIBUTIONS
4.1 DISTRIBUTIONS............................................ 17
4.2 AMOUNTS WITHHELD......................................... 19
SECTION 5 - MANAGEMENT AND OPERATIONS
5.1 JOINT MANAGEMENT COMMITTEE............................... 20
5.2 AUTHORITY OF JOINT MANAGEMENT COMMITTEE.................. 20
5.3 MEETINGS................................................. 22
5.4 DUTIES................................................... 22
5.5 RULES AND PROCEDURES..................................... 22
5.6 DUTY OF CARE............................................. 22
5.7 DEADLOCK BREAKING........................................ 22
SECTION 6 - INDEMNIFICATION OF PARTNERS
6.1 GENERAL.................................................. 22
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Page
6.2 ENVIRONMENTAL............................................ 22
6.3 PARTNERSHIP EXPENSES..................................... 23
6.4 LIMITATIONS.............................................. 23
SECTION 7 - REPRESENTATIONS AND WARRANTIES
7.1 PROST.................................................... 23
7.2 BWISS.................................................... 24
SECTION 8 - ACCOUNTING, BOOKS AND RECORDS
8.1 ACCOUNTING, BOOKS AND RECORDS............................ 25
8.2 REPORTS.................................................. 25
8.3 TAX RETURNS; INFORMATION................................. 26
8.4 SPECIAL BASIS ADJUSTMENT................................. 26
8.5 TAX MATTERS PARTNER...................................... 26
SECTION 9 - AMENDMENTS; MEETINGS
9.1 AMENDMENTS............................................... 26
SECTION 10 - TRANSFER OF INTERESTS
10.1 RESTRICTIONS ON TRANSFER................................. 27
10.2 RIGHT OF FIRST REFUSAL................................... 27
10.3 PERMITTED TRANSFERS...................................... 27
10.4 GENERAL TRANSFER PROVISIONS.............................. 27
10.5 TAX ALLOCATIONS AND CASH DISTRIBUTION.................... 28
10.6 COMPLIANCE............................................... 28
SECTION 11 - WITHDRAWALS; ACTION FOR PARTITION; BREACHES
11.1 WAIVER OF PARTITION...................................... 28
11.2 COVENANT NOT TO WITHDRAW OR DISSOLVE..................... 29
11.3 CONSEQUENCES OF VIOLATION OF COVENANTS................... 29
11.4 BREACH PAYMENTS.......................................... 30
11.5 NO BONDING............................................... 30
11.6 NET EQUITY............................................... 30
SECTION 12 - BUY-OUT
12.1 BUY-OUT PROVISION........................................ 31
12.2 NONSOLICITATION.......................................... 31
12.3 HIRING OF BWISS' EMPLOYEES............................... 32
12.4 NONDISCLOSURE OF CONFIDENTIAL INFORMATION................ 32
12.5 INTELLECTUAL PROPERTY RIGHTS............................. 33
12.6 PARTNERSHIP MATERIALS.................................... 33
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Page
SECTION 13 - DISSOLUTION AND WINDING UP
13.1 LIQUIDATING EVENTS....................................... 34
13.2 WINDING UP............................................... 34
13.3 COMPLIANCE WITH CERTAIN REQUIREMENTS OF REGULATIONS;..... 35
13.4 DEEMED DISTRIBUTION AND RECONTRIBUTION................... 35
13.5 RIGHTS OF PARTNERS....................................... 36
13.6 NOTICE OF DISSOLUTION.................................... 36
13.7 RIGHT OF FIRST REFUSAL................................... 36
SECTION 14 - MISCELLANEOUS
14.1 NOTICES.................................................. 39
14.2 BINDING EFFECT........................................... 39
14.3 CONSTRUCTION............................................. 39
14.4 SEVERABILITY............................................. 39
14.5 INCORPORATION BY REFERENCE............................... 39
14.6 FURTHER ACTION........................................... 39
14.7 GOVERNING LAW............................................ 39
14.8 COUNTERPART EXECUTION.................................... 39
14.9 ARBITRATION.............................................. 40
14.10 ATTORNEYS' FEES.......................................... 40
iii
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This AGREEMENT OF PARTNERSHIP OF BWI-PROST PARTNERS, a California
partnership, ("Agreement") is entered into and shall be effective as of the
Contribution Date (as defined in Section 1.7 of the Contribution Agreement
attached hereto as Exhibit A) by and among Prost Partners, L.P. ("Prost") and
BWI-St. Stan's, Inc., pursuant to the provisions of the California Uniform
Partnership Act, on the following terms and conditions:
WHEREAS, Prost currently owns and operates a brewery and brewpub
located in Modesto, California doing business as St. Stan's Brewing Company, and
Beverage Works, Inc. ("BWI"), which owns all of the outstanding shares of
BWI-St. Stan's, Inc. ("BWISS"), is seeking to acquire or enter into partnership
arrangements with at least two other breweries in the United States, which are
anticipated to be consummated upon the closing of an initial public offering of
BWI common shares; and
WHEREAS, Prost and BWI have skills, proprietary technologies and
know-how in producing, marketing, distributing and selling craft beers and other
beverages, which could be used to develop novel and cost-competitive products
and processes; and
WHEREAS, the parties hereto desire to create a partnership for the
purpose of developing their technologies and skills and producing such products
and processes.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the mutual
promises set forth herein and intending to be legally bound, the parties hereto
do hereby agree as follows:
SECTION 1
THE PARTNERSHIP
1.1 FORMATION. The Partnership is hereby formed as a California general
partnership effective as of the Contribution Date pursuant to, in accordance
with, and for purposes of, the provisions of the Act.
1.2 NAME. The name of the Partnership shall be BWI-Prost Partners and
all business of the Partnership shall be conducted in such name. The Partnership
shall hold all of its property in the name of the Partnership and not in the
name of any Partner.
1.3 PURPOSE.
(a) The business of the Partnership is (i) developing, promoting,
producing, distributing and selling St. Stan's Brewing Company products, and
(ii) cooperating with BWI and its subsidiaries and partners in the developing,
promoting, producing, distributing and selling of those entities' products.
(b) The Partnership shall be a partnership only for the purpose
specified in this Section 1.3. Except as otherwise provided in this Agreement,
the Partnership shall not engage in any other activity or business and no
Partner shall have any authority to hold itself out as a general agent of
another Partner in any other business or activity.
47
1.4 PLACE OF BUSINESS. The principal place of business of the
Partnership shall be at 821 L Street, Modesto, California, or at such other
place within or without the State of California as may be determined by the
Joint Management Committee.
1.5 TERM. The term of the Partnership shall commence on the
Contribution Date as defined in Section 1.7 of the Contribution Agreement and
shall continue until the winding up and liquidation of the Partnership and its
business is completed following a "Liquidating Event," as provided in Section 13
hereof.
1.6 STATUTORY COMPLIANCE. The Partnership shall exist under and be
governed by, and this Agreement shall be construed in accordance with, the
applicable laws of the State of California. The Partners shall make all filings
and disclosures required by, and shall otherwise comply with, all such laws. The
Partners shall execute and file in the appropriate records any assumed or
fictitious name certificates and other documents and instruments as may be
necessary or appropriate with respect to the formation of, and conduct of
business by, the Partnership.
1.7 TITLE TO PROPERTY. All real and personal property owned by the
Partnership shall be owned by the Partnership as an entity and no Partner shall
have any ownership interest in such property in its individual name or right,
and each Partners's interest in the Partnership shall be personal property for
all purposes. Except as otherwise provided in this Agreement, the Partnership
shall hold all of its real and personal property in the name of the Partnership
and not in the name of any Partner.
1.8 PAYMENTS OF INDIVIDUAL OBLIGATIONS. The Partnership's credit and
assets shall be used solely for the benefit of the Partnership, and no asset of
the Partnership shall be transferred or encumbered for or in payment of any
individual obligation of a Partner.
1.9 INDEPENDENT ACTIVITIES; TRANSACTIONS WITH AFFILIATES.
(a) Each Partner and any of its Affiliates shall be required to
devote only such time to the affairs of the Partnership as such Partner
determines in its sole discretion may be necessary to manage and operate the
Partnership, and each such Person, to the extent not otherwise directed by such
Partner, shall be free to serve any other Person or enterprise in any capacity
that it may deem appropriate in its discretion.
(b) Insofar as permitted by applicable law, each Partner (acting on
its own behalf) and its Affiliates may, except as otherwise set forth in this
Agreement, engage in whatever activities they choose, without having or
incurring any obligation to offer any interest in such activities to the
Partnership or any Partner and neither this Agreement nor any activity
undertaken pursuant hereto shall prevent any Partner or its Affiliates from
engaging in such activities, or require any Partner to permit the Partnership or
any Partner or its Affiliates to participate in any such activities, and as a
material part of the consideration for the execution of this Agreement by each
Partner, each Partner hereby waives, relinquishes, and renounces any such right
or claim of participation.
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1.10 DEFINITIONS. Capitalized words and phrases used in this Agreement
have the following meanings:
(a) "Act" means the California Uniform Partnership Act, as amended
from time to time (or any corresponding provisions of succeeding law).
(b) "Adverse Act" means, with respect to any Partner, any of the
following:
(i) A failure of such Partner to make any Capital Contribution
required pursuant to any provision of this Agreement;
(ii) A Transfer of all or any portion of such Partner's
interest in the Partnership except as expressly permitted or required by this
Agreement;
(iii) Any termination, dissolution or liquidation of a
corporation or partnership which is a Partner, or the taking of any action by
its directors, majority shareholders or general partners looking to the
termination, dissolution or liquidation of such Partner, unless substantially
all assets of such Partner are transferred, or are to be transferred, to a
Wholly Owned Affiliate of such Partner;
(iv) The Bankruptcy of such Partner or the occurrence of any
other event which would permit a trustee or receiver to acquire control of the
affairs or assets of such Partner; or
(v) A determination that such Partner has taken an action, or
has failed to take an action within the scope of its duties hereunder, that
results, or can reasonably be expected to result in, such Partner becoming
liable to indemnify the Partnership for a material sum pursuant to any provision
of this Agreement or that would justify a decree of dissolution of the
Partnership under the Act.
(c) "Affiliate" means, with respect to any Person, (i) any Person
directly or indirectly controlling, controlled by or under common control with
such Person, (ii) any Person owning or controlling ten percent (10%) or more of
the outstanding voting interests of such Person, (iii) any officer, director, or
general partner of such Person, or (iv) any Person who is an officer, director,
general partner, trustee, or holder of ten percent (10%) or more of the voting
interests of any Person described in clauses (i) through (iii) of this sentence.
For purposes of this definition, the term "controls," "is controlled by," or "is
under common control with" shall mean the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
person or entity, whether through the ownership of voting securities, by
contract or otherwise.
(d) "Agreement" means this Agreement of Partnership, as amended
from time to time. Words such as "herein," "hereinafter," "hereof," "hereto",
and "hereunder" refer to this Agreement as a whole, unless the context otherwise
requires.
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(e) "Bankruptcy" means, with respect to any Person, a "Voluntary
Bankruptcy" or an "Involuntary Bankruptcy." A "Voluntary Bankruptcy" means, with
respect to any Person, the inability of such Person generally to pay its debts
as such debts become due, or an admission in writing by such Person of its
inability to pay its debts generally or a general assignment by such Person for
the benefit of creditors; the filing of any petition or answer by such Person
seeking to adjudicate it a bankrupt or insolvent, or seeking for itself any
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of such Person or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking,
consenting to, or acquiescing in the entry of an order for relief or the
appointment of a receiver, trustee, custodian, or other similar official for
such Person or for any substantial part of its property; or corporate action
taken by such Person to authorize any of the actions set forth above. An
"Involuntary Bankruptcy" means, with respect to any Person, without the consent
or acquiescence of such Person, the entering of an order for relief or approving
a petition for relief or reorganization or any other petition seeking any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or other similar relief under any present or future bankruptcy, insolvency or
similar statute, law or regulation, or the filing of any such petition against
such Person which petition shall not be dismissed within ninety (90) days, or,
without the consent or acquiescence of such Person, the entering of an order
appointing a trustee, custodian, receiver or liquidator of such Person or of all
or any substantial part of the property of such Person which order shall not be
dismissed within sixty (60) days.
(f) "Business Day" means a day of the year on which banks are not
required or authorized to close in Los Angeles, California.
(g) "Capital Account" means, with respect to any Partner, the
Capital Account maintained for such Person in accordance with the following
provisions:
(i) To each Person's Capital Account there shall be credited
such Partner's Capital Contributions, such Partner's distributive share of
Profits and any items in the nature of income or gain which are specially
allocated pursuant to Section 3.3 or Section 3.4 hereof, and the amount of any
Partnership liabilities assumed by such Partner or which are secured by any
Property distributed to such Partner.
(ii) To each Partner's Capital Account there shall be debited
the amount of cash and the Gross Asset Value of any Property distributed to such
Partner pursuant to any provision of this Agreement, such Partner's distributive
share of Losses and any items in the nature of expenses or losses which are
specially allocated pursuant to Section 3.3 or Section 3.4 hereof, and the
amount of any liabilities of such Partner assumed by the Partnership or which
are secured by any property contributed by such Partner to the Partnership. If a
promissory note is distributed to a Partner by the Partnership that is the maker
of such note, such Partner's Capital Account will be decreased with respect to
such note only when there is a taxable disposition of such note by the Partner
or when the Partnership make principal payments on the note. The previous
sentence shall not apply if a note distributed to a Partner by the Partnership
who is the maker of such note is readily tradable on an established securities
market.
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Furthermore, the Capital Account of a Partner whose interest in the Partnership
is liquidated will be reduced to the extent of (i) the fair market value, at the
time of distribution of any negotiable promissory note (of which the Partnership
is the maker) that the Partnership distributes to the Partner on or after the
date such Partner's interest is liquidated and within the time specified in
Regulations Section 1.704-1(b)(2)(ii)(b)(2), and (ii) the fair market value, at
the time of liquidation of the unsatisfied portion of any negotiable promissory
note (of which the Partnership is the maker) that the Partnership previously
distributed to the Partner. For purposes of the preceding sentence, the fair
market value of a note will be no less than the outstanding principal balance of
such note, provided that such note bears interest at a rate no less than the
applicable federal rate at the time of valuation.
(iii) In the event any interest in the Partnership is
transferred in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it relates to the
transferred interest.
(iv) In determining the amount of any liability for purposes of
Sections 1.10(g)(i) and 1.10(g)(ii) hereof, there shall be taken into account
Code Section 752(c) and any other applicable provisions of the Code and
Regulations.
The foregoing provisions and the other provisions of the Agreement relating to
the maintenance of Capital Accounts are intended to comply with Regulations
Section 1.704-1(b)(2)(iv), and shall be interpreted and applied in a manner
consistent with such Regulations. In the event the Joint Management Committee
shall determine that it is prudent to modify the manner in which the Capital
Accounts, or any debits or credits thereto (including, without limitation,
debits or credits relating to liabilities which are secured by contributed or
distributed property or which are assumed by the Partnership or the Partners),
are computed in order to comply with such Regulations, the Joint Management
Committee may make such modification, provided that it is not likely to have a
material effect on the amounts distributable to any Partner pursuant to Section
13 hereof upon the dissolution of the Partnership. The Joint Management
Committee also shall (i) make any adjustments that are necessary or appropriate
to maintain equality between the Capital Accounts of the Partners and the amount
of Partnership capital reflected on the Partnership's balance sheet, as computed
for book purposes in accordance with Regulations Section 1.704-1(b)(2)(iv)(g),
and (ii) make any appropriate modifications in the event unanticipated events
might otherwise cause this Agreement not to comply with Regulations Section
1.704-1(b)(2)(iv).
(h) "Capital Contributions" means, with respect to any Partner,
the amount of money and the initial Gross Asset Value of any property (other
than money) contributed to the Partnership or the principal amount of
Partnership debts assumed with respect to the Partnership interest held by such
Partner pursuant to the terms of this Agreement. The principal amount of a
promissory note which is not readily traded on an established securities market
and which is contributed to the Partnership by the maker of the note (or by a
Person related to the maker of the note within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(c)) shall not be included in the Capital Contribution
of any Partner until the Partnership makes a taxable
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disposition of the note or until (and to the extent) principal payments are made
on the note, all in accordance with Regulations Section 1.704-1(b)(2)(iv)(d)(2).
(i) "Code" means the Internal Revenue Code of 1986, as amended from
time to time (or any corresponding provisions of succeeding law.)
(j) "Debt" means (i) any indebtedness for borrowed money or
deferred purchase price of property or evidenced by a note, bonds, or other
instruments, (ii) obligations as lessee under capital leases, (iii) obligations
secured by any mortgage, pledge, security interest, encumbrance, lien or charge
of any kind existing on any asset owned or held by the Partnership whether or
not the Partnership has assumed or become liable for the obligations secured
thereby, (iv) any obligation under any interest rate swap agreement (the
principal amount of such obligation shall be deemed to be the notional principal
amount on which such swap is based), and (v) obligations under direct or
indirect guarantees of (including obligations (contingent or otherwise) to
assure a creditor against loss in respect of) indebtedness or obligations of the
kinds referred to in clauses (i), (ii), (iii) and (iv) above, provided that Debt
shall not include obligations in respect of any accounts payable that are
incurred in the ordinary course of the Partnership's business and are not
delinquent or are being contested in good faith by appropriate proceedings.
(k) "Depreciation" means, for each Fiscal Year, an amount equal to
the depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Fiscal Year, except that if the Gross Asset Value
of an asset differs from its adjusted basis for federal income tax purposes at
the beginning of such Fiscal Year, Depreciation shall be an amount which bears
the same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such Fiscal
Year bears to such beginning adjusted tax basis; provided, however, that if the
adjusted basis for federal income tax purposes of an asset at the beginning of
such Fiscal Year is zero, Depreciation shall be determined with reference to
such beginning Gross Asset Value using any reasonable method selected by the
Joint Management Committee.
(l) "Environmental Laws" means any federal, state or local statute,
code, ordinance, rule, regulation, permit, consent, approval, license, judgment,
order, writ, judicial decision, common law rule, decree, agency interpretation,
injunction or other authorization or requirement whenever promulgated, issued,
or modified, including the requirement to register underground storage tanks,
relating to:
(i) emissions, discharges, spills, releases or threatened
releases of pollutants, contaminants, Hazardous Substances (as hereinafter
defined), materials containing Hazardous Substances, or hazardous or toxic
materials or wastes into ambient air, surface water, groundwater, watercourses,
publicly or privately owned treatment works, drains, sewer systems, wetlands,
septic systems or onto land;
(ii) the use, treatment, storage, disposal, handling,
manufacturing,
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transportation, or shipment of Hazardous Substances, materials containing
Hazardous Substances or hazardous and/or toxic wastes, material, products or
by-products (or of equipment or apparatus containing Hazardous Substances) as
defined in or regulated under the following statutes and their implementing
regulations: the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801
et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et
seq., the Comprehensive Environmental Response, Compensation and Liability Act,
as amended by the Superfund Amendments and Reauthorization Act, 42 U.S.C.
Section 9601 et seq., and/or the Toxic Substances Control Act, 15 U.S.C. Section
2601 et seq., each as amended from time to time; or
(iii) otherwise relating to pollution or the protection of
human health or the environment.
(m) "Fiscal Year" means (i) the period commencing on the
Contribution Date and ending on December 31, 1996, (ii) any subsequent twelve
(12) month period commencing on January 1 and ending on December 31, or (iii)
any portion of the period described in clause (ii) for which the Partnership is
required to allocate Profits, Losses and other items of Partnership income,
gain, loss or deduction pursuant to Section 3 hereof.
(n) "Gross Asset Value" means, with respect to any asset, tangible
or intangible, the asset's adjusted basis for federal income tax purposes,
except as follows:
(i) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such asset,
as determined by the Partners;
(ii) The Gross Asset Values of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as determined by
the Partners, as of the following times: (a) the acquisition of an additional
interest in the Partnership by any new or existing Partner in exchange for more
than a de minimis Capital Contribution; (b) the distribution by the Partnership
to a Partner of more than a de minimis amount of Property as consideration for
an interest in the Partnership; (c) the liquidation of the Partnership within
the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); and (d) when
calculating Net Equity under Section 11.6; provided, however, that adjustments
pursuant to clauses (a) and (b) above shall be made only if the Partners
reasonably determine that such adjustments are necessary or appropriate to
reflect the relative economic interests of the Partners in the Partnership;
(iii) The Gross Asset Value of any Partnership asset
distributed to any Partner shall be adjusted to equal the gross fair market
value of such asset on the date of distribution as determined by the distributee
and the Partners; and
(iv) The Gross Asset Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Regulations Section
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1.704-1(b)(2)(iv)(m) and Sections 1.10(z)(vi) and 3.3(e) hereof; provided,
however, that Gross Asset Values shall not be adjusted pursuant to this Section
1.10(n)(iv) to the extent the Partners determine that an adjustment pursuant to
Section 1.10(n)(ii) hereof is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant to this
Section 1.10(n)(iv).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
Section 1.10(n)(i), Section 1.10(n)(ii), or Section 1.10(n)(iv) hereof, such
Gross Asset Value shall thereafter be adjusted by the Depreciation taken into
account with respect to such asset for purposes of computing Profits and Losses.
In the event that the Partners are unable to determine the gross fair market
value for the purpose of determining the Gross Asset Value of any asset under
this Section 1.10(n), then the gross fair market value shall be the Gross
Appraised Value.
(o) "Gross Appraised Value" of an asset, tangible or intangible, as
of any day, shall be equal to the gross fair market value of the asset as of
such day. Gross Appraised Value shall be determined as follows:
(i) At any time after the thirtieth (30th) day a request is
made by either Partner to determine the gross fair market value of any asset,
either Partner may give notice to the other Partner that the gross fair market
value is to be determined under this Section 1.10(o). Such notice shall
designate the First Appraiser and the other Partner shall appoint the Second
Appraiser within ten (10) Business Days of receiving such notice designating the
First Appraiser.
(ii) If the Second Appraiser is timely designated, the First
and Second Appraisers shall meet within ten (10) days of such appointment and
shall endeavor, within twenty (20) days of such appointment, to agree upon, and
give written notice to the Partnership, the Partners, and the firm of
independent certified public accountants regularly employed by the Partnership,
of the gross fair market value of the asset (the "Appraisers' Notice"). The
agreed value shall be the asset's gross fair market value.
(iii) If an Appraisers' Notice is not given during such period,
then at any time after such period, either the Partner who appointed the First
Appraiser or the Partner who appointed the Second Appraiser, by written notice
to the First Appraiser and Second Appraiser, may demand that they appoint a
Third Appraiser (the "Third Appraiser"). If the First Appraiser and Second
Appraiser have not either given an Appraisers' Notice or appointed the Third
Appraiser (who shall have agreed to serve) by the twentieth (20th) day after
such demand, either the Partner who appointed the First Appraiser or the Partner
who appointed the Second Appraiser may request any judge of the Superior Court
of the County of Los Angeles, State of California to appoint the Third
Appraiser. After the appointment of the Third Appraiser, the gross fair market
value shall be the amount included in an Appraisers' Notice subscribed to by at
least two (2) of the three (3) appraisers; provided that before subscribing to a
Gross Appraised Value, the Third Appraiser shall meet at least once with the
First Appraiser and the Second
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Appraiser to discuss in good faith the appraisal of the asset. If two (2) of the
appraisers have not given an Appraisers' Notice within twenty (20) days of the
appointment of the Third Appraiser, the gross fair market value of the asset
shall be determined solely by the Third Appraiser, who shall give an Appraisers'
Notice within thirty (30) days of his appointment.
(iv) If a Second Appraiser is not timely appointed in the
manner provided by this Section 1.10(o), the gross fair market value shall be
determined solely by the First Appraiser who shall give an Appraisers' Notice of
such gross fair market value within ten (10) days of the last day on which the
Second Appraiser could have been timely designated.
(v) Each appraiser appointed hereunder shall be disinterested
and shall be qualified to appraise property similar to the asset.
(vi) As used in this Section 1.10(o), as of any day, the "gross
fair market value" of the asset means (1) the maximum amount that a single buyer
would reasonably be expected to pay for the asset on such day, free and clear of
all liens and encumbrances, in a single cash purchase, taking into account the
current condition and use of the asset, increased by (2) the additional amount,
if any, that such buyer would pay for any existing favorable financing or leases
on the asset, and decreased by (3) the amount, if any, that such buyer would
subtract from the unencumbered fair market value of the asset by reason of any
existing unfavorable financing or leases. When determining Gross Appraised Value
for purposes of Section 11.6, the Appraiser(s) under this Section 1.10(o) shall
not appraise the intangible assets, but total intangible assets of the Business
shall be deemed to equal (i) net income before interest, taxes, depreciation and
amortization (as determined under U.S. Generally Accepted Accounting Principles)
for the twelve (12) full calendar months preceding the date of the breach (ii)
multiplied by three (3).
(vii) The costs and expenses of the Appraisers shall be born
equally by the parties.3
(p) "Nonrecourse Deductions" has the meaning set forth in Section
1.704-2(b)(1) of the Regulations.
(q) "Nonrecourse Liability" has the meaning set forth in Section
1.704-2(b)(3) of the Regulations.
(r) "Partner Nonrecourse Debt" has the meaning set forth in Section
1.704-2(b)(4) of the Regulations.
(s) "Partner Nonrecourse Debt Minimum Gain" means an amount, with
respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain
that would result if such Partner Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Section 1.704-2(i)(3) of the
Regulations.
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(t) "Partner Nonrecourse Deductions" has the meaning set forth in
Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations.
(u) "Partners" means those entities executing this Agreement as
Partners. "Partner" means any one of the Partners.
(v) "Partnership" means the general partnership formed by this
Agreement and the partnership continuing the business of this Partnership in the
event of dissolution as herein provided.
(w) "Partnership Minimum Gain" has the meaning set forth in
Regulations Sections 1.704-2(b)(2) and 1.704-2(d).
(x) "Percentage Interest" means, with respect to any Partner, the
percentage interest set forth below such Partner's name in Section 2.1. In the
event any Partnership interest is transferred in accordance with the provisions
of this Agreement, the transferee of such interest shall succeed to the
Percentage Interest of his transferor to the extent it relates to the
transferred interest.
(y) "Person" means any individual, partnership, corporation, trust,
or other entity.
(z) "Profits" and "Losses" means, for each Fiscal Year, an amount
equal to the Partnership's taxable income or loss for such Fiscal Year,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss, or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(i) Any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Profits or Losses
pursuant to this Section 1.10(z) shall be added to such taxable income or loss;
(ii) Any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken
into account in computing Profits or Losses pursuant to this Section 1.10(z)
shall be subtracted from such taxable income or loss;
(iii) In the event the Gross Asset Value of any Partnership
asset is adjusted pursuant to Section 1.10(n)(ii) or Section 1.10(n)(iii)
hereof, the amount of such adjustment shall be taken into account as gain or
loss from the disposition of such asset for purposes of computing Profits or
Losses;
(iv) Gain or loss resulting from any disposition of Property
with respect to which gain or loss is recognized for federal income tax purposes
shall be computed by
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reference to the Gross Asset Value of the Property disposed of, notwithstanding
that the adjusted tax basis of such Property differs from its Gross Asset Value;
(v) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such Fiscal Year, computed in
accordance with Section 1.10(k) hereof;
(vi) To the extent an adjustment to the adjusted tax basis of
any Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken
into account in determining Capital Accounts as a result of a distribution other
than in liquidation of a Partner's interest in the Partnership, the amount of
such adjustment shall be treated as an item of gain (if the adjustment increases
the basis of the asset) or loss (if the adjustment decreases the basis of the
asset) from the disposition of the asset and shall be taken into account for
purposes of computing Profits or Losses; and
(vii) Notwithstanding any other provision of this Section
1.10(z), any items which are specially allocated pursuant to Sections 3.3 and
3.4 hereof shall not be taken into account in computing Profits or Losses.
The amounts of the items of Partnership income, gain, loss or deduction
available to be specially allocated pursuant to Sections 3.3 and 3.4 hereof
shall be determined by applying rules analogous to those set forth in Sections
1.10(z)(i) through 1.10(z)(vi) above.
(aa) "Property" means all real and personal property acquired by
the Partnership and any improvements thereto, and shall include both tangible
and intangible property.
(ab) "Regulations" means the Income Tax Regulations, including
Temporary Regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
(ac) "Transfer" means, as a noun, any voluntary or involuntary
transfer, sale, or other disposition and, as a verb, voluntarily or
involuntarily to transfer, sell, or otherwise dispose of.
(ad) "Wholly Owned Affiliate" of any Person shall mean (i) an
Affiliate of such Person one hundred percent (100%) of the voting stock or
beneficial ownership of which is owned directly by such Person, or by any Person
who, directly or indirectly, owns one hundred percent (100%) of the voting stock
or beneficial ownership of such Person, (ii) an Affiliate of such Person who,
directly or indirectly, owns one hundred percent (100%) of the voting stock or
beneficial ownership of such Person, and (iii) any Wholly Owned Affiliate of any
Affiliate described in clause (i) or clause (ii) of this Section 1.10(ad).
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SECTION 2
PARTNERS' CAPITAL CONTRIBUTIONS
2.1 INITIAL CAPITAL CONTRIBUTIONS. The names, addresses, and Percentage
Interests of the Partners are as follows:
BWI-ST. STAN'S, INC. PROST PARTNERS, L.P.
9800 S. Sepulveda Blvd. c/o Stanislaus Brewing Company, Inc.
Suite 720 821 L Street
Los Angeles, CA 90045 Modesto, CA 95354
Percentage Interest: 51.00% Percentage Interest: 49.00%
The initial Capital Contributions are set forth in the Contribution Agreement
attached hereto as Exhibit A.
2.2 ADDITIONAL CAPITAL CONTRIBUTIONS.
(a) No Partner shall be obligated to make any additional Capital
Contribution except as otherwise set forth herein.
(b) BWISS shall make additional Capital Contributions to the
Partnership in the total principal amount of $2,295,000 less the total amount of
Assumed Debts as determined under Section 1.6 of the Contribution Agreement as
at the Contribution Date. For the purpose of this Section 2.2(b), the difference
shall be referred to herein as the "Periodic Capital Contribution."
(i) The Periodic Capital Contribution after being reduced by
the Net Current Assets Decrease (as defined herein) shall be referred to herein
as the "Three Year Contribution."
(ii) BWISS shall pay to the Partnership interest at the rate
equal to ten percent (10%) multiplied by a fraction the numerator of which shall
be equal to the Three Year Contribution and the denominator of which shall be
the sum of the Three Year Contribution and the Net Current Assets Decrease.
Interest will stop accruing after the Three Year Contribution has been paid.
BWISS may prepay any or all of the Periodic Capital Contribution. Accrued
interest shall be payable quarterly on the last day of January, April, July and
October in each year commencing after the date the first principal payment is
due under this Section 2.2(b)(iii).
(iii) Principal payments shall be as follows:
(1) $100,000 eighteen (18) months after the Contribution
Date;
(2) $100,000 twenty-one (21) months after the Contribution
Date;
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(3) $100,000 twenty-four (24) months after the
Contribution Date;
(4) $100,000 twenty-seven (27) months after the
Contribution Date;
(5) $100,000 thirty (30) months after the Contribution
Date;
(6) $100,000 thirty-three (33) months after the
Contribution Date;
(7) The principal balance of the Three Year Contribution
thirty- six (36) months after the Contribution Date;
(8) The Net Current Assets Decrease sixty (60) months
after the Contribution Date.
(iv) If the public offering contemplated under Section 8.1(a)
of the Contribution Agreement results in gross proceeds in excess of
$10,000,000, BWISS shall make a principal payment on the Periodic Capital
Contribution within 30 days of the Contribution Date equal to 10% of the gross
proceeds raised in such public offering up to a maximum of $300,000.
(v) The "Net Current Assets Decrease" shall be equal to (1) the
net current assets as stated in the Contributed Business Balance Sheet in
accordance with Section 4.5 of the Contribution Agreement less (2) the net
current assets as stated in the Closing Balance Sheet in accordance with Section
8.2 of the Contribution Agreement. For purposes of this Section 2.2(b)(v) only,
the Closing Balance Sheet shall be no dated later than December 31, 1996. Net
Current Assets Decrease shall be zero if the net current assets as stated in the
Closing Balance Sheet is greater than the net current assets as stated in the
Contributed Business Balance Sheet. Net current assets shall be defined as
current assets less current liabilities. Net Current Assets Decrease shall be
exclusive of any (i) advances made by BWISS or its Affiliates to Prost; (2) of
the kegs acquired by BWISS or its Affiliates for the benefit of Prost to the
extent the kegs are included in the current assets; and (3) any accounting
changes since the date of the Contributed Business Balance Sheet.
(vi) Example. Assume the Contribution Date is October 31, 1996.
Assume Prost's net current assets as of April 30, 1996 are ($28,000) and net
current assets as of October 31, 1996 are ($108,000). The Net Current Assets
Decrease is ($80,000). Assume the Periodic Capital Contribution (after deducting
the amount under Section 1.6) is $1,150,000. The Three Year Contribution equals
$1,070,000. The interest rate would be 9.3% calculated as follows: 10% X
($1,070,000/$1,150,000) = 9.3%.
Interest accrues on the outstanding principal balance from October 31, 1996
through October 31, 1999, payable quarterly. The first interest payment is made
on April 30, 1998. Principal is
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paid as follows:
$100,000 April 30, 1998 $100,000 April 30, 1999
$100,000 July 31, 1998 $100,000 July 31, 1999
$100,000 October 31, 1998 $470,000 October 31, 1999
$100,000 January 31, 1999 $ 80,000 October 31, 2001
2.3 LOANS BY PARTNERS TO THE PARTNERSHIP. In the event that at least
four members of the Joint Management Committee determine that the Partners'
initial Capital Contributions under Section 2.1 are insufficient to meet the
Partnership's costs, expenses, obligations, liabilities and charges, or to make
any expenditure authorized by this Agreement, the Joint Management Committee may
request the Partners to advance funds to the Partnership. The Partnership must
offer both Partners equal opportunity to make loans on the same terms. All
amounts so advanced shall take the form of a loan and shall bear interest at the
federal funds rate plus 7%. Both Partners shall have the initial opportunity to
participate in any such advance in proportion to their then Percentage
Interests. Such loans shall be repayable solely out of property or assets of the
Partnership, in accordance with the provisions of Section 5.2, and no Partner
shall have any personal liability on account thereof, nor shall there be any
recourse to such Partner's assets.
2.4 OTHER MATTERS.
(a) Except as otherwise provided in this Agreement, no Partner
shall demand or receive a return of its Capital Contributions or withdraw from
the Partnership without the consent of all Partners. Under circumstances
requiring a return of any Capital Contributions, no Partner shall have the right
to receive property other than cash except as may be specifically provided
herein.
(b) No Partner shall receive any interest, salary, or drawing with
respect to its Capital Contributions or its Capital Account or for services
rendered on behalf of the Partnership or otherwise in its capacity as Partner,
except as otherwise provided in this Agreement.
(c) Except as otherwise provided in this Section 2 and Section 10
hereof, relating to Transfers of Partnership interests, no Person shall be
admitted to the Partnership as a Partner without the unanimous consent of the
Partners.
SECTION 3
ALLOCATIONS
3.1 PROFITS. After giving effect to the special allocations set forth
in Sections 3.3 and 3.4 hereof, Profits for any Fiscal Year shall be allocated
among the Partners in proportion to their Percentage Interests.
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3.2 LOSSES. After giving effect to the special allocations set forth in
Sections 3.3 and 3.4 hereof, Losses for any Fiscal Year shall be allocated among
the Partners in proportion to their Percentage Interests.
3.3 SPECIAL ALLOCATIONS. The following special allocations shall be
made in the following order:
(a) Minimum Gain Chargeback. Except as otherwise provided in
Section 1.704-2(f) of the Regulations, notwithstanding any other provision of
this Section 3, if there is a net decrease in Partnership Minimum Gain during
any Partnership Fiscal Year, each Partner shall be specially allocated items of
Partnership income and gain for such Fiscal Year (and, if necessary, subsequent
Fiscal Years) in an amount equal to such Partner's share of the net decrease in
Partnership Minimum Gain, determined in accordance with Regulations Section
1.704-2(g). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Partner
pursuant thereto. The items to be so allocated shall be determined in accordance
with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations. This Section
3.3(a) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-1(f) of the Regulations and shall be interpreted consistently
therewith.
(b) Partner Minimum Gain Chargeback. Except as otherwise provided
in Section 1.704-1(i)(4) of the Regulations, notwithstanding any other provision
of this Section 3, if there is a net decrease in Partner Nonrecourse Debt
Minimum Gain attributable to a Partner Nonrecourse Debt during any Partnership
Fiscal Year, each Partner who has a share of the Partner Nonrecourse Debt
Minimum Gain attributable to such Partner Nonrecourse Debt, determined in
accordance with Section 1.704-2(i)(5) of the Regulations, shall be specially
allocated items of Partnership income and gain for such Fiscal Year (and, if
necessary, subsequent Fiscal Years) in an amount equal to such Partner's share
of the net decrease in Partner Nonrecourse Debt Minimum Gain attributable to
such Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Partner
pursuant thereto. The items to be so allocated shall be determined in accordance
with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Regulations. This Section
3.3(b) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(i)(4) of the Regulations and shall be interpreted consistently
therewith.
(c) Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal
Year shall be specially allocated among the Partners in proportion to their
Percentage Interests.
(d) Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any Fiscal Year shall be specially allocated to the Partner who
bears the economic risk of loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in accordance with
Regulations Section 1.704-2(i)(1).
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(e) Code Section 754 Adjustment. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Code Section 734(b) or
Code Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining Capital Accounts as the result of a
distribution to a Partner in complete liquidation of its interest in the
Partnership, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases such basis) and such gain or loss shall be
specially allocated to the Partners in accordance with their interests in the
Partnership in the event Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or
to the Partners to whom such distribution was made in the event Regulations
Section 1.704-1(b)(2)(iv)(m)(4) applies.
(f) Allocations Relating to Taxable Issuance of Partnership
Interests. Any income, gain, loss or deduction realized as a direct or indirect
result of the issuance of an interest in the Partnership to a Partner (the
"Issuance Items") shall be allocated among the Partners so that, to the extent
possible, the net amount of such Issuance Items, together with all other
allocations under this Agreement to each Partner, shall be equal to the net
amount that would have been allocated to each such Partner if the Issuance Items
had not been realized.
3.4 CURATIVE ALLOCATIONS. The allocations set forth in Sections 3.3(a),
3.3(b), 3.3(c), 3.3(d) and 3.3(e) hereof (the "Regulatory Allocations") are
intended to comply with certain requirements of the Regulations. It is the
intent of the Partners that, to the extent possible, all Regulatory Allocations
shall be offset either with other Regulatory Allocations or with special
allocations of other items of Partnership income, gain, loss, or deduction
pursuant to this Section 3.4. Therefore, notwithstanding any other provision of
this Section 3 (other than the Regulatory Allocations), the Joint Management
Committee shall make such offsetting special allocations of Partnership income,
gain, loss or deduction in whatever manner it determines appropriate so that,
after such offsetting allocations are made, each Partner's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Partner would have had if the Regulatory Allocations were not part of the
Agreement and all Partnership items were allocated pursuant to Sections 3.1 and
3.2 hereof. In exercising its discretion under this Section 3.4, the Joint
Management Committee shall take into account future Regulatory Allocations under
Sections 3.3(a) and 3.3(b) that, although not yet made, are likely to offset
other Regulatory Allocations previously made under Sections 3.3(c) and 3.3(d).
3.5 OTHER ALLOCATION RULES.
(a) The Partners are aware of the income tax consequences of the
allocations made by this Section 3 and hereby agree to be bound by the
provisions of this Section 3 in reporting their shares of Partnership income and
loss for income tax purposes.
(b) For purposes of determining the Profits, Losses, or any other
items allocable to any period, Profits, Losses, and any such other items shall
be determined on a daily, monthly, or other basis, as determined by the Joint
Management Committee using any
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permissible method under Code Section 706 and the Regulations thereunder.
(c) Solely for purposes of determining a Partner's proportionate
share of the "excess nonrecourse liabilities" of the Partnership, within the
meaning of Regulations Section 1.752-3(a)(3), the Partners' interests in
Partnership profits are in proportion to their Percentage Interests.
(d) To the extent permitted by Section 1.704-2(h)(3) of the
Regulations, the Joint Management Committee shall endeavor not to treat
distributions as having been made from the proceeds of a Nonrecourse Liability
or a Partner Nonrecourse Debt.
3.6 TAX ALLOCATIONS: CODE SECTION 704(C). In accordance with Code
Section 704(c) and the Regulations thereunder, income, gain, loss, and deduction
with respect to any property contributed to the capital of the Partnership
shall, solely for tax purposes, be allocated among the Partners so as to take
account of any variation between the adjusted basis of such property to the
Partnership for federal income tax purposes and its initial Gross Asset Value.
In the event the Gross Asset Value of any Partnership asset is adjusted pursuant
to Section 1.10(n)(ii) hereof, subsequent allocations of income, gain, loss, and
deduction with respect to such asset shall take account of any variation between
the adjusted basis of such asset for federal income tax purposes and its Gross
Asset Value in the same manner as under Code Section 704(c) and the Regulations
thereunder. Any elections or other decisions relating to such allocations shall
be made by the Joint Management Committee in any manner that reasonably reflects
the purpose and intention of this Agreement. Allocations pursuant to this
Section 3.6 are solely for purposes of federal, state, and local taxes and shall
not affect, or in any way be taken into account in computing, any Person's
Capital Account or share of Profits, Losses, other items, or distributions
pursuant to any provisions of this Agreement.
SECTION 4
DISTRIBUTIONS
4.1 DISTRIBUTIONS. Except as provided in Section 13.2 hereof, all
distributions shall be made in accordance with the following:
(a) Subject to Section 4.1(b), distributions to the Partners by the
Partnership shall be made as frequently and in such amounts as may be
unanimously determined by the Partners; provided, however, that the aggregate
amount of each such distribution shall be that amount which such Partners
reasonably determine is not required to be retained by the Partnership to meet
the reasonably foreseeable cash requirements and needs of the business of the
Partnership and establish an adequate reserve for the payment of Partnership
liabilities and contingencies.
(b) Prost shall receive priority distributions as follows:
(i) Prost shall receive quarterly distributions in the amount
of $2,500;
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provided Prost has a positive Capital Account immediately after such
distributions; and
(ii) Prost shall receive distributions from the Partnership in
the total principal amount of $2,295,000 less the total amount of Assumed Debts
as determined under Section 1.6 of the Contribution Agreement as at the
Contribution Date. For the purpose of this Section 4.1(b)(ii), the difference
shall be referred to herein as the "Periodic Distribution."
(A) The Periodic Distribution after being reduced by the
Net Current Assets Decrease (as defined herein) shall be referred to herein as
the "Three Year Distribution."
(B) Prost shall receive from the Partnership interest at
the rate equal to ten percent (10%) multiplied by a fraction the numerator of
which shall be equal to the Three Year Distribution and the denominator of which
shall be the sum of the Three Year Distribution and the Net Current Assets
Decrease. Interest will stop accruing after the Three Year Distribution has been
paid. The Partnership may prepay any or all of the Periodic Distribution.
Accrued interest shall be payable quarterly on the last day of January, April,
July and October in each year commencing after the date the first principal
payment is due under this Section 4.1(b)(ii)(C).
(C) Principal payments shall be as follows:
(1) $100,000 eighteen (18) months after the
Contribution Date;
(2) $100,000 twenty-one (21) months after the
Contribution Date;
(3) $100,000 twenty-four (24) months after the
Contribution Date;
(4) $100,000 twenty-seven (27) months after the
Contribution Date;
(5) $100,000 thirty (30) months after the
Contribution Date;
(6) $100,000 thirty-three (33) months after the
Contribution Date;
(7) The principal balance of the Three Year
Distribution thirty-six (36) months after the Contribution Date;
(8) The Net Current Assets Decrease sixty (60) months
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after the Contribution Date.
(iv) If the public offering contemplated under Section 8.1(a)
of the Contribution Agreement results in gross proceeds in excess of
$10,000,000, Prost shall receive a principal payment on the Periodic
Distribution within 45 days of the Contribution Date equal to 10% of the gross
proceeds raised in such public offering up to a maximum of $300,000.
(v) The "Net Current Assets Decrease" shall be equal to (1) the
net current assets as stated in the Contributed Business Balance Sheet in
accordance with Section 4.5 of the Contribution Agreement less (2) the net
current assets as stated in the Closing Balance Sheet in accordance with Section
8.2 of the Contribution Agreement. For purposes of this Section 4.1(b)(v) only,
the Closing Balance Sheet shall be dated no later than December 31, 1996. Net
Current Assets Decrease shall be zero if the net current assets as stated in the
Closing Balance Sheet is greater than the net current assets as stated in the
Contributed Business Balance Sheet. Net current assets shall be defined as
current assets less current liabilities. Net Current Assets Decrease shall be
exclusive of any (i) advances made by BWISS or its Affiliates to Prost; (2) of
the kegs acquired by BWISS or its Affiliates for the benefit of Prost to the
extent the kegs are included in the current assets; and (3) any accounting
changes since the date of the Contributed Business Balance Sheet.
(c) All distributions governed by this Section 4.1 and which exceed
the amounts distributed pursuant to Section 4.1(b) shall be divided among the
Partners as follows:
(i) First, to Partners who have "Surplus Adjusted Capital
Accounts" as of the date of distribution in proportion to and to the extent of
each such Partner's Surplus Adjusted Capital Account; and
(ii) The balance, if any, to all Partners in proportion to
their Percentage Interests.
(d) The "Surplus Adjusted Capital Account" of a Partner as of the
date of distribution shall be equal to the excess, if any, of its Capital
Account as of such day over its "Required Capital Account" as of such day. The
"Required Capital Account" of a Partner as of the date of distribution shall be
an amount equal to the product of (i) the aggregate Capital Accounts of all
Partners as of such day, multiplied by (ii) such Partner's Percentage Interest.
4.2 AMOUNTS WITHHELD. All amounts withheld pursuant to the Code or any
provision of any state or local tax law with respect to any payment,
distribution or allocation to the Partnership or the Partners shall be treated
as amounts distributed to the Partners pursuant to this Section 4 for all
purposes under this Agreement. The Joint Management Committee is authorized to
withhold from distributions, or with respect to allocations, to the Partners and
to pay over to any federal, state, or local government any amounts required to
be so withheld pursuant to the Code or any provisions of any other federal,
state or local law and shall allocate such amounts to the Partners with respect
to which such amount was withheld.
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SECTION 5
MANAGEMENT AND OPERATIONS
5.1 JOINT MANAGEMENT COMMITTEE. The Partnership shall have a joint
management committee (the "Joint Management Committee") consisting of five
members. Each Partner shall appoint two members of the Joint Management
Committee, and the fifth member shall be appointed by BWISS, at its sole
discretion, after conferring with Prost. A member of the Joint Management
Committee appointed by a Partner may be removed at any time, with or without
cause, by the appointing Partner. Replacement members of the Joint Management
Committee shall be appointed as described above.
5.2 AUTHORITY OF JOINT MANAGEMENT COMMITTEE.
(a) Except as otherwise expressly provided in this Agreement, all
decisions respecting any matter set forth herein or otherwise affecting or
arising out of the conduct of the business of the Partnership shall be made by
the Joint Management Committee and the Joint Management Committee shall have the
exclusive right and full authority to manage, conduct and operate the
Partnership's business. The Joint Management Committee shall have all rights and
powers provided in the Act and otherwise provided by law, except to the extent
such powers may be expressly limited by this Agreement. Absent approval of both
Partners, transactions between the Partnership and the Partners or the Partners'
Affiliates shall be arms-length and intended to profit the Partnership. Except
as otherwise expressly provided in this Agreement, the Joint Management
Committee is hereby granted the right, power and authority to do on behalf of
the Partnership all things which, in its sole judgment, are necessary, proper or
desirable to carry out the aforementioned duties and responsibilities, including
but not limited to the right, power and authority from time to time to do the
following:
(i) acquire by purchase, lease, or otherwise any real or
personal property which may be necessary, convenient, or incidental to the
accomplishment of the purposes of the Partnership;
(ii) operate, maintain, finance, improve, construct, own, sell,
convey, assign, and lease any real or personal property necessary, convenient,
or incidental to the accomplishment of the purposes of the Partnership;
(iii) borrow money and issue evidences of indebtedness
necessary, convenient, or incidental to the accomplishment of the purposes of
the Partnership, and secure the same by mortgage, pledge, or other lien on any
Partnership Property; provided, however, the affirmative vote of four members of
the Joint Management Committee shall be required to cause the Partnership to
borrow money or to enter into, incur, or otherwise become liable for any other
obligation if after entering into, incurring or otherwise becoming liable for
such obligation, the aggregate amount of money to be paid pursuant to, or upon
termination of, all such obligations shall exceed $200,000, however, approval of
three members is only required for transactions in the ordinary course of
business or working capital financing up to 70% of
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accounts receivable and 20% of inventory under usual and customary terms and
conditions;
(iv) to cause to be paid all amounts due and payable by the
Partnership to any person or entity;
(v) to employ such agents, employees, managers, accountants,
attorneys, consultants and other persons, including itself, necessary or
appropriate to carry out the business and affairs of the Partnership, whether or
not such any persons so employed are affiliated or related to either Partner,
and to pay such fees, expenses, salaries, wages and other compensation to such
persons as it shall in its sole discretion determine;
(vi) to pay, extend, renew, modify, adjust, submit to
arbitration, prosecute, defend or compromise, upon such terms as it may
determine and upon such evidence as it may deem sufficient, any obligation,
suit, liability, cause of action or claim, including taxes, either in favor of
or against the Partnership;
(vii) to pay any and all fees and to make any and all
expenditures which it, in its sole discretion, deems necessary or appropriate in
connection with the organization of the Partnership, the management of the
affairs of the Partnership, and the carrying out of its obligations and
responsibilities under this Agreement;
(viii) to the extent that funds of the Partnership are, in the
Joint Management Committee's judgment, not immediately required for the conduct
of the Partnership's business, temporarily invest the excess funds in deposits
or securities as determined in the good faith of the Joint Management Committee.
(ix) to acquire, prosecute, maintain, protect and defend or
cause to be protected and defended all patents, patent rights, tradenames,
trademarks, copyrights and service marks, and all applications with respect
thereto and all proprietary information which may be held by the Partnership;
(x) to enter into, execute, acknowledge and deliver any and all
contracts, agreements or other instruments necessary or appropriate to carry on
the business of the Partnership as set forth herein; and
(xi) to cause to be paid all taxes, charges and assessments
that may be levied, assessed or imposed upon any of the assets of the
Partnership, unless the same are contested by the Joint Management Committee on
behalf of the Partnership.
(b) With respect to all of its obligations, powers and
responsibilities under this Agreement, the Joint Management Committee is
authorized to execute and deliver, for and on behalf of the Partnership, such
notes and other evidence of indebtedness, contracts, agreement, assignments,
deeds, leases, loan agreements, mortgages and other security instruments and
agreements as it deems proper, all on such terms and conditions as it deems
proper.
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5.3 MEETINGS. The Joint Management Committee shall meet at such times
and from time to time as it may determine. Members of the Joint Management
Committee shall receive from the Partnership reimbursement for any reasonable
out-of-pocket travel expenses incurred in connection with their attendance at
meetings of the Joint Management Committee.
5.4 DUTIES. The Joint Management Committee shall undertake such tasks,
and have such responsibilities, as it may determine are necessary to oversee and
supervise the business of the Partnership; provided, however, that the
activities of the Joint Management Committee and each member thereof (acting in
such capacity) shall be limited to those permitted under the Act. Except as
provided otherwise in this Agreement or the Act, all approvals, disapprovals and
other actions taken by the Joint Management Committee shall be authorized by a
majority of the Joint Management Committee members then holding office.
5.5 RULES AND PROCEDURES. The Joint Management Committee shall have the
authority to adopt rules and procedures, not inconsistent with this Agreement,
relating to the conduct of its affairs.
5.6 DUTY OF CARE. The members of the Joint Management Committee shall
exercise their best judgment in carrying out their functions for the
Partnership. The members of the Joint Management Committee shall not be liable
to any Partner for actions taken in good faith without gross negligence or a
willful disregard of their duties. Each member of the Joint Management Committee
shall be fully protected and justified with respect to any action or omission
taken or suffered by him in good faith if such action or omission is taken or
suffered in reliance upon and in accordance with the opinion or advice as to
matters of law of legal counsel, or as to matters of accounting of accountants,
selected by him with reasonable care.
5.7 DEADLOCK BREAKING. In the event that the Joint Management Committee
is unable to vote on an issue because there is not a majority, the issue will be
submitted for the determination by the Partners.
SECTION 6
INDEMNIFICATION OF PARTNERS
6.1 GENERAL. The Partnership, its receiver or its trustee (in the case
of its receiver or trustee, to the extent of the Property) shall indemnify, save
harmless, and pay all judgments and claims against each Partner or any partners,
officers or directors of such Partner relating to any liability or damage
incurred by reason of any act performed or omitted to be performed by such
Partner in connection with the business of the Partnership, including attorneys'
fees incurred by such Partner or any partners, officers or directors of such
Partner in connection with the defense of any action based on any such act or
omission, which attorneys' fees may be paid as incurred, including all such
liabilities under federal and state securities laws (including the Securities
Act of 1933, as amended) as permitted by law.
6.2 ENVIRONMENTAL. The Partnership, its receiver, or its trustee (in
the case of its
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receiver or trustee, to the extent of the Property) shall indemnify and hold
harmless, to the maximum extent permitted by law, each Partner from and against
any and all liabilities, sums paid in settlement of claims (if such settlement
is consented to by the Joint Management Committee), obligations, charges,
actions (formal or informal), claims (including, without limitation, claims for
personal injury under any theory or for real or personal property damage),
liens, taxes, administrative proceedings, losses, damages (including, without
limitation, punitive damages), penalties, fines, court costs, administrative
service fees, response and remediation costs, stabilization costs, encapsulation
costs, treatment, storage or disposal costs, groundwater monitoring or
environmental study, sampling or monitoring costs, other causes of action, and
any other costs and reasonable expenses (including, without limitation,
reasonable attorneys', experts', and consultants' fees and disbursements and
investigating, laboratory and data review fees) imposed upon or incurred by any
Partner (whether or not indemnified against by any other party) arising from and
after the date of this Agreement directly or indirectly out of:
(a) the past, present, or future treatment, storage, disposal,
generation, use, transport, movement, presence, release, threatened release,
spill, installation, sale, emission, injection, leaching, dumping, escaping or
seeping of any Hazardous Substances or material containing or alleged to contain
Hazardous Substances at or from any past, present, or future properties or
assets of the Partnership; and/or
(b) the violation or alleged violation by the Partnership or any
third party of any Environmental Laws with regard to the past, present, or
future ownership, operation, use, or occupying of any property or asset of the
Partnership.
6.3 PARTNERSHIP EXPENSES. The Partnership shall indemnify, save
harmless, and pay all expenses, costs, or liabilities of any Partner who for the
benefit of the Partnership makes any deposit, acquires any option, or makes any
other similar payment or assumes any obligation in connection with any property
proposed to be acquired by the Partnership and who suffers any financial loss as
the result of such action.
6.4 LIMITATIONS.
(a) Notwithstanding anything to the contrary in any of Sections
6.1, 6.2 and 6.3 above, no Partner shall be indemnified from any liability for
fraud, bad faith, willful misconduct, or gross negligence.
(b) Notwithstanding anything to the contrary in any of Sections
6.1, 6.2, and 6.3 above, in the event that any provision in any of such Sections
is determined to be invalid in whole or in part, such Section shall be enforced
to the maximum extent permitted by law.
SECTION 7
REPRESENTATIONS AND WARRANTIES
7.1 PROST. As of the date hereof, each of the statements in this
Section 7.1 shall be
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a true, accurate and full disclosure of all facts relevant to the matters
contained therein, and such warranties and representations shall survive the
execution of this Agreement. Prost hereby represents and warrants (to the extent
possible on the Contribution Date) that:
(a) Prost is a duly organized limited partnership validly existing
under the laws of the State of California and has the requisite power and
authority to enter into and carry out the terms of this Agreement.
(b) All action required to be taken by Prost and any partner
thereof to consummate this Agreement has been taken and no further approval of
any board, partner, court, or other body is necessary to permit Prost to
consummate this Agreement.
(c) To the best of its knowledge, neither the execution and
delivery of this Agreement, nor the performance or the compliance with this
Agreement, has resulted (or will result) in any violation of, or be in conflict
with, or invalidate, cancel, or make inoperative, or interfere with, or
constitute a default under, any charter, bylaw, partnership agreement,
indenture, trust agreement, mortgage, deed of trust, contract, agreement,
permit, judgment, decree or order, to which Prost is a party or would be bound
and there is no default and no event or omission has occurred which, but for the
passing of time or the giving of notice, or both, would constitute a default on
the part of Prost under this Agreement or the transactions contemplated thereby.
(d) To the best of its knowledge, there is no action, proceeding or
investigation, pending or threatened (nor any basis therefor) which questions,
directly or indirectly, the validity or enforceability of this Agreement as to
Prost.
(e) No representation, warranty or covenant of Prost in this
Agreement, or in any document or certificate furnished or to be furnished to
BWISS pursuant hereto, contains or will contain any untrue statement of material
facts or omits or will omit to state material facts necessary to make the
statements or facts contained therein not misleading. All such representations,
warranties or statements of Prost are based, to the best of Prost's knowledge,
upon current, accurate and complete information as of the time of their making,
and there have been, to the best of Prost's knowledge no changes in such
information subsequent thereto.
7.2 BWISS. As of the date hereof each of the statements in this Section
7.2 shall be a true, accurate and full disclosure of all facts relevant to the
matter contained therein, and such warranties and representations shall survive
the execution of this Agreement. BWISS hereby represents and warrants (to the
extent possible on the Contribution Date) that:
(a) BWISS is a duly organized corporation validly existing under
the laws of the State of California and has the requisite power and authority to
enter into and carry out the terms of this Agreement.
(b) All corporate action required to be taken by BWISS to
consummate this
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Agreement has been taken and that no further approval of any board, court, or
other body is necessary to permit BWISS to consummate this Agreement.
(c) To the best of its knowledge, neither the execution and
delivery of this Agreement, nor the performance of or the compliance with this
Agreement, has resulted (or will result) in any violation of, or be in conflict
with, or invalidate, cancel, or make inoperative, or interfere with, or
constitute a default under any charter, bylaw, partnership agreement, trust
agreement, mortgage, deed of trust, indenture, contract, agreement, permit,
judgment, decree, or order, to which BWISS is a party or would be bound and
there is no default and no event or omission has occurred which, but for the
passing of time or the giving of notice, or both, would constitute a default on
the part of BWISS under this Agreement or the transactions contemplated thereby.
(d) To the best of its knowledge, there is no action, proceeding or
investigation, pending or threatened (nor any basis therefor), which questions,
directly or indirectly, the validity or enforceability of this Agreement as to
BWISS.
(e) No representation, warranty or covenant of BWISS in this
Agreement, or in any document or certificate furnished or to be furnished to
Prost pursuant hereto, contains or will contain any untrue statement of material
facts or omits or will omit to state material facts necessary to make the
statements or facts contained therein not misleading. All such representations,
warranties or statements of BWISS are based, to the best of BWISS' knowledge,
upon current, accurate and complete information as of the time of their making,
and there have been, to the best of BWISS' knowledge, no change in such
information subsequent thereto.
SECTION 8
ACCOUNTING, BOOKS AND RECORDS
8.1 ACCOUNTING, BOOKS AND RECORDS. The Partnership shall maintain at
its principal place of business separate books of account for the Partnership
which shall show a true and accurate record of all costs and expenses incurred,
all charges made, all credits made and received, and all income derived in
connection with the operation of the Partnership business in accordance with
U.S. Generally Accepted Accounting Principles consistently applied and, to the
extent inconsistent therewith, in accordance with this Agreement. The
Partnership shall prepare its operational monthly, quarterly and annual reports
in accordance with U.S. Generally Accepted Accounting Principles consistently
applied and shall use the accrual method of accounting for tax purposes, and
shall keep its books accordingly. Each Partner shall, at its sole expense, have
the right, at any time without notice to any other Partner, to examine, copy,
and audit the Partnership's books and records during normal business hours.
8.2 REPORTS.
(a) In General. The Joint Management Committee shall be responsible
for the preparation of financial reports of the Partnership and the coordination
of financial matters of
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the Partnership with the Partnership's accountants.
(b) Reports. Within forty (40) days after the end of each Fiscal
Year and within forty (40) days after the end of any fiscal quarter, the Joint
Management Committee shall cause each Partner to be furnished with a copy of the
balance sheet of the Partnership as of the last day of the applicable period, a
statement of income or loss for the Partnership for such period, and a statement
of the Partnership's cash flow for such period prepared in accordance with U.S.
Generally Accepted Accounting Principles consistently applied. Annual statements
shall also include a statement of the Partners' Capital Accounts and changes
therein for such Fiscal Year prepared in accordance with U.S. Generally Accepted
Accounting Principles consistently applied. At the discretion of the Joint
Management Committee, annual financial statements may be audited by the
Partnership's accountants selected by the Joint Management Committee. Either
Partner may request the Joint Management Committee cause the Partnership's
accountants, who shall be selected by the Joint Management, to audit or review
the annual financial statements; provided, however, that the requesting Partner
shall pay the cost of such audit.
8.3 TAX RETURNS; INFORMATION. The Joint Management Committee shall
cause the Partnership's accountants to prepare all income and other tax returns
of the Partnership and shall cause the same to be filed in a timely manner. The
Joint Management Committee shall furnish to each Partner a copy of each such
return, together with any schedules or other information which each Partner may
require in connection with such Partner's own tax affairs.
8.4 SPECIAL BASIS ADJUSTMENT. In connection with any Permitted Transfer
of a Partnership interest, the Joint Management Committee shall cause the
Partnership, at the written request of the transferor or the transferee, on
behalf of the Partnership and at the time and in the manner provided in
Regulations Section 1.754-1(b), to make an election to adjust the basis of the
Partnership's property in the manner provided in Sections 734(b) and 743(b) of
the Code, and such transferee shall pay all costs incurred by the Partnership in
connection therewith, including, without limitation, reasonable attorneys' and
accountants' fees.
8.5 TAX MATTERS PARTNER. BWISS is specially authorized to act as the
"Tax Matters Partner" under the Code and in any similar capacity under state or
local law.
SECTION 9
AMENDMENTS
9.1 AMENDMENTS. Amendments to this Agreement may be proposed by any
Partner. Following such proposal, the Partner shall submit to the other Partner
a verbatim statement of any proposed amendment, providing that counsel for the
Partnership shall have approved of the same in writing as to form. The Partner
shall seek the written vote of the other Partner on the proposed amendment or
shall call a meeting to vote thereon and to transact any other business that it
may deem appropriate. A proposed amendment shall be adopted and be effective as
an amendment hereto if it receives the affirmative vote of the other Partner.
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SECTION 10
TRANSFER OF INTERESTS
10.1 RESTRICTIONS ON TRANSFER. Except as expressly provided for in this
Agreement, no Partner may, without the consent of the other Partner, sell,
convey, transfer, assign, mortgage, pledge, hypothecate encumber or otherwise
dispose in any way (a "Transfer") all or any portion of its Partnership Interest
or any interest it may have in any property of the Partnership, or withdraw or
retire from the Partnership. Any such attempted Transfer, withdrawal or
retirement not permitted hereunder shall be null and void.
10.2 RIGHT OF FIRST REFUSAL. If a Partner consents to a proposed
Transfer or the prohibitions contained in Section 10.1 are determined by a court
of competent jurisdiction to be unenforceable, then a Partner (the "Initiating
Partner") desiring to Transfer its Interest shall nevertheless notify ("Offering
Notice") the other Partner (the "Responding Partner") of its intention to do so.
The Responding Partner shall have the right to elect to purchase from the
Initiating Partner all (but not less than all) of the Interest referred to in
the Offering Notice at a price to be agreed upon by the Partners for a period of
30 days after the giving of the Offering Notice by delivering in writing to the
Initiating Partner notice of its intent to purchase the portion of the Interest
of the Initiating Partner covered by the Offering Notice. If a purchase price
cannot be agreed upon within such 30 day period, the purchase price shall be
determined by a panel of three valuation consultants, one chosen by each of the
Partners and the third chosen by the other valuation consultants. Within 45 days
thereafter, the purchase by the Responding Partner of said Interest shall be
consummated on the terms and conditions so agreed upon. If within the 30-day
period during which the Responding Partner has the right to elect to purchase
the Initiating Partner's Interest it does not make such election, then the
Initiating Partner, within 30 days after the expiration of said 30-day period,
may undertake and complete the Transfer to any Person the identity of which was
disclosed in the Offering Notice. The Transfer shall not be undertaken at a
lower price or upon more favorable terms than the purchase price determined as
above. If the Initiating Partner receives an offer from a third party that
contains terms more favorable to the terms originally offered to the Responding
Partner, the Initiating Partner must offer the Responding Partner the
opportunity to purchase the Initiating Partners interest on the more favorable
terms offered by the third party. If the Initiating Partner does not consummate
the original proposed Transfer or any subsequent modified Transfer within 60
days after the date of the Offering Notice, or within the time scheduled for
closing by the purchasing Person, whichever is later, then all the restrictions
of this Section 10.2 shall apply though no Offering Notice had been given.
10.3 PERMITTED TRANSFERS. A Partner shall have the right to Transfer
all or a portion of its interest in the Partnership to any Person who is (1) a
Wholly Owned Affiliate of such Partner, (2) any other Partner, or (3) any Person
upon consent of the other Partner.
10.4 GENERAL TRANSFER PROVISIONS. All transfers shall be by instrument
in form and substance satisfactory to counsel for the Partnership and shall
contain an expression by the assignee of its intention to accept the assignment
and to accept and adopt all of the terms and
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provisions of this Agreement, as the same may have been amended, and shall
provide for the payment by the assignor of all reasonable expenses incurred by
the Partnership in connection with such assignment, including, without
limitation, the necessary amendments to this Agreement to reflect such Transfer.
The transferor shall execute and acknowledge all such instruments, in form and
substance reasonably satisfactory to the Partnership's counsel, as may be
necessary or desirable to effectuate such Transfer. In no event shall the
Partnership dissolve or terminate upon the admission of any permitted Partner to
the Partnership or upon any permitted Transfer of an interest in the Partnership
by any Partner. Each Partner hereby waives its right to dissolve, liquidate or
terminate the Partnership in such event. Upon completion of a Transfer in
compliance with this Agreement, the transferor shall be released from all future
obligations occurring under this Agreement after the date of such Transfer
provided the assignee of such transferor assumes all such obligations of the
transferor. However, the transferor shall remain liable for its obligations
under this Agreement occurring on or prior to the date of such Transfer. Any
Transfer not made in accordance with the terms of this Agreement shall be void.
10.5 TAX ALLOCATIONS AND CASH DISTRIBUTION. If an Interest is
transferred, the net profits or losses allocable, and cash distributable, to the
holder of such Interest for the then fiscal year shall be allocated
proportionately between the transferor and the transferee based upon the number
of days during such fiscal year for which each party was the owner of the
transferred interest. However, if such parties agree that such net profits or
losses and cash are to be allocated and distributed based upon an interim
closing of the Partnership books, and such parties agree to pay all expenses
incurred by the Partnership in connection therewith and so notify the
Non-Transferring Partner, then all such net profits or losses and cash shall be
allocated and distributed between the transferor and transferee based upon an
interim closing of the Partnership's books and records.
10.6 COMPLIANCE. Notwithstanding anything to the contrary in this
Agreement, at law or in equity, no Partner shall Transfer or otherwise deal with
any Interest in a way that would cause a default under any material agreement to
which the Partnership is a party or by which it is bound.
SECTION 11
WITHDRAWALS; ACTION FOR PARTITION;
BREACHES
11.1 WAIVER OF PARTITION. No Partner shall, either directly or
indirectly, take any action to require partition, file a bill for Partnership
accounting or appraisement of the Partnership or of any of its assets or
properties or cause the sale of any Partnership property, and notwithstanding
any provisions of applicable law to the contrary, each Partner (and each of its
legal representatives, successors, or assigns) hereby irrevocably waives any and
all rights it may have to maintain any action for partition or to compel any
sale with respect to its Partnership interest, or with respect to any assets or
properties of the Partnership, except as expressly provided in this Agreement.
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11.2 COVENANT NOT TO WITHDRAW OR DISSOLVE. Notwithstanding any
provision of the Act, each Partner hereby covenants and agrees that the Partners
have entered into this Agreement based on their mutual expectation that all
Partners will continue as Partners and carry out the duties and obligations
undertaken by them hereunder and that, except as otherwise expressly required or
permitted hereby, each Partner hereby covenants and agrees not to (a) take any
action to file a certificate of dissolution or its equivalent with respect to
itself, (b) take any action that would cause a Voluntary Bankruptcy of such
Partner, (c) withdraw or attempt to withdraw from the Partnership, (d) exercise
any power under the Act to dissolve the Partnership, (e) Transfer all or any
portion of its interest in the Partnership, (f) petition for judicial
dissolution of the Partnership, or (g) demand a return of such Partner's
contributions or profits (or a bond or other security for the return of such
contributions or profits) without the consent of the other Partner.
11.3 CONSEQUENCES OF VIOLATION OF COVENANTS. Notwithstanding anything
to the contrary in the Act, if a Partner (a "Breaching Partner") attempts to (i)
cause a partition in breach of Section 11.1 hereof, (ii) withdraw from the
Partnership or dissolve the Partnership or take any action in breach of Section
11.2 hereof, or (iii) commit an Adverse Act and not cure such Adverse Act within
120 days, the Partnership shall continue and such Breaching Partner shall be
subject to this Section 11.3. In such event, the following shall occur:
(a) The Breaching Partner shall immediately cease to be a Partner
and shall have no further power to act for or bind the Partnership;
(b) The other Partner shall continue to have the right to possess
the Partnership's property and goodwill and to conduct its business and affairs;
(c) The Breaching Partner shall be liable in damages, without
requirement of a prior accounting, to the Partnership for all costs and
liabilities that the Partnership or any Partner may incur as a result of such
breach;
(d) The Partnership shall have no obligation to pay to the
Breaching Partner its contributions, capital, or profits, but may, by notice to
the Breaching Partner within thirty (30) days of his withdrawal, elect to make
Breach Payments (as hereinafter defined) to the Breaching Partner in complete
satisfaction of the Breaching Partner's interest in the Partnership;
(e) If the Partnership does not elect to make Breach Payments
pursuant to Section 11.3(d) hereof, the Partnership shall treat the Breaching
Partner as if he were an unadmitted assignee of the interest of the Breaching
Partner and shall make distributions to the Breaching Partner only of those
amounts otherwise payable with respect to such interest hereunder;
(f) The Partnership may apply any distributions otherwise payable
with respect to such interest (including Breach Payments) to satisfy any claims
it may have against the Breaching Partner;
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(g) The Breaching Partner shall have no right to inspect the
Partnership's books or records or obtain other information concerning the
Partnership's operations, and, if the Breaching Partner is in possession of the
Partnership's books and records, the Breaching Partner shall turn over the books
and records to the other Partner;
(h) The Breaching Partner shall continue to be liable to the
Partnership for any unpaid Capital Contributions required hereunder with respect
to such interest and to be jointly and severally liable with the other Partners
for any debts and liabilities (whether actual or contingent, known or unknown)
of the Partnership existing at the time the Breaching Partner withdraws or
dissolves; and
(i) Notwithstanding anything to the contrary hereinabove provided,
unless the Partnership has elected to make Breach Payments to the Breaching
Partner in satisfaction of its interest, the Partnership may offer and sell (on
any terms that are not manifestly unreasonable) the interest of the Breaching
Partner to any other Partners or other Persons on the Breaching Partner's
behalf, provided that any Person acquiring such interest becomes a Partner with
respect to such interest and agrees to perform the duties and obligations
imposed by this Agreement on the Breaching Partner.
11.4 BREACH PAYMENTS. For purposes hereof, Breach Payments shall be
made in four installments, each equal to one-fourth of the Breach Amount,
payable on the next four (4) consecutive anniversaries of the breach by the
Breaching Partner, with simple interest accrued from the date of such breach
through the date each such installment is paid on the unpaid balance of such
Breach Amount at 10 percent (10%) per annum. The Breach Amount shall be an
amount equal to the greater of $1 or the Net Equity of the Breaching Partner's
interest on the day of such breach, computed in accordance with Section 11.6
hereof. The Partnership may, at its sole election, prepay all or any portion of
the Breach Payments or interest accrued thereon at any time without penalty.
11.5 NO BONDING. Notwithstanding anything to the contrary in the Act,
the Partnership shall not be obligated to secure the value of the Breaching
Partner's interest by bond or otherwise; provided, however, that if a court of
competent jurisdiction determines that, in order to continue the business of the
Partnership such value must be so secured, the Partnership may provide such
security. If the Partnership provides such security, the Breaching Partner shall
not have any right to participate in Partnership profits or distributions during
the term of the Partnership, or to receive any interest on the value of such
interest. For this purpose, the value of the interest of the Breaching Partner
shall be the greater of $1 or the Net Equity of such interest as of the
effective date of the Breaching Partner's withdrawal.
11.6 NET EQUITY. The "Net Equity" of a Breaching Partner's interest in
the Partnership, as of any day, shall be the amount that would be distributed to
such Partner in liquidation of the Partnership pursuant to Section 13 hereof if
(1) all of the Partnership's assets were sold for their Gross Asset Values, (2)
the Partnership paid its accrued, but unpaid, liabilities and established
reserves for the payment of reasonably anticipated contingent or unknown
liabilities, and (3) the
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Partnership distributed the remaining proceeds to the Partners in liquidation,
all as of such day, provided that in determining such Net Equity, no reserve for
contingent or unknown liabilities shall be taken into account if such Partner
(or its successor in interest) agrees to indemnify the Partnership and the other
Partner for the Breaching Partner's portion of any such reserve. The Net Equity
of a Partner's interest in the Partnership shall be determined, without audit or
certification, from the books and records of the Partnership by the firm of
independent certified public accountants regularly employed by the Partnership.
The Net Equity of a Partner's interest shall be determined within thirty (30)
days of the day upon which such accountants are apprised in writing of the Gross
Asset Values, and the amount of such Net Equity shall be disclosed to the
Partnership and each of the Partners by written notice. The Net Equity
determination of such accountants shall be final and binding in the absence of a
showing of gross negligence or willful misconduct.
SECTION 12
BUY-OUT
12.1 BUY-OUT PROVISION. BWISS shall have the right to purchase all of
Prost's interest in the Partnership as determined herein.
(a) For a period ending at 11:59 P.M. P.S.T. on the date three
years after the Contribution Date, BWISS may give Prost notice of BWISS' intent
to exercise its buy-out right ("Election Notice"). As a result of the giving of
such Election Notice under this Section 12.1(a), Prost shall be bound to sell to
BWISS Prost's entire interest in the Partnership in the amount of $2,205,000
plus any distributions not made to Prost under Section 4.1(b)(ii) as of the date
of the Election Notice. The effect of giving the Election Notice shall terminate
any obligation the Partnership has to make any distributions to Prost.
(b) The closing of the purchase and sale of the interest under
Section 12.1(a) shall occur on a date and time mutually determined by the
Partners, but no later than the thirtieth day following the date of the Election
Notice. At the closing the Partners shall execute such documents and instruments
of conveyance as may be necessary or appropriate to confirm the transactions
contemplated hereby, including, without limitation, the Transfer of the
Partnership interest and the assumption of the obligations with respect to the
portion of the interest transferred. The reasonable costs of such Transfer and
closing including, without limitation, attorneys' fees and filing fees, shall be
divided equally between the Partners.
(c) If BWISS does not make the Election Notice prior to the
expiration of the buy-out provision pursuant to Section 12.1(a), such failure
shall be deemed a Liquidating Event under Section 13.1.
12.2 NONSOLICITATION. At all times after the date of the Election
Notice until the end of the fifth year following the Election Notice or BWISS
Purchase Offer (under Section 13.7 (b)) ("Post BWISS Election Period"), each of
Prost and Stanislaus Brewing Company, Inc. agrees that both will not (directly
or indirectly) call on or solicit or divert or take away from BWISS
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or its Affiliates the business of (including, without limitation, by divulging
to any competitor or potential competitor of BWISS or its Affiliates the name
of), any person, firm, corporation or other entity who or which at the date of
the Election Notice or BWISS Purchase Offer was, or at any time during the three
years preceding the Election Notice or BWISS Purchase Offer had been, a customer
of the Partnership, BWISS, or BWISS' Affiliates or whose identity is known to
Prost or Stanislaus Brewing Company, Inc. at the date of the Election Notice or
BWISS Purchase Offer as one whom the Partnership, BWISS, or BWISS' Affiliates
intends to solicit within the succeeding year. Nothing contained in this Section
12.2 shall affect or be deemed to affect in any manner any other provision of
this Agreement.
12.3 HIRING OF BWISS' EMPLOYEES. During the Post BWISS Election Period,
each of Prost and Stanislaus Brewing Company, Inc. agrees not to (directly or
indirectly) hire or offer employment to any employee of the Partnership, BWISS,
or BWISS' Affiliates whose employment is continued by the Partnership, BWISS, or
BWISS' Affiliates after the Election Notice or BWISS Purchase Offer unless the
Partnership, BWISS, or BWISS' Affiliates first terminates the employment of such
employee. Nothing contained in this Section 12.3 shall affect or be deemed to
affect in any manner any other provision of this Agreement.
12.4 NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) At all times after the date of the Election Notice or BWISS
Purchase Offer, Prost, Stanislaus Brewing Company, Inc., and their Affiliates
shall keep confidential and will not directly or indirectly divulge to anyone
nor use or otherwise appropriate for their own benefit, or on behalf of any
other person, firm, partnership or corporation by whom any of them might
subsequently be employed or otherwise associated or affiliated with, any
Confidential Information (as defined herein). For this purpose, "Confidential
Information" means any and all customer lists, product formulations,
arrangements with distributors, marketing information or strategies, trade
secrets or other confidential information of any kind, nature or description
concerning any matters affecting or relating to the business of the Partnership,
BWISS, or BWISS' Affiliates which derives economic value, actual or potential,
from not being generally known to the public or to other persons who can obtain
economic value from its disclosure or use. Nothing contained in this Section
12.4(a) shall affect or be deemed to affect in any manner any other provision of
this Agreement.
(b) At all times after the date of the Prost Purchase Offer (under
Section 13.7(a)), BWISS and its Affiliates shall keep confidential and will not
directly or indirectly divulge to anyone nor use or otherwise appropriate for
their own benefit, or on behalf of any other person, firm, partnership or
corporation by whom any of them might subsequently be employed or otherwise
associated or affiliated with, any Confidential Information (as defined herein).
For this purpose, "Confidential Information" means any and all customer lists,
product formulations, arrangements with distributors, marketing information or
strategies, trade secrets or other confidential information of any kind, nature
or description concerning any matters affecting or relating to the business of
the Partnership, Prost or Prost's Affiliates which derives economic value,
actual or potential, from not being generally known to the public or to other
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persons who can obtain economic value from its disclosure or use. Nothing
contained in this Section 12.4(b) shall affect or be deemed to affect in any
manner any other provision of this Agreement.
12.5 INTELLECTUAL PROPERTY RIGHTS.
(a) On and after the date of the Election Notice or BWISS Purchase
Offer, all intellectual property rights, whether or not patentable or
copyrightable, which (i) are made or developed with the equipment, supplies,
facilities, product formulations, trade secrets, time or other assets of the
Partnership or (ii) relate to the business, including anticipated research or
development, of the Partnership are and shall remain the sole property of BWISS
and upon request made by BWISS, Prost shall assign any and all rights, including
patents and patent rights, trademark and trade dress rights Prost may have
therein to BWISS. Nothing contained in this Section 12.5(a) shall affect or be
deemed to affect in any manner any other provision of this Agreement.
(b) On and after the date of the Prost Purchase Offer all
intellectual property rights, whether or not patentable or copyrightable, which
(i) are made or developed with the equipment, supplies, facilities, product
formulations, trade secrets, time or other assets of the Partnership or (ii)
relate to the business, including anticipated research or development, of the
Partnership are and shall remain the sole property of Prost and upon request
made by Prost, BWISS shall assign any and all rights, including patents and
patent rights, trademark and trade dress rights BWISS may have therein to Prost.
Nothing contained in this Section 12.5(b) shall affect or be deemed to affect in
any manner any other provision of this Agreement.
12.6 PARTNERSHIP MATERIALS.
(a) On and after the date of the Election Notice or BWISS Purchase
Offer, all reports and analysis, designs, drawings, contracts, contractual
arrangements, specifications, computer software, computer hardware and other
equipment, computer printouts, computer disks, documents, memoranda, notebooks,
correspondence, files, lists and other records, and the like, and all
photocopies or other reproductions thereof, affecting or relating to the
business of the Partnership shall be and remain the sole property of BWISS.
Nothing contained in this Section 12.6(a) shall affect or be deemed to affect in
any manner any other provision of this Agreement.
(b) On and after the date of the Prost Purchase Offer all reports
and analysis, designs, drawings, contracts, contractual arrangements,
specifications, computer software, computer hardware and other equipment,
computer printouts, computer disks, documents, memoranda, notebooks,
correspondence, files, lists and other records, and the like, and all
photocopies or other reproductions thereof, affecting or relating to the
business of the Partnership shall be and remain the sole property of Prost.
Nothing contained in this Section 12.6(b) shall affect or be deemed to affect in
any manner any other provision of this Agreement.
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SECTION 13
DISSOLUTION AND WINDING UP
13.1 LIQUIDATING EVENTS. The Partnership shall dissolve and commence
winding up and liquidating upon the first to occur of any of the following
("Liquidating Events"):
(a) December 31, 2016
(b) The sale of all or substantially all of the Property;
(c) The vote of the Partners;
(d) The happening of any other event that makes it unlawful or
impossible to carry on the business of the Partnership;
(e) Any event which causes there to be only one Partner; or
(f) The failure of BWISS to make the Election Notice in
accordance with Section 12.1.
The Partners hereby agree that, notwithstanding any provision of the Act, the
Partnership shall not dissolve prior to the occurrence of a Liquidating Event.
If it is determined, by a court of competent jurisdiction, that the Partnership
has dissolved prior to the occurrence of a Liquidating Event, the Partners
hereby agree to continue the business of the Partnership without a winding up or
liquidation.
13.2 WINDING UP. Upon the occurrence of a Liquidating Event, the
Partnership shall continue solely for the purpose of winding up its affairs in
an orderly manner, liquidating its assets, and satisfying the claims of its
creditors and Partners and no Partner shall take any action that is inconsistent
with, or not necessary to or appropriate for, winding up the Partnership's
business and affairs. To the extent not inconsistent with the foregoing, all
covenants and obligations in this Agreement shall continue in full force and
effect until such time as the Property has been distributed pursuant to this
Section 13.2 and the Partnership has terminated. The Joint Management Committee
shall be responsible for overseeing the winding up and liquidation of the
Partnership, shall take full account of the Partnership's liabilities and
Property, shall cause the Property to be liquidated as promptly as is consistent
with obtaining the fair market value thereof, and shall cause the proceeds
therefrom, to the extent sufficient therefor, to be applied and distributed in
the following order:
(a) First, to the payment and discharge of all of the Partnership's
debts and liabilities to creditors other than Partners;
(b) Second, to the payment and discharge of all of the
Partnership's debts and liabilities to Partners; and
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(c) The balance, if any, to the Partners in accordance with their
Capital Accounts, after giving effect to all contributions, distributions, and
allocations for all periods.
The Joint Management Committee shall not receive any additional compensation for
any services performed pursuant to this Section 13. Each Partner understands and
agrees that by accepting the provisions of this Section 13.2 setting forth the
priority of the distribution of the assets of the Partnership to be made upon
its liquidation, such Partner expressly waives any right which it, as a creditor
of the Partnership, might otherwise have under the Act to receive distributions
of assets pari passu with the other creditors of the Partnership in connection
with a distribution of assets of the Partnership in satisfaction of any
liability of the Partnership, and hereby subordinates to said creditors any such
right.
13.3 COMPLIANCE WITH CERTAIN REQUIREMENTS OF REGULATIONS; DEFICIT
CAPITAL ACCOUNTS. In the event the Partnership is "liquidated" within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g), (a) distributions shall be
made pursuant to this Section 13 to the Partners who have positive Capital
Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2), and (b)
if any Partner's Capital Account has a deficit balance (after giving effect to
all contributions, distributions, and allocations for all Fiscal Years,
including the Fiscal Year during which such liquidation occurs), such Partner
shall contribute to the capital of the Partnership the amount necessary to
restore such deficit balance to zero in compliance with Regulations Section
1.704-1(b)(ii)(b)(3). In the discretion of the Joint Management Committee, a pro
rata portion of the distributions that would otherwise be made to the Partners
pursuant to Section 13.2(c) hereof may be:
(a) distributed to a trust established for the benefit of the
Partners for the purposes of liquidating Partnership assets, collecting amounts
owed to the Partnership, and paying any contingent or unforeseen liabilities or
obligations of the Partnership or of the Partners arising out of or in
connection with the Partnership. The assets of any such trust shall be
distributed to the Partners from time to time, in the reasonable discretion of
the Joint Management Committee, in the same proportions as the amount
distributed to such trust by the Partnership would otherwise have been
distributed to the Partners pursuant to Section 13.2 hereof; or
(b) withheld to provide a reasonable reserve for Partnership
liabilities (contingent or otherwise) and to reflect the unrealized portion of
any installment obligations owed to the Partnership, provided that such withheld
amounts shall be distributed to the Partners as soon as practicable.
13.4 DEEMED DISTRIBUTION AND RECONTRIBUTION. Notwithstanding any other
provisions of this Section 13, in the event the Partnership is liquidated within
the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no Liquidating Event
has occurred, the Property shall not be liquidated, the Partnership's
liabilities shall not be paid or discharged, and the Partnership's affairs shall
not be wound up. Instead, the Partnership shall be deemed to have distributed
the Property in kind to the Partners, who shall be deemed to have assumed and
taken subject to all
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Partnership liabilities, all in accordance with their respective Capital
Accounts and if any Partner's Capital Account has a deficit balance (after
giving effect to all contributions, distributions, and allocations for all
Fiscal Years, including the Fiscal Year during which such liquidation occurs),
such Partner shall contribute to the capital of the Partnership the amount
necessary to restore such deficit balance to zero in compliance with Regulations
Section 1.704-1(b)(2)(ii)(b)(3). Immediately thereafter, the Partners shall be
deemed to have recontributed the Property in kind to the Partnership, which
shall be deemed to have assumed and taken subject to all such liabilities.
13.5 RIGHTS OF PARTNERS. Except as otherwise provided in this
Agreement, (a) each Partner shall look solely to the assets of the Partnership
for the return of its Capital Contributions and shall have no right or power to
demand or receive property other than cash from the Partnership and (b) neither
Partner shall have priority over the other Partner as to the return of his
Capital Contributions, distributions, or allocations.
13.6 NOTICE OF DISSOLUTION. In the event a Liquidating Event occurs or
an event occurs that would, but for provisions of Section 13.1 hereof, result in
a dissolution of the Partnership, the Joint Management Committee shall, within
thirty (30) days thereafter, (a) provide written notice thereof to each of the
Partners and to all other parties with whom the Partnership regularly conducts
business (as determined in the discretion of the Joint Management Committee),
and (b) publish notice of such dissolution in a newspaper of general circulation
in each place in which the Partnership regularly conducts business (as
determined in the discretion of the Joint Management Committee).
13.7 RIGHT OF FIRST REFUSAL. In the event BWISS fails to make the
Election Notice thereby causing a Liquidating Event pursuant to Section 13.1(f),
the Joint Management Committee shall not cause the winding up of the Partnership
pursuant to Section 13.2 if either Partner exercises its right of first refusal
pursuant to this Section 13.7.
(a) Prost shall have the right to buy all of BWISS' interest in the
Partnership based on the Appraised Value of the Partnership as of the date of
the Liquidating Event pursuant to Section 13.1(f). Within ten (10) Business Days
after receipt of the Appraisers' Notice, as defined herein, Prost may give
written notice to BWISS to exercise Prost's right to acquire all of BWISS'
interest in the Partnership for the purchase price equal to the Appraised Value
multiplied by BWISS' Percentage Interest (the "Prost Purchase Offer"). BWISS
shall be obligated to accept the Prost Purchase Offer. The closing shall take
place within thirty (30) days after Prost gives written notice of the Prost
Purchase Offer. The Prost Purchase Offer may, at the election of Prost, be paid
at the end of one year from the date of the Prost Purchase Offer; provided,
however, that (i) Prost shall grant BWISS a security interest in all existing
and after acquired equipment, inventory, and tangible personal property of the
Partnership and the proceeds derived from the sale thereof, (ii) Prost shall
grant BWISS a security interest in all accounts receivables and proceeds, (iii)
Prost shall grant BWISS a security interest on the real property located at 821
L Street, Modesto, California, (iv) Prost shall execute a promissory note
providing for payment of principal and accrued interest at the end of one year
from the date of
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the Prost Purchase Offer at the federal applicable rate then prevailing however
interest shall not accrue until 90 days after the date of the Prost Purchase
Offer, and (v) Prost shall execute such additional documents as reasonably
requested by BWISS to effectuate the foregoing.
(b) If Prost fails to give BWISS the Prost Purchase Offer within
ten (10) Business Days after receipt of the Appraisers' Notice, as defined
herein, BWISS shall have the right to buy all of Prost's interest in the
Partnership based on the Appraised Value of the Partnership as of the date of
the Liquidating Event pursuant to Section 13.1(f). Within twenty (20) Business
Days after receipt of the Appraisers' Notice, as defined herein, BWISS may give
written notice to Prost to exercise BWISS' right to acquire all of Prost's
interest in the Partnership for the purchase price equal to the Appraised Value
multiplied by Prost's Percentage Interest (the "BWISS Purchase Offer"). Prost
shall be obligated to accept the BWISS Purchase Offer. The closing shall take
place within thirty (30) days after BWISS gives written notice of the BWISS
Purchase Offer. The BWISS Purchase Offer may, at the election of BWISS, be paid
at the end of one year from the date of the BWISS Purchase Offer; provided,
however, that (i) BWISS shall grant Prost a security interest in all existing
and after acquired equipment, inventory, and tangible personal property of the
Partnership and the proceeds derived from the sale thereof, (ii) BWISS shall
grant Prost a security interest in all accounts receivables and proceeds, (iii)
BWISS shall grant Prost a security interest on the real property located at 821
L Street, Modesto, California, (iv) BWISS shall execute a promissory note
providing for payment of principal and accrued interest at the end of one year
from the date of the BWISS Purchase Offer at the federal applicable rate then
prevailing however interest shall not accrue until 90 days after the date of the
BWISS Purchase Offer, and (v) BWISS shall execute such additional documents as
reasonably requested by BWISS to effectuate the foregoing.
(c) If neither Partner appoints the First Appraiser within ten (10)
Business Days of the Liquidating Event pursuant to Section 13.1(f), or if
neither the Prost Purchase Offer or the BWISS Purchase Offer is timely made, the
Joint Management Committee shall commence winding up the Partnership in
accordance with Section 13.
(d) The Appraised Value shall be determined as follows:
(i) Within ten (10) Business Days of the Liquidating Event
pursuant to Section 13.1(f), one Partner shall designate the First Appraiser and
the other Partner shall appoint the Second Appraiser within ten (10) Business
Days of receiving such notice designating the First Appraiser.
(ii) If the Second Appraiser is timely designated, the First
and Second Appraisers shall meet within ten (10) Business Days of such
appointment and shall endeavor, within thirty (30) Business Days of such
appointment, to agree upon, and give written notice to the Partners of the
Appraised Value (the "Appraisers' Notice"). The agreed value shall be the
Appraised Value.
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(iii) If an Appraisers' Notice is not given during such period,
then at any time after such period, either BWISS or Prost, by written notice to
the First Appraiser and Second Appraiser (with a copy to the other Partner) may
demand that they appoint a Third Appraiser (the "Third Appraiser"). If the First
Appraiser and Second Appraiser have not either given an Appraisers' Notice or
appointed the Third Appraiser (who shall have agreed to serve) by the twentieth
(20th) Business Day after such demand, either BWISS or Prost may request any
judge of the Superior Court of the County of Los Angeles, State of California to
appoint the Third Appraiser. After the appointment of the Third Appraiser, the
Appraised Value shall be the amount included in an Appraisers' Notice subscribed
to by at least two (2) of the three (3) appraisers; provided that before
subscribing to an Appraised Value, the Third Appraiser shall meet at least once
with the First Appraiser and the Second Appraiser to discuss in good faith the
appraisal of the Partnership. If two (2) of the appraisers have not given an
Appraisers' Notice within twenty (20) Business Days of the appointment of the
Third Appraiser, the Appraised Value shall be determined solely by the Third
Appraiser, who shall give an Appraisers' Notice within thirty (30) days of his
appointment.
(iv) If a Second Appraiser is not timely appointed in the
manner provided by this Section 13.7, the Appraised Value shall be determined
solely by the First Appraiser who shall give an Appraisers' Notice of such
Appraised Value within ten (10) Business Days of the last day on which the
Second Appraiser could have been timely designated.
(v) Each appraiser appointed hereunder shall be disinterested
and shall be qualified to appraise assets similar to the Partnership's assets.
(vi) As used in this Section 13.7, as of any day, the
"Appraised Value" of the Partnership means (1) the maximum amount that one or
more buyers would reasonably be expected to pay for (A) all tangible assets of
the Partnership plus (B) net income before interest, taxes, depreciation and
amortization (as determined under U.S. Generally Accepted Accounting Principles)
for the twelve (12) full calendar months preceding the Prost Purchase Offer or
BWISS Purchase Offer, whichever is applicable, multiplied by three (3) (2) less
all accrued Partnership liabilities (as determined under U.S. Generally Accepted
Accounting Principles). Either Partner exercising its right under this Section
13.7 shall execute an indemnification agreement reasonably acceptable to the
other Partner's counsel obligating the buying Partner to indemnify the other
Partner and its Affiliates for any obligations or expenses, including reasonable
legal fees, incurred by the Partnership.
(vii) The costs and expenses of the Appraisers shall be born
equally by the parties.
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SECTION 14
MISCELLANEOUS
14.1 NOTICES. Any notice, payment, demand, or communication required or
permitted to be given by any provision of this Agreement shall be in writing and
sent by overnight courier, or by telephone or facsimile, if such telephone
conversation or facsimile is followed by a hard copy of the telephone
conversation or facsimile communication sent by overnight courier, charges
prepaid, addressed as follows or to such other address as such Person may from
time to time specify by notice to the Partners: if to the Partnership, to the
Partnership at the address set forth in Section 1.4 hereof; and if to a Partner,
to such Partner at the address set forth in Section 2.1. Any such notice shall
be deemed to be delivered, given, and received as of the date so delivered.
14.2 BINDING EFFECT. Except as otherwise provided in this Agreement,
every covenant, term, and provision of this Agreement shall be binding upon and
inure to the benefit of the Partners and their respective heirs, legatees,
representatives, successors, transferees, and assigns.
14.3 CONSTRUCTION. Every covenant, term, and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any Partner. The terms of this Agreement are intended to
embody the economic relationship among the Partners and shall not be subject to
modification by, or be conformed with, any actions by the Internal Revenue
Service except as this Agreement may be explicitly so amended and except as may
relate specifically to the filing of tax returns. Section and other headings
contained in this Agreement are for reference purposes only and are not intended
to describe, interpret, define, or limit the scope, extent, or intent of this
Agreement or any provision hereof.
14.4 SEVERABILITY. Every provision of this Agreement is intended to be
severable. If any term or provision hereof is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the validity or
legality of the remainder of this Agreement.
14.5 INCORPORATION BY REFERENCE. Every exhibit, schedule, and other
appendix attached to this Agreement and referred to herein is not incorporated
in this Agreement by reference unless this Agreement expressly otherwise
provides.
14.6 FURTHER ACTION. Each Partner agrees to perform all further acts
and execute, acknowledge, and deliver any documents which may be reasonably
necessary, appropriate, or desirable to carry out the provisions of this
Agreement.
14.7 GOVERNING LAW. The laws of the State of California shall govern
the validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the Partners.
14.8 COUNTERPART EXECUTION. This Agreement may be executed in any
number of counterparts with the same effect as if all of the Partners had signed
the same document. All
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counterparts shall be construed together and shall constitute one agreement.
14.9 ARBITRATION. Any dispute arising under this Agreement or the
transactions contemplated thereby shall be arbitrated before the American
Arbitration Association at its offices located in San Francisco, California.
14.10 ATTORNEYS' FEES. If any legal action, whether in court or
arbitration, arises under this Agreement or by reason of any asserted breach of
it, the prevailing party shall be entitled to recover all costs and expenses,
including reasonable attorneys' and expert witness fees, incurred in enforcing
or attempting to enforce any of the terms, covenants or conditions.
IN WITNESS WHEREOF, the parties have executed this Agreement of
Partnership as of September ______, 1996.
PROST PARTNERS, L.P. BWI-ST. STAN'S, INC.
By: By:
------------------------------ -----------------------------------
Garith Helm, President of Frederik G.M. Rodenhuis, President and
Stanislaus Brewing Company, Inc., Chief Executive Officer
General Partner
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ASSIGNMENT AGREEMENT
This Assignment Agreement ("Agreement") is made by and between BWI-St.
Stan's, Inc., a California corporation ("BWISS"), a wholly owned subsidiary of
Beverage Works, Inc., and Stanislaus Brewing Company, Inc., a California
corporation ("Stanislaus"). This Agreement shall be effective as of the closing
date pursuant to Section 12.1(b) or Section 13.7(b) of the Agreement of
Partnership of BWI-Prost Partners.
In consideration of the promises, mutual covenants and agreements set
forth herein, BWISS and Stanislaus agree as follows:
1. Assignment. Stanislaus hereby sells, assigns, transfers and conveys
free and clear of all liens, claims and encumbrances of any kind, to BWISS, its
successors and assigns, all rights Stanislaus has in and to the goodwill and
intangible property used in the operation of the business known as St. Stan's
Brewing Company, including, but not limited to, the intangible property listed
on Exhibit "A" attached hereto. Such rights assigned include the right to
enforce those rights against any third party liable for past, present or future
infringement, and the right to any money or other consideration which is
obtained or due from any such enforcement, whether through judgment, settlement,
licensing or otherwise.
2. Relationship Created by Agreements. Each of the parties hereto as
separate and independent legal entities. Nothing herein contained shall be
construed or deemed hereby to create a principal/agent relationship between the
parties nor any form of partnership or joint venture.
3. Good Title. Stanislaus shall not sell, transfer, convey, assign,
encumber or otherwise dispose of the property to be assigned hereunder from the
date of this Agreement without the written consent of BWISS.
4. Modification. This Agreement may be modified only by a written
consent of the parties.
5. Assignment. This Agreement shall be binding on and enure to the
benefit of the parties hereto and their respective successors and permitted
assigns. No party may assign any of its rights hereunder without the written
consent of the other party.
6. Further Assurances. At the request of BWISS and without further
consideration, Stanislaus will execute and deliver such other documents, and
take such other action as BWISS may reasonably request in order to consummate
the transactions contemplated hereby and to vest in BWISS good and marketable
title to the property transferred hereunder.
7. Governing Law. The validity, construction and performance of this
Agreement shall be governed by the laws of the State of California.
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8. Entire Agreement. This Agreement embodies the entire agreement and
understanding of the parties hereto.
9. Counterparts. This Agreement may be executed in counterparts.
BWI-ST. STAN'S, INC. STANISLAUS BREWING COMPANY
By: By:
----------------------------- ------------------------------
Frederik G.M. Rodenhuis Garith Helm
Chief Executive Officer President
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