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EXHIBIT 2.4
DEBT EXCHANGE AGREEMENT
This Debt Exchange Agreement (the "Debt Exchange Agreement") is being
entered into as of the _____ day of __________________, 1996, by and among
Beverage Works, Inc., a California corporation (the "Buyer"), Orange Empire
Brewing Company, a California corporation (the "Company"), and the debtholders
listed on the signature page hereto (each, a "Debtholder" and collectively, the
"Debtholders").
WITNESSETH
WHEREAS, the Buyer, the Company and each of the Debtholders are
entering into a Share Purchase Agreement (the "Share Purchase Agreement") of
event date herewith pursuant to which the Buyer is purchasing all of the issued
and outstanding shares of capital stock of the Company from the shareholders of
the Company, including each of the Debtholders; and
WHEREAS, the Buyer would not enter into the Share Purchase Agreement
unless the Debtholders execute and deliver this Debt Exchange Agreement; and
WHEREAS, the Debtholders are owed in the aggregate $644,000, inclusive
of interest, by the Company (the "Shareholder Debt"), which Shareholder Debt is
represented by various promissory notes in various amounts to each of the
Debtholders (the principal amount owed to each Debtholder is set forth on
Attachment 1).
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, it is hereby agreed by
the parties as follows:
1. Debt Exchange Agreement. The Debtholders covenant and agree
to accept as full payment and discharge of the Shareholder Debt their pro rata
amount of the following: (i) $301,000 in cash or by check and (ii) a
non-interest bearing Promissory Note in the original principal amount of
$343,000, said Promissory Note to mature ninety (90) days after the Buyer
closes its initial public offering and to be payable in full in either cash, or
up to maximum of 24,125 shares of the Buyer's Common Stock and/or warrants to
acquire up to a maximum of 50,000 shares of the Buyer's Common Stock at an
exercise price of $5.00 per share (the "Exercise Price"), or any combination
thereof, as is determined by the following formula (the "Pay-Off Formula"):
(i) 24,125 shares of the Buyer's Common Stock and 50,000 warrants,each warrant
entitling the holder thereof to purchase one share of the Buyer's
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Common Stock at the Exercise Price; or (ii) provided the Buyer is able to sell
at least 1,000,000 shares of Common Stock for its own account in its initial
public offering, then for each penny that the price per share to the public
that the Buyer receives for its shares of Common Stock in its initial public
offering is above $8.00 per share, then holders of the Shareholder Debt can
elect to receive the following:
(A) $909 in cash, payable by check and (B) up to a maximum of
24,125 shares of the Buyer's Common Stock and up to a maximum 50,000 warrants,
each warrant entitling the holder thereof to purchase one share of the Buyer's
Common Stock at the Exercise Price; the number of shares of Common Stock
available pursuant hereto shall be calculated as follows:
Z = 24,125 - (x/y)
where, Z = the number of shares of the Buyer's Common Stock
available;
X = the amount of cash paid; and
Y = the price per share to the public that the Buyer
received in its initial public offering.
For purposes of illustration only, if the price to the public of one share of
the Buyer's Common Stock in its initial public offering is $10.00 then the
holders of the Shareholder Debt can elect to receive either (i) 24,125 shares
of the Buyer's Common Stock and 50,000 warrants or (ii) $181,000 in cash, 5,945
shares of the Buyer's Common Stock and 50,000 warrants; the amount in (ii)
determined as follows:
(A) Cash payment = $909 x 200 (number of pennies above
$8.00 per share) = $181,800
(B) Number of shares available = 24,125 -(181,800)
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= 5,945 10
(C) Number of Warrants = 50,000
2. Effectiveness of Debt Exchange Agreement. The parties hereto
agree that the effectiveness and enforceability of this Agreement is
conditioned upon the closing of the transactions contemplated by the Share
Purchase Agreement.
3. Notices.
a. Addresses Of The Parties: All notices and
communications shall be given and delivered to the parties hereto at the
following addresses:
If to the Debtholder, at the address specified on the signature page
hereto.
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If to the Buyer and/or the Company, at:
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b. Notices: All notices, demands, requests and other
communications shall be in writing and shall be deemed effectively given and
delivered, if delivered in person, or if sent by mail at the earlier of their
receipt or five (5) days after the same have been deposited in a regularly
maintained receptacle for the deposit of U.S. mail, registered or certified,
postage prepaid, and addressed to either party as set forth above.
4. Successors and Assigns. The terms and provisions of this
Agreement shall be binding upon, enforceable by and shall inure to the benefit
of the parties hereto and their respective successors and assigns.
5. Entire Agreement; Amendments. This Agreement embodies all of
the understanding and agreements of the parties relating to the subject matter
hereof, and no reference shall be made to oral agreements and understandings
other than as referred to herein. Any amendments to this Agreement must be in
writing and signed by both parties.
6. Counterparts. This Agreement may be executed by the parties
in two or more counterparts, each of which together shall constitute one and
the same instrument.
7. Waivers. No waiver of any breach or threatened breach of any
section, term, provision and/or covenant of this Agreement shall be deemed to
be a waiver of any preceding or succeeding breach or threatened breach of the
same or any other section, term, provision and/or covenant of this Agreement.
No extension of time for the performance of any obligation or other act
required or permitted by this Agreement shall be deemed to be an extension of
the time for the performance of any other obligation or any other act required
or permitted by this Agreement.
8. Legal Fees and Expenses. In any legal action, lawsuit or
other proceeding to enforce any section, term, provision and/or covenant of
this Agreement or to procure adjudication or determination of the rights of the
parties hereto, the prevailing party shall be entitled to recover from the
other party each and all of such prevailing party's reasonable attorneys' fees,
costs and expenses, not limited to costs of suit, incurred in connection with
such proceeding, whether administrative, at law, in equity or otherwise,
including any and all appeals or petitions relating thereto. This provision
shall be construed as applicable to the entire Agreement. The term "prevailing
party" shall mean the party
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which the court determines is prevailing. If a court does not make such a
determination, then "prevailing party" shall mean that party which recovers a
greater relief in the action on the contract. A defendant shall be considered
the "prevailing party" when a dismissal is entered its favor, or where neither
the plaintiff nor the defendant obtains any relief.
9. Representation by Counsel. Each party hereto represents,
warrants and agrees with the other that it has been represented by independent
counsel of its own choosing, that it has had the full right and opportunity to
consult with its respective attorneys and has availed itself of this right and
opportunity, that each is fully aware of the contents of this Agreement and its
meaning, intent and legal effect, and that he or its authorized officer, as
appropriate, is competent to execute this Agreement and has executed this
Agreement free from coercion, duress or undue influence.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first set forth above.
THE BUYER
By:
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Name:
Title:
THE COMPANY
By:
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Name:
Title:
THE DEBTHOLDERS:
STREET & PETERS, CPA, INC.
By:
--------------------------------
Name:
Title:
Address:
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Michael Hagerman
Address:
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Norman Kretschmar
Address:
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John Barnicoat
Address:
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Richard Sanders
Address:
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Kenneth McMillin
Address:
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Rhonda McMillin
Address:
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John Henessey
Address:
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Joan Henessey
Address:
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ATTACHMENT 1
Name of Debtholder Principal Amount Owed
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Street & Peters, CPA, Inc. $ 16,463.86
Michael Hagerman 184,000.00 and
83,000.00
Norman Kretschmar 132,718.10 and
22,000.00
John Barnicoat 96,132.00
Richard Sanders and Kenneth McMillin 52,508.91
Kenneth and Rhonda McMillin 25,500.00
John and Joan Henessey 3,825.00
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EXHIBIT IV
A. Representations and Warranties of each of the Management Shareholders
and the Company. Each of the Management Shareholders and the Company hereby
jointly and severally represent and warrant to the Buyer, as of the date hereof
and as of the Closing Date, as follows:
1. Capitalization and Share Ownership. The Company's authorized
capital stock consists of 5,000,000 shares of common stock without par value
(the "Common Stock"). The Company is authorized to issue up to 1,000,000
shares of Common Stock as "Series A Common Shares" and up to 1,000,000 shares
of Common Stock as "Series B Common Shares". No other Series of Common Stock
are currently authorized. There are 454,734 shares of the Company's Common
Stock presently issued and outstanding (previously defined as the "Shares") ,
which Shares are owned by the Shareholders free and clear of any and all
Adverse Interests. All of the Shares have been duly authorized and validly
issued, are fully paid and nonassessable, were not issued in violation of the
terms of any Contract binding upon the Company, and were issued in compliance
with all applicable charter documents of the Company and all applicable federal
and state securities or "blue sky" laws and regulations. No equity securities
of the Company, other than the Shares, are issued or outstanding. Except as
set forth on Schedule 1:(a) there are, and have been, no preemptive rights with
respect to the issuance of the Shares; (b) there are: (i) no existing
Contracts, subscriptions, options, calls, commitments or rights of any
character to purchase or otherwise acquire any shares of capital stock or other
securities of the Company, whether or not presently issued or outstanding, from
any Shareholder, or the Company, at any time or upon the happening of any
stated event; (ii) no outstanding securities that are convertible into or
exchangeable for shares of capital stock or other securities of the Company;
and (iii) no Contracts, subscriptions, options, calls, warrants, commitments or
rights to purchase or otherwise acquire from any Shareholder or the Company any
such convertible or exchangeable securities; and (c) each Shareholder is the
sole owner, beneficially and of record, of that number of the issued and
outstanding shares of capital stock of the Company as appears next to his or
her name in Schedule 1.1 attached hereto, free and clear of any and all Adverse
Interests.
2. Due Organization; Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California, and has full corporate power and authority to own and/or
lease all of the Assets owned or leased by it and to carry on the Business as
now being conducted by it as and where the Assets are now owned or leased by it
and the
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Business is conducted by it. The Company is duly qualified or licensed to do
business as a foreign corporation in and is in good standing in each state set
forth on Schedule 2 where the character of its properties or the nature of its
Business require it to be so qualified. The copies of the Articles of
Incorporation and Bylaws, as amended, of the Company heretofore delivered to
the Buyer are true, complete and correct, and such instruments, as amended, are
in full force and effect. Except for the entities listed on Schedule 2
attached hereto (the "Subsidiaries"), if any, the Company has no subsidiaries
and no stock or other equity or ownership interest (whether controlling or not)
, directly or indirectly, in any corporation, association, partnership (general
or limited), joint venture, limited liability company or other entity.
Schedule 2 sets forth a description of all of the issued and outstanding equity
securities of each of the Subsidiaries. There are, and have been, no
preemptive rights with respect to the issuance of any of the equity Securities
of any Subsidiary. There are: (i) no existing Contracts, subscriptions,
options, calls, commitments or rights of any character to purchase or otherwise
acquire any shares of capital stock or other securities of any Subsidiary,
whether or not presently issued or outstanding, from any Shareholder, or the
Company, at any time or upon the happening of any stated event; (ii) no
outstanding securities that are convertible into or exchangeable for shares of
capital stock or other securities of any Subsidiary; and (iii) no Contracts,
subscriptions, options, calls, warrants, commitments or rights to purchase or
otherwise acquire from any Shareholder or the Company any such convertible or
exchangeable securities. The Company owns, of record and beneficially, all of
the issued and outstanding shares of capital stock of each Subsidiary free and
clear of any and all Adverse Interests.
3. Authority. The Company has the full corporate right, power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
All corporate and other actions required to be taken by the Company to
authorize the execution, delivery and performance of this Agreement and all
transactions contemplated hereby, including the obtaining of any requisite
board of director and shareholder approval, have been duly and validly taken.
Each of the Shareholders has the full right, power and authority, without the
consent of any other person, to execute and deliver this Agreement and to carry
out this Agreement and the transactions contemplated hereby.
4. Validity. The execution, delivery and performance of this
Agreement have been duly authorized by all requisite action, corporate and
other, on the part of the Company and each of the Shareholders, and this
Agreement has been duly executed and delivered by each of the Shareholders and
the Company and constitutes the valid and legally binding obligation of each of
the
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Shareholders and the Company, enforceable against it and him, as the case may
be, in accordance with its terms, except to the extent enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally or by general equitable principles.
5. Non-Contravention. Neither the execution and delivery of this
Agreement by any of the Shareholders or the Company, nor the consummation by
any of the Shareholders or the Company of the transactions contemplated hereby,
do, or would, after the giving of notice or the lapse of time or both, (a)
conflict with, result in a breach of, or constitute a default under, the
Articles of Incorporation or the Bylaws of the Company or any Subsidiary, or
any federal, state or local court or administrative order or process, or any
Contract or other instrument, including any express or implied warranty, to
which any of the Shareholders, the Company or any Subsidiary is a party or by
which any of the Shareholders (or any of their respective rights, properties or
Assets), the Company (or any of its rights, properties or Assets) or any
Subsidiary (or any of their respective rights, properties or Assets) is subject
or bound; (b) conflict with, result in a breach of, or constitute a default
under, any federal, state or local law, statute, rule or regulation; (c) result
in the creation of, or give any party the right to create, any Adverse Interest
upon any right, property or Asset of the Company or any Subsidiary; (d)
terminate, or give any party the right to terminate, amend, abandon or refuse
to perform, any Contract or commitment to which the Company or any Subsidiary
is a party or by which the Company (or any of its rights, properties or Assets)
or any Subsidiary (or any of their respective rights, properties or Assets) is
subject or bound; or (e) accelerate or modify, or give any party thereto the
right to accelerate or modify, the time within which, or the terms under which,
either the Company, any Subsidiary or any third party is to perform any duties
or obligations or receive any rights or benefits under any Contract or
commitment.
6. Force Majeure. The business, properties and Assets of the
Company have not been materially and adversely affected in any way as a result
of any fire, explosion, earthquake, flood, windstorm, accident or any other
casualty, labor trouble, condemnation, requisition or taking of property by any
government or any agency of any government, embargo, riot, act of God or public
enemy, or other similar or dissimilar casualty or event.
7. Plant, Machinery, and Equipment. Schedule 7 attached hereto
sets forth a complete and accurate list of all the plant, machinery, equipment,
furniture, fixtures, and other fixed assets currently used directly or
indirectly in the Business of the Company and any Subsidiary, whether leased or
owned. Except as set forth on Schedule 7 attached hereto, such fixed assets
are owned by the Company or its Subsidiaries free and clear of any and all
Adverse Interests, subject only to liens for current state or local
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property taxes not yet due and are adequate for the conduct of the Business as
it is now being conducted. All items set forth on Schedule 7 are in
reasonably good and usable operating condition and repair for the purpose they
are presently used by the Company and its Subsidiaries, except for ordinary
wear and tear. The Company's and each of the Subsidiaries' operations conform
to the requirements of all applicable laws, except where the failure to conform
would not have a materially adverse effect on such operations. Neither the
Company nor any Subsidiary has received any notice of any violation (which has
not been satisfied or complied with) of environmental, or other laws, statutes,
ordinances, codes or regulations relating to the use of its equipment.
8. Real Property. The Company and its Subsidiaries lease all of
their respective premises under valid and enforceable leases which are not
subject to termination by virtue of the transactions contemplated by this
Agreement. The premises are in reasonably good operating condition and repair,
ordinary wear and tear excepted. Schedule 8 attached hereto sets forth a
complete and accurate list of all the real property leased by the Company and
each of its Subsidiaries and used in the Business. True and correct copies of
all leases listed on Schedule 8 have been delivered to Buyer. Neither the
Company nor any Subsidiary is in default or alleged default of the leases
listed on Schedule 8. The Premises leased by the Company or any Subsidiary do
not violate any zoning regulation or ordinance of the state, city, town or
village in which such real property is located. Neither the Company nor any
Subsidiary has received any notes or notices of any eminent domain proceedings
or of violations of law, or municipal ordinances, orders or requirements noted
in or issued by any department having jurisdiction, against or affecting such
premises. With respect to the leasing of the premises, all existing permits,
approvals, consents and similar authorizations which the Company and each
Subsidiary is legally required to hold in order to occupy the premises as a
tenant are in full force and effect, and there is no action or proceeding
pending or, to the best knowledge of the Company and each of the Shareholders,
threatened, which would have the effect of restricting, terminating,
penalizing, limiting or otherwise making less valuable any of such permits,
approvals, consents or similar authorizations. Neither the Company nor any
Subsidiary is constructing or intending to construct any improvement at such
premises. The Company and each Subsidiary is in compliance with all applicable
environmental and other statutes, regulations, ordinances and requirements
which it is obligated to comply with as tenant of such premises and with regard
to which non-compliance would have a material adverse affect on the Company and
its Subsidiaries, taken as a whole, and neither the Company nor any of the
Shareholders knows of any violation with respect thereto, or any action or
proceeding pending or, to the best of the Company's and each of the
Shareholder's knowledge, threatened, alleging a violation of any such statute
or regulation, except any
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such immaterial and insubstantial violations. Neither the Company nor any of
the Shareholders knows of any violations of any easements or restrictions
relating to such premises which would materially adversely affect the use or
enjoyment of such premises by the Company or any of its Subsidiaries. Any
taxes and other impositions relating to such premises, due and payable, for
which the Company or any Subsidiary is responsible at the date of this
Agreement, have been duly paid.
9. Title to and Condition of the Assets. Except as set forth on
Schedule 9 attached hereto, the Company, directly or indirectly, is the sole
and exclusive legal and equitable owner of all right, title and interest in,
and has good and marketable title to, all of the Assets, free and clear of any
and all Adverse Interests of any kind or nature whatsoever. Each of the owned
tangible Assets of the Company and each Subsidiary, including the fixtures,
vehicles, equipment, machinery, furniture and other tangible assets used in the
Business, is in good repair and in good operating condition, and is suitable
for the purposes for which it presently is being used in the Business and
conform in all material respects to all applicable federal, state and local
laws, rules, regulations and ordinances relating to their use or operation.
Schedule 9 attached hereto sets forth accurate lists and summary descriptions
of all owned tangible Assets not listed on Schedule 7 where the value of an
individual item exceeds $1,000 or where an aggregate of similar items exceeds
$1,000, and of all Contracts and other arrangements and obligations to which
the Company is a party or is otherwise bound which relate in whole or in part
to the owned Assets. Such Assets, and the items listed on Schedule 7,
constitute substantially all of the tangible assets used in or necessary to
conduct the Business.
10. Financial Statements. The Company has delivered to the Buyer
its consolidated Balance Sheets as of December 31, 1995, and April 30, 1996, and
the related consolidated statements of operations, cash flows and shareholders'
equity for the years ended December 31, 1995 and December 31, 1994 and for the
four-month periods ended April 30, 1996 and April 30, 1995, accompanied by the
related accountant's reports, if any (the "Financial Statements"). The April
30, 1996 balance sheet may hereinafter be referred to as the "Latest Balance
Sheet", and the related consolidated statements of operations, cash flows and
shareholders' equity for the four-month period ended on such date may
collectively be referred to as, the "Interim Financial Statements". In
addition, the Company will deliver a balance sheet and related consolidated
statements of operations, cash flows and shareholders' equity for the
eight-month period ended July 31, 1996. The Financial Statements and Interim
Financial Statements are attached hereto as Schedule 10. All such financial
statements and information of or relating to the Company, together with any
notes thereto, are correct and present fairly the financial position of the
Company as of the respective dates indicated and its results of operations, cash
flows and
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shareholders' equity for the respective periods then ended, and were prepared in
conformity with U.S. generally accepted accounting principles as consistently
applied to the financial affairs of the Company ("GAAP").
11. Litigation. Except as set forth on Schedule 11 attached
hereto, there is no suit, action, claim or litigation, or legal,
administrative, arbitration or other proceeding or governmental investigation
or inquiry, pending or, to the best knowledge of each of the Shareholders and
the Company after due inquiry, threatened against or affecting the Company, any
Subsidiary, the Business or any of their respective properties or assets,
including the Assets, and/or any of the Shareholders, and, to the best
knowledge of each of the Shareholders and the Company after due inquiry, there
is no basis for any such suit, action, claim, litigation, proceeding,
investigation or inquiry, nor is there any judgment, decree, injunction,
ruling, award, order or writ of any court, governmental department, commission,
agency, instrumentality, arbitration tribunal or other person outstanding
against, binding upon or involving the Company, any Subsidiary, the Business,
or any of their respective properties or assets, including the Assets, any
directors or officers of the Company in their capacity as such, or any of the
Shareholders. Neither the Company, any Subsidiary nor any of the Shareholders,
nor any of their respective directors, officers, employees or agents, as
appropriate, is currently charged with, or is currently under investigation
with respect to, any violation of any provision of any foreign, federal, state
or local law or administrative regulation in respect of the Business. Neither
any of the Shareholders, the Company, nor any Subsidiary is in default with
respect to any judgment, decree, injunction, ruling, award, order or writ of
any foreign, federal, state or municipal agency or other governmental
department, board, commission, bureau, agency or instrumentality.
12. Legal Compliance.
(a) The Company and each of the Subsidiaries has complied
with all laws, statutes, ordinances, rules, regulations and orders of all
governmental entities applicable to the Business or the Assets, including,
without limiting the generality of the foregoing, Title VII of the Civil Rights
Act of 1964, as amended ("Title VII"), the Age Discrimination in Employment Act
of 1967, as amended ("ADEA") , the Equal Pay Act of 1963, as amended ("EPA"),
the National Labor Relations Act of 1935, as amended ("NLRA"), the Federal
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), the
federal and any California occupational safety health acts, including, but not
limited to, the Occupational Safety and Health Act of 1970, as amended
("OSHA"), and all applicable statutes, regulations, orders and restrictions
relating to environmental standards or controls, except for violations thereof
which, in the aggregate, do not have a material adverse effect on the Business
or the Assets of the Company or any Subsidiary. The
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Company and each of its Subsidiaries has all permits, certificates, licenses,
approvals and other authorizations required in connection with the operation of
the Business by it, all of which are valid and effective and each of which are
listed on Schedule 12(a) attached hereto. The Company and each of its
Subsidiaries has complied in all respects with all obligations under such
permits, certificates, licenses, approvals and other authorizations.
(b) The operations, practices, policies and procedures of
the Company, each of its Subsidiaries and each of their respective employees
have been conducted in compliance with all, and have not given rise to any
loss, liability, damage, costs or expenses under any, applicable federal, state
and local laws, orders, regulations, directives and restrictions concerning
protection of the environment, the disposal of hazardous, toxic or industrial
chemicals, substances or wastes, and health and safety, including, but not
limited to, the following statutes and all orders, rules, regulations,
directives and restrictions issued thereunder or promulgated in connection
therewith: (i) the Clean Air Act, as amended (the "Clean Air Act"); (ii) the
Federal Water Pollution Control Act, as amended (the "Clean Water Act"); (iii)
the Resource Conservation and Recovery Act of 1976, as amended ("RCRA"); (iv)
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended ("CERCLA"); (v) the Toxic Substances Control Act, as amended
("TSCA"); (vi) OSHA; and (vii) all California environmental statutes.
(c) There are no claims, investigations, litigation,
administrative proceedings, judgments or orders, whether pending or, to the
best knowledge of each of the Shareholders or the Company, threatened against
or affecting the Company, any Subsidiary, the Business, any real property
leased or owned by the Company or any Subsidiary (the "Real Property") or any
of the Shareholders, relating to any hazardous substances, hazardous wastes,
discharges, emissions or other forms of pollution (collectively, "EPA Matters")
relating in any way to the Real Property. Neither any of the Shareholders, the
Company nor any Subsidiary has liability for clean-up, compliance or required
capital expenditures in connection with any EPA Matter arising prior to the
date hereof which affect or may affect, materially and adversely, the Business,
the Real Property or the Assets.
(d) No hazardous or toxic substances, within the meaning
of any applicable statute or regulation, are presently stored or otherwise
located at the Real Property which may, in the aggregate, materially and
adversely affect the Business or the Assets, and, further within the definition
of such statutes and regulations, no part of such Real Property or, to the best
knowledge of each of the Shareholders and the Company, adjacent parcels of real
estate, including the groundwater located thereon or thereunder, is presently
contaminated by any such substance which affects or may
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affect, materially and adversely, the Business, the Real Property or the
Assets.
(e) No notice has been issued, and no investigation or
review is pending or, to the best knowledge of each of the Shareholders and the
Company, threatened by any governmental entity, with respect to (i) any alleged
violation by the Company or any Subsidiary of any law, ordinance, rule,
regulation, order, policy or guideline of any governmental entity, or (ii) any
alleged failure of the Company or any Subsidiary to have all permits,
certificates, licenses, approvals and other authorizations required of the
Company or any Subsidiary in connection with the operation of the Business or
the Assets. The Company has furnished the Buyer with copies of all reports or
other documents concerning the Company, each Subsidiary or any of their
respective employees made by the Company or any Subsidiary during the past five
years (i) pursuant to Title VII, to OSHA, the ADEA, EPA, NLRA and ERISA, and
(ii) pursuant to workers' compensation statutes. Neither any of the
Shareholders, the Company nor any Subsidiary has filed a notice or report of
any release of any hazardous and toxic substances, within the meaning of any
applicable statute or regulation, that affects or may affect, materially or
adversely, the Business, the Real Property or the Assets.
(f) The operations of the Company and each Subsidiary have
been conducted in accordance with all applicable laws, regulations and other
requirements of all national governmental authorities, and of all territories,
states, municipalities and other political subdivisions and agencies thereof,
having jurisdiction over the Company and each Subsidiary, including, without
limitation, all such laws, regulations, ordinances and requirements relating to
environmental, antitrust, consumer protection, labor and employment, zoning and
land use, currency exchange, immigration, health, occupational safety, pension,
securities and trading with the enemy matters, except for minor violations that
individually, or in the aggregate, will have no material adverse effect on the
business, operations or financial condition of the Company or any Subsidiary.
Neither the Company, any Subsidiary nor any Shareholder has received any
notification of any asserted present or past failure by the Company or any
Subsidiary to comply with such laws, regulations, ordinances or requirements.
The Company has all permits, authorizations and consents necessary for the
operation of its business as currently conducted.
13. Books of Account; Returns and Reports; Taxes.
(a) The books of account (the "Books of Account") of the
Company fairly reflect, in accordance with GAAP, (i) all transactions relating
to the Company and (ii) all items of income and expense, Assets, liabilities,
contingent liabilities and accruals relating to the Company. The Company has
not engaged in any transaction, maintained any bank account or used any
corporate
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funds except for transactions, bank accounts and funds which have been and are
reflected in the normally maintained books and records of the Company.
(b) For purposes of this Agreement, "Taxes" or "Tax"
means all net income, capital gains, gross income, gross receipts, sales, use,
ad Valorem, franchise, profits, license, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property (real and personal), or
windfall profit taxes, customs duties, or other taxes, fees, assessments, or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax, or additional amounts imposed by any taxing authority
("Taxing Authority") on the Company.
(c) The Company has filed or will file when due all
federal, foreign, state and local tax returns, tax information returns,
reports, and estimates for all years and periods (and portions thereof) for
which the due date (with extensions) is on or before the Closing Date. All
such returns, reports and estimates were or will be prepared in the manner
required by applicable law, and reflect or will reflect the liability for Taxes
of the Company in all material respects and all Taxes shown thereby to be
payable and all assessments received by the Company have been paid or will be
paid when due.
(d) Schedule 13 attached hereto sets forth a list of all
jurisdictions in which the Company has filed or will file income or franchise
tax returns for each taxable period (or portion thereof) ending on or before
the Closing Date.
(e) The Company has withheld or will withhold amounts
from its employees and has filed or will file all federal, foreign, state and
local returns and reports with respect to employee income tax withholding and
social security and unemployment Taxes for all periods (or portions thereof)
ending on or before the Closing Date, in compliance with the provisions of the
Internal Revenue Code of 1986, as amended (the "Code") and all other applicable
federal, foreign, state and local laws.
(f) The Company has paid, or had provided a sufficient
reserve on the Latest Balance Sheet for the payment of, all federal, foreign,
state, and local Taxes with respect to all periods (or portions thereof) ending
on or before the date of the Latest Balance Sheet.
(g) Except as set forth on Schedule 13 attached hereto,
no federal, foreign, state or local income tax returns of the Company have been
examined or audited by the Internal Revenue Service or complimentary foreign,
state or local revenue service, and any deficiencies or assessments, including
interest and penalties thereon, claimed or made as a result of such
examinations or audits have been paid or provided for.
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16
(h) There are no material claims or investigations by any
Taxing Authority pending or to the best knowledge of the Shareholders
threatened against the Company for any past due Taxes, and there has been no
waiver of any applicable statute of limitations or extension of the time for
the assessment of any Tax against the Company.
(i) The Company has not made, signed, or filed, nor will
it make, sign, or file any consent under Section 341(f) of the Code with
respect to any taxable period ending on or before the Closing Date.
(j) The Company is not now, and never has been, a member
of any consolidated federal income tax group, and it is not now, and never has
been a party to any agreement relating to the sharing of any liability for, or
payment of, Taxes with any other person or entity.
(k) Notwithstanding any other provision contained in this
Agreement, each of the Shareholders and the Company are satisfied as to, and
have relied solely upon their respective tax advisors with respect to, the
incidents of taxation which will or may result from the transactions
contemplated by this Agreement.
14. No Material Adverse Developments. Since the date of the
Latest Balance Sheet, there has not been any change or any development
involving a prospective change, which has materially and adversely affected, or
may materially and adversely affect, the condition, financial or otherwise,
prospects, Assets, properties, or results of operation of the Business or the
Company.
15. No Consents. Except as set forth on Schedule 15 attached
hereto, no permit, consent, approval, novation, authorization or other order
of, or filing with, any governmental authority, board or other regulatory body
or any other person is required in connection with the execution, delivery and
consummation of this Agreement by any of the Shareholders or the Company and
the consummation of the transactions contemplated hereby.
16. [Intentionally Omitted]
17. Information. Each of the Management Shareholders and the
Company have furnished and will continue to furnish to the Buyer detailed
information with respect to the Business and the properties, Assets and
financial condition of the Company, and each of the Management Shareholders and
the Company acknowledge that the Buyer has relied and will rely thereon in
entering into this Agreement and consummating the transactions contemplated by
this Agreement. All information contained in the Schedules and Exhibits
attached to this Agreement and in the documents furnished to the Buyer by any
of the Management Shareholders or by the Company pursuant to or in connection
with this Agreement or otherwise is,
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17
and shall be at the Closing, true, correct and complete. True, correct and
complete copies, all underlying documents incorporated or referred to in such
Schedules and Exhibits, or in documents otherwise furnished to the Buyer by any
of the Management Shareholders or the Company, as the same have been amended,
have been furnished to the Buyer by the Company and the Management
Shareholders. This Agreement and the Schedules and Exhibits attached hereto,
taken as a whole, do not contain any untrue statement by any of the Management
Shareholders or the Company of a material fact or any omission by any of the
Management Shareholders or the Company to state a material fact required to be
stated by any of the Management Shareholders or the Company therein or
necessary to make any statement by any of the Management Shareholders or the
Company therein not misleading.
18. Accounts Receivable; Inventory. All accounts receivable as
set forth on the Latest Balance Sheet or arising since the Latest Balance Sheet
date (a) have arisen only in the ordinary course of business consistent with
past practice for goods sold and delivered or services performed and (b) are
collectible in full at the recorded amounts thereof (free of any, and subject
to no, known defenses, setoffs or counterclaims) in the ordinary course of
business, net of any allowance for doubtful accounts reflected in the Latest
Balance Sheet. The inventory as set forth on the Latest Balance Sheet or
arising since the Latest Balance Sheet date was acquired and has been
maintained in accordance with the regular business practices of the Company,
consists of new and unused items of a quality and quantity usable or saleable
in the ordinary course of business of the Company consistent with past
practice, and is valued in accordance with GAAP. None of such inventory is
obsolete, unusable, slow moving, damaged or unsalable in the ordinary course of
the Company's business consistent with past practice.
19. Directors and Officers. Schedule 19 hereto is a true, correct
and complete list of all the Directors and Officers of the Company and each
Subsidiary.
20. Location of Assets. Except for certain items located at the
respective locations set forth opposite their description on Schedule 20
attached hereto, all of the Assets are located at the Real Property.
21. Leases. Set forth on Schedule 21 attached hereto is an
accurate and complete list of all leases pursuant to which the Company leases
personal property. A true and complete copy of each such lease has been
delivered to the Buyer, and no changes have been made therein since the date of
such delivery. Each such lease is valid, binding and enforceable in accordance
with its terms, there are no existing defaults by the Company or any third
party thereunder and no event has occurred which (with or without notice,
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18
lapse of time or both) would constitute a material default thereunder by any
party.
22. [Intentionally Omitted]
23. Employee Benefit Plans and Arrangements. Schedule 23 attached
hereto contains a complete list of all employee benefit plans, whether formal
or informal, whether or not set forth in writing, and whether covering one
person or more than one person, sponsored or maintained by the Company. For
the purposes hereof, the term "employee benefit plan" includes all plans,
funds, programs, policies, arrangements, practices, customs and understandings
providing benefits of economic value to any employee, former employee, or
present or former beneficiary, dependent or assignee of any such employee or
former employee, other than regular salary, wages or commissions paid
substantially concurrently with the performance of the services for which paid.
Without limitation, the term "employee benefit plan" includes all employee
welfare benefit plans within the meaning of section 3(l) of ERISA and all
employee pension benefit plans within the meaning of section 3(2) of ERISA.
Each plan providing benefits which are funded through a policy of insurance is
indicated by the word "insured" placed by the listing of the plan in Schedule
23.
[ADDITIONAL REPS TO COME DEPENDING UPON PLANS DISCLOSED]
24. Intellectual Property Matters. In the conduct of the
Business, the Company did or does not utilize any patent, trademark, trade
name, service mark, copyright, software, license, trade secret or know-how
except as listed on Schedule 24 hereto (the "Intellectual Property"), all of
which Intellectual Property is owned by or is licensed to the Company or its
Subsidiaries as more particularly designated on Schedule 24. Any Intellectual
Property owned by the Company is free and clear of any and all Adverse
Interests. Neither the Company nor any Subsidiary infringes upon or unlawfully
or wrongfully use any patent, trademark, trade name, service mark, copyright,
license or trade secret owned or claimed by another. Neither the Company nor
any Subsidiary is in default under, nor has received any notice of any claim of
infringement or any other claim or proceeding relating to, any such patent,
trademark, trade name, service mark, copyright, license or trade secret.
Except as set forth on Schedule 24, no present or former employee of the
Company or any Subsidiary and no other person owns or has any proprietary,
financial or other interest, direct or indirect, in whole or in part, in any
patent, trademark, trade-name, service mark, license or copyright, or in any
application therefor, or in any trade secret, which the Company owns, possesses
or uses in its operations as now or heretofore conducted. Schedule 24 hereto
lists all license, confidentiality or nondisclosure agreements to which the
Company, any Subsidiary or any of their respective employees engaged in the
Business is a party which relates to the Business.
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19
25. Absence of Undisclosed Liabilities. Neither the Company nor
any Subsidiary has any material liabilities, secured or unsecured, accrued or
contingent, choate or inchoate, except (a) as and to the extent reflected or
reserved against in the Interim Financial Statements or (b) as disclosed in
writing in this Agreement or the Schedules and Exhibits attached hereto.
26. Insurance. Schedule 26 hereto contains a description of all
insurance policies held by the Company and each Subsidiary concerning the
Business and the Assets including amounts and lines of coverage and a
description of all claims pending, if any. The Company and each Subsidiary
maintained and now maintains (a) insurance, of a type customary for businesses
similar to the Business, on all the Assets covering property damage and loss of
income by fire or other casualty, and (b) insurance protection against all
liabilities, claims, and risks against which it is customary to insure.
Neither the Company nor any Subsidiary is in default with respect to payments
of premiums on any such policy and no notice of cancellation or non-renewal of
any such coverage has been received. There are no provisions in such insurance
policies for retroactive or retrospective premium adjustments. Neither the
Company nor any Management Shareholder knows or has reason to know of the
occurrence of any event which reasonably might form the basis of any claim
against the Company, any Subsidiary, the Business or the Assets or which might
increase the insurance premiums payable for any such coverage. There are no
outstanding performance bonds covering or issued for the benefit of the Company
or any Subsidiary. Except as set forth on Schedule 26, no claim is pending
under any such policy and such policies are in full force and effect.
27. Employees. Schedule 27 hereto sets forth the names and
current annual salary rates or current hourly wages of all present employees of
the Company and each Subsidiary, together with the average number of hours
worked per week, the date of the last salary increase, the date of commencement
of employment of each employee with the Company or any Subsidiary, and a
summary of salary, bonuses and other compensation, if any, paid or payable to
each of such persons for or in respect of that portion of the 1996 calendar
year ending on the Latest Balance Sheet date. Schedule 27 hereto also sets
forth the earnings for each of such employees as reflected on Form W-2 for the
1995 calendar year. Schedule 27 hereto also sets forth the total accrued
vacation pay that each employee is entitled to receive, which amounts are
properly and accurately reflected on the Company's Books of Account and
properly and accurately reserved on the Company's Financial Statements. Except
as set forth on Schedule 27 attached hereto, at the Latest Balance Sheet Date
there were, at the date hereof there are and at the Closing Date there will be,
no bonuses, profit sharing, incentives, commissions or other compensation of
any kind with respect to work done prior to the Latest Balance Sheet, the date
hereof or the Closing Date, respectively, due to or expected by present or
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20
former employees of the Company and each Subsidiary not fully paid prior to
such date (other than accrued payroll charges in the ordinary course of
business consistent with past practice for the pay period during which this
Agreement is executed or the Closing occurs) or, with respect to work done
prior to the date of the Latest Balance Sheet, not fully accrued on the Latest
Balance Sheet.
28. Union Activity. Neither the Company nor any Subsidiary has
any collective bargaining agreements with any labor union or other
representative of employees. No strike, slowdown, picketing or work stoppage
by any union or other group of employees against the Company or any Subsidiary,
and no secondary boycott with respect to their respective products or services,
lockout by the Company or any Subsidiary of any of their respective employees
or any other labor trouble or other occurrence, event or condition of a similar
character, has occurred or been threatened.
29. Transactions with Affiliates. Except as set forth on Schedule
29 attached hereto, neither any of the Shareholders nor any director or officer
of the Company or any Subsidiary, or any member of his or her immediate family
or any other of its, his or her affiliates, owns or has an ownership interest
in any corporation or other entity that is or was during the last three years a
party to, or in any property which is or was during the last three years the
subject of, Contracts, business arrangements or relationships of any kind with
the Company or any Subsidiary or any predecessors thereto. All such disclosed
transactions between the Company, any Subsidiary and any of the Shareholders or
any affiliate have been on substantially the same terms and conditions as
similar transactions between non-affiliated parties and are properly recorded
on the Books of Account of the Company.
30. Contracts; Delivery of Documents. Schedule 30 attached hereto
contains a complete and accurate list of all written Contracts and other
documents and summaries of any material oral Contracts (including all
amendments, supplements, modifications or waivers currently in effect) binding
upon the Company or any Subsidiary, and other commitments of the Company or any
Subsidiary (including all incomplete and proposed capital expenditure
projects). Each of such Contracts and commitments is in full force and effect
and, to the best of the Company's or any Shareholder's knowledge, no party to
any such Contract or commitment is in default or alleged default thereunder.
To the extent any consent is required for the assignment of any such Contract
or commitment, all such required consents have been obtained by the Company or
the Shareholders, as appropriate. The Company and the Shareholders have
delivered to the Buyer true, correct and complete copies of the Company's and
each Subsidiaries' charter documents and Bylaws and all written Contracts and
other documents described in this Agreement or set forth in any Schedule
attached hereto.
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21
31. [Intentionally Omitted]
32. Conduct of Business. Since the Latest Balance Sheet date, the
Business has been operated in the manner described in Section 5.1 and the
Company has not taken any action that would have been prohibited by Section 5.1
had that Section been effective since the Latest Balance Sheet date.
33. Additional Information. Schedule 33 attached hereto contains
accurate lists and summary descriptions of the following:
(a) the names of all persons authorized to borrow money
or incur or guarantee indebtedness on behalf of the Company and each
Subsidiary; and
(b) the names of all persons holding powers of attorney
from the Company and each Subsidiary and a summary statement of the terms
thereof;
34. Corporate Records. The minute books of the Company and each
Subsidiary are current and contain correct and complete copies of all charter
documents of the Company and each Subsidiary, respectively, including all
amendments thereto and restatements thereof, and of all minutes of meetings,
resolutions and other actions and proceedings of their respective shareholders
and boards of directors and all committees thereof, duly signed by the
Secretary or an Assistant Secretary, and the stock record book of the Company
is also current, correct and complete and reflects the issuance of all of the
Shares to the Shareholders and the stock record book of each Subsidiary is also
current, correct and complete and reflects the issuance of each of such
Subsidiaries' equity securities to the Company.
35. Foreign Investment in Real Property Tax Act. The Company is
not now and has never been a "United States real property holding corporation"
for purposes of Section 897 (c) (2) of the Code and the Treasury Regulations
thereunder ("FIRPTA").
36. No Erosion of Customer Base. There have been no recent
contract cancellations or other events resulting in a material erosion in the
Company's customer base.
37. Permits, Licenses, Etc. Schedule 37 attached hereto lists all
permits, licenses, franchises, concessions, zoning variances and other
governmental approvals, authorizations and orders which have been obtained and
are currently used in connection with the conduct of the Business by the
Company and each Subsidiary. Such permits, licenses, franchises, concessions,
variances, approvals, authorizations and orders constitute all governmental
approvals and authorizations necessary under all applicable local, state or
federal laws and regulations for the operation of the Business by the Company
and each Subsidiary as it
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22
has been heretofore conducted, and the Business has been conducted in
compliance with all such applicable laws and regulations. All such permits,
licenses, franchises, concessions, variances, approvals, authorizations and
orders are presently in full force and effect; to the best of the Company's and
each Shareholder's knowledge, no suspension or cancellation of any of them is
threatened; and the consummation of this transaction does not affect the
validity or effectiveness of, and does not require the consent or approval of
any party to, or any other person or governmental agency having jurisdiction
over, any such permit, license, franchise, concession, variance, approval,
authorization or order, except such consents or approvals as has been obtained.
Without in any way limiting the generality of the foregoing, Schedule 37
attached hereto contains a separate list of all permits, licenses, franchises,
concessions and other governmental approvals and authorizations relating to the
brewing, making, distilling, transporting or otherwise handling of alcoholic
beverages (the "Alcohol Licenses"). Each of such Alcohol Licenses is presently
in full force and effect, duly and validly issued and appropriate and adequate
for the conduct of the Business. Except as set forth on Schedule 37 attached
hereto, neither the Company nor any Subsidiary requires any Alcohol Licenses
for the operation of the Business.
B. Representations and Warranties of the Buyer. The Buyer hereby
represents and warrants to the Company and each of the Shareholders as of the
date hereof, and as of the Closing Date, as follows:
1. Due Organization; Qualification. The Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California, and has full corporate power and authority to own and/or
lease all of the assets owned or leased by it, and to carry on its business as
now being conducted by it as and where its assets are now owned or leased by it
and its business conducted. The Buyer is duly qualified or licensed to do
business as a foreign corporation in and is in good standing where the
character of its properties or the nature of its business require it to be so
qualified. The copies of the Articles of Incorporation and Bylaws, as amended,
of the Buyer heretofore delivered to the Shareholder Representative are true,
complete and correct, and such instruments, as amended, are in full force and
effect.
2. Authority. The Buyer has full corporate right, power and
authority, without the consent of any other person, to execute and deliver this
Agreement and to carry out the transactions contemplated hereby. All corporate
and other actions required to be taken by the Buyer to authorize the execution,
delivery and performance of this Agreement and all transactions contemplated
hereby will have been duly and properly taken as of the Closing.
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23
3. Validity. This Agreement constitutes the valid and legally
binding obligation of the Buyer, enforceable against it in accordance with its
terms, except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting creditors
rights generally or by general equitable principles.
4. Non-Contravention. Neither the execution and delivery of this
Agreement by the Buyer nor the consummation by the Buyer of the transactions
contemplated hereby, do, or would, after the giving of notice or the lapse of
time or both, (a) conflict with, result in a breach of, or constitute a default
under, the Articles of Incorporation or the Bylaws of the Buyer, or any
federal, state or local court or administrative order or process, or any other
material agreement, contract, commitment or other instrument, including any
express or implied warranty, to which the Buyer is a party or by which the
Buyer (or its assets or properties) is subject or bound; (b) conflict with,
result in a breach of, or constitute a default under, any federal, state, or
local law, statute, rule or regulation; or (c) violate or conflict with any
other material restriction of any kind or character whatsoever to which the
Buyer is subject.
5. Capitalization and Share Ownership. The Buyer's authorized
capital stock consists of 20,000,000 shares of common stock, no par value per
share ("Buyer's Common Stock") and 5,000,000 preferred shares. As of July 18,
1996, there are issued and outstanding 2,412,863 shares of Buyer's Common Stock
and no preferred shares. All of such shares have been duly authorized and
validly issued, are fully paid and nonassessable, were not issued in violation
of the terms of any Contract binding upon the Buyer, and were issued in
compliance with all applicable charter documents of the Buyer and all
applicable federal and state securities or "blue sky" laws and regulations.
There are, and have been, no preemptive rights with respect to the issuance of
such shares.
6. Authorization of Common Stock and Convertible Instruments.
The issuance of the shares of Buyer's Common Stock at the Closing has been duly
authorized by all necessary corporate action and, when issued as contemplated
by this Agreement, will be duly authorized and validly issued, fully paid and
nonassessable, and issued in compliance with all applicable charter documents
of the Buyer and such issuances will not be in violation of the terms of any
Contract binding upon the Buyer.
7. Financial Statements. The Buyer has delivered or will deliver
to the Company and/or the Shareholder Representative its consolidated Balance
Sheets as of December 31, 1995, April 30, 1996, and the related consolidated
statements of operations, cash flows and shareholder's equity for the years then
ended, accompanied by the related accountant's reports, if any. In addition,
the Buyer has delivered or will deliver to the Shareholder Representative its
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24
internally prepared, unaudited consolidated Balance Sheet as of April 30, 1996,
1996 (the "Buyer's Latest balance Sheet"), and the related unaudited
consolidated statements of operations, cash flows and shareholder's equity for
the four month period ended on such date, which are attached hereto as Schedule
B.7 attached hereto. All such financial statements and information of or
relating to the Buyer, together with any notes thereto, are correct and present
fairly the financial position of the Buyer as of the respective dates indicated
and its results of operations, cash flows and shareholder's equity for the
respective periods then ended (subject to normal year-end adjustments), and
were prepared in conformity with GAAP consistently applied.
8. Litigation. Except as set forth on Schedule B.8 attached
hereto, there is no suit, action, claim or litigation, or legal,
administrative, arbitration or other proceeding or governmental investigation
or inquiry, pending or, to the best knowledge of the Buyer after due inquiry,
threatened against or affecting the Buyer, any subsidiary of the Buyer (the
"Buyer's Subsidiaries"), its Business or any of their respective properties or
assets which would have a material adverse effect on the Buyer, its business or
assets, and, to the best knowledge of the Buyer after due inquiry, there is no
basis for any such suit, action, claim, litigation, proceeding, investigation
or inquiry nor is there any judgment, decree, injunction, ruling, award, order
or writ of any court, governmental department, commission, agency,
instrumentality, arbitration tribunal or other person outstanding against,
binding upon or involving the Buyer, the Buyer's Subsidiaries, its business or
any of their respective properties or assets which would have a material
adverse effect on the Buyer, its business or assets. Neither the Buyer, the
Buyer's Subsidiaries nor, to the best of the Buyer's knowledge, any of their
respective directors, officers, employees or agents, as appropriate, is
currently charged with, or is currently under investigation with respect to,
any violation of any provision of any foreign, federal, state or local law or
administrative regulation in respect of the Buyer's business. Neither the
Buyer nor any of the Buyer's Subsidiaries is in default with respect to any
judgment, decree, injunction, ruling, award, order or writ or any foreign,
federal, state or municipal agency or other governmental department, board,
commission, bureau, agency or instrumentality which would have a material
adverse effect on the Buyer, its business or assets.
9. Compliance with Law. The operations of the Buyer and each of
the Buyer's Subsidiaries have been conducted in accordance with all applicable
laws, regulations and other requirements of all national governmental
authorities, and of all territories, states, municipalities and other political
subdivisions and agencies thereof, having jurisdiction over the Buyer or the
Buyer's Subsidiaries, as the case may be, including, without limitation, all
such laws, regulations, ordinances and requirements relating to environmental,
antitrust, consumer protection, labor and employ-
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25
ment, zoning and land use, currency exchange, immigration, health, occupational
safety, pension, securities and trading with the enemy matters, except for minor
violations that individually, or in the aggregate, will have no material adverse
effect on the business, operations or financial condition of the Buyer. Neither
the Buyer nor any of the Buyer's Subsidiaries has received any notification of
any asserted present or past failure by the Buyer or any of the Buyer's
Subsidiaries to comply with such laws, regulations, ordinances or requirements
which have not been satisfactorily corrected prior to the date hereof. The
Buyer and the Buyer's Subsidiaries have all permits, authorizations and consents
necessary for the operation of their respective businesses as currently
conducted.
10. No Material Adverse Developments. Except as set forth on
Schedule B.10 attached hereto, since the date of the Buyer's Latest Balance
Sheet, there has not been any change or any development involving a prospective
change, which has materially and adversely affected, or may materially and
adversely affect, the condition, financial or otherwise, prospects, assets,
properties, or results of operation of the Buyer, the Buyer's Subsidiaries or
their respective businesses.
11. No Consents. Except as set forth on Schedule B.11 attached
hereto, no permit, consent, approval, novation, authorization or other order
of, or filing with, any governmental authority, board or other regulatory body
or any other person is required in connection with the execution, delivery and
consummation of this Agreement by the Buyer and the consummation of the
transactions contemplated hereby.
12. Information; Securities Law Compliance. True, correct and
complete copies of any underlying documents incorporated or referred to in the
Schedules and Exhibits to this Agreement, as the same have been amended, have
been furnished to the Company and/or the Shareholder Representative by the
Buyer.
This Agreement and the Schedules and Exhibits attached hereto, taken
as a whole, do not contain any untrue statement by the Buyer of a material fact
or any omission by the Buyer to state a material fact required to be stated by
the Buyer therein or necessary to make any statement by the Buyer therein not
misleading. Further, none of the information to be included or incorporated by
reference in the registration statement relating to the Buyer's initial public
offering (the "Registration Statement") will at the time it becomes effective,
contain any statement which, at the time and in light of the circumstances
under which it is made, is false or misleading with respect to any material
fact, or which omits to state any material fact required to be stated therein
or necessary in order to make the statements therein not false or misleading.
The Registration Statement will comply as to form in all material respects with
the provisions of the Securities Act of 1933, as
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26
amended. Notwithstanding the foregoing, the Buyer does not make any
representation or warranty regarding any information supplied by the Company,
the Shareholders, the underwriter or selling shareholders for inclusion in the
Registration Statement.
The disclosure document to be prepared by the Buyer and delivered
pursuant to Regulation D ("Regulation D") of the Securities Act of 1933, as
amended, to shareholders of the Company who are not "accredited investors" as
defined in Regulation D (the "Placement Memorandum") will not contain any
statement which, at the time and in the light of the circumstances in which it
is made, is false or misleading with respect to any material fact, or which
omits to state any material fact required to be stated therein or necessary in
order to make the statements therein not false or misleading. The Placement
Memorandum will comply as to form in all material respects with the provisions
of Regulation D. Notwithstanding the foregoing, the Buyer does not make any
representation or warranty regarding any information supplied by the Company,
the Shareholders, the underwriter or selling shareholders for inclusion in the
Placement Memorandum.
The Buyer has complied and will continue to comply in all material
respects with all federal and state securities laws applicable to it in
connection with the transactions contemplated in this Agreement, except to the
extent that any failure so to comply results from the violation by the Company
or any Shareholder of applicable securities laws or the failure by any
Shareholder to supply information reasonably requested by the Buyer to assure
compliance with such laws.
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