SUPPLEMENTAL AGREEMENT
THIS SUPPLEMENTAL AGREEMENT (the "Agreement") is made and entered
into as of August 29, 1997, by and among Browne Bottling Company, a
Delaware corporation (the "Company"), All-American Bottling Financial Corp.
("Financial"), Stephen B. Browne, an individual ("SBB"), Browne and Browne
Partners, an Oklahoma general partnership ("B&B"), Browne Oklahoma
Properties Partnership, an Oklahoma general partnership ("BOP"), Tennessee
Properties Partnership, an Oklahoma general partnership ("TOP"), and
Stephen B. Browne, as Trustee of a trust created for the benefit of Stephen
Virgil Browne ("Trustee") (SBB, B&B, BOP, TOP and Trustee are sometimes
referred to collectively as "Browne"), and Records Investments, L.L.C., an
Oklahoma limited liability company ("Records").
RECITALS
A. The Company, SBB, B&B, BOP and Tom L. King ("King") are
parties to or otherwise bound by the terms and provisions of a certain
Stockholders' Agreement, as amended and restated on August 16, 1993 (the
"Stockholders' Agreement"), the terms of which are incorporated herein by
this reference.
B. Effective August 29, 1997, Records acquired 84,228 shares of
the Company's outstanding shares of common stock, par value $.01 per share
(the "Common Stock") and 500 shares of the Company's outstanding Series B
Preferred Stock, par value $.01 per share (the "Series B Preferred Stock")
from persons previously bound by the Stockholders' Agreement and, as part
of such transaction, Records has agreed to be bound by the terms and
provisions of the Stockholders' Agreement. Since August 29, 1997, Records
has also acquired warrants to purchase ("Warrants") an aggregate 9,145
shares of Common Stock at an exercise price of $.01 per share. Records
beneficially owns $8,187,000 principal amount of 13% Senior Secured Notes
due 2001, Series B, issued by the Company's wholly-owned subsidiary, All-
American Bottling Corporation, a Delaware corporation ("All-American") (the
"Senior Notes").
C. Browne owns 500 shares of Series B Preferred Stock, 107,016
shares of Common Stock and Warrants to purchase an aggregate of 9,144
shares of Common Stock at a price of $.01 per share. Browne beneficially
owns $11,506,000 principal amount of Senior Notes.
D. Financial owns Warrants to purchase an aggregate of 1,183
shares of Common Stock.
E. King beneficially owns 1,000 shares of Common Stock.
F. The parties desire to enter into certain agreements with
respect to the ownership of the Company's Series B Preferred Stock, Common
Stock, Senior Notes and Warrants and governance of the Company which will
supplement and be in addition to the Stockholders' Agreement, all as more
fully set forth herein.
AGREEMENT
In consideration of the recitals set forth above and of the
mutual covenants, benefits and burdens set forth in this Agreement, and
other valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. CERTAIN DEFINITIONS. The terms "Agreement," "All-American,"
"Browne," "Common Stock," "Company," "Financial," "Records," "Senior
Notes," "Series B Preferred Stock," "Stockholders' Agreement" and
"Warrants" shall have the meanings specified above. In addition the
following terms shall have the meanings indicated:
"AFFILIATE" - Any Person that directly or indirectly
controls, is controlled by, or is under common control with the Person in
question. The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities, by
contract or otherwise.
"BOARD" - The Board of Directors of the Company.
"BOARD APPROVAL" - The affirmative approval of at least a
majority of all persons duly elected or appointed to, and constituting, the
entire Board of Directors of the Company (the "Directors").
"MAJORITY IN INTEREST" - Reference to a Majority in Interest
or any other specified percentage in Interest shall mean those shareholders
entitled to vote, who, at the time of determination thereof, have either a
majority or the specified percentage, as the case may be, of the combined
voting power of all Securities entitled to vote on the particular matter,
as the case may be.
"MAJORITY VOTE" - With respect to the Board, the affirmative
vote of at least a majority of the Directors.
"MERGER" - The statutory merger of the Company with and into
Newco as provided for in Section 3.2 of this Agreement.
"NEWCO" - A newly formed Oklahoma corporation into which the
Company shall be merged in the Merger.
"NEW COMMON STOCK" - The common stock of Newco or the
Company to be issued upon consummation of the Transaction, having a par
value of $.01 per share.
"PERSON" - Any individual, corporation, association,
partnership, joint venture, trust, estate, or other entity or organization.
"SECURITIES" - The Company's Series A Preferred Stock, par
value $.01 per share ("Series A Preferred Stock), Series B Preferred Stock,
Common Stock, Nonvoting Common Stock, par value $.01 per share ("Nonvoting
Common Stock") and Warrants.
"SPLIT" - A reverse split of the Company's Common Stock.
"STOCKHOLDER" - A holder of record of the Company's
outstanding Securities.
"STOCKHOLDER APPROVAL" - The affirmative vote by the holders
of Securities representing not less than 51% of the total combined voting
power of all outstanding Securities having the right to vote.
"TRANSACTION" - The Merger or the Split.
2. CAPITALIZATION OF THE COMPANY. The capitalization of the
Company consists of:
51,316 shares of Series A Preferred Stock, none of which are
issued or outstanding;
1,000 share of Series B Preferred Stock, of which 1,000 shares
are issued and outstanding;
5,263 shares of Nonvoting Common Stock, none of which are issued
or outstanding;
220,295 shares of Common Stock, of which 192,224 shares are
issued and outstanding;
21,360 Warrants to purchase an aggregate of 21,360 shares of
Common Stock, all of which are issued and outstanding, and none of which
have been exercised; and
The Company's wholly-owned subsidiary, All-American, has issued
and there is outstanding $45,000,000 principal amount of Senior Notes.
The Series B Preferred Stock, Common Stock, Warrants and Senior
Notes are beneficially owned by the persons and entities in the respective
amounts reflected on Exhibit A.
3. SECURITIES OWNERSHIP. The parties have agreed that Browne
and Records shall have equal ownership of all outstanding Securities and
Senior Notes. In order to effect such ownership, the parties agree that:
3.1 ASSIGNMENT OF WARRANTS. Browne and Financial agree
to grant, bargain, sell, transfer and assign 9,144 Warrants and 1,183
Warrants, respectively, to Records and Records agrees to pay $1.00 for all
such Warrants.
3.2 ACQUISITION OF ADDITIONAL WARRANTS. The parties
acknowledge that, in addition to the Warrants beneficially owned by Browne,
Financial and Records, Warrants to purchase an additional 1,888 shares of
Common Stock are outstanding (the "Other Warrants") and held of record as
follows:
RECORD OWNER NUMBERS OF OTHER WARRANTS
Cede & Co. 1,831
Christopher Salyer 47
Lessman Limited Co. 10
Total 1,888
The parties shall use their respective best efforts to acquire all the
Other Warrants upon such terms and conditions as may be negotiated with the
respective owners of the Other Warrants and agreed to by Browne and
Records. To the extent that Browne or Records is successful in negotiating
for the purchase of all or any of the Other Warrants, Browne and Records
shall jointly and in equal shares consummate the purchase of the Other
Warrants in accordance with the terms negotiated by the Company, Browne or
Records, as the case may be, and any such Other Warrants thus acquired
shall be assigned by Browne or the Company to Records for the cash sum of
$1.00, and shall be owned by Records.
3.3. TRANSACTION. Not later than May 15, 1998, Browne and
Records shall cause the Company to authorize either (a) a statutory merger
(the "Merger") with and into a newly formed Oklahoma corporation ("Newco"),
or (b) a reverse split of the Company's Common Stock (the "Split" and,
together with the Merger, the "Transaction"), upon such terms and
conditions as the Board of Directors of the Company may approve but which
shall include the following:
(a) The Transaction shall be effective on or prior
to August 1, 1998.
(b) The exchange ratio for the Transaction shall be
one share of New Common Stock in exchange for a number of shares of Common
Stock which is not less than the aggregate number of shares of Common Stock
which would have been issuable upon exercise of all Other Warrants
immediately prior to the effective date of the Transaction.
(c) Immediately prior to the effective date of the
Transaction, Browne and Records shall surrender for cancellation all
Warrants then beneficially owned by them.
(d) No fractional share of New Common Stock shall be
issued in connection with the Transaction. In view of the issuance of any
fraction of a share, a holder of Common Stock or Warrants, who would
otherwise be entitled to receive a fractional share of New Common Stock
upon consummation of the Transaction or upon exercise of the Other Warrants
immediately after the Transaction, shall be entitled to receive cash equal
to the fair market value, as determined in good faith by the Board of
Directors of the Company in accordance with Delaware law, of the whole
share of New Common Stock which would otherwise be issued, multiplied by
such fraction.
(e) At least thirty (30) days prior to the record
date of the Transaction, the Company shall cause the Warrant Agent to
deliver written notice of the Transaction and the terms thereof, to each
registered holder of the Other Warrants.
3.4. OPTIONS. Upon completion of the Transaction, Browne
and Records shall each have an option to purchase shares of New Common
Stock, each of which options shall be exercisable in whole but not in part
at any time during a period commencing on the first business day next
following the effective date of the Transaction and ending ninety (90) days
thereafter. The number of shares of New Common Stock issuable upon
exercise of the respective options, if any, shall be that number of shares
which, when issued, would represent, in the case of Browne, 50.1% and in
the case of Records, 49.9%, respectively, of the total number of
outstanding shares of New Common Stock, on a fully diluted basis. The
aggregate purchase price to be paid for shares of New Common Stock to be
issued upon exercise of the options shall be the aggregate par value of all
shares of New Common Stock to be issued to Browne and Records. Each option
shall be exercised by written notice thereof given by the option-holder to
the Company, and shall be accompanied by a cashier's or certified check in
the amount of the exercise price, payable to the Company. The New Common
Stock issuable upon the exercise of the Option shall be delivered by the
Company to the appropriate party within three (3) days following the notice
of exercise. The certificates evidencing such New Common Stock shall bear
the legends provided for in Section 2.5 of the Stockholders' Agreement.
3.5. FAILURE OF TRANSACTION. Prior to the consummation of
the Transaction or, if the Transaction shall not be consummated in
accordance with the terms of this Agreement, then and in such event Browne
and Records agree that in the event of the occurrence of any of the
following events affecting the Company:
(a) the sale of all or substantially all of the
assets followed by a distribution of cash,
securities or property to the shareholders of
the Company;
(b) the acquisition of the Company by another person
or entity;
(c) the sale of control of the Company;
(d) the payment by the Company of a dividend payable
in cash, securities or property;
(e) the liquidation of the Company; or
(f) any other transaction by which cash, securities
or property is distributed with respect to or is
delivered in exchange for outstanding Common
Stock,
Browne and Records will share equally in all such stock, securities or
property.
3.6. SENIOR NOTES. Browne and Records agree to use their
best efforts to own equal amounts of Senior Notes. If at any time either
Browne or Records owns a greater principal amount of Senior Notes than the
other, the party owning the greater amount will sell, and the party owning
the lesser principal amount will purchase, such principal amount of Senior
Notes as will cause the ownership of Senior Notes to be equal as between
Browne and Records.
4. BOARD OF DIRECTORS.
4.1. NUMBER, ELECTION AND CLASSIFICATION OF DIRECTORS.
The Board shall consist of six (6) persons or such other even number of
directors as shall be determined by Stockholder Approval. So long as
Browne beneficially owns shares of Common Stock which represent at least
twenty five percent (25%) of the combined voting power of all outstanding
securities of the Company entitled to vote in the election of directors,
Browne shall be entitled to designate one-half of the total number of
persons to be members of the Board (the "Browne Directors"). So long as
Records beneficially owns shares of Common Stock which represent at least
twenty five (25%) of the combined voting power of all outstanding
Securities of the Company entitled to vote in the election of directors,
Records shall be entitled to designate one-half of the total number of
persons to be members of the Board (the "Records Directors"). The initial
Board shall include:
BROWNE DIRECTORS RECORDS DIRECTORS
Stephen B. Browne George J. Records
Jim Turner G.J. Records, Jr.
Tom L. King (to be selected by Records)
4.2. TERM OF DIRECTORS. Each Director shall be elected
annually and shall hold office for a term of one year and until his/her
successor shall have been duly elected and shall have qualified. A vacancy
on the Board resulting from the departure of a member of the Board who is a
Browne Director shall be filled by Browne, and a vacancy resulting from the
departure of a member of the Board who is a Records Director shall be
filled by Records. A vacancy on the Board shall be filled for the
unexpired term of the former member of the Board whose departure from the
Board created such vacancy.
4.3. VOTING FOR DIRECTORS. So long as Browne or Records
is entitled to designate members of the Board of Directors, each of Browne
and Records agrees to vote all shares of the Company's Capital Stock which
it is entitled to vote in the election of directors for the election to the
Board of Directors the persons from time to time designated by Browne and
Records, as the case may be, including persons designated to fill vacancies
on the Board of Directors. To such end, each of Browne and Records hereby
irrevocably constitutes and appoints Stephen B. Browne and G.J. Records,
Jr., and each or any of them, with full power of substitution, as the sole
and exclusive attorney-in-fact and proxy to vote all shares of the
Company's Capital Stock which such party is entitled to vote in connection
with the election of directors of the Company and directs such proxies to
vote all such shares of the Company's Capital Stock for the election as
directors the persons designated from time to time by Browne and Records to
be Directors pursuant to this Agreement. The proxy given hereby shall be
deemed to be coupled with an interest, and shall continue for so long as
this Agreement shall be in force and effect or for such shorter period as
may be mutually agreed upon by the parties.
4.4. AUTHORITY OF BOARD. The Board shall exercise control
over all aspects of Company's business and affairs. The Board shall have
full and complete authority and discretion to make any and all decisions
concerning the business and affairs of the Company. The Board may, subject
to the provisions of this Agreement, elect such Officers, and delegate such
authority to such Officers, as the Board deems necessary or advisable, and
in the best interests of the Company. Except as otherwise expressly
provided herein, all actions and approvals by the Board shall be effected
by a Majority Vote.
4.5. INDEMNITY OF DIRECTORS. No Director of the Company
shall be liable, responsible or accountable for damages or otherwise to the
Shareholders or any other Person or the Company for any acts taken or
performed or for any omission to act, if such conduct does not constitute
willful misconduct or recklessness. In any threatened, pending or
completed action, suit or investigation in which any Director or the
Company was or is a party by virtue of his status as a Director of the
Company, the Company shall, solely from Company assets, indemnify the
Director against judgments, settlements, penalties, fines or expenses,
including attorneys' fees, incurred by him in connection therewith, so long
as his action or failure to act does not constitute willful misconduct,
recklessness, a breach of loyalty, lack of good faith, intentional
misconduct, knowing violation of law, or a transaction from which he
derived an improper personal benefit. The indemnification rights herein
contained shall be cumulative of, and in addition to, any and all other
rights and remedies to which the Director shall be entitled, whether
pursuant to some other provision of this Agreement, or any other agreement
at law or in equity.
4.6. RESIGNATION OF DIRECTOR. Any Director may resign
from the Board at any time by giving written notice to the Company. The
resignation of any Director shall take effect upon the receipt of notice or
at such time as shall be specified in the notice. The acceptance of the
resignation shall not be necessary to make it effective.
4.7. REMOVAL OF DIRECTORS. A Browne Director may be
removed at any time, with or without cause, by Browne. A Records Director
may be removed at any time, with or without cause, by Records.
5. LEASES. It is expected that Browne and Records will form a
partnership or limited liability company (the "Entity") to which Records
will contribute cash and Browne will contribute improved real property
currently leased to the Company and its subsidiaries. The parties agree
that such leases will not be modified without the prior mutual consent of
Browne and Records.
6. DISCLOSURE OF INFORMATION. Each of Browne and Records
agrees that so long as Browne or Records is entitled to designate a member
of the Company's Board of Directors and for a period of five (5) years
thereafter, neither party will, without the prior written consent of the
Board of the Company, directly or indirectly, in any individual, corporate
or representative capacity whatsoever, reveal, divulge, disclose or
communicate to any person, firm, association, corporation or other entity
in any manner whatsoever information of any kind, nature or description
concerning any matters affecting or relating to the Business which are not
already in the public domain, including without limitation: (i) the names
of any of the prior or present customers or accounts of the Business, (ii)
the prices for which the Company obtains or has obtained, or at which it
sells, or has sold, products of the Business, (iii) the names of the
personnel involved in the Business, (iv) the Company's financial affairs as
they relate to the Business, or (v) the Company's plans, trade secrets, or
other data of any kind, nature or description whatsoever relating to the
Business. Without regard to whether any or all of the foregoing matters
would be deemed confidential, material or important, the parties hereto
stipulate that as among them, the same are important, material and
confidential and materially affect Company's effective and successful
conduct of the Business and its goodwill.
7. COVENANT NOT TO COMPETE. Each of Browne and Records agrees
that so long as Browne or Records is entitled to designate a member of the
Company's Board of Directors and for a period of five (5) years thereafter
without the prior written consent of the Board of the Company, neither
party will, directly or indirectly, (i) through any corporation,
partnership or other entity (a) with respect to which such party or any
Affiliate of such party is now or may hereafter be a director, executive
officer or general partner, or (b) which is now or may hereafter be
otherwise owned or controlled by such party or any Affiliate of such party,
or (ii) as principal, agent, employee, employer, consultant, director,
stockholder or holder of any equity security, partner or in any other
individual or representative capacity whatsoever:
7.1 Call upon, solicit, divert, take away or attempt to
call upon, solicit, divert or take away any then existing customers,
suppliers, businesses, or accounts of the Business, or of the Company in
connection with any business competitive with the Business in any State
where the Company may conduct the Business (collectively, the "Restricted
States"), nor interfere or compete with the Business, or any portion
thereof or the Company in connection with such customers, suppliers,
businesses, and accounts in the Restricted States;
7.2. Knowingly hire, attempt to hire, contact or solicit
with respect to hiring any present employee or future employee or
consultant of the Business or any portion thereof, or the Company;
7.3. Knowingly engage in, or give any advice to, any
person, firm, partnership, association, corporation or other entity engaged
in a business competitive with the Business or any portion thereof in the
Restricted States; or
7.4. Lend credit, money or reputation for the purpose of
establishing or operating a business competitive with the Business or any
portion thereof in the Restricted States.
These covenants are intended to restrict the respective parties
and each of their respective Affiliates, employees, Associates, agents and
representatives from competing in any manner with the Business, any portion
thereof or the Company in the activities carried on by the Company in
connection with the Business or any portion thereof. The parties hereto
agree that prohibitions set forth in this SECTION 7 shall be liberally
interpreted in order to carry out the intents and purposes of this
Agreement. As used in this Agreement, the term "Affiliate" shall mean a
person that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with, the person
specified; and, when used to indicate a relationship with any person, shall
include (i) a corporation or organization of which such person is an
officer or partner or is, directly or indirectly, the beneficial owner of
10 percent or more of any class of equity securities, (ii) any trust or
other estate in which such person has a substantial beneficial interest or
as to which such person serves as trustee or in a similar capacity, and
(iii) any relative or spouse of such person, or any relative of such
spouse, who has the same home as such person or who is a director or
officer of the person or any of its parents or subsidiaries.
8. CORPORATE OPPORTUNITIES. In the event either party is
presented with any opportunity to engage in a business activity which is
closely related to the business in which the Company is engaged or expects
to engage (an "Opportunity"), and if such Opportunity is presented to such
party under circumstances that (a) should reasonably lead such party to
believe that the person offering the Opportunity expects the Opportunity to
be offered to the Company or (b) should reasonably cause such party to
believe that the Opportunity would be of interest to the Company, the party
receiving the Opportunity shall not take advantage of such Opportunity
unless (x) such party first offers the Opportunity to the Board and makes
disclosure to the Board regarding the Opportunity and the interest of such
party in taking advantage of the Opportunity, (y) the Opportunity is
rejected by Board Approval.
9. ENFORCEMENT OF COVENANTS. Each party acknowledges that a
violation or attempted violation on its part of any agreement in SECTIONS
5, 6, 7 AND 8 above will cause such damage to the Company and the Business
which will be irreparable, and accordingly, each party agrees that the
Company shall be entitled as a matter of right to an injunction from any
court of competent jurisdiction, restraining any further violation of such
agreements by such party and its Affiliates, their respective employees,
agents or representatives, either individually or collectively. Each party
further agrees that the five (5) year period of restriction set forth in
SECTIONS 6 AND 7 above shall be tolled during any period of violation
thereof by such party or any Affiliate of such party. Any exercise by the
Company of its rights pursuant to this SECTION 9 shall be cumulative and in
addition to any other remedies to which the Company may be entitled.
10. INVALID PROVISIONS. If any provision hereof is held to be
illegal, invalid or unenforceable under present or future laws effective
during the term hereof, such provisions shall be fully severable; this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect and shall
not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom. Further, in lieu of such illegal, invalid or
unenforceable provision there shall be added automatically as a part hereof
a provision as similar in the terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and
enforceable.
11. WAIVER OF BREACH. The failure of any party to enforce any
of its rights hereunder shall not be deemed to be a waiver of such rights,
unless such waiver is an express written waiver which has been signed by
the waiving party. Waiver of any one breach shall not be deemed to be a
waiver of any other breach of the same or any other provision hereof.
12. ENTIRE AGREEMENT. This Agreement contains the complete
understanding and the entire agreement of the parties hereto with respect
to the subject matter hereof and there are no other agreements,
understandings, restrictions, representations or warranties among the
parties other than those set forth herein or provided for hereby. No
modification or amendment of any of the terms, conditions or provisions in
this Agreement may be made other than by written agreement signed by the
parties hereto.
13. CAPTIONS. The captions, headings and arrangements used in
this Agreement are for convenience only and do not in any way limit or
amplify the terms and provisions hereof.
14. CHOICE OF LAW. The validity of this Agreement, the
construction of its terms and the determination of the rights and duties of
the parties hereto shall, be governed by, and construed in accordance with,
the laws of the State of Oklahoma applicable to contracts made and to be
performed wholly within such State, without regard to the choice of law
rules of the State of Oklahoma.
15. PARTIES IN INTEREST. This Agreement shall bind and inure to
the benefit of the parties hereto and their respective legal
representatives, successors and assigns. This Agreement may not be
transferred or assigned by any party hereto. Nothing in this Agreement is
intended, or shall be construed, to confer upon or to give any person other
than the parties hereto any rights or remedies under, or by reason of, this
Agreement, except as expressly provided for herein.
16. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original for all purposes
and all of which shall be deemed collectively to be one agreement, but in
making proof hereof it shall only be necessary to exhibit one such
counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
COMPANY: BROWNE BOTTLING COMPANY
By: STEPHEN B. BROWNE
Stephen B. Browne, President
FINANCIAL: ALL-AMERICAN BOTTLING FINANCIAL CORP.
By: STEPHEN B. BROWNE
Stephen B. Browne, President
BROWNE:
STEPHEN B. BROWNE
Stephen B. Browne, individually and as a
general partner of Browne Oklahoma
Properties Partnership, Tennessee
Properties Partnership, Browne and Browne
Partners and as Trustee of a trust created
for the benefit of Stephen Virgil Browne
RECORDS: RECORDS INVESTMENTS, L.L.C.
By: G.J. RECORDS, JR.
G.J. Records, Jr., President