EXHIBIT 2.17
EXECUTION COPY
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF OCTOBER 1, 1996
AMONG
ATLANTIC BEVERAGE COMPANY, INC.,
GROGAN'S MERGER CORP.,
GROGAN'S FARM, INC.,
BOBBY L. GROGAN
AND
BETTY RUTH GROGAN
EXECUTION COPY
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "AGREEMENT"), dated as
of the 1st day of October, 1996, by and among GROGAN'S MERGER CORP., a Delaware
corporation ("SUBSIDIARY"), ATLANTIC BEVERAGE COMPANY, INC., a Delaware
corporation and the sole stockholder of Subsidiary ("ABEV") and GROGAN'S FARM,
INC., a Kentucky corporation ("GFI") and BOBBY L. GROGAN and BETTY RUTH GROGAN,
husband and wife and residents of Kentucky and the only stockholders of GFI
("OWNERs"). Owners and GFI are hereinafter referred to collectively as the
"SELLING PARTIES".
R E C I T A L S:
WHEREAS, GFI is engaged in the business (the "BUSINESS") of
manufacturing and marketing prepared food products and related products and
services; and
WHEREAS, the parties deem it desirable, upon the terms and conditions
contained herein, that GFI be merged with and into Subsidiary, with Subsidiary
being the surviving corporation (the "MERGER"); and
WHEREAS, for Federal income taxes it is intended that the Merger
qualify as a "reorganization" within the meaning of Section 368(a)(2)(D) of the
Internal Revenue Code of 1986, as amended (the "CODE").
NOW, THEREFORE, and in consideration of the mutual premises and
representations, warranties and covenants and other good and valuable
consideration, the receipt and sufficiency of which being acknowledged, the
parties agree as follows:
1. MERGER. On the Closing Date (as defined in Section 4 hereof), in
reliance on the representations, warranties, and agreements of the parties, and
on the terms and subject to the conditions set forth herein, GFI will be merged
with and into Subsidiary pursuant to the provisions and with the effect provided
in the general corporation laws of Delaware and Kentucky. The parties shall
execute and deliver appropriate merger documents under the corporate laws of
Delaware and Kentucky, containing the terms provided in this Agreement,
including Certificates of Merger which shall be filed with the Secretaries of
State of Delaware and Kentucky on the Closing Date. The Merger shall become
effective when properly executed Certificates of Merger are so filed.
As a result of the Merger, each share of the common stock of ABEV,
$0.01 par value theretofore authorized (whether issued or unissued) shall remain
unchanged
and shall be deemed to be shares of the common stock of ABEV. Accordingly, each
such share of common stock outstanding on the Closing Date shall continue to be
and remain issued and outstanding shares of common stock of ABEV without any
action on the part of the holders of any such shares of stock. As a result of
the Merger, each share of the common stock of the Subsidiary, $0.001 par value
theretofore authorized (whether issued or unissued) shall remain unchanged and
shall be deemed to be shares of the common stock of the Subsidiary as the
surviving corporation. Accordingly, each such share of common stock outstanding
on the Closing Date shall continue to be and remain issued and outstanding
shares of common stock of the Subsidiary as the surviving corporation without
any action on the part of the holders of any such shares of stock.
2. CONVERSION OF SHARES. As a result of the Merger and without any
action on the part of Owners, as the holders of all of the issued and
outstanding shares of capital stock of GFI (collectively, the "SHARES"), all of
the Shares and all rights in respect thereof shall (subject to ABEV's and
Subsidiary's rights to indemnification as provided in Section 13 hereof) be
exchanged for and converted into an aggregate of Five Hundred Seventy Three
Thousand Eight Hundred Ten (573,810) shares of ABEV's common stock (the "ABEV
STOCK"), Subsidiary's promissory note (the "NOTE") in the principal amount of
$200,000 in the form of SCHEDULE A, attached hereto, and cash (the "CASH") in
the amount of SEVEN HUNDRED THOUSAND DOLLARS ($700,000.00) plus interest thereon
at the rate of seven per cent (7%) per annum accrued from October 1, 1996 to the
Closing Date plus a reimbursement (the "REIMBURSEMENT") of all funds incurred by
GFI in connection with work done with respect to GFI's cooking line, which
expenses shall first be approved by ABEV, payable as set forth below. The ABEV
Stock, the Cash and the Reimbursement is hereinafter sometimes referred to
together as the "MERGER CONSIDERATION".
Each share of ABEV Stock shall be fully paid and non-assessable. From
and after the Closing, the certificates representing the Shares shall evidence
ownership in ABEV and the right to receive the Cash and the Reimbursement on the
basis set forth in the foregoing paragraph, and the conversion shall be complete
and effective at the Closing without regard to the date on which the Shares are
surrendered for exchange for certificates representing the ABEV Stock. The ABEV
Stock will be subject to the restrictions and conditions set forth in Section
121 hereof and the certificates representing the ABEV Stock shall contain a
legend to reflect such restrictions and conditions.
3. DELIVERY OF MERGER CONSIDERATION. On the terms and subject to the
conditions herein, the Cash and the Reimbursement shall be delivered to the
Selling Parties in immediately available funds at the Closing, and the
certificates representing the ABEV Stock shall be delivered within ten (10)
business days after the Closing Date.
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4. CLOSING. The consummation of the transactions contemplated hereby
(the "CLOSING") shall take place no earlier than ten (10) days after all
conditions precedent have been satisfied, but no later than sixty (60) days
after the date hereof, at 9:00 A.M. (the "CLOSING DATE") at the law offices of
the Selling Parties' counsel in Paducah, Kentucky, or otherwise, on such other
date or place as the parties hereto may mutually agree. The transactions shall
be effective for financial purposes as if the ownership of the shares changed
hands as of 8:00 a.m. on October 1, 1996, at which time Subsidiary shall take
control of the Business, and all decisions of any nature in respect thereof. The
Closing shall occur concurrently with the transactions contemplated by each of
(i) the certain Asset Purchase Agreement dated September 27, 1996 among ABEV,
Grogan's Sausage, Inc., a Kentucky corporation and Owners (the "APA"), and (ii)
the certain Real Estate Purchase Agreement dated September 27, 1996 among
Subsidiary and Owners (the "RPA"). This Agreement, the APA, the RPA and all
other documents and instruments delivered in connection therewith are
hereinafter collectively referred to together as the "TRANSACTION DOCUMENTS".
5. THE SELLING PARTIES' REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. Each of the Selling Parties hereby jointly and severally, with the
other Selling Parties, represents and warrants to, covenants and agrees with,
ABEV and Subsidiary, now and as of the Closing Date, as follows:
A. Organization, Standing and Power. GFI is a corporation duly
organized, validly existing and in good standing under the laws of Kentucky.
GFI's federal employer identification number, state identification number for
sales and tax purposes and all similar identification numbers are set forth on
PART A of EXHIBIT 5A, attached hereto. GFI has all requisite corporate power and
authority to own, lease and operate the assets owned, leased or operated by it
(collectively, the "Assets") and to carry on the Business as now being conducted
in the manner that, and in the places in which, the Business is now being
conducted. Neither the nature of the Business nor the ownership, operation or
leasing of real estate or personal property by GFI requires it to qualify as a
foreign corporation in any jurisdiction other than jurisdictions in which the
failure to so qualify would not materially and adversely affect the Business or
any of the Assets. GFI is not qualified to transact business as a foreign
corporation in any state. GFI does not conduct any business or own or lease any
asset or property of any nature outside of the United States. Each of the
Selling Parties have the full power and authority and legal capacity to enter
into and deliver this Agreement, participate in the Merger and perform all other
acts necessary or appropriate to consummate all of the transactions contemplated
hereby. GFI does not now and has never had any subsidiaries. The Assets are
described in PART B of EXHIBIT 5A. GFI is and has always been an "S"
corporation.
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B. Capital Structure; Ownership of Assets and Related Matters.
(i) The capital structure of GFI, including the
number of authorized, issued and outstanding shares of capital stock
are listed on PART A of EXHIBIT 5B(i), attached hereto. Owners own,
both beneficially and of record, all of the issued and outstanding
shares of capital stock, equity or equity equivalents in and to GFI. At
the Closing the Shares will be free and clear of all Encumbrances (as
defined below) of any nature whatsoever. In addition, GFI has and will
have, at Closing, good and marketable title to, or a valid and
transferable leasehold interest in, all of the Assets, except for such
Assets as may be sold or otherwise disposed of between the date hereof
and the Closing Date in the ordinary course of business. No other
"PERSON" (as defined in Section 15M hereof) has any fee, leasehold or
equitable interest in and to the Assets, except as set forth on PART B
of EXHIBIT 5B(i). Except as set forth on PART B of EXHIBIT 5B(i), on
the Closing Date, the Assets will be free and clear of all of the
following (hereinafter collectively referred to as "ENCUMBRANCES"):
security interests, liens, pledges, claims, charges, escrows,
encumbrances, options, rights of first refusal, mortgages, indentures,
security agreements or other agreements, arrangements, contracts,
commitments, understandings or obligations, whether written or oral,
encumbering title in any way, other than the Encumbrances created
hereby. None of the Selling Parties has any direct or indirect
financial stake in any Person which has an interest in any assets used
in conducting the Business, except for Owners' fee interest in the real
property located at Route 2, Arlington, KY 42021.
(ii) Except for this Agreement, there are no
outstanding options, warrants or other rights, contracts, commitments,
agreements, understandings, arrangements or restrictions relating to
the purchase or acquisition of any shares of capital stock or other
equity securities or interests of any nature of GFI.
(iii) GFI neither owns nor has ever owned, shares of
any class of capital stock of any other corporation and does not have
any interest in any other entity and there are no contracts,
commitments, agreements, understandings or arrangements relating to
such.
(iv) GFI has never assumed or succeeded to the
liabilities of any Person, whether by operation of law or otherwise,
and it has never been known by any other name or done business under
any other name. EXCEPT FOR SALES OF FINISHED GOODS IN AN AMOUNT NOT
EXCEEDING $600,000 IN THE LAST TWELVE MONTHS, THE BUSINESS DOES NOT
INCLUDE, AND HAS NEVER INCLUDED, THE SALE OF ANY PRODUCT OF ANY NATURE
TO ANY UNAFFILIATED THIRD PARTY, IT BEING REPRESENTED THAT,
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EXCEPT AS SET FORTH ABOVE, SALES OF PRODUCTS ARE UNDERTAKEN ONLY BY
GROGAN'S SAUSAGE, INC.
(v) Except for sales of inventory in the ordinary
course of business, and the rights of ABEV and Subsidiary hereunder,
there are no outstanding options, warrants or rights to purchase or
acquire any interest whatsoever in any of the Assets, and there are no
contracts, commitments, agreements, understandings, arrangements or
restrictions relating to the ownership or operation of any of the
Assets.
(vi) The Assets constitute all of the property
necessary for the conduct of the Business in the manner in which and to
the extent to which it is currently being conducted. To Owners'
knowledge, there is no fact, event or action which could result in an
adverse change in the Business, prospects, financial condition or
results of operations or the operation or ownership of the Assets by
Subsidiary following the Closing.
(vii) The Assets owned or leased by GFI on the date
hereof constitute, and will constitute at Closing, all of the
properties and assets used in the conduct of the Business on the date
hereof, are in good working condition, have been maintained in
accordance with industry standards, and are sufficient to conduct the
Business in a manner consistent with past practices. The Selling
Parties know of no condition which, either alone or with other
conditions, interferes with the economic value of any of the Assets or
the use thereof in the manner used by GFI in the Business.
(viii) The Assets do not include any interest of any
nature in any parcel of real property, except for the leases described
on EXHIBIT 5B(viii) (collectively, the "REAL ESTATE").
C. Authorization. This Agreement and all writings relating
hereto to be executed and delivered by each of the Selling Parties have been
duly authorized by all necessary action and constitute the valid and binding
obligations of each the Selling Parties, enforceable in accordance with their
respective terms. The individuals executing this Agreement and the other
documents executed in connection herewith, individually and on behalf of GFI,
have been duly authorized and have the legal capacity to execute all of such
documents in such capacities. Neither the execution and delivery hereof nor any
writing relating hereto nor the consummation by any of the Selling Parties of
the transactions contemplated hereby or thereby, nor compliance with any of the
provisions hereof or thereof, will: (i) conflict with or result in a breach of
GFI's Articles or Certificate of Incorporation or By-Laws; (ii) violate any
statute, law, rule or regulation or any order, writ, injunction or decree of any
court or governmental authority; (iii) violate or conflict with or constitute a
default under (or give rise to any right of termination, modification,
cancellation or acceleration under), any agreement or writing of any
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nature to which any of the Selling Parties is a party or by which the Assets may
be bound or affected, or result in the creation of any Encumbrance against or
upon any of the Shares or Assets under any agreement or writing to which any of
the Selling Parties is a party or by which any of them or their assets may be
bound or affected, or (iv) impair or in any way limit any governmental or
official license, approval, permit or authorization of GFI. Other than as set
forth on EXHIBIT 5C, attached hereto, no consent or approval of or notification
to any Person is necessary or required in connection with the execution and
delivery by any of the Selling Parties of this Agreement or any writing relating
hereto or the consummation of the transactions contemplated hereby or thereby.
D. Financial Statements.
(i) EXHIBIT 5D hereto consists of the balance sheets
and the related statements of income, changes in shareholders' equity
and accountant's substantially omitted disclosure compilation report
thereon, if applicable, as at and for the fiscal years ended December
31, 1994 and 1995, and all interim statements prepared to date for the
fiscal year to end December 31, 1996 (collectively and as updated, the
"HISTORICAL FINANCIALS"). EXHIBIT 5D shall be updated as interim
statements are prepared. The Historical Financials are true, correct
and complete and present fairly the financial position of GFI and the
results of its operations and changes in shareholders' equity as at the
dates thereof and for the periods covered thereby, do not include or
omit to state any material fact which renders them misleading, and have
been prepared in conformity with generally accepted accounting
principles applied on a consistent basis, except as may be disclosed in
the reports relating thereto. At the Closing, the Selling Parties shall
deliver to ABEV and Subsidiary a balance sheet dated as of the end of
the accounting period before the Closing Date (the "CLOSING BALANCE
SHEET") based on the best knowledge and good faith of the Owners, which
shall be prepared on a basis consistent with the Historical Financials
and in accordance with the provisions hereof. The Closing Balance Sheet
shall be certified by all of the Selling Parties as showing the
financial position of GFI as of that date.
(ii) Except as disclosed therein, the statements of
income included in the Historical Financials do not contain any items
of special or nonrecurring income, and the balance sheets included in
the Historical Financials do not, and the Closing Balance Sheet will
not, reflect any write-up or revaluation increasing the book value of
any asset, other than adjustments required by ABEV and Subsidiary's
outside auditors in the determination of the Merger Consideration, and
as disclosed thereon.
(iii) All pro forma adjustments made by any of the
Selling Parties or on any of the Selling Parties' behalf in any sales
brochure or other
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document or literature delivered to ABEV and Subsidiary as part of
their review of the Business are reasonable, appropriate and adequate.
E. Liabilities.
(i) The liabilities of GFI on the Historical
Financials consisted, and the liabilities on the Closing Balance Sheet
will consist, solely of obligations and liabilities incurred in the
ordinary and regular course of Business to Persons which are not
affiliated with any of the Selling Parties, except for lease payments
in connection with the Real Estate.
(ii) As of the Closing, GFI will have no material and
adverse liability or obligation of any nature whatsoever, including,
without limitation, known or unknown, fixed or contingent, accrued,
absolute, matured or unmatured, or any "LOSS CONTINGENCIES" considered
"PROBABLE" or "REASONABLY POSSIBLE" within the meaning of the Financial
Accounting Standards Board's Statement of Financial Accounting
Standards No. 5, which were not or will not be recorded on the
Historical Financials, the Closing Balance Sheet or on EXHIBIT 5E(ii)
hereof, it being the intent of the parties that every "material"
liability or obligation of every nature (including those liabilities or
obligations commonly referred to as "off-balance sheet" liabilities) be
properly disclosed to ABEV and Subsidiary, and properly accrued on
either the Historical Financials or the Closing Balance Sheet or
disclosed herein, as the case may be. All contingent liabilities either
not disclosed or disclosed on EXHIBIT 5E(ii) shall be for the account
of the Selling Parties for purposes of determining indemnification
hereunder, and, if any such liability is paid by ABEV and Subsidiary,
then, such payment shall be deemed accrued on the books of the Business
as of September 30, 1996 for the purpose of retroactively adjusting the
Merger Consideration. Furthermore, should such undisclosed liability be
deemed a recurring operating expense of the Business, then for
indemnification purposes and otherwise, the Merger Consideration shall
be deemed to have been reduced Four Dollars ($4.00) for every dollar of
such operating expense, payable by a cash payment to Subsidiary.
(iii) All reserves and allowances included or to be
included in the Historical Financials and the Closing Balance Sheet
are, and will be, adequate, appropriate and reasonable (in accordance
with generally accepted accounting principles), as may be required by
ABEV and Subsidiary's outside auditors.
(iv) EXHIBIT 5E(iv) is a complete list (the
"PAYABLES' LIST"), as sworn to by the Selling Parties, of every
creditor of GFI, including taxing authorities (whether the liability to
such creditor is accrued, absolute, contingent or otherwise), listed by
name, address, amount of liability to such
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creditor, and whether such liability is disputed. The Payables' List
shall be updated as of the Closing Date.
F. Absence of Changes. Except as otherwise listed on EXHIBIT
5F hereto or as expressly permitted to satisfy the conditions precedent herein,
the Business has been operated only in the ordinary and regular course and there
has not been, since June 30, 1996 and through the Closing Date there will not
be, with respect to GFI: (i) any material and adverse change in its condition,
financial or otherwise; (ii) any material and adverse damage, destruction or
loss, whether or not covered by insurance; (iii) other than for purchases of
inventory in the ordinary course of business, the incurring of any obligation or
liability of any nature (whether absolute, accrued, contingent or otherwise and
whether due or to become due) in excess of $10,000.00; (iv) any transfer or
application of any assets of GFI to the payment of any amount payable to or for
its benefit or any of the following Persons ("SELLING PARTIES' AFFILIATES"): any
member of the family of Owners or any Person which is controlled, directly or
indirectly, by either Owner or by any member of the family of either Owner; (v)
any declaration, setting aside or payment of any dividend or other distribution
in respect of any shares of capital stock of GFI, or any direct or indirect
redemption, purchase or other acquisition of any such stock; (vi) any organized
labor negotiations, strike or work stoppage affecting the Business or any threat
of the foregoing; (vii) any sale, transfer or other disposition of any tangible
or intangible asset of GFI to any Person (except for (a) payments of third party
obligations incurred in the ordinary and regular course of business, in
accordance with the regular payment practice of GFI, and (b) sales of inventory
in the ordinary and regular course of business); (viii) any termination or
waiver of any rights of material value to the Business; (ix) the adoption of any
statute, rule, regulation or order which materially and adversely affects the
Business; (x) any increase in the compensation of, or benefits for, officers,
employees, independent contractors or other Persons performing services for GFI
(including, without limitation, any increase pursuant to any bonus, pension,
profit-sharing or other plan or commitment), having annual remuneration in
excess of $40,000, except for increases in accordance with GFI's normal salary
administration policies; (xi) other than improvements to the Real Estate, any
capital expenditure or commitment in excess of $20,000.00 for property, plant or
equipment; (xii) any forward purchase commitments not completed by the Closing
Date involving more than $20,000.00; (xiii) any material change in the
accounting methods or practices followed by GFI or any change in depreciation or
amortization policies or rates theretofore adopted; (xiv) any payment of any
liability or obligation of GFI in excess of $5,000.00 sooner than in accordance
with its usual or customary practices; (xv) any sale of goods or services to any
customer where the payment for such goods or services allows for the payment
therefor more than fifteen (15) days after the goods or services have been
provided to such customer; or (xvi) any commitment, obligation or understanding
to do any of the foregoing.
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G. Tax Matters. GFI has filed, and will timely file, all tax
returns and reports required to be filed and, in respect of any period ending
prior to or which includes the Closing Date, has paid, or has set up an adequate
reserve for the payment of, all taxes required to be paid or anticipated to be
payable, which reserve either is reflected in the Historical Financials or will
be reflected in the Closing Balance Sheet, as the case may be. All tax returns
of GFI for the last five (5) years have been delivered to ABEV and Subsidiary,
and there have been no audits of such returns. GFI has no liability for any
taxes in excess of the amounts so paid or reserves so established. GFI has
properly withheld and paid, and will properly withhold and pay, all payroll or
similar taxes. GFI is not delinquent in the payment of any tax, assessment,
penalties or interest and it has not requested any extension of time within
which to file any tax returns in respect of any fiscal year which have not since
been filed. All tax returns filed or to be filed are, or will be, true, complete
and correct. There are no tax liens on any of the Assets or Shares. No
deficiencies for any tax, assessment, penalties or interest have been proposed,
asserted, assessed or, to the knowledge of Owners, threatened against GFI which
would not be covered by existing reserves and, as of the date hereof, no
requests for waiver of the time to assess any such tax are pending. GFI is not
currently involved in an audit and, to the knowledge of Owners, none are
threatened. None of the Selling Parties have given or been requested to give
waivers of any statute of limitations relating to the assessment or payment of
any taxes for any taxable period. As of the Closing Date, all taxes collected
under color of law will have been remitted to the proper taxing jurisdiction.
For purposes hereof, the term "tax" shall include all Federal, state, local and
foreign taxes, assessments, and all franchise, sales, use, occupation, property,
excise or other taxes of any nature whatsoever, and governmental charges,
including penalties and interest relating to the foregoing. GFI does not have,
and will not have, any obligation of any nature to indemnify either Owner for
tax liabilities owing due to the intentional acts of either Owner.
H. Property Owned, Leased or Licensed.
(i) PART A of EXHIBIT 5H(i) contains a list of all
real estate leased by GFI (collectively, the "REAL ESTATE") and the
termination date or notice requirement with respect to termination,
annual rental and renewal or purchase options. GFI does not own any fee
interest in any real property and has no understandings, agreements or
commitments to purchase any.
(a) True and complete copies of all leases
relating to the Real Estate have been delivered to ABEV and Subsidiary.
The Selling Parties know of no interior or exterior structural defects
or other defects in the buildings or improvements thereto or in the
plumbing, electrical, mechanical, heating, ventilating,
air-conditioning, sprinkler or other systems thereof. To the knowledge
of Owners, PART B of EXHIBIT 5H(i), or the environmental assessment or
an update thereof to be delivered, at Owners' cost, to ABEV and
Subsidiary (along with the update, the "ENVIRONMENTAL
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REPORT") with respect to the Real Estate, sets forth the location of
all underground or below grade storage tanks, pumps, piping,
dispensers, or any retention pits located on any part of the Real
Estate, and a list of all documents, notices, test reports or other
information relating thereto including a description of substances
stored therein. In addition, at the Closing, each of the Selling
Parties will deliver a Certificate (the "ENVIRONMENTAL CERTIFICATE")
which details all known or suspected environmental concerns with
respect to the Real Estate and the operation of the Business not
expressly detailed in the Environmental Report or on PARt B of EXHIBIT
5H(i). The Environmental Certificate shall also detail the sources of
information utilized by the Selling Parties therein.
(b) With respect to the Real Estate: the
lessor has good and indefeasible title in fee simple thereto and owns
all buildings and other structures (excluding equipment and other
fixtures which are owned by GFI) thereon; there are no unrecorded
leases, Encumbrances, restrictions or other matters materially
affecting title or the current use thereof and no Person (other than
the lessor) has the right to impose or claim any interest whatsoever
thereon; and, there are no covenants, conditions, restrictions or other
title exceptions applicable thereto which are presently violated or
which adversely affect the marketability thereof and there are no
defects therein or thereon.
(c) To Owners' knowledge, the Real Estate is
not subject to or threatened with any requests, applications or
proceedings to condemn, rezone or demolish all or any portion thereof.
GFI has obtained all permits and certificates necessary for the use and
occupancy thereof and the improvements thereon and such use and
occupancy is and has been in full compliance with all federal, state
and local laws, rules and regulations. To the knowledge of Owners: (i)
all water, sewer, gas, electric, telephone, drainage and other utility
equipment, air conditioning, heating, ventilation and all other
facilities and services (collectively, the "SERVICES") required by law
or necessary for the operation of the Real Estate as it is now being
operated are installed and connected pursuant to valid permits, are
adequate to service such Real Estate, and are in good operating
condition and repair, and (ii) no material fact or condition exists
which would result in the termination or impairment in the furnishing
of any Service.
(d) None of the Selling Parties have
received notice of and have no awareness of any currently due, pending
or threatened general or special assessments, taxes, litigation or
governmental proceedings against or affecting or which may affect the
Real Estate. The most recent taxes and assessments with respect to the
Real Estate are set forth in PART C of EXHIBIT 5H(i).
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(e) To Owners' knowledge: each parcel of
Real Estate consists of one contiguous parcel, abuts on and has direct
vehicular access to a dedicated thoroughfare; and none of the Real
Estate is in an area designated as being subject to flood hazards or
risks.
(f) With respect to the leases covering the
Real Estate, such leases are in full force and effect, are valid and
binding obligations of the parties thereto, have not been amended and
are enforceable against the parties thereto in accordance with the
terms thereof. There are no defaults (alleged or actual) by either
party to such leases and no event has occurred which with due notice or
lapse of time or both would constitute a default. None of the Selling
Parties has any obligation to pay brokerage commissions or other
compensation in connection with such leases.
(ii) EXHIBIt 5H(ii) contains a list of each item of
machinery, equipment, tooling, office furniture, automobiles, trucks
and other fixed assets owned or leased by GFI (collectively, the "M&E")
and all locations thereof. EXHIBIT 5H(ii) also contains a list and
brief description of each lease or other agreement under which GFI pays
in excess of $5,000.00 annually to lease, license, hold or operate any
of the M&E. Copies of all leases relating to any item of M&E have been
delivered to ABEV and Subsidiary. The M&E will, individually or in the
aggregate, be fit for such assets' intended use as of the Closing Date.
(iii) None of the Selling Parties have any right,
title or interest in and to any (a) non-governmental licenses,
franchises, distribution or other similar rights, or (b) trademarks,
trade names (except for GFI's corporate name and trade name and
recipes), service marks, copyrights, know-how, software, written,
magnetic and storage media, inventions, designs, models, processes,
patents or any other proprietary rights and applications for any of the
foregoing. With respect to GFI's trade name and recipes, none of the
Selling Parties pay any royalty with respect to any of them, has the
exclusive right to bring actions for the infringement thereof and has
not granted any rights of any nature in any of them to any Person. No
product made or sold by GFI or for its benefit violates any license,
franchise or distribution agreement or infringes any trademark, trade
name, service mark, copyright, know-how, trade secret or patent of
another Person.
I. Insurance. GFI has maintained and presently maintains in
effect insurance covering the Assets and the Business from reasonably
foreseeable losses and any liabilities or risks relating thereto and such
insurance coverage shall be maintained by GFI through the Closing Date. Exhibit
5I hereto sets forth a complete and accurate schedule (including the type of
policy, the policy number, the limits of coverage, the carrier, the insurance
agent or broker and the expiration date) of all insurance policies, letters of
credit or performance bonds held or issued
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by or on behalf of GFI and now in force and those contemplated (including,
without limitation, comprehensive general liability, personal liability,
comprehensive general casualty and extended coverage, automobile, machinery,
fire and lightning, title, endowment, life, workers' compensation and fidelity
bond coverage) (collectively, the "INSURANCE POLICIES") and insurance agents
and/or brokers providing such insurance coverage. Except as disclosed on EXHIBIT
5I, such coverage fully complies with all contractual requirements of the
Business and GFI has not forfeited or waived any claim under any Insurance
Policies and each has fully complied with the terms and conditions thereof. The
products liability, personal injury and property damage insurance maintained has
been on an "OCCURRENCE" basis during the five-year period prior to the Closing
Date. EXHIBIT 5K sets forth all property damage or personal injury claims
asserted against GFI during the past three years, or otherwise still pending.
Except as otherwise set forth on EXHIBIT 5K, all of such claims have been and
are being defended by insurance carriers or indemnitors without reservation and
are or will be completely covered by the Insurance Policies. None of the Selling
Parties has received notification, either directly or indirectly, from any
insurance carrier, denying or disputing any claim made by GFI, denying or
disputing any coverage for any such claim, denying or disputing the amount of
any claim, or regarding the possible termination, cancellation or amendment of
or premium increase with respect to any Insurance Policies. GFI has no pending
or anticipated claim against any of the insurance carriers under any of such
policies and there has been no, to the knowledge of Owners, actual or alleged,
occurrence of any kind which may give rise to any such claim.
J. Agreements, Etc. EXHIBIT 5J contains a list of all written,
and brief description of all oral, contracts, agreements, leases,
understandings, commitments, licenses, letters of credit, instruments and
obligations, the open purchase and sales orders journals, if any, as of the
beginning of business on the date hereof (which journals shall be updated as of
the Closing Date), and other instruments and obligations not listed on another
Exhibit or schedule hereto (unless excluded therefrom due to the dollar amount
involved) affecting the Business in any manner whatsoever (collectively, the
"CONTRACTS"). With respect to the Contracts, except as otherwise set forth on
such EXHIBIT 5J: (i) all are in full force and effect, have not been modified or
amended, and constitute legal, valid and binding obligations of the respective
parties thereto; (ii) GFI has, in all material respects, performed all of the
obligations required to be performed by it to date and is not in default or, to
the Owners' knowledge, alleged, to be in default in any respect thereunder, no
party has been released from any obligation thereto and there exists no event,
condition or occurrence which, with or without notice, lapse of time or the
occurrence of any other event, would constitute a default thereunder by GFI or,
to Owners' knowledge, would constitute a default on the part of any other party
thereto; (iii) the continuation, validity and effectiveness under the current
terms thereof (including the current rentals under any leases or licenses) will
in no way be affected by the Merger or other transactions contemplated hereby,
or, if any would
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be affected without a consent or waiver, the Selling Parties shall cause an
appropriate consent or waiver respecting such transfer to be delivered to ABEV
and Subsidiary prior to the Closing Date at no cost or other adverse
consequences to GFI, ABEV or Subsidiary; and (iv) none require the payment or
performance of material considerations by GFI on or after the Closing Date
without the receipt of consideration of commensurate value, within the meaning
of applicable fraudulent conveyance laws or decisions. The Selling Parties have
furnished to ABEV and Subsidiary complete copies of all written Contracts and
complete written summaries of all oral Contracts described on any Exhibit
hereto. GFI is not restricted by any agreement to which it is a party from
carrying on the Business anywhere in the world. The Contracts confer on GFI all
rights necessary to enable it to conduct the Business as now being conducted (as
well as any expansion thereof now contemplated) and none imposes upon it any
unduly or extraordinary burdensome obligation.
K. Litigation and Claims, Etc. Except as set forth on Exhibit
5K, there are no personal injury, product liability or other actions, suits,
claims, investigations or legal or administrative or arbitration proceedings of
any nature pending or, to the knowledge of Owners, threatened, against or
involving any of the Selling Parties, the Assets, the Business or products,
whether at law or in equity, or before or by any foreign, federal, state,
municipal or other governmental or quasi-governmental instrumentality. Attached
to EXHIBIT 5K are (i) all service bulletins or similar notices to customers,
vendors or the public at-large and other Persons which discusses or notifies
such Persons about problems with GFI's products, and (ii) all notes from all
technical or engineering meetings (or the like) which relate in any way to
problems or potential problems of any nature with respect to such products. To
the knowledge of Owners, there is no basis for any other such action, suit,
claim, investigation or proceeding, and except as set forth on EXHIBIT 5K, none
of the foregoing has been pending during the last three years. There are no
outstanding orders, decrees or stipulations issued by any foreign, local, state
or federal judicial or governmental or quasi-governmental authority to which any
of the Selling Parties is or was a party or by which any is or was bound. The
insurance coverages in the Insurance Policies are adequate in character and
amount to pay all liabilities relating to the matters described in EXHIBIT 5K.
EXHIBIT 5K also details all "recalls" or similar measures or public notices
which occurred on or after January 1, 1995, and details GFI's system for
handling claims, whether under warranties or otherwise, and also lists all such
claims made in the last three years.
L. Compliance; Governmental Authorizations; OSHA.
(i) GFI is in compliance, in all material respects,
with all federal, state and local laws, ordinances, regulations,
permits, licenses, decrees, judgments and orders applicable to the
Business, and has all foreign and United States, federal, state and
local governmental licenses and permits
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necessary for the conduct of the Business as presently conducted or
contemplated; such licenses and permits are legally valid and in full
force and effect; no violations are or have been recorded in respect of
any thereof; and no proceeding is pending or, to the knowledge of
Owners, threatened, to revoke or limit any thereof. EXHIBIT 5L contains
a list and description (including subject matter and termination
information) of: (a) all such governmental licenses and permits (none
of which will be affected by the Merger or other transactions
contemplated hereby, unless otherwise indicated on said Exhibit); and
(b) all consents, orders, decrees and other compliance agreements under
which GFI is operating or bound, copies of all of which have been
furnished to ABEV and Subsidiary.
(ii) The Selling Parties have furnished to ABEV and
Subsidiary copies of all written reports in their control or possession
of inspections relating to the Business and properties from January 1,
1994 through the date hereof under the Occupational Safety and Health
Administration Act, as amended, or comparable state legislation and all
other applicable foreign and United States federal, state and local
health and safety laws and regulations or any other law, rule or
regulation that either GFI or the Business is subject. To the knowledge
of Owners, there have been no other similar inspections. The
deficiencies, if any, noted on such reports or any deficiencies noted
by inspection through the Closing Date have been corrected, or will be
corrected by the Closing. To the knowledge of Owners, there is no other
safety, health, environmental or other material problem or concern
relating to the Business.
M. Inventories. The inventories of GFI included on the
Historical Financials and to be included on the Closing Balance Sheet are and
will be valued with respect to each category of inventory at the lower of cost
or market value, net of reserves. Such inventories are all usable in the
ordinary and regular course of the Business, and are fit and sufficient for the
purpose for which they were purchased. All excess and obsolete items have been
written down to net realizable value, or written off, and all obsolete, damaged
or spoiled items have been destroyed. The inventories which were in transit on
the date hereof, and the inventories which are in transit on the Closing Date do
not and will not include any items which are damaged, spoiled or below standard
quality (except items for which GFI will receive credit or replacement from the
manufacturer or shipper thereof). GFI has exercised, and through the Closing
Date will exercise, its best efforts to have, the proper amount of inventories
to conduct the Business consistent with past practices. All inventories are
located at the Real Estate. GFI's inventories do not have any allocation of
overhead except as specifically disclosed on EXHIBIT 5M. Except as specifically
disclosed on EXHIBIT 5M, the inventory consists of items of quality and quantity
usable in the normal course of the Business. The Selling Parties will provide to
ABEV and Subsidiary a list of all inventory (the "INVENTORY LIST") on hand as of
the end of the monthly accounting period ending closest to the
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Closing Date, which list will comply with all of the requirements contained in
Sections 5D and 5M hereof.
N. Employee Matters. GFI has generally enjoyed a good
employer-employee relationship with their respective employees. GFI has accrued
on the Historical Financials, and will accrue, adequate reserves on the Closing
Balance Sheet, for all wages, salaries, contractual bonuses, vacation pay and
other direct and indirect compensation earned by, or accrued for the benefit of,
all employees (whether or not vested or payable by such date). The Closing
Balance Sheet will also include accruals for year end contractual bonuses,
pension and profit-sharing contributions, and any other adjustments which might
normally be made only at year end. Upon termination of the employment of any
employee of GFI, none of it, ABEV or Subsidiary will incur any liability for any
severance or termination pay, pension or profit-sharing benefit or other similar
payment under GFI's practices or policies in effect on or prior to the Closing
Date. Except as set forth on EXHIBIT 5K, there are no controversies pending or,
to the knowledge of Owners, threatened by any of GFI's employees, former
employees, job applicants or any association, group or other Person or Persons
regarding any of the Selling Parties' employment practices or policies.
GFI is not a party to or bound by any employment or consulting
agreement, any collective bargaining agreement or any other agreement with a
labor union. There is not pending or, to the knowledge of Owners, threatened any
labor dispute, strike or work stoppage (whether by their own employees or
another Person's employees) which may affect the Business or which may interfere
with its continued operation. GFI has complied with all laws, rules and
regulations in connection with all employment matters, including, without
limitation, hiring and firing of employees, wage matters, collective bargaining
matters, and matters relating to the National Labor Relations Act and the
Workers Adjustment and Retraining Notification Act, and to Owners' knowledge,
there are no activities or proceedings of any labor union to organize any
employees thereof. During the twelve-month period preceding the date hereof,
there have not been any significant labor troubles involving employees of GFI
and there are no significant threats of work stoppages by such employees.
EXHIBIT 5N contains a list of all directors, officers, managers,
employees, consultants, independent contractors and other Persons rendering any
service to GFI who, during the 1996 fiscal year, are expected to receive
remuneration in excess of $25,000, together with the current job title and
aggregate remuneration rate (bonus and salary) for each such person, as well as
the total remuneration paid to date and expected amount of remuneration in 1996.
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O. Employee Benefit Plans.
(i) Except as is described in EXHIBIT 5O(i), neither
any of the Selling Parties nor any current or former Plan Affiliate of
any of the Selling Parties has at any time had any liability with
respect to any of the following (whether written, unwritten or
terminated): (a) any "employee welfare benefit plan," as defined in
Section 3(1) of ERISA, (b) any "employee pension benefit plan," as
defined in Section 3(2) of ERISA, or (c) any other plan, policy,
program, arrangement or agreement providing employee benefits (or other
similar benefits) to former employees, dependents, beneficiaries,
directors or independent contractors, including, but not limited to,
any bonus or incentive plan, stock option, restricted stock, stock
bonus plan, salary reduction agreement, change-of-control agreement,
severance agreement, material fringe benefit program, short-term
disability plan or sick leave, personnel policy, vacation time, holiday
pay, moving expense reimbursement program, employment agreement or
consulting agreement which could result in ABEV or Subsidiary having
any liability, whether direct or indirect.
(ii) As used herein, the following terms shall have
the following respective meanings: (a) the term "EMPLOYEE PLAN" shall
mean any plan, policy, program, arrangement or agreement described in
Section 50(i), whether or not scheduled; and (b) the term "ERISA" shall
mean the Employee Retirement Income Security Act of 1974, as amended.
(iii) With respect to any person or entity ("FIRST
PERSON"), the term "PLAN AFFILIATE" shall mean any other person or
entity with whom the First Person constitutes all or part of a
controlled group, or which would be treated with the First Person as
under common control or whose employees would be treated as employed by
the First Person, under Section 414 of the Code and any regulations,
administrative rulings and case law interpreting the foregoing.
(iv) No Employee Plan (a) is subject to Title IV of
ERISA, (b) is a "multiemployer plan" as defined in Section 4001 of
ERISA, a "multiemployer plan" within the meaning of Section 3(37) of
ERISA, a "multiple employer plan" within the meaning of Code Section
413(c) or a "multiple employer welfare arrangement" within the meaning
of Section 3(40) of ERISA, or (c) provides any welfare-type benefits
for retirees or former employees, or their spouses or dependents
(except for limited continued medical benefit coverage for former
employees, their spouses and other dependents as required to be
provided under Section 4980B of the Code).
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(v) A complete copy of each written Employee Plan as
amended to the Closing, together with Form 5500 Annual Reports for the
three (3) most recent plan years, if any; a copy of any funding vehicle
with respect to each such plan; a copy of the most recent determination
letter with respect to such plan (if any); have been delivered to ABEV
and Subsidiary. A description of the material terms of any unwritten
Employee Plan is set forth in EXHIBIT 5O(v). No person has made any
statement, whether oral or in writing, regarding any Employee Plan
which will result in any liability to ABEV or Subsidiary in excess of
any liability previously disclosed pursuant to this paragraph.
(vi) Each Employee Plan (a) has been and currently
complies in form and in operation in all respects with all applicable
requirements of ERISA and the Code and any other applicable Federal and
state laws, (b) has been and is operated and administered in compliance
with its terms (except as otherwise required by law); (c) has been and
is operated in compliance with the applicable requirements of the Code
and ERISA in such a manner as to qualify, where appropriate, for both
Federal and state purposes, for income tax exclusions to its
participants, tax-exempt income for its funding vehicle, and the
allowance of deductions and credits with respect to contributions
thereto; and (d) where applicable, has received a favorable
determination letter from the Internal Revenue Service.
(vii) With respect to each Employee Plan, no person
has: (a) has entered into any non-exempt "prohibited transaction," as
such term is defined in ERISA or the Code; or (b) has breached a
fiduciary obligation; which could subject ABEV or Subsidiary to any
liability.
(viii) With respect to each Employee Plan all
required or recommended contributions, payments, premiums,
contributions, reimbursements, expenses, accruals or other liabilities
for all periods ending prior to or as of June 30, 1996 (including
periods from the first day of the then current plan year to such date)
(a) have been fully satisfied, (b) will be accrued as of such date, or
(c) are subject to a funding arrangement separate from the assets of
GFI or any of its Plan Affiliates.
P. Transactions with Related Parties. EXHIBIT 5P lists all
amounts directly or indirectly paid (or deemed for accounting purposes to have
been paid) or to be paid by any of the Selling Parties, to, or received by any
of the Selling Parties from any Person which is controlled by, controls, or
under common control with, directly or indirectly, any of the Selling Parties
during the current and the last fiscal year for products or services (including
any charge for management, interest, capital employed, administrative,
purchasing, financial or other services) related in any way to the Business. For
purposes of this Section, the term "Selling Parties" shall include any and all
of the "Selling Parties' Affiliates."
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Q. Accounts and Notes Receivable. EXHIBIT 5Q contains an aged
list of unpaid accounts and notes receivable (the "Receivables") owing to GFI as
of a date not more than four (4) business days prior to the date hereof, with
the address of the Business' trade debtors. ABEV and Subsidiary shall be
furnished with an updated schedule of Receivables and any other information
relating thereto as ABEV and Subsidiary shall reasonably request on reasonable
advance notice. All of the Receivables reflected on the Historical Financials
and to be reflected on updated Receivables Schedules and the Closing Balance
Sheet constituted and will constitute only valid claims against third parties
not affiliated with any of the Selling Parties. The schedule of Receivables also
highlights trade debtors of GFI with principal places of business outside of the
continental United States. The Receivables arose or will arise from bona fide
transactions in the ordinary and regular course of Business and all (subject to
the reserve for bad debt) are collectible within thirty (30) days after they
arose or will arise (except with respect to the Receivables due and owing from
Wal-Mart and Kroger, which Receivables are collectible within sixty (60) days
after they arose or will arise), and are not subject to any defenses, set-offs
or counterclaims. The Historical Financials do, and the Closing Balance Sheet
will, include reserves for bad debt reasonably based on past customer
performance. Except as listed on EXHIBIT 5Q, GFI does not sell, and does not
contemplate selling, products directly to the United States of America or any
branch, agency or subdivision thereof. EXHIBIT 5Q also highlights those
customers of the Business whose accounts have been more than thirty (30) days
past due repeatedly over the past six (6) months.
R. Customers and Suppliers. EXHIBIT 5R is a list of the ten
(10) largest customers (excluding Grogan's Sausage, Inc.) and suppliers
(measured by U.S. dollar volume in each case) of the Business during the 1995
and 1996 (to date) fiscal years and the last twelve (12) months showing, with
respect to each, the name, address and dollar volume involved. GFI is not
required to provide any bonding, guaranty or other financial security
arrangements in connection with any transactions with any of their customers or
suppliers, except as described on EXHIBIT 5R. Owners have no knowledge or reason
to believe that as a result of the Merger or other transactions contemplated
hereby or otherwise, any customer or supplier listed on EXHIBIT 5R intends to
cease or substantially reduce, the purchase or sale, respectively, of goods or
services from or to ABEV and Subsidiary on terms and conditions similar to those
imposed on purchases and sales from and to GFI prior to the date hereof. The
Selling Parties do not know of any claims or disputes pending, contemplated or
threatened with respect to any of the parties referred to in EXHIBIT 5R and none
are concerned about the financial viability of any of such parties.
S. Miscellaneous Assets. The Assets do not and will not
include (i) any contracts for future services or prepaid items or deferred
charges, the substantial value or benefit of which will not be usable by ABEV
and Subsidiary
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after the Closing Date, and (ii) any goodwill, organization expense or other
intangible asset.
T. Bank Accounts; Officers; Directors; Credit Cards. Exhibit
5T is a list of all bank accounts, safe deposit and post office boxes and the
like in the name of or controlled by any of the Selling Parties with respect to
the Business and details about the Persons having access thereto. EXHIBIT 5T
also lists all officers, directors and managers of GFI and all credit or debit
cards under which it has or may have current or future liability and the names
of the Persons holding such cards.
U. Business Generally. Other than for events affecting the
economy or GFI's industry in general, since January 1, 1996, to the knowledge of
Owners, there have been no events, transactions or information affecting or
relating to GFI or the Business which could be reasonably expected to have a
material and adverse effect on the Business.
V. Reports and Studies. EXHIBIT 5V lists all reports and
studies relating to the Business or the sale thereof in the possession or
control of any of the Selling Parties prepared for the officers, directors,
management, stockholders and agents of the Selling Parties since January 1, 1995
by investment bankers, investment advisors, accountants, engineers,
environmental consultants, management consultants or any other Persons.
W. Environmental Matters.
(i) None of the Selling Parties has transported,
stored, treated or disposed, and none has allowed or arranged for any
other Person to transport, store, treat or dispose waste to or at: (a)
any location other than a site lawfully permitted to receive such waste
for such purposes or (b) any location designated for remedial action
pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), the Resource Conservation
and Recovery Act, as amended ("RCRA"), or any similar federal, state or
local statute; and none has performed, arranged for or allowed by any
method or procedure such transportation or disposal in contravention of
any laws or regulations or in any other manner which may result in
liability for contamination of the environment. None of the Selling
Parties has disposed, and none has allowed or arranged for any other
Person to dispose, of waste upon property owned or leased by any of
them.
(ii) (a) No generation, use, handling, storage,
treatment, Release (as defined below), discharge, spillage or disposal
of any Hazardous Waste, Hazardous Substance or Hazardous Chemical (as
defined below) has occurred or is occurring at any site or Facility (as
defined below) at any time owned, leased or operated, directly or
indirectly, by any of the Selling Parties,
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(b) no Hazardous Waste or waste containing any Hazardous Substance or
Hazardous Chemical generated, used, handled, stored or treated by GFI
has been stored, Released, discharged, spilled or disposed of at any
site or Facility at any time owned, leased or operated, directly or
indirectly, by any of the Selling Parties, and (c) no site or Facility,
at any time, owned, leased or operated, directly or indirectly, by any
of the Selling Parties is or has been the site of any industrial
facility, dump or landfill.
(iii) No soil or water in, upon, under or adjacent to
any site or Facility at any time owned, leased, or operated, directly
or indirectly, by any of the Selling Parties has been contaminated by
any Hazardous Waste, Hazardous Substance or Hazardous Chemical and no
such site constitutes a nuisance of any kind or nature.
(iv) None of the Selling Parties has received
notification of any past or present failure by GFI to comply with any
laws, regulations, permits, franchises, licenses or orders applicable
to it or the Business, which have not been remedied, cured or complied
with. Without limiting the generality of the foregoing, none of the
Selling Parties has received any notification (including requests for
information directed to any) from any governmental or
quasi-governmental agency or Person asserting that GFI is or may be a
"potentially responsible party" for a remedial action at any Facility,
pursuant to the provisions of CERCLA, or any similar federal, state or
local statute assigning responsibility for the costs of investigating
or remediation of Releases of contaminants into the environment.
(v) For purposes of this Agreement, the terms
"Hazardous Waste", "Hazardous Substance", "Hazardous Chemical",
"pollutant", "contaminant", "Release" and "Facility" include any
"hazardous waste", "hazardous substance", "pollutant", "contaminant"
and "facility", respectively, within the meaning of RCRA, CERCLA, the
Emergency Planning and Community Rights to Know Act of 1986, as
amended, or any other federal, state or local law, rule or regulation
adopted pursuant thereto or otherwise relating to the disposal of
Hazardous Wastes or the cleanup of sites at which Hazardous Substances
have been released or the environment in general.
(vi) EXHIBIT 5W(vi) is a list of (a) locations
(identified by address, owner/operator, type of facility, type of
waste, and period of time the Facility was used) to which GFI has,
during the past three (3) years, transported, or caused to be
transported, or allowed or arranged for any other Person to transport,
any type of waste material, generated by either or its customers, for
storage, treatment, burning, recycling or disposal and (b) storage,
treatment, burning, recycling or disposal activities which either has
undertaken, during the past three (3) years, at locations then or
presently owned or occupied by either together with such other relevant
information
-21-
concerning such locations as would enable ABEV and
Subsidiary to determine whether either has any liability for such
locations and the activities thereon, including, but not limited to,
property address, nature of either's interest in the property, current
owner of the property, nature of the activity conducted at such
location, type and form of waste, estimated volume of waste disposal on
or in ground, and period of time the activity was conducted.
X. Continuity of Business Enterprise. GFI operates at least
one significant historic business line, or owns at least a significant portion
of its historic business assets, in each case within the meaning of Treasury
Regulation Section 1.368-1(d).
Y. Additional Tax Matters.
(i) The fair market value of the ABEV Stock and
Merger Consideration received by Owners will be approximately equal to
the fair market value of the Shares surrendered in the Merger.
(ii) Subsidiary will acquire at least 90 percent of
the fair market value of the net assets and at least 70 percent of the
fair market value of the gross assets held by GFI immediately prior to
the Merger. For purposes of this representation, amounts paid by GFI to
Owners in cash or other property, GFI's assets used to pay its
reorganization expenses and all redemptions and distributions (except
for regular, normal dividends) made by GFI immediately preceding the
Merger will be included as assets of GFI held immediately prior to the
transactions.
(iii) The liabilities of GFI assumed by Subsidiary
and the liabilities to which the Assets are subject were incurred by
GFI in the ordinary course of business.
(iv) Owners will pay all expenses associated with the
preparation and negotiation of this Agreement and all documents
executed in connection herewith and the consummation of the Merger and
the other transactions contemplated hereby.
(v) There is no intercorporate indebtedness existing
between either Owner and GFI or between Subsidiary and GFI that was
issued, acquired or will be settled at a discount.
(vi) GFI is not an investment company as defined in
Sections 368(a)(2)(F)(iii) and (iv) of the Code.
(vii) GFI is not under the jurisdiction of a court in
a Title 11 or similar case within the meaning of Section 368(a)(3)(A)
of the Code.
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(viii) The fair market value of the Assets
transferred to Subsidiary will equal or exceed the sum of the
liabilities assumed by Subsidiary, plus the amount of liabilities, if
any, to which the Assets are subject.
Z. Brokers and Finders. Except for The March Group, LLC, whose
commission shall be borne entirely by Owners, none of the Selling Parties nor
any officer, director or employee thereof, has employed any broker or finder or
incurred any liability for any financial advisory fees, brokerage fees,
commissions or finders' fees, and, except as stated above, no broker or finder
has acted directly or indirectly for any of the Selling Parties in connection
with this Agreement and the transactions contemplated hereby.
AA. Securities' Issues.
(i) Owners have a joint net worth, at the date
hereof, of over $1,000,000.00, and therefore Owners are "accredited
investors" within the meaning of Rule 501(a) promulgated by the
Securities and Exchange Commission ("SEC") under the Securities Act of
1933, as amended (the "1933 ACT").
(ii) Owners have such knowledge and experience in
financial matters (either by themselves or with their financial
advisors) that they are capable of evaluating the relative risks and
merits of an investment in the ABEV Stock.
(iii) Owners have received all of the SEC Reports (as
defined below). In making their decision have the Shares exchanged for
the ABEV Stock, Owners have relied solely upon independent
investigations made by them or their financial advisors, and they have
received no representation or warranty from ABEV or any of its
affiliates, employees or agents, except as expressly set forth herein.
(iv) Owners understand that the ABEV Stock has not
been registered under the 1933 Act or the securities acts of any of the
states of the United States or other possessions or areas subject to
its jurisdiction, in reliance on exemptions for private offerings and
may be sold or disposed of in the absence of such registration only
pursuant to an exemption from such registration and only in accordance
with the terms, conditions and restrictions contained in this
Agreement. The shares of ABEV Stock being delivered to Owners shall
bear a legend to the following effect:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be sold or transferred except in compliance with that
Act. The securities represented by this certificate are
subject to the transfer restrictions,
-23-
voting requirements and other conditions and provisions of an
Agreement and Plan of Reorganization dated as of October 1,
1996 by and among GROGAN'S MERGER CORP., ATLANTIC BEVERAGE
COMPANY, INC., GROGAN'S FARM, INC., BOBBY L. GROGAN and BETTY
RUTH GROGAN, copies of which are on file at the principal
executive offices of Atlantic Beverage Company, Inc."
(v) Owners understand that no federal or state agency
has made any finding or determination as to the fairness of an
investment in, or any recommendation or endorsement of, the ABEV Stock.
(vi) The ABEV Stock being transferred to Owners will
be held by Owners solely for their own account (and not for the account
of others) for investment and will not be held with a view to or for
the resale, distribution, subdivision, or fractionalization thereof;
Owners have no present intention or plans to enter into any contract,
undertaking, agreement, or arrangement relating thereto.
(vii) Owners acknowledge that: there are substantial
restrictions on the transferability of the ABEV Stock; the ABEV Stock
acquired will not be, and Owners have no right to require that the ABEV
Stock be, registered under the 1933 Act; there may not be any public
market for the ABEV Stock or such market may be limited; and,
accordingly, Owners may not be able to liquidate their investment in
the ABEV Stock in a timely manner.
(viii) IN FURTHERANCE OF THE FOREGOING, OWNERS
ACKNOWLEDGE THAT THERE WILL BE PLACED WITH ABEV'S TRANSFER AGENT "STOP
TRANSFER" ORDERS WITH RESPECT TO THE ABEV STOCK.
BB. Material Disclosures. No representation, warranty,
covenant or agreement by the Selling Parties contained herein, and no statement
contained in any certificate, Schedule, Exhibit, list or other writing furnished
to ABEV and Subsidiary in connection with the transactions contemplated hereby,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein not
misleading. All Schedules and Exhibits hereto and all writings furnished to ABEV
and Subsidiary hereunder or in connection with the transactions contemplated
hereby are accurate, true and complete. All representations, warranties,
covenants and agreements made by the Selling Parties herein and all other
agreements and instruments delivered in connection herewith or pursuant hereto
and facts and information contained in the Exhibits and Schedules shall be true
and correct as of the Closing Date with the same effect as if they had been made
at and as of the Closing Date. There are no facts, conditions, or aspects
relating to the past or present operations
-24-
of GFI and the Business which are not set forth herein which would have a
material adverse affect upon the operation of the Business after the Closing
Date or ABEV and Subsidiary's investment decision in consummating the Merger,
and none of the Selling Parties know of any fact, event or action which could
result in a material adverse change in the Business, prospects, financial
condition or results of operations of GFI and the Business or the operation or
ownership of the Assets by ABEV and Subsidiary following the Closing. The
records of GFI relating to the Business are accurate and complete in all
material respects and there are no matters as to which appropriate entries have
not been made in such records.
6. ABEV AND SUBSIDIARY'S REPRESENTATIONS, WARRANTIES, AGREEMENTS AND
COVENANTS. Each of ABEV and Subsidiary hereby jointly and severally, represents
and warrants to, covenants and agrees with, the Selling Parties, now and as of
the Closing Date, as follows:
A. Organization, Standing and Power. Each of ABEV and
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Each has all requisite power
and authority to own, lease and operate the Assets and to carry on the Business
after the Merger and other transactions contemplated hereby. Each of ABEV and
Subsidiary has the full power and authority to enter into this Agreement and
perform all acts necessary or appropriate to consummate all of the Merger and
other transactions contemplated hereby.
B. Authorization. This Agreement and all writings relating
hereto to be executed and delivered by ABEV and Subsidiary have been duly
authorized by all necessary action and constitute the valid and binding
obligations of ABEV and Subsidiary, enforceable in accordance with their
respective terms. The individuals executing this Agreement and the other
documents executed in connection herewith on behalf of ABEV and Subsidiary have
been duly authorized to execute all of such documents on behalf thereof. Neither
the execution and delivery hereof nor any writing relating hereto nor the
consummation by ABEV and Subsidiary of the transactions contemplated hereby or
thereby, nor compliance with any of the provisions hereof or thereof, will: (i)
conflict with or result in a material breach of the Certificates of
Incorporation or By-Laws of ABEV and Subsidiary; (ii) violate any statute, law,
rule or regulation or any order, writ, injunction or decree of any court or
governmental authority; (iii) violate or conflict with or constitute a default
under (or give rise to any right of termination, modification, cancellation or
acceleration under), any agreement or writing of any nature to which either ABEV
and Subsidiary is a party or by which its assets may be bound or affected, or,
except as consented to by ABEV and Subsidiary, result in the creation of any
Encumbrance against or upon any of their assets under any agreement or writing
to which either is a party or by which either or their assets may be bound or
affected; or (iv) impair or in any way limit any governmental or official
license, approval, permit or authorization of either ABEV and Subsidiary. Other
than LaSalle National Bank,
-25-
no consent or approval of or notification to any Person is necessary or required
in connection with the execution and delivery by ABEV and Subsidiary hereof or
any writing relating hereto or the consummation of the transactions contemplated
hereby or thereby.
C. Continuity of Business Enterprise. It is the intention of
Subsidiary to continue at least one historic significant business line of GFI,
or to use at least a significant portion of GFI's historic business assets, in
each case within the meaning of Treasury Regulation Section 368-1(d).
D. Additional Tax Matters.
(i) Prior to the transaction, ABEV will be in control
of Subsidiary within the meaning of Section 368(c)(1) of the Code.
(ii) Following the transaction, Subsidiary will not
issue additional shares of its stock that would result in ABEV losing
control of Subsidiary within the meaning of Section 368(c)(1) of the
Code.
(iii) ABEV has no plan or intention to reacquire any
of its stock issued in the transaction.
(iv) ABEV has no plan or intention to liquidate
Subsidiary; to merge Subsidiary with and into another corporation; to
sell or otherwise dispose of the stock of Subsidiary; or to cause
Subsidiary to sell or otherwise dispose of any of the assets of GFI
acquired in the transaction, except for dispositions made in the
ordinary course of business or transfers described in Section
368(a)(2)(C) of the Code.
(v) No stock of Subsidiary will be issued in the
transaction.
(vi) ABEV and Subsidiary shall pay their respective
expenses, if any, incurred in connection with the transactions.
(vii) There is no intercorporate indebtedness
existing between ABEV and GFI or between Subsidiary and GFI that was
issued, acquired or will be settled at a discount.
(viii) Neither ABEV nor Subsidiary is an investment
company as defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
E. Brokers and Finders. Neither ABEV and Subsidiary nor any
officer, director or employee thereof, has employed any broker or finder or
incurred any liability for any financial advisory fees, brokerage fees,
commissions or finders' fees, and except as stated above, no broker or finder
has acted directly or indirectly
-26-
for ABEV and Subsidiary, in connection with this Agreement and the transactions
contemplated hereby.
F. SEC Issues.
(i) The ABEV Stock to be issued has been duly
authorized and, upon issuance, will be validly issued, fully paid and
nonassessable, and free and clear of all Encumbrances, except as
expressly set forth in this Agreement.
(ii) The authorized capital stock of ABEV consists of
30,000,000 shares of common stock, $.01 par value per share and
5,000,000 shares of preferred stock, $.01 par value per share, of which
(as of June 30, 1996), 5,740,984 shares of common stock were issued and
outstanding, no shares of preferred stock were issued and outstanding,
and there were options to acquire 287,836 shares of common stock
outstanding, and 396,000 shares of common stock are held in the
treasury of ABEV.
(iii) Except for the 1996 Proxy Statement, ABEV has
filed all forms, reports and documents required to be filed by it with
the SEC since January 1, 1996, and has heretofore made available to
Owners, in the form filed with the SEC (excluding any exhibits
thereto), (i) its Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, and (ii) all other forms, reports and other
registration statements filed by ABEV with the SEC since January 1,
1996 (such forms, reports and other documents being hereinafter
referred to collectively as the "SEC Reports").
(iv) The SEC Reports and any other forms, reports and
other documents filed by ABEV with the SEC after the date of this
Agreement (i) were or will be prepared in accordance with the
requirements of the 1933 Act and the Securities Exchange Act of 1934,
as amended (the "1934 Act"), as the case may be, and the rules and
regulations thereunder, and (ii) did not at the time they were filed,
or will not at the time they are filed, contain any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not
misleading.
(v) The financial statements (including, in each
case, any notes thereto) contained in the SEC Reports were prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated (except as may be
indicated in the notes thereto) and each fairly presented the financial
position, results of operations and cash flows of ABEV as at the
respective dates thereof and for the respective periods indicated
therein (subject, in the case of unaudited statements, to normal and
recurring year-end adjustments which were not
-27-
and are not expected, individually or in the aggregate, to be material
in amount).
(vi) Since December 31, 1995 there has not been any
change, occurrence or circumstance in the business, results of
operations or financial condition of ABEV having, individually or in
the aggregate, a material adverse effect on its business, other than
changes, occurrences and circumstances referred to in any subsequently
filed SEC Reports.
(vii) There is no claim, action, proceeding or
investigation pending or, to the knowledge of ABEV, threatened by any
public official or governmental authority, against ABEV, or any of its
property or assets before any court, arbitrator or administrative,
governmental or regulatory authority or body, which challenges the
validity of this Agreement or the ABEV Stock or any action taken or to
be taken pursuant hereto or, except as set forth in the SEC Reports,
which is reasonably likely to have a material adverse effect on ABEV's
business.
G. Material Disclosures. No representation, warranty, covenant
or agreement by ABEV and Subsidiary contained herein, and no statement contained
in any certificate, Schedule, Exhibit, list or other writing furnished to any of
the Selling Parties in connection with the transactions contemplated hereby,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein not
misleading. All Schedules and Exhibits hereto and all copies of all writings
furnished to the Selling Parties hereunder or in connection with the
transactions contemplated hereby are accurate, true and complete. All
representations, warranties, covenants and agreements made by ABEV and
Subsidiary herein and facts and information contained in the Exhibits and
Schedules shall be true and correct as of the Closing Date with the same effect
as if they had been made at and as of the Closing Date. There are no facts,
conditions, or aspects relating to the past or present operations of ABEV and
Subsidiary which are not set forth herein which would have a material adverse
affect upon the operation of the Business.
7. CLOSING TRANSACTIONS. On the Closing Date (or on a date otherwise
indicated herein):
A. The Selling Parties shall deliver or cause to be delivered to ABEV
and Subsidiary:
(i) The Shares, with attached assignments and
appropriate Letters of Transmittal, as shall be reasonably sufficient
to evidence that the Shares are free and clear of all Encumbrances.
(ii) Such bills of sale, endorsements, assignments,
receipts and other instruments, in such form as are reasonably
satisfactory to ABEV
-28-
and Subsidiary, to evidence that the Assets are free and clear of all
Encumbrances.
(iii) Such keys, lock and safe combinations, and new
bank signature cards and other similar items as ABEV and Subsidiary
shall require to obtain full occupation and control of the Assets and
Business.
(iv) The Certificates required by Sections 9A and 9B
hereof.
(v) The legal opinion of counsel to the Selling
Parties, in substantially the form as Schedule B attached hereto.
(vi) Certificate(s) of good standing of GFI certified
by the Secretary of State of Kentucky and all other states in which GFI
is qualified to transact business as a foreign corporation, dated
within thirty (30) days of the Closing Date.
(vii) A copy of the Articles (or Certificate) of
Incorporation of GFI, certified by the Secretary of State of Kentucky
within thirty (30) days of the Closing Date.
(viii) Possession of the Real Estate.
(ix) Such estoppel letters as are reasonably
requested by ABEV and Subsidiary, including those to be executed and
delivered by the landlords of the Real Estate, in form and substance
acceptable to ABEV and Subsidiary's counsel.
(x) All consents, waivers and releases necessary,
required or appropriate to consummate the transactions contemplated
hereby.
(xi) Uniform Commercial Code Tax, Lien and Judgment
Search results showing to the reasonable satisfaction of ABEV and
Subsidiary that all Encumbrances, if any, on the Assets and Shares have
been released.
(xii) An Authorization of Inspection, in form and
substance acceptable to ABEV and Subsidiary.
(xiii) Certificates of Title, as appropriate,
evidencing GFI's ownership of the Assets.
(xiv) The Closing Balance Sheet, and, as updated to
the end of the accounting period ended closest to the Closing, the
Inventory List, an updated Payables' List and an updated schedule of
Receivables.
-29-
(xv) Certified copies of resolutions duly and
unanimously adopted by GFI's Board of Directors and Shareholders
approving the Merger and other transactions contemplated by, and
authorizing the execution, delivery and performance by GFI of, this
Agreement, and a certificate as to the incumbency of officers of GFI
executing any instrument or other document delivered in connection with
such transactions.
(xvi) Such documents and instruments as are necessary
to grant Subsidiary, and no other Person, the right to use all trade
names currently used by GFI.
(xvii) Results of environmental assessments
evidencing and indicating no environmental risk with respect to the
Real Estate.
(xviii) Such other documents as the ABEV and
Subsidiary may reasonably request.
B. ABEV and Subsidiary shall deliver or cause to be delivered to the
Selling Parties:
(i) The Cash, the Reimbursement and the Note.
(ii) Within ten (10) business days after the
Closing, stock certificates representing the ABEV Stock.
(iii) The Certificates required by Sections 10A and
10B hereof.
(iv) Certified copies of resolutions duly adopted by
ABEV and Subsidiary's Board of Directors approving the Merger and other
transactions contemplated by, and authorizing the execution, delivery
and performance by ABEV and Subsidiary of this Agreement, and a
certificate as to the incumbency of officers of ABEV and Subsidiary
executing any instrument or other document delivered in connection with
such transactions.
(v) Certificates of good standing of ABEV and
Subsidiary certified by the Secretary of State of the State of
Delaware, dated within thirty (30) days of the Closing Date.
(vi) A copy of the Certificate(s) of Incorporation of
ABEV and Subsidiary, certified by the Secretary of State of the State
of Delaware, dated within thirty (30) days of the Closing Date.
(vii) The legal opinion of Tom D. Wippman, P.C.,
counsel to ABEV and Subsidiary, in the form of Schedule C, attached
hereto.
(viii) Such other documents as the Selling Parties
may reasonably request.
-30-
C. Subsidiary and Bobby L. Grogan will execute and deliver an
Employment Agreement in the forms attached hereto as Schedule D, attached
hereto.
D. ABEV and Subsidiary and Owners shall execute and deliver the RPA in
the form attached hereto as Schedule E, attached hereto.
E. ABEV and Subsidiary, and Owners and Grogan's Sausage, Inc. shall
execute and deliver the APA in the form attached hereto as Schedule F, attached
hereto.
F. Certain employees of GFI, including Darren Grogan, shall execute
non-compete agreements in form and substance acceptable to ABEV, in its sole
discretion.
8. CONDUCT AND TRANSACTIONS PRIOR TO CLOSING.
A. Access to Records and Properties of GFI. From and after the
date hereof until the Closing Date, the Selling Parties shall afford (i) to all
representatives of ABEV and Subsidiary, free and full access at all reasonable
times to the assets, properties, books and records of GFI in order that ABEV and
Subsidiary may have full opportunity to make investigations of the assets and
affairs of GFI, and to such additional data and other information about the
Business and properties of GFI as ABEV and Subsidiary shall reasonably request
or that the Selling Parties believe in good faith ABEV and Subsidiary would want
to see in making its investment decision hereunder, and (ii) to the accountants
of ABEV and Subsidiary, free and full access at all times to work papers and
other records of GFI's accountants relating to the Business. Any such
investigation made pursuant to clause (i) or (ii) shall not affect or otherwise
diminish any of the representations, warranties, covenants or agreements of the
Selling Parties hereunder or ABEV and Subsidiary's rights to indemnification or
otherwise. All information to which ABEV and Subsidiary is given access shall be
kept strictly confidential except as required by law, statute, rule or
regulation and, should the transactions contemplated hereby fail to be
consummated, all such information shall be returned to the Selling Parties.
B. Operation of Business of GFI. From the date hereof to the Closing
Date, GFI shall operate only in the ordinary and regular course of business,
consistent with past practices, and shall:
(i) consult with ABEV and Subsidiary on a regular
basis with respect to all decisions outside of the ordinary and regular
course of business involving or otherwise which may have a material
affect on the Business;
-31-
(ii) maintain the Assets in good repair, order and
condition, reasonable wear and use excepted;
(iii) maintain and keep in full force and effect all
Insurance Policies;
(iv) not, except as permitted under Section 5F: (a)
enter into any contract or agreement binding upon either which is to be
assumed by ABEV and Subsidiary hereunder and which is not immediately
terminable upon thirty (30) days notice without cost; (b) extend credit
in the sale of the products or services other than in accordance with
prior credit practices; (c) lease, buy or otherwise acquire any real
estate or any interest therein; (d) increase any type of compensation
payable or to become payable to any of employees, directors, agents or
representatives; (e) make any change in its capital structure; (f) do
any other thing or act described in Section 5F hereof; or (g) enter
into any agreement, commitment or understanding to do any of the
foregoing;
(v) not do anything outside of the ordinary course of
business which has the intent or effect of changing the Merger
Consideration;
(vi) use its best efforts to preserve intact its
business organizations, and to keep available to ABEV and Subsidiary
the services of all present officers, employees and agents and use its
best efforts to preserve for ABEV and Subsidiary the goodwill of
suppliers, customers and others having business relations with GFI; and
(vii) maintain its books, accounts and records in a
proper manner and in the usual, regular and ordinary manner on a basis
consistent with prior years.
C. Supplements. From time to time prior to the Closing Date,
the Selling Parties shall furnish to ABEV and Subsidiary supplemental
information with respect to any matters or events arising or discovered
subsequent to the date hereof which, if existing or known on the date hereof,
would have rendered any statement, representation or warranty made by the
Selling Parties or any information contained in any EXHIBIT or Schedule hereto
then inaccurate or incomplete; the furnishing of such supplemental information
shall not, however, affect or otherwise diminish any of the representations,
warranties, covenants or agreements of the Selling Parties hereunder. The
furnishing of any supplemental information which is materially different than
previously submitted information shall provide ABEV and Subsidiary with the
unilateral right to terminate this Agreement and any duties and obligations
hereunder, without cost or liability.
Notwithstanding the foregoing, ABEV and Subsidiary acknowledges that
the open purchase orders journals and open sales orders journals change in the
-32-
ordinary and regular course of business; therefore, the Selling Parties shall
only be obligated to provide ABEV and Subsidiary with an updated list of such
journals as of the beginning of business on the Closing Date.
D. Risk of Loss. With respect to any material loss, damage,
condemnation or destruction of any of the Assets, upon any such loss, damage,
condemnation or destruction, ABEV and Subsidiary may at its option, cancel and
terminate this Agreement or proceed as follows: if, in the event of any such
material loss, damage or destruction prior to the Closing, ABEV and Subsidiary
elect not to terminate, the parties shall promptly attempt to agree on a
mutually satisfactory reduction in the total price to be paid for the Assets,
and the transaction shall be closed on the basis of such reduced price. If the
parties are unable to agree on such reduced value within seven (7) days after
notice to ABEV and Subsidiary of such loss, damage, destruction or taking and
ABEV and Subsidiary are not willing to conclude the transaction by payment of
the full price, then any party hereto may terminate this Agreement. In the event
the parties agree to a mutually satisfactory reduction of the price and the
transaction is closed on that basis, any insurance or condemnation proceeds
shall be paid to and retained by GFI. In the event the parties do not agree to a
mutually satisfactory reduction of the price, and ABEV and Subsidiary elect to
conclude the transaction by payment of the full price, any insurance or
condemnation proceeds shall be paid to and retained by ABEV and Subsidiary.
E. Consents, Waivers and Releases. The Selling Parties shall, at their
own cost and expense:
(i) Provide all necessary or appropriate consents and
comply with all provisions arguably relating to the transactions
contemplated hereby, including all federal, state or local laws, rules
and regulations;
(ii) Procure consents to the transactions
contemplated hereby, waivers of rights from, or releases from:
(a) all parties holding security interests
on any of the Assets;
(b) the stockholders and directors of GFI,
which consent shall be deemed to have been granted as of the date
hereof by Owners' execution hereof;
(c) all other parties deemed necessary or
appropriate by ABEV and Subsidiary.
All of such approvals, waivers, consents and releases shall be in form
and substance satisfactory to ABEV and Subsidiary and their counsel, in their
sole discretion.
-33-
F. [THIS SECTION INTENTIONALLY LEFT BLANK]
G. Distributions to Owners from GFI. Between the date hereof
and September 30, 1996, there will not be, directly or indirectly, distributions
or dividends of any kind or nature from GFI to either Owner or any Selling
Parties' Affiliates except as permitted by ABEV. After September 30, 1996 and
until the Closing, there will not be, directly or indirectly, distributions or
dividends of any kind or nature from GFI to either Owner or any Selling Parties'
Affiliates other than the following (collectively, the "ALLOWED DISTRIBUTIONS"):
salary at the rate of $50,000 per year to Bobby L. Grogan.
H. Cooking Line. All expenses related in any manner to GFI's cooking
line shall first be approved by ABEV.
9. CONDITIONS OF OBLIGATIONS OF ABEV AND SUBSIDIARY. The obligations of
ABEV and Subsidiary to perform this Agreement are subject to the satisfaction of
the following conditions on or prior to the Closing Date:
A. Representations, Warranties, Covenants and Agreements. The
representations, warranties, covenants and agreements of the Selling Parties in
this Agreement or in any Schedule, Exhibit, certificate or document delivered in
connection herewith shall be true and correct in all material respects on the
Closing Date, and ABEV and Subsidiary shall have received a Certificate signed
by the Selling Parties to that effect.
B. Performance of Obligations of the Selling Parties. The Selling
Parties shall have performed all agreements and obligations required to be
performed by them on or prior to the Closing Date, and ABEV and Subsidiary shall
have received a Certificate signed by the Selling Parties to that effect.
C. Consents, Waivers and Releases. The Selling Parties shall
have obtained, or to the reasonable satisfaction of ABEV and Subsidiary obviated
the need to obtain, all consents, waivers and releases (including those
described in Section 8E) from third parties necessary to execute and deliver
this Agreement and consummate the transactions contemplated hereby. Also, ABEV
and Subsidiary shall have obtained the consent of ABEV and Subsidiary's Board of
Directors to execute and deliver this Agreement and consummate the transactions
contemplated hereby.
D. No Litigation. No action, suit or other proceeding shall be pending
before any court, tribunal or governmental authority seeking or threatening to
restrain or prohibit the consummation of the transactions contemplated hereby,
or seeking to obtain damages in respect thereof, or involving a claim that
consummation thereof would result in the violation of any law, decree or
regulation of any governmental authority having appropriate jurisdiction.
-34-
E. Absence of Changes. Except as otherwise listed on Exhibit
5F hereto, since January 1, 1996, the Business has been operated only in the
ordinary and regular course and there has not been, and through the Closing Date
there will not be, with respect to GFI, any thing or act described in Section 5F
hereof, and there shall not have been, with respect to the Business, any adverse
changes.
F. Completion of Review by ABEV and Subsidiary. ABEV and
Subsidiary shall have completed their business, accounting, financial,
environmental and legal review of the Business and Assets, and ABEV and
Subsidiary shall, in their sole and absolute discretion, be satisfied with the
results of such investigation or otherwise waive this condition.
G. Financing and Additional Financial Matters. ABEV and
Subsidiary shall have procured financing in an amount and on terms and
conditions that are satisfactory to ABEV and Subsidiary, in their sole
discretion. Also, as of the Closing Date, ABEV and Subsidiary shall be satisfied
that (i) GFI shall have paid all liabilities in the ordinary course of business,
and (ii) for the period September 30, 1996 to the Closing Date, there shall have
been no distributions of any nature whatsoever from GFI to Owners or any Selling
Parties' Affiliates, except for the Allowed Distributions. In addition, ABEV and
Subsidiary shall have received satisfactory evidence that as of September 30,
1996, all expenses which are or should have been accrued, as provided by ABEV's
accountants, shall have been accrued (or paid), and, as of such date and the
Closing Date, there shall be sufficient cash on hand to discharge such
liabilities and accruals. Finally, ABEV and its accountants shall be satisfied
that the only audit of GFI which is required under appropriate SEC guidelines is
for the twelve-month period ended September 30, 1996.
H. Closing Documents. The Selling Parties shall have delivered, or
shall have caused the delivery of all appropriate documents and instruments
described in Section 7 hereof.
10. CONDITIONS OF OBLIGATIONS OF THE SELLING PARTIES. The obligations
of the Selling Parties to perform this Agreement are subject to the
satisfaction, on or prior to the Closing Date, of the following conditions:
A. Representations, Warranties, Covenants and Agreements. The
representations, warranties, covenants and agreements of ABEV and Subsidiary
herein or in any Schedule, Exhibit, certificate or document delivered in
connection herewith shall be true and correct in all material respects on the
Closing Date, and the Selling Parties shall have received a Certificate signed
by ABEV and Subsidiary to that effect.
B. Performance of Obligations of ABEV and Subsidiary. ABEV and
Subsidiary shall have performed all agreements and obligations required to be
-35-
performed by it on or prior to the Closing Date, and the Selling Parties shall
have received a Certificate signed by ABEV and Subsidiary to that effect.
C. Consents, Waivers and Releases. ABEV and Subsidiary shall have
obtained, or to the reasonable satisfaction of the Selling Parties obviated the
need to obtain, all consents, waivers and releases from third parties necessary
to execute and deliver this Agreement, buy the Assets and consummate the
transactions contemplated hereby.
D. No Litigation. No action, suit or other proceeding shall be pending
before any court, tribunal or governmental authority seeking or threatening to
restrain or prohibit the consummation of the transactions contemplated hereby,
or seeking to obtain damages in respect thereof, or involving a claim that
consummation thereof would result in the violation of any law, decree or
regulation of any governmental authority having appropriate jurisdiction.
E. Closing Documents. ABEV and Subsidiary shall have delivered, or
shall have caused the delivery of, all appropriate documents and instruments
described in Section 7 hereof
11. CLOSING NOT A WAIVER. The fact that the parties have chosen to
consummate the transactions contemplated hereby shall not act or be deemed or
construed as a waiver of either party or estop either party from pursuing their
respective rights to indemnification hereunder or other remedies for any reason
whatsoever.
12. POST-CLOSING COVENANTS.
A. Restrictive Covenants.
(i) Nondisclosure. Each Owner acknowledges that
he/she has been and will be entrusted with trade secrets, marketing,
operating and strategic plans, customer and supplier lists, proprietary
information, recipes and other confidential or specialized data and/or
information relative to the Business, whether now existing or to be
developed or created after the Closing Date (collectively, "TRADE
SECRETS"). Each Owner covenants and agrees that he/she shall at all
times after the date hereof hold in strictest confidence any and all
Trade Secrets that may have come or may come into his/her possession or
within his/her knowledge concerning or related to the products,
services, processes, recipes, businesses, suppliers, customers and
clients of GFI and the Business and also that the Trade Secrets
constitute Assets of GFI and not of any individual. Each Owner
covenants and agrees that neither he/she nor any Person controlled by
his/her will for any reason, directly or indirectly, for
himself/herself or for the benefit of any other Person, use, copy,
divulge or otherwise disseminate or disclose any of the Trade Secrets
owned or used by, or licensed to, GFI or any of its affiliates or
-36-
otherwise relating to GFI or the Business, provided that either Owner
may disclose Trade Secrets pursuant to an order by a court of competent
jurisdiction, provided, further, that such Owner shall give ABEV and
Subsidiary notice of such order and any court pleading requesting such
disclosure, in order to provide ABEV and Subsidiary with an opportunity
to prevent such disclosure or procure an appropriate protective order.
(ii) Customers and Trade Secrets. Each Owner
acknowledges that customers and customer accounts and the Trade Secrets
of GFI will, after the Closing and Merger, at all times be the sole and
separate property of Subsidiary, in which neither Owner has any rights
whatsoever, and all activities of or work performed by either Owner for
or on behalf of Subsidiary after the Merger will be performed solely
for the benefit of Subsidiary and the goodwill resulting from such
efforts by Owners is and at all times will be the sole and separate
property of Subsidiary, which goodwill is intended to be protected, in
part, by this Section.
(iii) Non-Solicitation; Non-Hire. Each Owner agrees
that from the Closing Date and continuing for a period (the
"NON-COMPETE PERIOD") of four (4) years from the Closing Date, neither
he/she nor any person or enterprise controlled by him/her will solicit
or hire or contract with, for employment, consulting or any other
reason, any person (except family members) who was employed by ABEV,
Subsidiary or GFI or any of such parties' affiliates as a manager,
sales person, officer, office head, buyer, driver,
accountant/controller or other key employee at any time within one (1)
year prior to the time of the act of solicitation, or hire.
(iv) Non-Competition by Owners. During the
Non-Compete Period, each Owner agrees that neither he/she nor any
person or enterprise controlled by him/her will become a stockholder,
director, officer, agent, employee or representative of or consultant
to a corporation or member of a partnership or limited liability
company, engage as a sole proprietor in any business, act as a
consultant to any of the foregoing or otherwise engage, directly or
indirectly, in any enterprise which competes with the Business in any
geographic area in which GFI currently, and the Subsidiary
subsequently, carries on such Business or contemplates or has the
capability of doing business on the date of the acts described above,
including the geographic areas set forth in EXHIBIT 12A(iv); provided,
however, that the foregoing shall not prohibit the ownership of less
than two percent (2%) of the outstanding shares of the stock of any
corporation engaged in any business, which shares are regularly traded
on a national securities exchange or in any over-the-counter market.
The Non-Compete Period shall be extended for that period of time during
which either Owner is in violation of the covenants contained in this
Section 12A.
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(v) Relief, Reformation; Severability. Each Owner
agrees that the covenants contained in this Section 12 are separate and
are reasonable in their scope and duration and may be enforced by
specific performance or otherwise. Neither Owner shall raise any issue
of reasonableness as a defense in any proceeding to enforce any of the
covenants herein. Notwithstanding the foregoing, in the event that a
covenant included in this Section 12 shall be deemed by any court to be
unreasonably broad in any respect, then, to the extent permitted, the
court which makes such finding shall modify such covenant for the
purpose of making such covenant reasonable in scope and duration. The
validity, legality or enforceability of the remaining provisions of
this Agreement shall not be affected by any such modification.
(vi) Remedies. Each Owner acknowledges that any
breach of the restrictive covenants herein will cause irreparable harm
to ABEV and Subsidiary, and that such harm will be difficult if not
impossible to ascertain. Therefore, if any action or proceeding is
commenced by or on behalf of ABEV or Subsidiary to enforce the
provisions hereof, they shall be entitled to equitable relief,
including injunction, against any actual or threatened breach hereof,
and any damages arising therefrom including, without limitation,
reasonable fees of its attorneys and their support staff and all other
costs and expenses incurred by either ABEV or Subsidiary in good faith
in connection therewith without bond and without liability should such
relief be denied, modified or vacated. Neither the right to obtain such
relief nor the obtaining of such relief shall be exclusive of or
preclude ABEV or Subsidiary from any other remedy. Each Owner hereby
waives the claim or defense to an action for equitable relief by the
other that ABEV or Subsidiary has an adequate remedy at law or has not
been or is not being irreparably injured by such breach. FURTHERMORE,
EACH OWNER HEREBY IRREVOCABLY WAIVES ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE OF ANY NATURE ARISING OUT OF,
CONNECTED WITH, RELATED OR INCIDENTAL TO THE RESTRICTIVE COVENANTS
CONTAINED IN THIS SECTION 12 HEREOF. INSTEAD, ANY DISPUTES RESOLVED IN
COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
B. Inventions. Owners shall and hereby do assign to ABEV and
Subsidiary their entire right, title and interest in all discoveries, computer
programs, processes and improvements, patentable or otherwise, trade secrets and
ideas, writings and copyrightable material, which have been or may be conceived
by either of them or developed or acquired by either of them during the
Non-Compete Period, which may pertain directly or indirectly to the Business.
Each Owner agrees to promptly and fully disclose in writing all such
developments. Each Owner acknowledges that all Trade Secrets and other ideas
relating to the Business which
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were or will be conceived by him/her before the date hereof or during the
Non-Compete Period have been, or shall be, assigned by them to Subsidiary. Each
Owner will, upon ABEV and Subsidiary's request, execute, acknowledge and deliver
to ABEV and Subsidiary all instruments and do all other acts which are necessary
or desirable to enable ABEV and Subsidiary to file and prosecute applications
for, and to acquire, maintain and enforce all letters, patents, trademark
registrations, or copyrights or enforce all rights in any intangible or
intellectual property in all countries.
C. Collection of Receivables. From and after the Closing,
Subsidiary shall have the sole right and authority to collect, for its own
account, all of the Receivables, and to endorse in GFI's name, any checks or
drafts received on account of any such Receivables or such other items. Each
Owner agrees that he/she will transfer or deliver to Subsidiary, promptly after
the receipt thereof, any cash or other property which he may receive after the
Closing in respect of any claims, contracts, licenses, leases, commitments,
sales orders, purchase orders, Receivables of any character or any other items
related directly or indirectly to the Business.
D. Power of Attorney. Effective as of the Closing, each Owner
hereby constitutes and appoints Merrick M. Elfman, Alan F. Sussna or their
successors and assigns, with the full power and right of substitution, as
Owners' true and lawful attorney: (i) to institute and prosecute all proceedings
which Subsidiary may deem proper in order to collect, assert or enforce any
claim, right or title of any kind in or to the Assets; (ii) to defend or
compromise any and all actions, suits or proceedings in respect of any of the
Assets, and to do all such acts and things in relation thereto as ABEV and
Subsidiary shall deem necessary or advisable; and (iii) to take all action which
ABEV and Subsidiary may reasonably deem proper in order to provide ABEV and
Subsidiary with all of the benefits relating to the Assets. Each Owner
acknowledges that the foregoing powers are coupled with an interest and shall be
irrevocable. Subsidiary shall be entitled to retain for its own account any
amounts collected pursuant to the foregoing powers, including any amounts
payable as interest in respect thereof.
E. Subrogation of ABEV and Subsidiary. In the event that ABEV
or Subsidiary shall become liable for or suffer any damage with respect to any
matter which was covered by insurance maintained by GFI on or prior to the
Closing, ABEV and Subsidiary shall be and hereby are each subrogated to any
rights of GFI under such insurance coverage, and, in addition, each Owner agrees
to promptly remit to ABEV and Subsidiary any insurance proceeds which he/she may
receive on account of any such liability or damage.
F. No Adverse Action. Neither Owners nor any of their agents
or representatives shall take any action, directly or indirectly, that would in
any way adversely affect ABEV and Subsidiary's efforts to obtain all proper
permits and
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authorizations necessary or appropriate to operate the Business in any manner
deemed reasonable by ABEV and Subsidiary.
G. Tax Matters. The Selling Parties, ABEV and Subsidiary each
agrees that each shall report the Merger as a tax-free reorganization pursuant
to Section 368(a)(2)(D) of the Code for federal income tax purposes and that
each will take or omit to take any and all actions required or recommended by
its respective counsel to cause the Merger to qualify as a tax-free
reorganization pursuant to Section 368(a)(2)(D) of the Code for federal income
tax purposes.
H. Indemnification Matters. From and after the Closing, to the
extent that either Owner has a right, either legal or equitable, to
indemnification, subrogation or other similar right or remedy from GFI for any
matter whatsoever, such Owner shall waive such right or remedy and shall not
attempt, whether directly or indirectly, to enforce or collect such right or
remedy at any time.
I. ABEV STOCK TRANSFER RESTRICTIONS AND OTHER CONDITIONS.
(i) Each Owner agrees and acknowledges, for
himself/herself and his/her Affiliates and Associates (as defined
below), that he/she is investing in the ABEV Stock for investment
purposes only and not with the intent or objective of affecting or
influencing the management or control of the business, operations or
affairs of ABEV. In furtherance of the foregoing, each Owner agrees,
during the period that either Owner owns (whether of record or
beneficially and whether directly or indirectly) any shares of ABEV
Stock, not to take, and not to permit any of his/her Affiliates or
Associates to take, actions which are inconsistent with this objective,
including, without limitation, acquiring, offering to acquire or
agreeing to acquire, directly or indirectly, by purchase, gift or
otherwise, any ABEV Stock or assets of ABEV except as expressly
permitted herein. In addition, while either Owner owns (whether of
record or beneficially and whether directly or indirectly) any shares
of ABEV Stock, each Owner will not, and will not permit any of his/her
Affiliates or Associates to, without the prior written consent of ABEV,
directly or indirectly:
(a) acquire, Beneficially Own (as defined
below), or offer, propose or agree to Beneficially Own any ABEV Stock
(other than that acquired hereunder) if, as a result of such
acquisition or ownership, the voting power of all ABEV Stock
Beneficially Owned by Owners (when aggregated) shall exceed 450,000
shares of ABEV Stock; or
(b) make, or in any way participate,
directly or indirectly, in, any "solicitation" of "proxies" to vote (as
such terms are used in the proxy rules of the SEC), initiate, propose,
communicate with or otherwise solicit stockholders of ABEV for the
approval of one or more stockholder
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proposals or induce or attempt to induce any other person
to initiate any stockholder proposal in opposition to any matter which
has been recommended by the majority of the directors of ABEV
(including the approved slate of directors for any particular election)
or in favor of any matter which has not been approved by the majority
of the directors of ABEV or seek to advise, encourage or influence any
person or entity with respect to the voting of any ABEV Stock, or
induce or attempt to induce any person to initiate any stockholder
proposal; or
(c) form, join, in any way participate in,
or act in concert with any Person or in any manner encourage the
formation of, a "group" (as such term is defined in Section l3(d)(3) of
the 1934 Act) with respect to any ABEV Stock, for the purpose of
acquiring, holding, voting or disposing or voting securities of ABEV,
or otherwise become a "person" or a member of a "group" within the
meaning of Section 13(d)(3) of the 1934 Act which Beneficially Owns or
seeks to Beneficially Own ABEV Stock; or
(d) except as contemplated hereby, deposit
any ABEV Stock into a voting trust, or subject any ABEV Stock to any
agreement or arrangement with respect to the voting of any ABEV Stock
or other agreement having similar effect; or
(e) seek to affect or influence the control
of the management or Board of Directors of ABEV or its business
operations or affairs, or make any proposal, whether written or oral,
to the Board of Directors of ABEV or any director or officer of ABEV
with respect to a tender offer for ABEV Stock, a merger or similar
business combination transaction or the sale of substantially all of
the assets of ABEV, or make any public statements with respect thereto;
or
(f) participate in, aid and abet or
otherwise induce any Person to take any of the actions enumerated in
(i) through (v) above or any other actions inconsistent therewith,
including the accumulation of ABEV Stock with any intent or objective
inconsistent therewith.
In furtherance of the foregoing, neither Owners nor any Affiliate nor
Associate thereof shall (i) nominate any Person to ABEV's Board of Directors or
(ii) stand for election to ABEV's Board of Directors. In addition, while Owners
Beneficially Own more than 50,000 in the aggregate, each Owner hereby agrees to
vote the shares of ABEV Stock Beneficially Owned by such Owner in favor of any
matter which has been approved by the majority of the directors of ABEV, and
agrees to deliver a proxy indicating such at least five (5) business days before
any vote is taken by ABEV's stockholders.
(ii) Each Owner will not, in any manner, directly or
indirectly, sell, transfer, pledge, encumber or otherwise dispose of
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(collectively, "Transfers") any shares of ABEV Stock (including any
shares of ABEV Stock not acquired hereunder) until the third
anniversary after such shares of ABEV Stock are acquired, except for
such Transfers as are in accordance with the following:
(a) Transfers of any ABEV Stock to any
Affiliate of such Owner; provided, that such Affiliate shall, upon such
transfer, become a party to, and bound by, this Agreement and agree to
be bound by all the provisions hereof; or
(b) Transfers of ABEV Stock pursuant to any
bona fide tender or exchange offer to acquire ABEV Stock or an "all
cash for any and all shares" offer, which is not opposed by a majority
of the Board of Directors of ABEV.
Thereafter, Transfers by each Owner shall only be permissible pursuant
to (a) and (b) immediately above and in sale(s) in the public market pursuant to
Rule 144 under the 1934 Act, and even in the event that Rule 144 is
inapplicable, in accordance with such Rule's volume restrictions; provided,
however, that no such Transfers via sale(s) in the public market shall be made
knowingly to any Person in contravention of the provisions or intent of the
restrictions contained in this Agreement. All Transfers, regardless of when such
Transfer is made, shall only be made in the thirty (30) day period following
ABEV's release of earnings. No private Transfers of any shares of ABEV Stock are
permitted unless with the prior approval of ABEV.
(iii) Both Owners shall be present, in person or by
proxy, at all meetings of stockholders of ABEV so that all ABEV Stock
Beneficially Owned by both Owners shall be counted for purposes of
determining the presence of a quorum at such meetings, provided that
Owner shall have received prior notice of any such meeting.
(iv) For purposes of this Agreement, the following
terms shall have the following meanings:
(a) "AFFILIATE" or "ASSOCIATE" shall mean
any Person that (i) directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, the Person specified or (ii) is (A) the specified
Person's spouse, parent, child, brother or sister or any issue of the
foregoing (for purposes of the definition of Affiliate or Associate,
issue shall include Persons legally adopted into the line of descent),
(B) any corporation or organization of which the Person specified or
such specified Person's spouse, parent, child, brother or sister or any
issue of the foregoing is an officer or partner or is, directly or
indirectly, the beneficial owner of ten percent or more of any class of
voting stock, and (C) any trust or other estate in which the specified
Person or such specified Person's spouse, parent, child,
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brother or sister or any issue of the foregoing serves as trustee or in
a similar fiduciary capacity and (D) the heirs or legatees of the
specified Person by will or under the laws of descent and distribution;
(b) "BENEFICIALLY OWN", with respect to any
securities, and "BENEFICIAL OWNERSHIP" shall mean having beneficial
ownership as determined pursuant to Rule 13d-3 under the 1934 Act
including pursuant to any agreement, arrangement or understanding,
whether or not in writing, and shall include those shares of ABEV Stock
Beneficially Owned by either Owner's Affiliates and Associates; and
(c) "PERSON" shall mean any individual,
partnership, joint venture, corporation, trust, limited liability
company, incorporated organization, government or department or agency
of a government, or any entity that would be deemed to be a "PERSON"
under Section 13(d)(3) of the 1934 Act.
(v) Each Owner acknowledges that any breach of the
covenants herein will cause irreparable harm to ABEV, and that such
harm will be difficult if not impossible to ascertain. Therefore, if
any action or proceeding is commenced by or on behalf of ABEV to
enforce the provisions hereof, ABEV shall be entitled to equitable
relief, including injunction, against any actual or threatened breach
hereof; and any damages arising therefrom including, without
limitation, reasonable fees of its attorneys and their support staff
and all other costs and expenses incurred by ABEV in good faith in
connection therewith without bond and without liability should such
relief be denied, modified or vacated. Neither the right to obtain such
relief nor the obtaining of such relief shall be exclusive of or
preclude ABEV from any other remedy. Each Owner hereby waives the claim
or defense to an action for equitable relief by the other that ABEV has
an adequate remedy at law or has not been or is not being irreparably
injured by such breach. FURTHERMORE, EACH OWNER HEREBY IRREVOCABLY
WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE OF
ANY NATURE ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
COVENANTS CONTAINED IN THIS SECTION. INSTEAD, ANY DISPUTES RESOLVED IN
COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
(vi) IN FURTHERANCE OF THE FOREGOING, OWNERS
ACKNOWLEDGE THAT THERE WILL BE PLACED WITH ABEV'S TRANSFER AGENT "STOP
TRANSFER" ORDERS WITH RESPECT TO THE ABEV STOCK.
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13. INDEMNIFICATION.
A. Owners agree to jointly and severally indemnify and hold
harmless ABEV and Subsidiary, and each of ABEV's and Subsidiary's shareholders,
subsidiaries, affiliates, officers, directors, agents and other representatives
(collectively, "ABEV's INDEMNIFIED PARTIES") against any and all damages,
losses, settlement payments, obligations, liabilities, claims, actions, causes
of action, suits, proceedings, costs of investigations, demands, assessments,
judgments, Encumbrances and costs and expenses (including, without limitation,
attorneys' fees, interest, penalties and all costs associated therewith incurred
by such party in good faith) (collectively, "LOSSES") suffered, sustained,
incurred or paid by any of ABEV's Indemnified Parties, to which such indemnified
party may become subject under any federal, state or local law, rule or
regulation, at common law or otherwise (including in settlement of any
litigation), insofar as such Losses (or actions in respect thereof) arise out of
or are based upon any of the following: (i) any untrue or inaccurate statement
or alleged untrue or inaccurate statement or misrepresentation or breach of
warranty made by any of the Selling Parties in any of the Transaction Documents,
including the information included in any EXHIBIT thereto, or arise out of or
are based upon any of the Selling Parties' omission or alleged omission to state
herein a material fact required to be stated in any of the Transaction Documents
or necessary to make the statements in the Transaction Documents not misleading;
(ii) the claims of any broker or finder engaged by any of the Selling Parties
pursuant to the transactions contemplated by the Transaction Documents; (iii)
the nonfulfillment or breach or alleged nonfulfillment or breach of any
agreement or covenant of any of the Selling Parties in any of the Transaction
Documents; (iv) the assertion against any of ABEV's Indemnified Parties or any
of their assets of any liability or obligation of any of the Selling Parties not
accurately disclosed in any of the Transaction Documents for any reason
whatsoever (regardless of whether such liability or obligation is known or
unknown, fixed or contingent, accrued, absolute, matured or unmatured or
otherwise), or relating to any of the Selling Parties, or the Business or
Assets, whether absolute or contingent, matured or unmatured, known or unknown;
(v) any personal injury, death, property damage or other claim (whether covered
by warranties or otherwise) attributable to services or products designed,
manufactured, processed, administrated, serviced or sold by GFI or any affiliate
thereof; and (vi) all items that are or should have been listed on EXHIBIT 5K
herein or the corresponding EXHIBIT in the APA; and will reimburse each
indemnified party for any legal or other cost or expense incurred by such party
in good faith in connection with investigating or defending any such loss,
claim, damage, liability or action. This indemnity agreement will be in addition
to any liability which either of the Owners may otherwise have and to any remedy
which ABEV and Subsidiary may otherwise have. To the extent that any matter
gives rise to indemnification hereunder, such matter shall be deemed to have
been accrued on the books of GFI and/or GSI as of June 30, 1996, for the
purposes of calculating the Merger Consideration, and if such matter is a
recurring operating expense of the Business,
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the Merger Consideration will be decreased by four (4) times the amount of the
matter. Notwithstanding the foregoing, if it is determined that ABEV or
Subsidiary have actual knowledge (i.e., not constructive knowledge or otherwise)
of a matter (other than matters related to taxes, USDA matters and litigation
and/or claims of any nature) which would give rise to indemnification hereunder
and choose to consummate the transactions without first adjusting the Merger
Consideration, ABEV and Subsidiary shall be deemed to have waived their right to
indemnification with respect solely to that matter.
B. ABEV and Subsidiary will indemnify and hold harmless Owners
and Owners' agents and representatives (collectively, "OWNERS' INDEMNIFIED
PARTIES") against any and all Losses suffered, sustained, incurred or paid by
any Owners' Indemnified Parties, to which such indemnified party may become
subject under any federal, state or local law, rule or regulation, at common law
or otherwise (including in settlement of any litigation), insofar as such Losses
(or actions in respect thereof) arise out of or are based upon any of the
following: (i) any untrue or inaccurate statement or alleged untrue or
inaccurate statement misrepresentation or breach of warranty made by ABEV and
Subsidiary in any of the Transaction Documents, including the information
included in any EXHIBIT thereto, or arise out of or are based upon ABEV and
Subsidiary's omission or alleged omission to state in any of the Transaction
Documents a material fact required to be stated therein or necessary to make the
statements therein not misleading; (ii) the claims of any broker or finder
engaged by ABEV and Subsidiary pursuant to the transactions contemplated by the
Transaction Documents; (iii) the nonfulfillment or breach or alleged
nonfulfillment or breach of any agreement or covenant of ABEV and Subsidiary in
any of the Transaction Documents; (iv) to the extent not indemnified pursuant to
Section 13A above, the assertion against any Owners' Indemnified Parties or any
of their assets of any liability or obligation of ABEV and Subsidiary, or
relating to ABEV and Subsidiary's operations or any of their assets, whether
absolute or contingent, matured or unmatured, known or unknown; and (v) to the
extent not indemnified pursuant to Section 13A above, any personal injury, death
or property damage attributable to products manufactured and sold by ABEV and
Subsidiary; and will reimburse each indemnified party for any legal or other
expenses reasonably incurred by such party in connection with investigating or
defending any such loss, claim, damage, liability or action. This indemnity
agreement will be in addition to any liability which ABEV and Subsidiary may
otherwise have and to any remedy which Owners may otherwise have.
C. Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party
under this Section, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party except to the extent
that the indemnifying party was prejudiced by such failure to notify or any
other liability.
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In case any such action is brought against any indemnified party, and it
notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in and, to the extent that it may wish and
at its cost and expense, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; provided, however, that if (i) the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, or the indemnified and indemnifying parties may have
conflicting interests which would make it inappropriate for the same counsel to
represent both of them, the indemnified party or parties shall have the right to
select separate counsel as set forth below, at the indemnifying parties' cost,
to assume such legal defense (in which case the indemnified parties' counsel
shall be the lead counsel in such defense) and otherwise to participate in the
defense of such action on behalf of such indemnified party or parties, and (ii)
an indemnifying party shall only be able to assume the defense of an action if
it can reasonably demonstrate its financial soundness and wherewithal (which may
include bonding over a reasonable reserve) necessary for a lengthy defense and
possible judgment. Upon receipt of notice from the indemnifying party to such
indemnified party of its election so to assume defense of such action and
approval by the indemnified party of counsel, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof, unless (i) the indemnified party shall have employed such
counsel in connection with the assumption of legal defense in accordance with
the proviso to the next preceding sentence (it being understood, however, that
the indemnifying party shall not be liable for the expenses of more than one
separate counsel representing all indemnified parties not having different or
additional defenses or potential conflicting interests among themselves who are
parties to such action), (ii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of commencement of the action, or (iii)
the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party. No indemnifying
party shall, without the prior written consent of the indemnifying party, effect
any settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability arising out
of such proceeding.
Notwithstanding anything contained herein to the contrary, an
indemnified party shall have no obligation to bring a third party action or an
action for indemnification or contribution simultaneously or in connection with
a third party action which may give rise to rights of indemnification or
contribution or similar remedies.
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D. Subject to the last sentence of Section 13A, each Owner
acknowledges that ABEV and Subsidiary is relying on all of the representations,
warranties, covenants and agreements contained in each of the Transaction
Documents, without respect to whether Owners had knowledge of the information
contained therein, and agree not to raise as a defense to a claim by ABEV and
Subsidiary for indemnification pursuant to this Section 13 or otherwise that
ABEV and Subsidiary had knowledge or either Owner did not have knowledge of the
untruth, inaccuracy, nonfulfillment or breach of, or ABEV and Subsidiary did not
rely upon, the representations, warranties, covenants or agreements of the
Selling Parties contained in the Transaction Documents. ABEV and Subsidiary
acknowledge that Owners are relying on all of the representations, warranties,
covenants and agreements contained in each of the Transaction Documents without
respect to whether ABEV and Subsidiary had knowledge of the information
contained therein and agrees not to raise as a defense to a claim by Owners for
indemnification pursuant to this Section 13 that either Owner had knowledge or
ABEV and Subsidiary did not have knowledge of the untruth, inaccuracy,
nonfulfillment or breach of, or Owners did not rely upon, the representations,
warranties, covenants and agreements of ABEV and Subsidiary contained in the
Transaction Documents.
E. All amounts that may become due from either Owner to ABEV
and Subsidiary after the determination that such amount has become payable
pursuant to any of the Transaction Documents, shall be paid jointly and
severally by Owners immediately upon demand by ABEV or Subsidiary, and if not so
paid within five (5) business days of such demand, such amounts may be offset by
ABEV and Subsidiary against any amounts then owing to either Owner under any
document, instrument, agreement or understanding (including, without limitation,
the Note, the RPA and the APA), and if the amount to be offset is greater than
the amount which is then currently owing to either Owner, then (i) such amounts
which are not then able to be immediately offset or are not then immediately
paid shall bear interest at the rate of fifteen percent (15%) per annum,
accruing from the date such amount is demanded until paid or later offset, and
(ii) ABEV and Subsidiary may pursue all other remedies available to them in
order to collect such amount. The foregoing remedies shall not be mutually
exclusive.
F. All amounts that may become due from ABEV and Subsidiary to
either Owner after the determination that such amount has become payable
pursuant to any of the Transaction Documents, shall be paid by ABEV and
Subsidiary immediately upon demand by such Owner, and if not so paid within five
(5) business days of such demand, such amounts may be offset by such Owner
against any amounts then owing to ABEV and Subsidiary under any document,
instrument, agreement or understanding, and if the amount to be offset is
greater than the amount which is then currently owing to ABEV and Subsidiary,
then (i) such amounts which are not then able to be immediately offset or are
not then immediately paid shall bear interest at the rate of fifteen percent
(15%) per annum,
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accruing from the date such amount is demanded until paid or
later offset, and (ii) either Owner may pursue all other remedies available to
them in order to collect such amount. The foregoing remedies shall not be
mutually exclusive.
l4. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AGREEMENTS AND COVENANTS.
A. All representations, warranties, agreements and covenants
made by any party hereto in this Agreement shall survive the Closing of the
transactions hereunder.
B. The representations and warranties hereunder shall not be
affected or diminished by any investigation at any time by or on behalf of the
party for whose benefit such representations, warranties, covenants and
agreements were made, or the fact that such representations, warranties,
agreements and covenants were made to such party's knowledge.
15. MISCELLANEOUS.
A. Manner of Closing. At the Closing, all transactions shall
be conducted substantially concurrently and no transaction shall be deemed to be
completed until all are completed.
B. Access to Records. ABEV and Subsidiary shall afford to
Owners and their agents, the opportunity, upon reasonable advance notice, to
examine and make copies of the books and records of GFI having an effect on all
periods prior to the Closing Date, in connection with tax and financial
reporting matters and other bona fide business purposes, and ABEV and Subsidiary
shall use reasonable efforts to retain such books and records for a period of
four (4) years from the date of such books and records.
C. Parties in Interest. This Agreement shall be binding upon,
inure to the benefit of; and be enforceable by the parties and their respective
executors, successors and assigns. Furthermore, (i) Owners are prohibited from
selling, transferring, or otherwise distributing his interest in any part of the
Merger Consideration without first having the transferee or distributee becoming
jointly and severally liable for Owners' obligations hereunder, and (ii) should
either Owner already have, or in the future create, a trust for his benefit or
the benefit of any family member, then Owners' signatures below will constitute
and, if necessary, such trust will execute such instruments as are necessary to
evidence, such trust being jointly and severally liable for Owners' obligations
hereunder. By Owners' execution hereof, each hereby acknowledges that any trust
to which either has transferred, or in the future transfers, assets with the
intent, purpose or effect of estate planning purposes or to avoid liability
hereunder or of which either is the trustee or is a beneficiary, shall be
jointly and severally liable for all of Owners' obligations hereunder, without
the necessity for further action on any party's behalf
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Notwithstanding the foregoing, each Owner is prohibited from assigning his/her
interests hereunder, by operation of law or otherwise. Each Owner hereby
consents to a collateral assignment of ABEV's and Subsidiary's rights hereunder
to a lender, understanding that such lender shall have the ability to enforce
the rights of ABEV and Subsidiary granted herein.
D. Entire Agreement; Amendments. This Agreement, the Exhibits
and Schedules attached hereto, and the other writings referred to herein or
delivered in connection herewith contain the entire understanding of the parties
with respect to its subject matter, and supersedes all prior understandings and
agreements. This Agreement may be amended only by a written instrument duly
executed by the parties. Any reference herein to this Agreement shall be deemed
to include the Exhibits and Schedules attached hereto. If any provision of this
Agreement is determined to be illegal or unenforceable, such provision will be
deemed amended to the extent necessary to conform to applicable law or, if it
cannot be so amended without materially altering the intention of the parties,
it will be deemed stricken and the remainder of the Agreement will remain in
full force and effect.
E. Headings. The section and subsection headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
F. Notices. All notices, claims, certificates, requests,
demands and other communications ("COMMUNICATIONS") hereunder shall be in
writing and shall be deemed to have been duly given when personally delivered,
mailed (by registered or certified mail, postage prepaid) or sent by overnight
courier service or facsimile addressed as follows:
If to any of the Selling Parties,
in care of Mr. Grogan, at: Bobby L. Grogan
Route #2
Arlington, KY 42021
With a copy to: Gary B. Houston, Esq.
WHITLOW ROBERTS HOUSTON
& STRAUB
Old National Bank Building
300 Broadway
Paducah, KY 42002-0995
Facsimile: (502) 443-4571
If to ABEV and Subsidiary: c/o Sterling Capital, Ltd.
650 Dundee Road, Suite 370
Northbrook, IL 60062
Facsimile: (847) 480-0199
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With a copy to: Tom D. Wippman, P.C.
650 Dundee Road, Suite 370
Northbrook, Illinois 60062
Facsimile: (847)480-0199
or to such other address as the person to whom a communication is to be given
may have furnished to the others in writing in accordance herewith. A
communication given by any other means shall be deemed duly given on the earlier
of when actually received by the addressee or three (3) days after sending such
communication. Notice hereunder to either Owner shall be deemed to be notice to
each of the Selling Parties.
G. Public Announcements. All public announcements relating to
this Agreement or the transactions contemplated hereby, including announcements
to employees, will be made only as may be agreed upon jointly by the parties
hereto, or as ABEV and Subsidiary considers required or appropriate to comply
with applicable law. Any governmental, public or private inquiries or requests
for information shall be promptly referred to ABEV and Subsidiary.
H. Further Assurances. After the Closing Date, without further
consideration, the parties shall execute and deliver such further instruments
and documents as either party shall reasonably request to consummate the
transactions contemplated hereby.
I. Waivers. Any party to this Agreement may, by written notice
to the other party hereto, waive any provision of this Agreement. The waiver by
any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent, same or different breach.
J. Materiality and Knowledge. The terms "MATERIAL" or
"MATERIALLY" or "MATERIALITY" shall mean either (i) the existence of a fact or
condition or facts or conditions which, if a dollar amount is readily
ascertainable with respect to such, has a value, either individually or in the
aggregate, of more than $10,000.00, except if such fact or condition relates to
taxes, claims and/or litigation in which case such matter shall be material
irrespective of the dollar amount, or (ii) the determination by a lender, in
such lender's sole and absolute discretion, that such fact or condition is, or,
if known to such lender would be, material for purposes of its making a loan to
ABEV and Subsidiary in order to consummate the transactions hereunder or to
avoid any acceleration of such loan, or (iii) any fact or condition which gives
rise to any right of termination, cancellation, acceleration or modification of
any agreement or understanding to which GFI is a party and such right has been
exercised. The term "KNOWLEDGE" shall mean (i) actual knowledge or notice, (ii)
that knowledge which a party should know after having made all reasonable
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inquiries and (iii) that an individual or individuals making a statement as to
its, his or her "KNOWLEDGE" has made all reasonable inquiries regarding the
facts and circumstances relating to such statement. For purposes of this
Agreement, the knowledge of any of the Selling Parties shall be deemed to be the
knowledge of all of the Selling Parties (i.e., the knowledge of one of the
Selling Parties shall be imputed to all other Selling Parties, including both
Owners), and the receipt of a notice by any shall be deemed to be receipt by
all. The knowledge of any employee of GFI shall be deemed to be the knowledge of
GFI.
K. Counterparts. The Agreement may be executed in one or more
counterparts, but all such counterparts shall constitute one and the same
instrument.
L. Certificate. A Certificate shall mean a certificate signed
by the individual stating that (i) such individual who is signing the
certificate has made or has caused to be made such investigations as are
necessary in order to permit him to verify the accuracy of the information set
forth in such certificate and (ii) to the individual's knowledge, after due
inquiry, such certificate does not misstate any material fact and does not omit
any fact necessary to make the certificate not misleading.
M. Use of Certain Terms. The term "GFI", and "Selling Parties"
shall also include all predecessors thereof and businesses acquired by or merged
therewith, or businesses whose liabilities (some or all) have been assumed by
GFI or the Selling Parties. The term "each of the Selling Parties" shall mean
any or all thereof, including Owners, whichever has the broadest meaning given
the particular context. The term "PERSON" shall mean an individual, a
partnership, a joint venture, a joint stock company, a corporation, a trust, an
unincorporated organization, a limited liability company, any other legal entity
and a government, governmental body or quasi-governmental body, or any
department, agency or political subdivision thereof
N. Applicable Law. The terms and conditions of this Agreement
shall be governed by and construed in accordance with the laws of the State of
Delaware applicable to agreements between Delaware residents entered into and to
be performed entirely within Delaware.
O. Consent to Jurisdiction. For those matters or disputes of
any nature arising out of, connected with, related or incidental to a party
seeking to compel action (other than payment) or cease a prohibited action, the
parties hereto hereby irrevocably submit themselves to the exclusive
jurisdiction of the courts of Kentucky located in the City of Paducah, Kentucky
and to the jurisdiction of the United States District Court for the Western
District of Kentucky for the purpose of bringing any action that may be brought
in connection with the provisions hereof. The parties hereto hereby individually
agree that they shall not assert any claim that they are not subject to the
exclusive jurisdiction of such courts, that the venue is improper, that the
forum is inconvenient or any similar objection, claim or
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argument. Service of process on any of the parties hereto with regard to any
such action may be made by mailing the process to such Persons by regular or
certified mail to the address of such Person set forth herein or to any
subsequent address to which notices shall be sent.
P. Agreement to Arbitrate. Except for those matters described
in Section 150 above, in the event of any other dispute arising out of,
connected with, related or incidental to this Agreement and the documents or
instruments delivered in connection herewith, such dispute shall be submitted to
arbitration in accordance with the terms of this Section. The party who is
alleging that a dispute exists shall send a notice of such dispute to all other
parties, which notice shall set forth in detail the dispute, the parties
involved and the position of such party with respect thereto. Within ten (10)
business days after the delivery of such a notice, counsel for the parties shall
deliver a joint request to the Managing Partner of the Cincinnati, Ohio Office
of Strauss & Troy, Esq., requesting such person to deliver a list of ten (10)
prospective arbitrators, all of whom such partner believes to be experienced in
commercial arbitration, along with a brief resume of each such person. The
parties shall do all things necessary to reasonably cooperate in the selection
of the ten (10) persons, including holding Strauss & Troy harmless from any and
all claims arising out of such selection and arbitration. If such Managing
Partner declines, the list of ten (10) shall be selected by the party asking for
arbitration receiving a list from any private dispute resolution firm with
offices in Cincinnati. The arbitrator shall be selected as follows: within three
(3) days after the list is delivered to each party, each party shall assign rank
of preference to each available arbitrator, with number one being the most
preferable and ten being the least preferable (i.e., a different rank must be
assigned to each available arbitrator) and deliver such rankings confidentially
to the person or firm which created the list; in the event of a tie, the person
or firm which created the list shall then select the arbitrator from the two
potential arbitrators which have tied. The single arbitrator with the lowest
total score shall be the arbitrator for the dispute. The arbitrator so selected
shall schedule a hearing in Paducah, Kentucky, on the disputed issues within
forty-five (45) days after his appointment, and the arbitrator shall render his
decision after the hearing, in writing, as expeditiously as is possible, and
shall be delivered to the parties. The arbitrator shall render his decision
based on written materials supplied by the parties to the arbitration in support
of their respective oral presentations at the hearing, and no party shall be
entitled to discovery in such matter. Each party shall supply a copy of any
written materials to be submitted to the arbitrator at least fifteen (15) days
prior to the scheduled hearing. The parties agree that the arbitrator shall not
have any power or authority to award punitive damages. A default judgment may be
entered against any party who fails to appear at the arbitration hearing. Such
decision and determination shall be final and unappealable and shall be filed as
a judgment of record in any jurisdiction designated by the successful party. The
successful party shall be entitled to recover all fees, costs and expenses
incurred in connection with such arbitration. The parties hereto agree that this
paragraph has been included to
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rapidly and inexpensively resolve any disputes between them with respect to the
matters described above, and that this paragraph shall be grounds for dismissal
of any court action commenced by any party with respect to a dispute arising out
of such matters.
THE PARTIES AGREE THAT ANY ARBITRATION SHALL BE GOVERNED BY AND PURSUANT TO THE
FEDERAL ARBITRATION ACT, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER.
Q. Exceptions to Exclusive Jurisdiction and Mandatory
Arbitration. Notwithstanding the provisions of Sections 15O and 15P hereof, in
the event that there is a third party action which may give rise to rights of
indemnification or contribution from one party(ies) to another, the parties
hereto irrevocably submit themselves to the jurisdiction of the court in which
such third party action is brought, and the party to be indemnified may, but
shall not be obligated to, bring a third party action or other appropriate
proceeding to enforce such rights of indemnification or contribution. The
foregoing is not intended to confer any rights upon any other party other than
the parties hereto.
R. Pronouns. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, singular and plural as the identity
of that person referred to requires.
S. Joint and Several Obligations. The duties and obligations
of each of the Selling Parties are joint and several, and the Selling Parties
hereby acknowledge the same, and each of the Selling Parties hereby guarantees
performance of all duties and obligations of the other under and pursuant to
this Agreement. Furthermore, where there is imposed an obligation or duty upon
one Selling Party, each of the other Selling Parties shall be jointly and
severally liable for ensuring the prompt compliance of such obligation or duty
thereof. Notwithstanding the foregoing, after the Merger, neither Owner shall be
entitled to contribution or other similar remedy or remedies from GFI for
Owners' obligations hereunder, it being the intent that only the Owners (or
their successors, assigns, trusts, etc.) shall be responsible for the indemnity
obligations hereunder.
T. Effect of Disputes. Notwithstanding the fact that there may
from time to time be disputes among the parties concerning the terms and
conditions hereof, the parties agree not to under any circumstances, disparage,
criticize or denigrate the talents, skills, prospects, abilities, integrity or
character of the other parties hereto, or such parties' management, directors,
employees, agents or representatives (including those of ABEV and Subsidiary's
affiliates). Each of the Selling Parties further agrees that each will not, at
any time after the date hereof and without ABEV and Subsidiary's written
consent, contact any past, present or prospective customer, supplier, employee
or agent or representative of GFI or ABEV and Subsidiary with the intent,
purpose or effect of injuring the
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reputation, business or business relationships of ABEV and Subsidiary. The
provisions of this Section shall survive the execution and termination hereof,
irrespective of the reason for such termination.
U. Mutual Drafting. This Agreement is the joint product of
ABEV and Subsidiary, GFI and Owners and their respective counsel, and each
provision hereof has been subject to the mutual consultation, negotiation and
agreement of such parties and counsel, and shall not be construed for or against
any party hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
ATLANTIC BEVERAGE COMPANY, INC.
By
Merrick M. Elfman, Chairman
GROGAN'S MERGER CORP.
By
Merrick M. Elfman, Chairman
GROGAN'S FARM, INC.
By
Bobby L. Grogan, President
Bobby L. Grogan
Betty Ruth Grogan
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