EXHIBIT 99.1
ASSET PURCHASE AGREEMENT
BETWEEN
PORTLAND BREWING COMPANY
PYRAMID BREWERIES INC.
AND PBC ACQUISITION, LLC
DATED JANUARY 26, 2004
CONTENTS
1. Definitions....................................................................... 1
2. Purchase and Sale of Assets....................................................... 6
2.1 Purchase and Sale........................................................ 6
2.1.1 Cash and Equivalents............................................ 6
2.1.2 Accounts Receivable............................................. 7
2.1.3 Equipment....................................................... 7
2.1.4 Equipment and Other Personal Property Leases.................... 7
2.1.5 Inventory....................................................... 7
2.1.6 Intellectual Property........................................... 7
2.1.7 Permits......................................................... 8
2.1.8 Contract Rights and Other Intangible Assets..................... 8
2.1.9 Certain Tax Refunds............................................. 8
2.1.10 Other Records, Manuals and Documents............................ 8
2.1.11 Insurance Proceeds.............................................. 8
2.2 Excluded Assets.......................................................... 9
2.2.1 Tax Refunds..................................................... 9
2.2.2 Excluded Real Property.......................................... 9
2.2.3 Excluded Contracts.............................................. 9
2.2.4 Other Excluded Assets........................................... 9
2.2.5 Excluded Permits................................................ 9
2.2.6 Excluded Brands................................................. 9
2.3 Assumption of Liabilities................................................ 10
2.4 Excluded Liabilities..................................................... 10
2.4.1 Excluded Real Property.......................................... 10
2.4.2 Taxes........................................................... 10
2.4.3 Litigation...................................................... 11
2.4.4 Claims.......................................................... 11
2.4.5 Warranties...................................................... 11
2.4.6 Environmental Liability......................................... 11
2.4.7 Severance Costs................................................. 11
2.4.8 Employee Expenses............................................... 11
2.4.9 Certain Indebtedness............................................ 11
2.4.10 Other........................................................... 12
2.5 Accounts Receivable; Cash; Tax Refunds................................... 12
2.6 Instruments of Sale and Transfer......................................... 12
2.7 Further Assurances....................................................... 12
3. Purchase Price.................................................................... 13
3.1 Purchase Price........................................................... 13
3.2 Purchase Price Adjustment................................................ 13
3.3 Earn Out Payments........................................................ 15
3.4 Allocation of Purchase Price............................................. 15
4. Closing........................................................................... 15
4.1 Closing Date............................................................. 15
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4.2 Closing Payments to Seller............................................... 15
4.3 Repayment of Revolving Credit Facility................................... 16
5. Representations and Warranties of Seller.......................................... 16
5.1 Organization, Good Standing, etc......................................... 16
5.2 Corporate Authority; Authority for Agreement............................. 17
5.3 No Conflict.............................................................. 17
5.4 Consents and Approvals................................................... 18
5.5 Financial Statements..................................................... 18
5.6 Absence of Certain Changes or Events..................................... 18
5.7 Taxes.................................................................... 19
5.8 Property................................................................. 20
5.9 Equipment................................................................ 21
5.10 Environmental and Safety Matters......................................... 21
5.11 Contracts................................................................ 21
5.12 Claims and Legal Proceedings............................................. 22
5.13 Labor Matters............................................................ 22
5.14 Trademarks and Intellectual Property..................................... 22
5.15 Accounts and Other Receivables........................................... 23
5.16 Inventory................................................................ 23
5.17 No Material Adverse Change............................................... 23
5.18 Product Warranties....................................................... 23
5.19 Compliance With Law...................................................... 23
5.20 Permits and Qualifications............................................... 24
5.21 Insurance................................................................ 24
5.22 Employee Benefit Plans................................................... 24
5.23 Excluded Assets.......................................................... 25
5.24 Brokerage................................................................ 26
5.25 Customers and Suppliers.................................................. 26
5.26 Assets Complete; Title................................................... 26
5.27 Full Disclosure.......................................................... 26
5.28 Proxy Statement.......................................................... 27
5.29 Investment Representations and Warranties................................ 27
5.30 Disclaimer of Other Representations and Warranties....................... 28
6. Representations and Warranties of Buyer........................................... 28
6.1 Organization, Good Standing, Power, etc.................................. 28
6.2 Corporate Authority...................................................... 28
6.3 Brokerage................................................................ 29
6.4 Full Disclosure.......................................................... 29
6.5 Issuance of Pyramid Stock................................................ 29
6.6 No Conflict.............................................................. 29
6.7 Financial Statements..................................................... 30
6.8 No Material Adverse Change............................................... 30
7. Certain Covenants................................................................. 30
7.1 Access and Confidentiality............................................... 30
7.2 Assignment of Contracts.................................................. 30
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7.3 Conduct of Business Prior to Closing..................................... 31
7.4 Covenants to Satisfy Conditions.......................................... 32
7.5 Board Recommendations.................................................... 32
7.6 Acquisition Proposals.................................................... 33
7.7 Seller's Shareholders' Meeting........................................... 34
7.8 Proxy Statement.......................................................... 34
7.9 Revolving Line of Credit; Payments with Respect to Long-Term Debt........ 34
7.10 Notice of Seller's Breach................................................ 35
8. Conditions Precedent to Obligations of Buyer...................................... 35
8.1 Representations, Warranties and Covenants................................ 35
8.2 No Adverse Changes....................................................... 35
8.3 Consents and Approvals................................................... 35
8.4 Taxes.................................................................... 36
8.5 Delivery of Documents.................................................... 36
8.6 Trademark License Agreement.............................................. 37
8.7 Legal Opinion............................................................ 37
8.8 Satisfaction of Conditions............................................... 37
8.9 No Injunction or Litigation.............................................. 37
8.10 Restructuring of Related Party Debt and Release of Security Interests.... 37
9. Conditions Precedent to Obligations of Seller..................................... 37
9.1 Representations, Warranties and Covenants................................ 37
9.2 No Adverse Changes....................................................... 38
9.3 Delivery of Documents.................................................... 38
9.4 Consents and Approvals................................................... 38
9.5 Shareholder Vote......................................................... 38
9.6 Satisfaction of Conditions............................................... 38
9.7 No Injunction or Litigation.............................................. 39
9.8 Legal Opinion............................................................ 39
10. Certain Post-Closing Covenants.................................................... 39
10.1 Further Assurances....................................................... 39
10.2 Books and Records; Cooperation with Respect to Preparation and
Audit of Financial Statements............................................ 39
10.3 Post-Closing Cooperation................................................. 40
10.4 Dissolution.............................................................. 40
10.5 Board Representation..................................................... 40
10.6 Employees and 401(k) Plans............................................... 40
10.7 Shareholder Cards and Discounts.......................................... 41
11. Taxes and Costs; Apportionments................................................... 41
11.1 Transfer Taxes........................................................... 41
11.2 Transaction Costs........................................................ 41
11.3 Apportionments........................................................... 41
11.4 Cooperation.............................................................. 41
11.5 Employee Withholding..................................................... 42
12. Intentionally Left Blank.......................................................... 42
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13. Covenants Not to Compete.......................................................... 42
13.1 Covenant................................................................. 42
13.2 Remedies................................................................. 42
14. Survival and Indemnification...................................................... 43
14.1 Survival................................................................. 43
14.2 Indemnification by Seller................................................ 43
14.3 Indemnification by Buyer................................................. 43
14.4 Limitations on Indemnification........................................... 44
14.5 Procedure................................................................ 45
14.6 Election of Remedies..................................................... 46
14.7 Exclusive Remedies....................................................... 46
15. Termination....................................................................... 46
15.1 Termination.............................................................. 46
15.2 Effect of Termination.................................................... 47
15.3 Fees and Expenses........................................................ 48
16. Miscellaneous..................................................................... 49
16.1 Confidentiality Obligations of Seller Following the Closing.............. 49
16.2 Public Announcements..................................................... 49
16.3 Severability............................................................. 49
16.4 Modification and Waiver.................................................. 49
16.5 Notices.................................................................. 50
16.6 Assignment............................................................... 50
16.7 Captions................................................................. 50
16.8 Entire Agreement......................................................... 51
16.9 No Third-Party Rights.................................................... 51
16.10 Counterparts............................................................. 51
16.11 Governing Law............................................................ 51
16.12 Attorneys' Fees.......................................................... 51
16.13 Records.................................................................. 51
Exhibit 2.6(a) Xxxx of Sale and Assignment
Exhibit 2.6(b) Assignment and Assumption Agreement
Exhibit 3.3 Earn Out Payments
Exhibit 8.5(d) Debt Exchange Agreement
Exhibit 8.5(e)(1) Brewery Facility Lease
Exhibit 8.5(e)(2) Alehouse Facility Lease
Exhibit 8.5(g) Voting Agreement
Exhibit 8.5(h) Escrow Agreement
Exhibit 8.5(k) Noncompete Agreement
Exhibit 8.7 Opinion of Seller's Counsel
Exhibit 9.8 Opinion of Buyer's Counsel
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "AGREEMENT") is made as of the 26th
day of January, 2004, by and between Portland Brewing Company, an Oregon
corporation ("SELLER"), and Pyramid Breweries Inc., a Washington corporation
("BUYER"), and PBC Acquisition, LLC, a Delaware limited liability company and
wholly-owned subsidiary of Buyer ("ACQUISITION SUBSIDIARY").
RECITALS
A. Seller desires and intends to sell substantially all of its
operating assets and other rights relating to its brewery and alehouse
operations, at the price and on the terms and conditions herein set forth.
B. Buyer desires and intends to purchase substantially all of the
operating assets and other rights relating to Seller's brewery and alehouse
operations and to assume certain of the operating liabilities relating to such
operations, at the price and on the terms and conditions herein set forth.
C. Buyer has formed Acquisition Subsidiary for the purpose of
acquiring such assets.
AGREEMENT
NOW, THEREFORE, in consideration of the covenants and agreements set
forth herein, the parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the meanings set forth below:
1.1 "AFFILIATE": of any person (the "SUBJECT") means any other
person which, directly or indirectly, controls or is controlled by or is under
common control with the Subject and, without limiting the generality of the
foregoing, includes, in any event, (a) any person which beneficially owns or
holds 25% or more of any class of voting securities of the Subject or 25% or
more of the legal or beneficial interest in the Subject and (b) any person of
which the Subject beneficially owns or holds 25% or more of any class of voting
securities or 25% or more of the legal or beneficial interest. "Control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such person, whether through the ownership of voting
securities, by contract or otherwise.
1.2 "AGREEMENT": This Agreement and all Schedules and Exhibits
hereto.
1.3 "ASSETS": As defined in Section 2.1.
1.4 "ASSIGNMENT AND ASSUMPTION AGREEMENT": As defined in Section
2.6.
1.5 "ASSUMED CONTRACTS": As defined in Section 2.1.8.
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1.6 "ASSUMED LIABILITIES": As defined in Section 2.3.
1.7 "BALANCE SHEET DATE": As defined in Section 5.5.
1.8 "XXXX OF SALE": As defined in Section 2.6.
1.9 "BUSINESS": The business, operations and activities of Seller
relating to its brewery and alehouse, including, but not limited to, the
manufacture, marketing, promotion, sale and distribution of the Products, but
excluding the Excluded Assets.
1.10 "CLAIM": Any claim, demand, cause of action, suit, proceeding,
arbitration, hearing or investigation.
1.11 "CLOSING": The consummation of the purchase and sale of the
Assets under this Agreement.
1.12 "CLOSING DATE": The date upon which the Closing becomes
effective.
1.13 "CODE": The Internal Revenue Code of 1986, as amended, and all
regulations promulgated thereunder, as in effect from time to time.
1.14 "CONTRACT": Any contract, agreement, lease, license, grant of
immunity from suit in regard to intellectual property rights, commitment,
arrangement, purchase or sale order, or undertaking, whether written or oral.
1.15 "DISCLOSURE SCHEDULE": That certain Disclosure Schedule dated
as of the date hereof and delivered by Seller to Buyer on the date hereof in
connection with this Agreement and incorporated by reference herein.
1.16 "EMPLOYEE BENEFIT PLANS": Any retirement, pension, profit
sharing, deferred compensation, stock bonus, savings, bonus, incentive,
cafeteria, medical, dental, vision, hospitalization, life insurance, accidental
death and dismemberment, medical expense reimbursement, dependent care
assistance, tuition reimbursement, disability, sick pay, holiday, vacation,
severance, change of control, stock purchase, stock option, restricted stock,
phantom stock, stock appreciation rights, fringe benefit or other employee
benefit plan, fund, policy, program, contract, arrangement or payroll practice
of any kind (including any "employee benefit plan," as defined in Section 3(3)
of ERISA) or any employment, consulting or personal services contract, whether
written or oral, qualified or nonqualified, funded or unfunded, or domestic or
foreign, (i) sponsored, maintained or contributed to by Seller or any ERISA
Affiliate or to which Seller or any ERISA Affiliate is a party, (ii) covering or
benefiting any current or former officer, employee, agent, director or
independent contractor of Seller or any ERISA Affiliate (or any dependent or
beneficiary of any such individual), or (iii) with respect to which Seller or
any ERISA Affiliate has (or could have) any obligation or liability.
1.17 "ERISA": The Employee Retirement Income Security Act of 1974,
as amended.
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1.18 "ERISA AFFILIATE" means any corporation, partnership, limited
liability company, sole proprietorship, trade, business or other entity or
organization that, together with Seller, is or was treated as a single employer
under Section 414(b), (c), (m) or (o) of the Code.
1.18 "ENCUMBRANCE": Any security interest, mortgage, lien, charge,
option, easement, license, adverse claim or restriction of any kind, including,
but not limited to, any restriction on the use, transfer, voting, receipt of
income or other exercise of any attributes of ownership other than (a)
mechanics', materialmen's and similar liens; (b) liens for Taxes not yet due or
payable; (c) purchase money liens and liens securing rental payments under
capital lease arrangements; and (d) other statutory liens arising in the
ordinary course of business and not incurred in connection with the borrowing of
money; and (e) those items described on SCHEDULE 1.18 of the Disclosure
Schedule.
1.19 "ENVIRONMENTAL AND SAFETY LAW": Any federal, state, local or
other laws (whether under common law, statute, ordinance, rule or regulation),
permits, orders, decrees, judgments and other requirements of governmental
authorities, as such requirements are enacted and in effect on or prior to the
Closing, relating to public health and safety, worker health and safety, or
pollution or protection of the environment.
1.20 "EXCHANGE ACT": The Securities Exchange Act of 1934, as
amended.
1.21 "EXCLUDED ASSETS": As defined in Section 2.2.
1.22 "EXCLUDED BUSINESSES": as defined in Section 2.2.4.
1.23 "EXCLUDED LIABILITIES": As defined in Section 2.4.
1.24 "EXCLUDED REAL PROPERTY": As defined in Section 2.2.2.
1.25 "FACILITIES": The real property situated at 0000 XX 00xx
Xxxxxx and 0000 XX 00xx Xxxxxx, Xxxxxxxx, Xxxxxx, where Seller conducts the
Business, and all plants, buildings, structures, improvements, machinery and
equipment located thereon.
1.26 "FINANCIAL STATEMENTS": As defined in Section 5.5.
1.27 "GOVERNMENTAL BODY": Any federal, state or other court or
governmental body, any subdivision, agency, commission or authority thereof, or
any quasi-governmental or private body exercising any regulatory or taxing
authority thereunder, domestic or foreign.
1.28 "HAZARDOUS MATERIALS": Any chemicals, materials, substances,
or wastes that are regulated, designated, defined or included in any definition
under any Environmental and Safety Laws as dangerous, hazardous, radioactive or
toxic or as a pollutant or contaminant, including, without limitation, asbestos
or asbestos-containing materials, petroleum or petroleum products,
polychlorinated biphenyls and urea formaldehyde.
1.29 "INDEMNIFIED PARTY": As defined in Section 14.4.
1.30 "INDEMNIFYING PARTY": As defined in Section 14.5.
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1.31 "INDEPENDENT ACCOUNTANT": The Portland Oregon office of Xxxxx
Xxxxxxxx, or such other accounting firm as may be mutually acceptable to the
parties.
1.32 "INTELLECTUAL PROPERTY": As defined in Section 2.1.6.
1.33 "INTERIM PERIOD": As defined in Section 3.2(b).
1.34 "INTERIM PERIOD ADJUSTED NET INCOME (LOSS)": As defined in
Section 3.2(b).
1.35 "INTERIM PERIOD INCOME STATEMENT": As defined in Section
3.2(b).
1.36 "INVENTORY": The inventories of Seller described in Section
2.1.5.
1.37 "JUDGMENT": Any judgment, order, award, writ, injunction or
decree of any Governmental Body or arbitrator.
1.38 "LOSS": Any loss, damage, Judgment, debt, liability,
obligation, fine, penalty, cost or expense (including, but not limited to, any
legal and accounting fee or expense), whether or not relating to personal
injury, property damage, public or worker health, welfare or safety, natural
resources or the environment and whether or not relating to violations of or
liability under Environmental and Safety Law.
1.39 "MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE": Any
circumstance, event, development, effect or change that would (i) in the case of
Seller, be materially adverse to the Business as currently conducted, the
Assets, taken as a whole, or the financial condition or results of operations of
the Business; (ii) in the case of Buyer, be materially adverse to Buyer's
business as currently conducted or Buyer's financial condition or results of
operations; or (iii) materially impede the ability of any party to consummate
timely the transactions contemplated by this Agreement; provided, that none of
the following shall be deemed to constitute, and none of the following shall be
taken into account in determining whether there has been, a Material Adverse
Effect or Material Adverse Change: (a) any adverse circumstance, event,
development, effect or change arising from or relating to the (1) general
business or economic conditions, including such conditions related to the craft
brewing business, (2) national or international political or social conditions,
including the engagement by the United States in hostilities, whether or not
pursuant to the declaration of a national emergency or war, or the occurrence of
any military or terrorist attack upon the United States, or any of its
territories, possessions, or diplomatic or consular offices or upon any military
installation, equipments or personnel of the United States, (3) financial,
banking, or securities markets (including any disruption thereof), (4) changes
in United States generally accepted accounting principles, (5) changes in law,
rules, regulations, orders, or other binding directives issued by any
Governmental Body or (6) the taking of any action contemplated by this Agreement
and the other Transaction Documents; (b) a decrease in one party's stock price
or the failure by that party to meet or exceed internal or research analysts'
earnings or other estimates or projections; provided in the case of Buyer, if
Buyer's Determination Price (as defined below) prior to the Closing Date is less
than $1.75, such event shall be a Material Adverse Change unless Buyer, in its
sole discretion, elects to pay the entire Remaining Purchase Price in cash; or
(c) any existing circumstance, event, development, effect or change affecting a
party with respect to which the other party has knowledge as of the date of this
Agreement. For purposes of clause (b) of this Section 1.39, "Buyer's
Determination Price" means the average closing price per share of Pyramid
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Stock, as publicly reported on the Nasdaq National Market System, for any
consecutive 30 trading days period commencing as of the date of this Agreement
and ending on the Closing Date. For purposes of clause (c) of this Section 1.39,
"Knowledge" means the actual, conscious awareness of the circumstance, event,
development, effect or change at issue by one or more executive officers of the
party against whom knowledge is charged.
1.40 "MINIMUM CASH PURCHASE PRICE": As defined in Section 3.1.
1.41 "MISREPRESENTATION CLAIMS": As defined in Section 14.7.
1.42 "MOST RECENT BALANCE SHEET": As defined in Section 5.5.
1.43 "PERMIT": Any permit, license, approval, certification,
endorsement or qualification of any Governmental Body or any other person or
entity (including, but not limited to, any customer).
1.44 "PERSONAL PROPERTY": As defined in Section 5.8.
1.45 "PRODUCTS": Any and all of the ale, beer, soda, clothing,
hats, glassware and other products that Seller now sells or manufactured or sold
during the past five years or is developing, other than products related to the
Excluded Assets.
1.46 "PURCHASE PRICE": As defined in Section 3.1.
1.47 "PURCHASE PRICE ADJUSTMENT": As defined in Section 3.2(a).
1.48 "PURCHASE PRICE ADJUSTMENT STATEMENT": As defined in Section
3.2(b).
1.49 "REAL PROPERTY": As defined in Section 5.8.
1.50 "RELEASE": Any releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, migrating,
disposing or dumping of Hazardous Materials.
1.51 "REMAINING PURCHASE PRICE": As defined in Section 3.1(b).
1.52 "REMEDIAL ACTION": Any action to identify, eliminate or
minimize any threat or potential threat posed by Hazardous Materials to public
or worker health, welfare or safety, natural resources or the environment,
including without limitation any investigation, assessment, clean-up or
monitoring activities.
1.53 "RESTRICTED ACTIVITIES": As defined in Section 13.1.
1.54 "SEC": The Securities and Exchange Commission.
1.55 "SELLER TERMINATION FEE": As defined in Section 15.3.
1.56 "SECURITIES ACT": The Securities Act of 1933, as amended.
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1.57 "SHAREHOLDERS MEETING": The meeting of Seller's Shareholders
convened to vote on this Agreement and the purchase and sale of the Assets by
Buyer.
1.58 "TAX" or "TAXES": (i) All taxes, charges, fees, levies or
other assessments, including, without limitation, income, excise, gross
receipts, personal property, real property, sales, use, ad valorem, transfer,
state and federal alcohol taxes, franchise, profits, license, withholding,
payroll, employment, severance, stamp, occupation, windfall profits, social
security and unemployment or other taxes imposed by the United States or any
agency or instrumentality thereof, any state, county, local or foreign
government, or any agency or instrumentality thereof, and any interest or fines,
and any and all penalties or additions relating to such taxes, charges, fees,
levies or other assessments; (ii) any liability for the payment of any amounts
of the type described in clause (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group for any period; and (iii)
any liability for the payment of any amounts of the type described in clause (i)
or (ii) as a result of any express or implied obligation to indemnify any other
person or as a result of any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
1.59 "TAX RETURNS": Any federal, state, local and foreign report,
return, statement or other written information, including any schedules or
attachments thereto and any amendment thereof, required to be supplied to a
Governmental Body in connection with Taxes.
1.60 "THIRD PARTY CLAIM": As defined in Section 14.5.
1.61 "TRANSACTION DOCUMENTS": Any and all of the agreements and
documents referenced in Sections 8 and 9.
1.62 "TRANSFER": As defined in Section 2.1.
1.63 "TRANSFER TAXES": As defined in Section 11.1.
2. PURCHASE AND SALE OF ASSETS
2.1 PURCHASE AND SALE
Subject to the terms and conditions of this Agreement, at the Closing,
Seller shall sell, transfer, convey, assign and deliver (collectively,
"TRANSFER"), or cause to be transferred, to Acquisition Subsidiary, free and
clear of all Encumbrances, and Acquisition Subsidiary shall purchase and
acquire, all of Seller's right, title and interest in and to all of the assets
and rights (collectively, the "ASSETS") of every type and description, used in
or relating to the Business, whether tangible or intangible, personal or mixed,
wherever located and whether or not reflected on the books and records of
Seller, including, but not limited to, the following assets and rights (but
excluding the Excluded Assets):
2.1.1 CASH AND EQUIVALENTS
Seller's cash or similar cash and cash equivalent items existing as of
the close of business on the Closing Date.
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2.1.2 ACCOUNTS RECEIVABLE
Seller's accounts receivable employed primarily or exclusively in
Seller's operation of the Business and existing as of the close of business on
the Closing Date.
2.1.3 EQUIPMENT
All machinery, equipment, furniture, computer hardware, fixtures, motor
vehicles, tooling, leasehold improvements and other tangible personal property
owned by Seller and employed primarily or exclusively in Seller's operation of
the Business as of the close of business on the Closing Date, including, without
limitation, the personal property described in SCHEDULE 2.1.3 of the Disclosure
Schedule, such personal property and fixtures as are located on the Excluded
Real Property, and all rights to the warranties received from the manufacturers
and distributors of all such personal property and fixtures and any related
claims, credits, rights of recovery and setoffs with respect to such personal
property and fixtures.
2.1.4 EQUIPMENT AND OTHER PERSONAL PROPERTY LEASES
All of Seller's right, title and interest in, to and under the leases
and rental agreements in respect of equipment or other tangible personal
property employed primarily or exclusively in Seller's operation of the Business
as of the close of business on the Closing Date, including, without limitation,
those leases and agreements described in SCHEDULE 2.1.4 of the Disclosure
Schedule.
2.1.5 INVENTORY
All inventory, wherever located, including raw materials, packaging,
finished goods, production supplies, and restaurant supplies produced by or
employed primarily or exclusively in Seller's operation of the Business as of
the close of business on the Closing Date ("INVENTORY"), including, without
limitation, the types of Inventory described in SCHEDULE 2.1.5 of the Disclosure
Schedule (which Schedule sets forth raw materials, finished goods, packaging and
other Inventory as of the Balance Sheet Date by net book value and location),
but excluding inventory of the Excluded Brands, and all rights of Seller to the
warranties received from suppliers and distributors and any related claims,
credits, rights of recovery and setoffs with respect to such Inventory.
2.1.6 INTELLECTUAL PROPERTY
All information (whether or not protectable or registered by patent,
trademark, copyright or trade secret rights) and intellectual property rights
possessed or owned by Seller and employed primarily or exclusively in Seller's
operation of the Business as of the close of business on the Closing Date, and
all right, title and interest of Seller in, to and under licenses, sublicenses
or like agreements providing Seller any right or concession to use any
information or intellectual property, and, in each case, employed primarily or
exclusively in Seller's operation of the Business as of the close of business on
the Closing Date, including all trade names, trademarks (including common-law
trademarks), service marks, art work, packaging, plates, emblems, logos,
insignia and copyrights, and their registrations and applications, and all
goodwill associated therewith, all technology, know-how, trade secrets,
manufacturing processes, formulae, drawings, designs, systems, forms, technical
manuals, data, computer programs and product information and all documentary
evidence of any of the foregoing, including, without limitation, the trademarks,
other assets and related agreements
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described in SCHEDULE 2.1.6 of the Disclosure Schedule (collectively, the
"INTELLECTUAL PROPERTY"), but excluding the Excluded Brands.
2.1.7 PERMITS
Except for the Excluded Permits, all Permits relating primarily or
exclusively to Seller's operation of the Business as of the close of business on
the Closing Date, to the extent actually assignable or transferable, including,
without limitation, those described in SCHEDULE 2.1.7 of the Disclosure
Schedule.
2.1.8 CONTRACT RIGHTS AND OTHER INTANGIBLE ASSETS
All of Seller's right, title and interest in, to and under all
contracts and agreements, purchase orders, sales orders, sale and distribution
agreements, supply agreements, contract brewing agreements, leases and other
instruments and agreements relating primarily or exclusively to Seller's
operation of the Business as of the close of business on the Closing Date (the
"ASSUMED CONTRACTS"), and all goodwill associated with the Business, including,
without limitation, Seller's right, title and interest in, to and under the
contracts, agreements and other assets described in SCHEDULE 2.1.8 of the
Disclosure Schedule; provided, however, that no contractual rights or
obligations relating to the manufacture, distribution or sale of Products
marketed under the Excluded Brands shall be deemed to be included in the Assumed
Contracts, whether or not such contractual rights or obligations are expressed
in any contract listed on SCHEDULE 2.1.8.
2.1.9 CERTAIN TAX REFUNDS
All of Seller's right, title and interest in and to any refunds of
Taxes (net of any Tax liabilities arising as a result of such refunds) paid with
respect to the Business for Tax Periods (or portions thereof) ending on or prior
to the Closing Date, other than refunds relating to federal or state income
taxes or business and occupation taxes.
2.1.10 OTHER RECORDS, MANUALS AND DOCUMENTS
Subject to any third-party confidentiality limitations, all of Seller's
mailing lists, customer lists, supplier lists, vendor data, marketing
information and procedures, sales and customer files, advertising and
promotional materials, current product material, equipment maintenance records,
warranty information, records of plant operations and the source and disposition
of materials used and produced in such plants, standard forms of documents,
manuals of operations or business procedures and other similar procedures, and
all other information of Seller relating primarily or exclusively to Seller's
operation of the Business as of the close of business on the Closing Date and,
with respect to the Real Property to be leased or subleased to Buyer, access to
all soil test reports, building inspection reports, building plans, blueprints,
renderings and surveys.
2.1.11 INSURANCE PROCEEDS
All insurance proceeds paid or payable to Seller in respect of any
damage to or destruction or loss of any assets or rights of Seller reflected on
the Schedules referred to in this Section 2.1, including any assets of Seller
that, as far as could reasonably be foreseen, would have been included in the
Assets but for such damage, destruction or loss.
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2.2 EXCLUDED ASSETS
Seller and Buyer expressly understand and agree that Seller is not
transferring to Buyer pursuant to this Agreement any of the following assets or
rights of Seller (the "EXCLUDED ASSETS").
2.2.1 TAX REFUNDS
Seller's rights to refunds of federal or state income or business and
occupation Taxes paid with respect to the Business for Tax periods (or portions
thereof) ending on or prior to the Closing Date.
2.2.2 EXCLUDED REAL PROPERTY
All of Seller's real property, and all rights and liabilities relating
thereto, described in SCHEDULE 2.2.2 of the Disclosure Schedule (the "EXCLUDED
REAL PROPERTY").
2.2.3 EXCLUDED CONTRACTS
All of Seller's right, title and interest in, to and under all
contracts and agreements described in SCHEDULE 2.2.3 of the Disclosure Schedule,
and all contractual rights or obligations relating to the manufacture,
distribution or sale of Products marked under the Excluded Brands.
2.2.4 OTHER EXCLUDED ASSETS
All other assets of Seller described in SCHEDULE 2.2.4 of the
Disclosure Schedule including, but not limited to, all assets used exclusively
in Seller's hand truck manufacturing or whiskey distribution businesses (the
"EXCLUDED BUSINESSES"), excluding any cash balances in bank accounts designated
for any of the Excluded Businesses, which cash shall be applied to the repayment
of the Revolving Credit Facility as contemplated in Section 4.3, including,
without limitation, those Claims listed on SCHEDULE 5.12.
2.2.5 EXCLUDED PERMITS
All of Seller's right, title and interest in, to and under all Permits
described in SCHEDULE 2.2.5 of the Disclosure Schedule (the "EXCLUDED PERMITS").
2.2.6 EXCLUDED BRANDS
All of Seller's right, title, interest, and any goodwill, in the
following brands: (a) GOVERNATOR, THE GOVERNATOR, THE GOVERNATOR ALE, and any
and all other brands incorporating "GOVERNATOR"; (b) PUMPING IRON, PUMPING IRON
BREWING COMPANY, and any and all other brands incorporating "PUMPING" and
"IRON"; and (c) all logos, designs, advertising materials, promotional
materials, and marketing materials associated therewith, including, but not
limited to, the logos and designs depicted in the artwork for the label shown on
SCHEDULE 2.2.6 (collectively, the "EXCLUDED BRANDS").
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2.3 ASSUMPTION OF LIABILITIES
Upon the terms and subject to the conditions of this Agreement,
Acquisition Subsidiary agrees, effective at the time of Closing, to assume all
obligations and liabilities of Seller of any kind, character or description,
arising exclusively or primarily out of the conduct of the Business (the
"ASSUMED LIABILITIES"), except for the Excluded Liabilities, including, without
limitation, the following:
(a) Accounts payable which are either disclosed on the
Most Recent Balance Sheet or incurred by Seller in the ordinary course of
operating the Business between January 1, 2004 and the Closing;
(b) Liabilities and obligations related to customer
deposits which are either disclosed on the Most Recent Balance Sheet or incurred
by Seller in the ordinary course of operating the Business between January 1,
2004 and the Closing;
(c) Accrued payroll (including bonuses in the ordinary
course of business) and accrued vacation and sick time which are either
disclosed on the Most Recent Balance Sheet or incurred in the ordinary course of
operating the Business between January 1, 2004 and the Closing;
(d) Other accrued liabilities relating to the Business
(of the nature included in the Most Recent Balance Sheet in the line item "Other
accrued liabilities") which are either disclosed on the Most Recent Balance
Sheet or incurred by Seller in the ordinary course of operating the Business
between January 1, 2004 and the Closing;
(e) Indebtedness to certain related parties of Seller,
after giving effect to the transfer of the Excluded Real Property, subject to a
mortgage or deed of trust securing the Real Estate Facility, to the holder(s) of
such indebtedness in exchange for the cancellation of a portion of such
indebtedness (the "RELATED PARTY DEBT"), as more particularly described in
SCHEDULE 2.3(e) of the Disclosure Schedule; and
(f) Seller's obligations under the Assumed Contracts.
2.4 EXCLUDED LIABILITIES
Neither Buyer nor Acquisition Subsidiary shall assume any liabilities
other than the Assumed Liabilities, nor shall it assume any of the following
obligations or liabilities, which shall remain obligations and liabilities of
Seller (all obligations or liabilities not assumed by Buyer or Acquisition
Subsidiary herein are called the "EXCLUDED LIABILITIES"):
2.4.1 EXCLUDED REAL PROPERTY
Any payables, claims, liabilities, fines, rents and contractual and
other obligations, contingent or otherwise, in any way relating to the Excluded
Real Property.
2.4.2 TAXES
Any liabilities for Taxes of Seller, including (without limitation) any
Taxes relating to the use or ownership of the Assets, or the operation of the
Business, on or prior to the Closing Date.
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2.4.3 LITIGATION
Any claim, Judgment, penalty, settlement agreement or other obligation
to pay in respect of any Claim that is pending or threatened on or prior to the
Closing Date, including, but not limited to, those listed in SCHEDULE 5.12 of
the Disclosure Schedule.
2.4.4 CLAIMS
All Claims, liabilities or other obligations that relate to injuries,
actions, omissions, conditions or events that occurred or existed on or prior to
the Closing Date, whether based on any act or omission of Seller, in connection
with the operation of the Business.
2.4.5 WARRANTIES
Seller's liabilities and obligations pursuant to warranties (express or
implied) to customers for Products manufactured or sold on or prior to the
Closing Date.
2.4.6 ENVIRONMENTAL LIABILITY
All Claims, Losses and liabilities arising out of or relating to (a)
the failure of Seller to comply with any Environmental and Safety Laws,
including, without limitation, any noncompliance with respect to the Facilities
(or any other property that the Seller at any time owned, leased, subleased or
used) or to the conduct of the Business on or prior to the Closing Date, (b) the
presence or Release, on or prior to the Closing Date, of Hazardous Materials on,
at or from the Facilities (or any other property that the Seller at any time
owned, leased, subleased or used) and (c) the presence or Release of Hazardous
Materials on, at or from at any other location if Seller bears any
responsibility for the generation, transportation, storage, treatment, Release
or disposal of such Hazardous Materials.
2.4.7 SEVERANCE COSTS
All severance obligations and other costs of terminating employees
wherever located resulting from any termination or cessation of employment
occurring on or prior to the Closing Date, from whatever source such obligations
and costs arise, including, without limitation, contractual obligations, notices
to employees, employment manuals, course of dealings, past practices,
obligations relating to Section 2806 or 4999 of the Code, or otherwise.
2.4.8 EMPLOYEE EXPENSES
Except for the Assumed Liabilities referred to in 2.3(c) and
liabilities under any Employee Benefit Plan of Seller included as an Assumed
Contract on Schedule 2.1.8 arising after the Closing Date, all liabilities and
obligations with respect to any Employee Benefit Plan.
2.4.9 CERTAIN INDEBTEDNESS
Seller's obligations with respect to the payment of principal, interest
or other amounts under (i) that certain Business Loan Agreement dated as of
August 1, 2001 between Seller and Washington Mutual Bank dba Western Bank, as
amended (the "REVOLVING CREDIT FACILITY"), and (ii) that certain
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Business Loan Agreement dated as of October 28, 2003 between Seller and Sterling
Savings Bank (the "REAL ESTATE FACILITY").
2.4.10 OTHER
All Claims, liabilities and obligations in respect of any Excluded
Asset (including, without limitation, the Excluded Brands) or in respect of the
Excluded Businesses, and all liabilities or obligations of Seller in respect of
costs or expenses incurred by or on behalf of Seller in connection with the
transactions contemplated by this Agreement.
2.5 ACCOUNTS RECEIVABLE; CASH; TAX REFUNDS
The parties have agreed that the accounts receivable of the Business as
of the Closing Date are included in the Assets being purchased by Buyer. Seller
agrees that all payments from customers of the Business which have unpaid
accounts due to Seller as of the Closing Date shall be transmitted to Buyer in
accordance with this Section. Seller shall pay such monies to Buyer within five
business days of receipt, until the customer's account balance as of the Closing
Date has been paid in full. Buyer shall have access during normal business hours
to Seller's books and records as reasonably required to enable Buyer to verify
the amounts of monies received by Seller from such customers. All cash balances
relating to the Business in bank accounts of Seller or on hand as of the Closing
Date shall be remitted, by check or wire transfer, to Buyer within two business
days of the Closing Date. Seller shall, upon the request of Buyer, provide bank
statements or other satisfactory evidence of the amount of cash held by Seller
as of the Closing Date. Any refunds of Taxes included in the Assets pursuant to
Section 2.1.9 received by Seller after the Closing Date shall be remitted, by
check or wire transfer, to Buyer within five business days after receipt.
2.6 INSTRUMENTS OF SALE AND TRANSFER
On or prior to the Closing Date, Seller shall deliver to Buyer and
Buyer shall deliver to Seller, as the case may be, such instruments of sale and
assignment as shall, in the reasonable judgment of Buyer and Seller, be
effective to vest in Buyer on the Closing Date all of Seller's right, title and
interest in and to the Assets and to evidence the assumption of the Assumed
Liabilities by Buyer, including, without limitation, a Xxxx of Sale and
Assignment substantially in the form of EXHIBIT 2.6(a) (the "XXXX OF SALE") and
an Assignment and Assumption Agreement substantially in the form of EXHIBIT
2.6(b) (the "ASSIGNMENT AND ASSUMPTION AGREEMENT"). Seller shall take all
reasonable additional steps as may be necessary to put Buyer in possession and
operating control of the Assets at the Closing, and Buyer shall take all
reasonable additional steps as may be necessary for it to assume the Assumed
Liabilities at the Closing.
2.7 FURTHER ASSURANCES
From time to time following the Closing, Buyer and Seller shall execute
and deliver, or cause to be executed and delivered, to the other such additional
instruments of conveyance and transfer and evidences of assumption as such party
may reasonably request or as may be otherwise necessary or desirable to carry
out the purposes of this Agreement.
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3. PURCHASE PRICE
3.1 PURCHASE PRICE
The aggregate purchase price for the Assets shall be the sum of Four
Million Two Hundred Sixteen Thousand Seven Hundred Fifty-Eight Dollars
($4,216,758) (the "PURCHASE PRICE"), subject to adjustment as provided in
Section 3.2. The Purchase Price will consist of the following:
(a) Buyer's assumption of the Assumed Liabilities; and
(b) an amount equal to the difference between (i) the
Purchase Price and (ii) the sum of (A) the outstanding amounts at December 31,
2003 of the Assumed Liabilities specified in subsections 2.3(a)-(d) and (B) the
amount of the Related Party Debt to be assumed pursuant to the terms of this
Agreement (the "REMAINING PURCHASE PRICE"), payable either in cash or in shares
of the unregistered common stock of Pyramid Breweries Inc. (the "PYRAMID
STOCK"), or a combination of both cash and Pyramid Stock, at the sole discretion
of Pyramid; provided, that the Remaining Purchase Price shall consist of a
minimum cash payment in the amount equal to the sum of (x) the amount
outstanding as of the Closing Date under the Revolving Credit Facility which is
attributable to the Business, but not to exceed $1,000,000, which will be
applied at Closing in the manner set forth in Section 4.3, and (y) $200,000 (x
and y together, the "MINIMUM CASH PURCHASE PRICE").
If Pyramid chooses to pay some or all of the Remaining
Purchase Price (net of the Minimum Cash Purchase Price) in Pyramid Stock, the
number of shares of Pyramid Stock issuable to Seller will be determined by
dividing (i) the portion of the Remaining Purchase Price to be paid in shares of
Pyramid Stock by (ii) the Fair Market Value of Pyramid Stock on the date hereof.
For purposes of this Agreement, the "FAIR MARKET VALUE" of Pyramid Stock shall
mean the average closing price per share of Pyramid Stock, as publicly reported
on the Nasdaq National Market System, for the thirty trading days ending the
trading day immediately prior to the date of execution of this Agreement. No
fractional shares of Pyramid Stock will be issued by Buyer. The value of any
fractional share shall be payable to Seller in cash.
3.2 PURCHASE PRICE ADJUSTMENT
The Purchase Price shall be subject to adjustment after the Closing as
specified in this Section 3.2 as follows:
(a) The Purchase Price shall be increased or decreased,
as applicable, by the amount of Interim Period Adjusted Net Income (Loss) (as
defined below) (the "PURCHASE PRICE ADJUSTMENT").
(b) As promptly as practicable, but in any event no later
than 30 days, following the Closing Date, Seller shall deliver to Buyer (i) a
statement of operations for Business for the period commencing on January 1,
2004 and ending on the Closing Date (the "INTERIM PERIOD"), prepared in
accordance with generally accepted accounting principles (other than for
accompanying notes), consistently applied (the "INTERIM PERIOD INCOME
STATEMENT") and (ii) Seller's statement of the amount of the Purchase Price
Adjustment ("PURCHASE PRICE ADJUSTMENT STATEMENT"), which shall be equal to the
net income (loss) for the Interim Period, as shown on the Interim Period Income
Statement, adding back depreciation and amortization expense for the Interim
Period, as shown on
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the Interim Period Income Statement and adding back any reductions in long-term
debt ("INTERIM PERIOD ADJUSTED NET INCOME (LOSS)").
(c) To enable Buyer to evaluate the Interim Period Income
Statement and the Purchase Price Adjustment Statement, Seller agrees, upon
Buyer's request, to provide Buyer or Buyer's representatives reasonable access
to Seller's accounting books and records and to employees or other agents or
representatives involved in Seller's accounting function or in the preparation
or review of the Interim Period Income Statement.
(d) Buyer shall deliver to Seller, no later than 60 days
after its receipt of the Purchase Price Adjustment Statement, notice of
acceptance of the Purchase Price Adjustment set forth in Seller's Purchase Price
Adjustment Statement (the "ACCEPTANCE NOTICE") or notice of dispute of the
Purchase Price Adjustment set forth in Seller's Purchase Price Adjustment
Statement (a "DISPUTE NOTICE"). A Dispute Notice will set forth in reasonable
detail a written explanation of the basis for Buyer's dispute with Seller's
determination of the amount of the Purchase Price Adjustment. If Buyer delivers
an Acceptance Notice, or if Buyer fails to give a Dispute Notice within the
prescribed time period (in which case Buyer will be deemed to have accepted
Seller's determination of Purchase Price Adjustment), the amount of the Purchase
Price Adjustment set forth in the Purchase Price Adjustment Statement shall be
final and binding upon the parties.
(e) If Buyer delivers a Dispute Notice to Seller within
the time set forth in Section 3.2(d), Buyer and Seller shall meet, as soon as
practicable (but in any event no later than 10 days) after delivery of a Dispute
Notice, to attempt to reconcile the parties' differences with regard to the
amount of the Purchase Price Adjustment. If the parties are able to reconcile
such differences within 30 days after the date of delivery of the Dispute
Notice, the amount of the Purchase Price Adjustment agreed to in writing shall
be final and binding upon the parties.
(f) If Seller and Buyer fail to reach agreement under
Section 3.2(e) within 30 days after the date of delivery of the Dispute Notice,
either Seller or Buyer may refer the final determination of Purchase Price
Adjustment to the Independent Accountant, who will determine the amount of the
Purchase Price Adjustment as promptly as practicable, but in any event within 45
days after being engaged. The fees and costs of the Independent Accountant will
be shared equally by Buyer and Seller. The determination of Purchase Price
Adjustment by the Independent Accountant will be final and binding upon the
parties.
(g) If the final Purchase Price Adjustment results in an
increase to the Purchase Price, Buyer shall deposit the Purchase Price
Adjustment Holdback with the Escrow Agent, to be held pursuant to the terms of
the Escrow Agreement, and remit to Seller the additional amount by which the
final Purchase Price Adjustment exceeds the amount of the Purchase Price
Adjustment Holdback. If the final Purchase Price Adjustment results in a
decrease to the Purchase Price, but is less than the Purchase Price Adjustment
Holdback, Buyer shall deposit the portion of the Purchase Price Adjustment
Holdback which exceeds the final Purchase Price Adjustment with the Escrow
Agent, to be held pursuant to the terms of the Escrow Agreement. If the final
Purchase Price Adjustment results in a decrease to the Purchase Price, but is
more than the Purchase Price Adjustment Holdback, Seller shall remit to Buyer an
amount equal to the difference between the amount of the final Purchase Price
Adjustment and the amount of the Purchase Price Adjustment Holdback. The
Purchase Price, as adjusted by the Purchase Price Adjustment, is referred to as
the "ADJUSTED PURCHASE PRICE."
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(h) Any amounts payable by Buyer to Seller hereunder may
be paid by delivery of cash, Pyramid Stock (valued as provided in Section 3.1),
or a combination thereof, in Buyer's sole discretion. If Seller received Pyramid
Stock in payment of a portion of the Purchase Price at Closing, any amounts
payable by Seller to Buyer hereunder may be paid in cash or by Seller's return
to Buyer of a number of shares of Pyramid Stock (valued as provided in Section
3.1) equal to the amount owed by Seller, or a combination thereof.
3.3 EARN OUT PAYMENTS
Depending on certain conditions, Seller may be entitled to additional
payments (collectively, the "EARN OUT PAYMENTS"), as is described on EXHIBIT 3.3
to this Agreement. All parties hereto acknowledge that at all times after the
Closing, the Business will be operated by Buyer in such manner as Buyer deems
prudent or desirable in its sole and absolute discretion and that such operation
including, without limitation, the business plan and strategy and the sales and
marketing associated with the Business, may not be in accordance with the
Buyer's or Seller's past practices or with their respective current business
plans. Moreover, Seller's right to any Earn Out Payments shall not in any way be
deemed to give Seller any ownership or other interest in the Business.
3.4 ALLOCATION OF PURCHASE PRICE
As soon as practicable after the final determination of the Purchase
Price Adjustment, Buyer shall deliver to Seller a statement (the "ALLOCATION
STATEMENT") allocating the Adjusted Purchase Price (including Assumed
Liabilities to the extent properly taken into account under Section 1060 of the
Code among the Assets and the restrictive covenants set forth in Section 13 in
accordance with Section 1060 of the Code; provided, that Buyer and Seller shall
cooperate in the preparation of the Allocation Statement and Seller shall have
the right to approve the Allocation Statement (which approval shall not be
withheld unreasonably). Seller and Buyer agree to be bound by the Allocation
Statement and act in accordance with the Allocation Statement for all tax
purposes.
4. CLOSING
4.1 CLOSING DATE
Subject to the terms and conditions of this Agreement, the Closing
shall take place at the offices of Xxxxxxx Coie LLP in Portland, Oregon, within
two business days after satisfaction or waiver of the last to be fulfilled of
the conditions set forth in Sections 8 and 9, or at such other location or time
as the parties may agree, and shall be effective as of midnight of the Closing
Date.
4.2 CLOSING PAYMENTS TO SELLER
At the Closing, Buyer shall pay to Seller the Remaining Purchase Price,
less:
(a) an amount equal to $150,000 (the "INDEMNITY ESCROW
AMOUNT"), in the form of cash, Pyramid Stock or combination thereof (in Buyer's
sole discretion), which shall be deposited with an escrow agent (the "ESCROW
AGENT") pursuant to the terms of an Escrow Agreement, a form of which attached
as EXHIBIT 8.5(h) (the "ESCROW AGREEMENT"), and
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(b) an amount equal to $250,000 (the "PURCHASE PRICE
ADJUSTMENT HOLDBACK") which shall be retained by Buyer pending final
determination of the Purchase Price Adjustment, as provided in Section 3.2.
The portion of the Remaining Purchase Price (net of the Indemnity
Escrow Amount and the Purchase Price Adjustment Holdback) shall be paid (i) in
cash, by wire transfer of immediately available funds to such bank account of
Seller as it may designate in writing prior to the Closing, (ii) in Pyramid
Stock, in which case Buyer will cause a stock certificate to be issued in the
name of Seller, or (iii) a combination of cash and Pyramid Stock; provided, that
the Minimum Cash Purchase Price will be paid to Seller at Closing.
4.3 REPAYMENT OF REVOLVING CREDIT FACILITY
At the Closing, the Revolving Credit Facility with Washington Mutual
dba Western Bank, the lender under such facility, will be paid down by a
sufficient amount so that the lender releases its security interest in the
Assets. Buyer and Seller shall, to the extent required by Washington Mutual,
establish an escrow trust account, with an escrow agent mutually acceptable to
Buyer and Seller ("CLOSING ESCROW AGENT"), for the pay down of the Revolving
Credit Facility. In such event, (i) Buyer shall deposit, on the business day
immediately preceding the Closing Date, into such escrow account, by wire
transfer of immediately available funds, an amount equal to the amount
outstanding as of the Closing Date of the Revolving Credit Facility attributable
to the Business (not to exceed $1,000,000), and (ii) Washington Mutual shall
deposit into the escrow account one or more UCC-3 Termination Statements and
such other instruments as may be necessary to release in full any security
interest Washington Mutual may have in any of the Assets being purchased by
Buyer. Upon confirmation to Buyer by the Closing Escrow Agent that it is in a
position to file such Termination Statements and other instruments with
applicable Governmental Bodies, the Closing Escrow Agent shall deliver funds
deposited in escrow by Buyer to pay down the Revolving Credit Facility. In the
event that Washington Mutual does not require the establishment of a closing
escrow to facilitate the paydown of the Revolving Credit Facility and the
release of any security interests in Assets being purchased by Buyer, the
parties agree to establish such other closing procedures as are reasonably
acceptable to the parties and Washington Mutual.
5. REPRESENTATIONS AND WARRANTIES OF SELLER
To induce Buyer to enter into and perform this Agreement, Seller
represents and warrants to Buyer (which representations and warranties shall
survive the Closing as provided in Section 14) as follows in this Section 5:
5.1 ORGANIZATION, GOOD STANDING, ETC.
Seller is a corporation duly incorporated and validly existing under
the laws of the State of Oregon. Seller is qualified to do business in each
state of the United States where the failure to be duly qualified is reasonably
likely to have a Material Adverse Effect. Seller has all requisite corporate
power and authority to own, operate and lease the Assets and to carry on the
Business as now being conducted.
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5.2 CORPORATE AUTHORITY; AUTHORITY FOR AGREEMENT
(a) Seller has full corporate power and authority to
execute and deliver this Agreement and the Transaction Documents to which it is
a party and perform its obligations hereunder and thereunder. The execution and
delivery by Seller of this Agreement and the Transaction Documents to which it
is a party, the performance by Seller of its obligations hereunder and
thereunder and the consummation by Seller of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action,
other than the approval and adoption of this Agreement at the Shareholders'
Meeting by the affirmative vote of a majority of the voting power of the
outstanding shares of Seller common stock and a majority of the voting power of
the outstanding shares of Seller Series A Preferred Stock, each voting as a
separate class, as of the record date for such meeting as required by the Oregon
Business Corporation Act and Seller's articles of incorporation and bylaws (the
"REQUISITE SHAREHOLDER APPROVAL"). This Agreement constitutes a valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms (provided that the consummation of the transactions contemplated by this
Agreement is subject to the Requisite Shareholder Approval), and the Transaction
Documents to which Seller is a party, when executed and delivered by Seller,
will constitute valid and binding obligations of Seller, enforceable against
Seller in accordance with their respective terms subject to bankruptcy,
insolvency and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(b) A special committee of independent directors and the
Board of Directors of Seller have (i) determined that this Agreement and the
Transaction Documents to which Seller is a party and the transactions
contemplated hereby and thereby are in the best interests of Seller, (ii)
approved and authorized this Agreement and the Transaction Documents to which
Seller is a party (provided that the consummation of the transactions
contemplated by this Agreement is subject to the Requisite Shareholder
Approval), and (iii) resolved to propose and recommend approval and adoption of
this Agreement by Seller's shareholders. Seller has taken all necessary action
to exempt this Agreement and the transactions contemplated by this Agreement
from, and this Agreement and such transactions are exempt from any restrictive
provisions of (1) any applicable state anti-takeover laws and regulations, and
(2) the Articles of Incorporation or Bylaws of Seller.
5.3 NO CONFLICT
Subject to the approval by its shareholders referred to in Section 5.2,
and the required filings under federal and state securities laws, and except as
disclosed in SCHEDULE 5.3 of the Disclosure Schedule, the execution, delivery
and performance by Seller of this Agreement or the Transaction Documents to
which Seller is a party and the consummation of the transactions contemplated
hereby or thereby, will not (a) violate, conflict with, or result in any breach
of, any provision of Seller's articles of incorporation or by-laws; or (b)
violate, conflict with, result in any breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would constitute a default)
under any Assumed Contract or Judgment to which Seller is a party or by which it
is bound or which relates to the Products, the Assets or the Business, which
violation, conflict, breach or default is reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect; or (c) result in the creation
of any Encumbrance on any of the Assets, which creation is reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect; or (d)
violate any applicable law, statute, rule, ordinance or regulation of any
Governmental Body (a "LAW"), which violation is reasonably likely, individually
or in the aggregate, to have a Material Adverse Effect; or (e) violate or result
in the
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suspension, revocation, modification, invalidity or limitation of any Permits
relating to the Products, the Assets or the Business which violation or other
event is reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect.
5.4 CONSENTS AND APPROVALS
Except as set forth in SCHEDULE 5.4 of the Disclosure Schedule, (a) no
consent, approval or authorization of, or declaration, filing or registration
with, any Governmental Body is required for the execution, delivery and
performance by Seller of this Agreement and the Transaction Documents to which
it is a party and for the consummation by Seller of the transactions
contemplated hereby and thereby other than such consents, approvals,
authorizations, declarations, filings or registrations the absence of which,
individually or in the aggregate, is not reasonably likely to have a Material
Adverse Effect, and (b) no consent, approval or authorization of any third party
is required for the execution, delivery and performance by Seller of this
Agreement and the Transaction Documents to which it is a party and the
consummation by Seller of the transactions contemplated hereby and thereby other
than such consents, approvals or authorizations the absence of which,
individually or in the aggregate is not reasonably likely to have a Material
Adverse Effect.
5.5 FINANCIAL STATEMENTS
Seller has delivered to Buyer the following financial statements of the
Business, which are set forth in SCHEDULE 5.5 of the Disclosure Schedule
(collectively, the "FINANCIAL STATEMENTS"): (i) an audited consolidated balance
sheet as of December 31, 2002, and audited statements of operations, cash flows
and stockholders equity for the years ended December 31, 2002 and 2001, (ii) an
unaudited interim balance sheet (the "MOST RECENT BALANCE SHEET") as of December
31, 2003 (the "BALANCE SHEET DATE") and the related unaudited statements of
operation for the twelve-month period then ended. The Financial Statements were
prepared from the books and records kept by Seller and fairly present the
financial condition of Seller as of their respective dates and the results of
operations of Seller for the respective years or periods then ended, in
accordance with generally accepted accounting principles consistently applied
(other than, with respect to the unaudited Financial Statements at and for the
twelve-month period ended December 31, 2003, the accompanying notes, normal year
end adjustments and other presentation items). Each accrual reflected on the
Most Recent Balance Sheet is adequate to meet the liability underlying such
accrual. The Most Recent Balance Sheet reflects all properties and assets, real,
personal or mixed, that are used by Seller in the Business and are required to
be reflected on such balance sheet pursuant to generally accepted accounting
principles consistently applied.
5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS
Except as set forth in SCHEDULE 5.6 of the Disclosure Schedule, since
the Balance Sheet Date, and through the Closing Date, Seller has conducted the
Business in the ordinary course consistent with Seller's past practice, and has
not:
(a) taken any action or entered into or agreed to enter
into any transaction, agreement or commitment (other than this Agreement and
matters related thereto) not in the ordinary course of business;
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(b) created or incurred any new borrowings or reduced any
outstanding borrowings other than borrowings in the ordinary course of business
under the Revolving Credit Facility;
(c) incurred any other obligation or liability (absolute
or contingent), other than current liabilities incurred, and obligations made or
contracts entered into, in the ordinary course of business.
(d) encumbered or disposed of any assets or made any
capital expenditures, except in the ordinary course of business or in an amount
in excess of $15,000 in the aggregate;
(e) paid any dividends or made distributions;
(f) cancelled any debts or waived any substantial rights
on claims other than in the ordinary course of business;
(g) suffered any damage, destruction or loss, whether or
not covered by insurance, materially and adversely affecting the Business;
(h) taken any action resulting in the reduction of the
Business's working capital (current assets including cash, less current
liabilities not including the short-term or current portion of long-term debt)
except for such customary changes as may be required in the ordinary course of
business;
(i) changed the compensation and terms of employment
provided to the Business's employees, except for changes made with the prior
knowledge and consent of Buyer; or
(j) entered into or agreed to enter into any transaction,
agreement or commitment, suffered the occurrence of any event or events or
experienced any change in financial condition, business, results of operations
or otherwise that, in the aggregate, has (i) interfered with the normal and
usual operations of the Business or business prospects of the Business or (ii)
resulted in a Material Adverse Change with respect to Seller's Business.
5.7 TAXES
Except as set forth in SCHEDULE 5.7 of the Disclosure Schedule:
(a) Seller has properly prepared and timely filed all Tax
Returns required to be filed by Seller and has paid all Taxes (whether or not
shown on any Tax Return) that Seller was required to pay. Such Tax Returns are
true and correct in all respects and have been prepared in accordance with
applicable law.
(b) No such Tax Returns have been or currently are the
subject of audit or examination nor has Seller been notified in writing, or
otherwise, that it is the subject of any pending, proposed or threatened action,
investigation, proceeding, audit, claim or assessment by or before any
Governmental Body nor does Seller have any reason to believe that any such
notice will be received in the future.
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(c) Seller is not currently the beneficiary of any
extension of time within which to file any Tax Return, and Seller has not waived
any statute of limitations in respect of Taxes or agreed to any extension of
time with respect to any Tax assessment or deficiency. Seller has duly and
timely withheld from employee salaries, or wages or other compensation (whether
or not paid in cash) and other amounts paid to creditors, independent
contractors and other third parties and paid over to the appropriate
governmental authority all amounts required to be so withheld and paid over for
all periods under all applicable Tax or other laws.
(d) Seller has made available to Buyer copies of all
income, payroll, sales and use Tax Returns that have been filed by Seller for
Tax periods beginning since January 1, 2000 and ending on or before the Closing
Date.
(e) Seller does not have or know of any basis for the
assertion of any claim for any liabilities for unpaid Taxes for which Buyer
would become liable as a result of the transactions contemplated by this
Agreement or that could result in an Encumbrance on any of the Assets or the
commencement of a Claim against Buyer or Acquisition Subsidiary.
(f) Seller is not a party to a tax sharing or allocation
agreement nor does Seller owe any amount under any such agreement. Seller (i)
has not been a member of any affiliated group within the meaning of Code Section
1504 of the Code or any similar group defined under a similar provision of
state, local, or foreign law filing a consolidated federal income Tax Return and
(ii) has no liability for the Taxes of any person under Treasury Regulation
Section 1.1502-6, Treasury Regulation Section 1.1502-78 (or any comparable
provision of foreign, state or local law), as a transferee or successor, by
contract, or otherwise.
(g) Seller does not have and has not had a permanent
establishment in any foreign country, as defined in any applicable Tax treaty or
convention between the United States and such foreign country, and has not
engaged in any trade or business within, or derived any income from, any state,
local or foreign jurisdiction other than those jurisdictions for which Tax
Returns have been duly filed by Seller or for which Tax Returns are not required
to be filed. No claim has ever been made by any Governmental Body in a
jurisdiction where Seller does not file Tax Returns that Seller is or may be
subject to taxation by such jurisdiction.
5.8 PROPERTY
(a) SCHEDULE 5.8(a) of the Disclosure Schedule contains a
complete and accurate list of all real property (the "REAL PROPERTY") owned,
leased or used by Seller with respect to the Business as now conducted.
(b) Except as set forth in SCHEDULE 5.8(b) of the
Disclosure Schedule, Seller owns or leases all of the personal property and
assets necessary for the conduct of the Business as now conducted ("PERSONAL
PROPERTY"). With respect to the Personal Property it owns, all such property is
free and clear of all Encumbrances, except Encumbrances that arise in the
ordinary course of business and do not impair Seller's ownership or use of such
Personal Property. With respect to the Personal Property it leases, Seller is in
compliance with such leases and, to Seller's knowledge, holds a valid leasehold
interest free of any Encumbrances, except those that arise in the ordinary
course of business and do not impair its ownership or use of such Personal
Property or those of the lessor of such Personal Property.
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5.9 EQUIPMENT
Except as set forth in SCHEDULE 5.9 of the Disclosure Schedule, the
machinery, equipment, furniture and other physical assets included in the Assets
are free of material defect (patent and latent), have been maintained in
accordance with normal industry practice, are in good operating condition and
repair (subject to normal wear and tear). During the past three years there has
not been any significant interruption in the conduct of the Business, including,
but not limited to, the operation of the Facilities, due to the malfunctioning
of any such Assets.
5.10 ENVIRONMENTAL AND SAFETY MATTERS
(a) Except as set forth in SCHEDULE 5.10 of the Disclosure
Schedule:
(i) Seller has, to the extent required by
applicable Environmental and Safety Laws, obtained and is in compliance with all
Permits required for its conduct of the Business and use of the Facilities.
Seller's conduct of the Business is and has been in compliance, in all material
respects, with all applicable Environmental and Safety Laws.
(ii) Seller has not received any written notice
of (a) any alleged violation of any Environmental and Safety Laws, including,
without limitation, any violation with respect to the Facilities or the conduct
of the Business or (b) its potential responsibility for the presence or Release
of Hazardous Materials at any site.
(iii) Except as allowed under a Permit, no
unpermitted or unlawful Release of Hazardous Materials has occurred from, upon,
below or into the Facilities by Seller that would give rise to material
liabilities to Seller and, to the knowledge of Seller, no unpermitted or
unlawful Release of Hazardous Materials has occurred on any adjacent property
that has migrated to, through or under the Facilities.
(iv) The Facilities have not been used to
generate, manufacture, transport, treat, store, use, handle, recycle, Release or
dispose of any Hazardous Materials, except in accordance with applicable
Environmental and Safety Laws. Seller has not generated, transported, treated,
stored, Released or disposed of, any Hazardous Materials that would give rise to
material liabilities to Seller for a violation of any Environmental and Safety
Laws.
(v) No tanks used at any time for the storage of
any Hazardous Materials above or below ground are present, as of the date of
this Agreement, on or at the Facilities. Any tanks previously used for the
storage of any Hazardous Materials above or below ground on or at the Facilities
were removed and closed in compliance with Environmental and Safety Laws.
5.11 CONTRACTS
SCHEDULE 5.11 of the Disclosure Schedule contains a complete and
accurate list of the following and relating to the Business (i) all written and
oral express contracts, agreements, instruments and arrangements ("CONTRACTS")
to which Seller is a party involving obligations (contingent or otherwise) of,
or payments to, Seller in excess of $5,000 annually, (ii) any Contract
containing any covenant limiting the freedom of Seller to engage in any business
activity or compete with any person or entity, and (iii) any other Contract that
is material to the business of Seller. Except as specifically set forth in
SCHEDULE 5.11 of the Disclosure Schedule, all such Contracts (the
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"MATERIAL CONTRACTS") are valid and in full force and effect, Seller has
performed its obligations thereunder, and there are not, under any of the
Material Contracts, any defaults or events of default on the part of Seller or,
to Seller's knowledge, any other party thereto. Seller has not received any
written notice indicating that Seller or another party, as the case may be, is
presently in default under or in breach or violation of any Material Contract.
Seller has not received notice that any party to any such Material Contract
intends to cancel, terminate or refuse to renew such contract or to exercise or
decline to exercise any option or right thereunder.
5.12 CLAIMS AND LEGAL PROCEEDINGS
Except as specifically set forth in SCHEDULE 5.12 of the Disclosure
Schedule, there are no Claims pending or, to Seller's knowledge, threatened
against Seller with respect to the operation of the Business, before or by any
Governmental Body or nongovernmental department, commission, board, bureau,
agency or instrumentality or any other person. To Seller's knowledge, there is
no valid basis for any Claim, other than as specifically set forth in SCHEDULE
5.12 of the Disclosure Schedule, adverse to the Business by or before any
Governmental Body or nongovernmental department, commission, board, bureau,
agency or instrumentality, or any other person. There are no outstanding or
unsatisfied Judgments to which Seller is a party or that involve the
transactions contemplated herein.
5.13 LABOR MATTERS
Except as set forth in SCHEDULE 5.13 of the Disclosure Schedule, during
the three-year period preceding the date of this Agreement, there have been no
disputes, employee grievances or disciplinary actions pending or, to the
knowledge of Seller, threatened between Seller and any of its current or former
employees. Seller is not or, during the three-year period preceding the date of
this Agreement, has not been a party to any collective bargaining agreement with
any labor union, and has no knowledge of any organizational efforts by or on
behalf of any labor union with respect to employees of Seller and is not the
subject of any proceeding asserting that Seller has committed an unfair labor
practice or seeking to compel Seller to bargain with any labor organization as
to wages or conditions of employment. No event has occurred or circumstance
exists that could provide the basis for any work stoppage or other labor dispute
affecting Seller. There is no lockout of any employee by Seller, and no such
action is contemplated. There has been no "mass layoff" or "plant closing" as
defined by applicable law with respect to Seller.
5.14 TRADEMARKS AND INTELLECTUAL PROPERTY
Seller owns, or has a contractual right to use, all copyrights,
trademarks, trade names, service marks, licenses and other intellectual property
rights ("INTELLECTUAL PROPERTY") now used in the Business, including, without
limitation, Intellectual Property listed on SCHEDULE 2.1.6 of the Disclosure
Schedule. SCHEDULE 2.1.6 of the Disclosure Schedule is an accurate and complete
list of all such copyrights, trademarks, trade names, service marks, licenses
and other intellectual property rights now used in the Business (or used within
the Business in the last five years). Except as set forth in SCHEDULE 5.14, to
the best of Seller's knowledge, none of the copyrights, trademarks, trade names,
service marks, licenses and other intellectual property rights used by Seller in
the Business infringes upon any validly issued or pending trademark, trade name,
service xxxx, copyright of any other person or entity, or, to Seller's
knowledge, any other material intellectual property right of any other person or
entity. A complete and correct list of any interference actions or adverse
claims
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(whether asserted by or against Seller) made or threatened in respect of the
copyrights, trademarks, trade names, service marks, licenses and other
intellectual property rights during the last three years, is set forth in
SCHEDULE 5.14 of the Disclosure Schedule.
5.15 ACCOUNTS AND OTHER RECEIVABLES
All accounts receivable of the Business reflected in the Most Recent
Balance Sheet, or existing at the Closing Date, have been collected or are
collectible within 120 days after the date incurred in the amounts at which they
are carried on the books of Seller, subject to the reserve for bad debts
reflected in the Most Recent Balance Sheet as adjusted for operations and
transactions through the Closing Date in accordance with the past custom and
practice of Seller.
5.16 INVENTORY
(a) All items in the inventory of the Business reflected in
the Most Recent Balance Sheet or as currently owned by Seller for use in the
operation of the Business, including inventories of raw materials, supplies, and
packaging and labeling materials to be transferred to Buyer hereunder, (i) have
been valued in accordance with generally accepted accounting principles and (ii)
are not damaged or defective and are of a quality and quantity usable and
salable in the ordinary course of business subject to the reserve for inventory
writedown reflected in the Most Recent Balance Sheet as adjusted for operations
and transactions through the Closing Date in accordance with the past custom and
practice of Seller.
(b) Seller's inventories of finished Products, raw materials,
supplies, and packaging and labeling materials as of December 31, 2003, the
approximate quantities thereof, and their location, are set forth in SCHEDULE
5.16 of the Disclosure Schedule.
5.17 NO MATERIAL ADVERSE CHANGE
Since the date of the Most Recent Balance Sheet, to Seller's knowledge,
there has not been any Material Adverse Change with respect to the Business.
5.18 PRODUCT WARRANTIES
Seller has not made any express product warranties in connection with
the sale of the Products.
5.19 COMPLIANCE WITH LAW
Except for matters relating to compliance with laws that are addressed
in other sections of this Section 5, Seller is and has been in compliance with
all laws, statutes, rules, ordinances and regulations promulgated by any
Governmental Body and all Judgments applicable to the ownership or operation of
the Assets or the Facilities, the conduct of the Business or the sale of the
Products, except where the failure to comply would not have a Material Adverse
Effect. During the past five years, Seller has not received any written notice
of any alleged violation (whether past or present and whether remedied or not)
of any such law, statute, rule, ordinance, regulation or Judgment.
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5.20 PERMITS AND QUALIFICATIONS
All Permits that are currently required for the ownership or operation
of the Assets or the Facilities or the conduct of the Business (including, but
not limited to, the manufacture, marketing, promotion, sale or distribution of
the Products) have been obtained by Seller, are in full force and effect and are
listed in SCHEDULE 2.1.7 of the Disclosure Schedule, with their expiration
dates, if any. Except for matters covered in Section 5.10, Seller is and has
been in compliance in all material respects with all such Permits, and Seller
has not received any notice of any alleged violation (whether past or present
and whether remedied or not) of, nor any threat of the suspension, revocation,
modification, invalidity or limitation of, any such Permit, nor is Seller aware
of any basis for any claim of any such violation or any such threat.
5.21 INSURANCE
Seller currently maintains adequate insurance protection against all
liabilities, Claims and risks against which it is customary for companies
engaged in the same or a similar business to insure.
5.22 EMPLOYEE BENEFIT PLANS
(a) Employee Benefit Plans. SCHEDULE 5.22 of the Disclosure
Schedule sets forth an accurate and complete list of each Employee Benefit Plan.
Neither Seller nor any ERISA Affiliate has any agreement, arrangement,
commitment or obligation, whether formal or informal, whether written or
unwritten and whether legally binding or not, to create, enter into or
contribute to any additional Employee Benefit Plan, or to modify or amend any
existing Employee Benefit Plan. The terms of each Employee Benefit Plan permit
Seller or any ERISA Affiliate to amend or terminate such Employee Benefit Plan
(or its participation therein) at any time and for any reason without penalty
and without material liability or expense. None of the rights of Seller or any
ERISA Affiliate under any Employee Benefit Plan will be impaired in any way by
this Agreement or the consummation of the transactions contemplated by this
Agreement.
(b) Documents Provided. Seller has delivered, or cause to be
delivered, to Buyer true, correct and complete copies of all Employee Benefit
Plans (including all amendments thereto), along with, to the extent applicable
to the particular Employee Benefit Plan, the following information: (i) copies
of the annual reports (Form 5500 series) filed with respect to the Employee
Benefit Plan for the last three years; (ii) copies of the summary plan
descriptions, summary annual reports, summaries of material modifications and
all material employee manuals or communications filed or distributed with
respect to the Employee Benefit Plan during the last three years; (iii) copies
of any insurance contracts or trust agreements through which the Employee
Benefit Plan is funded; (iv) copies of all contracts relating to the Employee
Benefit Plan, including, but not limited to, service provider agreements,
insurance contracts, investment management agreements, subscription and
prescription agreements and recordkeeping agreements; (v) a copy of the most
recent IRS determination letter issued with respect to the Employee Benefit
Plan; and (vi) notice of any material change occurring with respect to the
Employee Benefit Plan since the date of the most recently completed and filed
annual report.
(c) Compliance With Laws. To the knowledge of Seller, each
Employee Benefit Plan (and each related trust, insurance contract, or fund) has
been maintained, funded and administered in
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accordance with the terms of such Benefit Plan and complies in form and in
operation in all respects with the applicable requirements of ERISA and the
Code, except where the failure to comply would not have a Material Adverse
Effects.
(d) Qualified Plans. Each Employee Benefit Plan and related trust
intended to be qualified under Section 401(a) of the Code (i) is and has, at all
times since inception, been qualified under Section 401(a) of the Code, and the
trust established thereunder is, and at all times since inception, has been
exempt from taxation under Section 501(a) of the Code, and (ii) is the subject
of an unrevoked favorable determination from the IRS with respect to such
Employee Benefit Plan's qualified status under the Code or has remaining a
period of time under the Code, applicable Treasury Regulations or IRS
pronouncements in which to apply for such a letter and to make any amendments
necessary to obtain such a letter. No fact exists or is reasonably expected by
Seller or any ERISA Affiliate to arise, that could adversely affect the
qualification or exemption of any such Employee Benefit Plan or its related
trust. No such Employee Benefit Plan is a "top-heavy plan," as defined in
Section 416 of the Code.
(e) Other Claims and Investigations. There are no actions, suits
or claims (other than routine claims for benefits) pending or, to the knowledge
of Seller or any ERISA Affiliate, threatened with respect to any Employee
Benefit Plan or against the assets of any Employee Benefit Plan, nor, to the
knowledge of Seller or any ERISA Affiliate, is there a reasonable basis for any
such action, suit or claim. None of the Employee Benefit Plans is currently
under investigation, audit or review (of which Seller or any ERISA Affiliate has
received notice), directly or indirectly, by the IRS or the U.S. Department of
Labor and, to the knowledge of Seller or any ERISA Affiliate, no such action is
contemplated or under consideration.
(f) Multiemployer, Multiple Employer and Title IV Plans. Neither
Seller nor any ERISA Affiliate sponsors, maintains or contributes to, or has
ever sponsored, maintained or contributed to (or been obligated to sponsor,
maintain or contribute to), (i) a multiemployer plan, as defined in Section
3(37) or 4001(a)(3) of ERISA, (ii) a multiple employer plan, within the meaning
of Section 4063 or 4064 of ERISA, (iii) an Employee Benefit Plan that is subject
to Section 412 of the Code, Section 302 of ERISA or Title IV of ERISA, or (iv) a
multiple employer welfare arrangement, as defined in Section 3(40) of ERISA.
(g) Payments Resulting From Transactions. The consummation of any
transaction contemplated by this Agreement will not result in any (i) payment
(whether of severance pay or otherwise) becoming due from Seller or any ERISA
Affiliate to any officer, employee, former employee or director thereof or to
the trustee under any "rabbi trust" or similar arrangement, or (ii) benefit
under any Employee Benefit Plan being established or becoming funded,
accelerated, vested or payable.
5.23 EXCLUDED ASSETS
Except as set forth in SCHEDULE 5.23 of the Disclosure Schedule, none
of the Excluded Assets is currently being used in the conduct of the Business
for any purpose.
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5.24 BROKERAGE
Except as set forth in SCHEDULE 5.24 of the Disclosure Schedule, Seller
has not retained any broker or finder in connection with the transactions
contemplated by this Agreement. Any brokerage or finder's fee due to any broker
or finder in violation of the foregoing representation shall be paid by Seller.
5.25 CUSTOMERS AND SUPPLIERS
Except as set forth in SCHEDULE 5.25 of the Disclosure Schedule, no
customer (other than retail customers of Seller's ale house operation),
distributor or supplier of Seller relating to the Business has during the last
12 months decreased or limited materially, or threatened to decrease or limit
materially, its purchase of Seller's Products, or its supply of materials or
services to Seller, as the case may be. SCHEDULE 5.25 of the Disclosure Schedule
lists each customer or distributor of Seller who accounted for 10% or more of
the revenues of the Business during the period from January 1, 2002 to December
31, 2003 and the dollar and volume amount of each Product sold to each such
customer during such period. SCHEDULE 5.25 of the Disclosure Schedule also lists
each supplier of Seller who accounted for 10% or more of the expenses of the
Business for materials purchased during such period, and the dollar and volume
amount of the materials purchased from each such supplier during such period.
5.26 ASSETS COMPLETE; TITLE
Except for the Excluded Assets, the Assets to be transferred to Buyer
pursuant to this Agreement and the Transaction Documents constitute all the
other assets and rights necessary to operate the Business in the manner
presently operated by Seller.
Except as set forth in SCHEDULE 5.26 of the Disclosure Schedule, Seller
has good and marketable title to, or a valid leasehold interest in, the Assets,
free and clear of any Encumbrances.
5.27 FULL DISCLOSURE
(a) Since January 1, 2001, Seller has filed with the SEC
all required forms, reports, registration statements and documents required to
be filed by it with the SEC (collectively, all such forms, reports, registration
statements, and documents filed are referred to herein as "SELLER SEC REPORTS"),
all of which complied as to form when filed in all material respects with the
applicable provisions of the Securities Act and the Exchange Act, as the case
may be. Accurate and complete copies of Seller SEC Reports have been made
available to Seller. As of their respective dates, Seller SEC Reports (including
documents incorporated by reference therein and all exhibits and schedules
thereto) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) The representations and warranties contained in this
Section 5 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 5, in the light of the circumstances under
which they were made, not misleading.
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5.28 PROXY STATEMENT
The proxy statement to be mailed to Seller's shareholders in connection
with the Shareholders' Meeting (the "PROXY STATEMENT") at the date such document
is first published, sent or deliver to Seller's shareholders or, unless promptly
corrected, at any time prior to the Shareholders' Meeting, will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading. The
Proxy Statement will comply as to form and substance in all material respects
with the requirements of the Exchange Act and the applicable rules and
regulations of the SEC thereunder. Notwithstanding the foregoing, no
representation or warranty is made by Seller with respect to statements made
based on information supplied by Buyer for inclusion in the Proxy Statement.
5.29 INVESTMENT REPRESENTATIONS AND WARRANTIES
(a) Seller is an "accredited investor," as such term is
defined in Rule 501(a) of the Regulation D under the Securities Act.
(b) To the extent that any portion of the Purchase Price
is paid in Pyramid Stock, such Pyramid Stock shall be acquired by Seller for
investment, for Seller's own account, not as a nominee or agent. Other than as
disclosed on SCHEDULE 5.29 of the Disclosure Schedule, Seller has no present
intention of selling, granting any participation in or otherwise distributing
any of the Pyramid Stock, nor does Seller have any contract, undertaking,
agreement or arrangement with any person or entity to sell, transfer or grant a
participation to such person or entity with respect to any of the Pyramid Stock
that may be received pursuant to this Agreement.
(c) Seller is in a financial position to hold the Pyramid
Stock acquired pursuant to this Agreement and is able to bear the economic risk
and withstand a complete loss of its investment.
(d) Seller recognizes that the investment represented by
the Pyramid Stock involves a high degree of risk, including the risks described
in Buyer's Annual Report on Form 10-K for the year ended December 31, 2002, and
its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2003, June
30, 2003 and September 30, 2003.
(e) Seller has obtained, to the extent it deems
necessary, its own professional advice with respect to the risks inherent in the
investment in the Pyramid Stock, and the suitability of the investment in the
Pyramid Stock in light of its financial condition and investment needs. Seller,
either alone or with the assistance of a professional advisor, is a
sophisticated investor, is able to fend for itself in the transactions
contemplated by this Agreement, and has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of an investment in the Pyramid Stock.
(f) Seller has been given access to full and complete
information regarding Buyer including, in particular, the current financial
condition of Buyer and the risks associated therewith and has utilized such
access to its satisfaction for the purpose of obtaining information or verifying
information, and particularly, Seller has either attended or been given
reasonable opportunity to attend a meeting with representatives of Buyer for the
purpose of asking questions of,
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and receiving answers from, such representatives concerning the terms and
conditions of the purchase and sale of the Pyramid Stock pursuant to this
Agreement and to obtain any additional information, to the extent reasonably
available.
(g) Seller realizes that (i) the Pyramid Stock has not
been registered under the Securities Act, and (ii) the shares of Pyramid Stock
are characterized under the Act as "restricted securities" and, therefore,
cannot be sold or transferred unless they are subsequently registered under the
Act or an exemption from such registration is available. Seller represents that
it is familiar with Rule 144 of the SEC as presently in effect, and understands
the resale limitations imposed thereby and by the Act.
5.30 DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES
Except as expressly set forth in this Section 5, Seller makes no
representation or warranty, express or implied, at law or in equity, in respect
of any of its assets (including, without limitation, the Assets), liabilities or
operations, including, without limitation, with respect to merchantability,
fitness for any particular purpose or noninfringement, and any such other
representations and warranties are expressly disclaimed. Buyer acknowledges and
agrees that, except to the extent specifically set forth in this Section 5,
Buyer is purchasing the Assets on an "as-is, where-is" basis. Without limiting
the generality of the foregoing Buyer makes no representation or warranty
regarding any assets other than the Assets or any liabilities other than the
Assumed Liabilities, and none shall be implied by law or in equity.
6. REPRESENTATIONS AND WARRANTIES OF BUYER
To induce Seller to enter into this Agreement, each of Buyer and
Acquisition Subsidiary represents and warrants to Seller (which representations
and warranties shall survive the Closing as provided in Section 14) all as
follows in this Section 6:
6.1 ORGANIZATION, GOOD STANDING, POWER, ETC.
Buyer is a corporation duly organized and validly existing under the
laws of the State of Washington. Acquisition Subsidiary is a limited liability
company organized and validly existing under the laws of the State of Delaware
Each of Buyer and Acquisition Subsidiary has all requisite power and authority
to own or lease and operate its assets and to carry on its business as it is now
conducted.
6.2 CORPORATE AUTHORITY
Each of Buyer and Acquisition Subsidiary has full corporate power and
authority to execute and deliver this Agreement and the Transaction Documents to
which it is a party and perform its obligations hereunder and thereunder. The
execution and delivery by Buyer and Acquisition Subsidiary of this Agreement and
the Transaction Documents to which it is a party, the performance by Buyer and
Acquisition Subsidiary of its obligations hereunder and thereunder and the
consummation by Buyer and Acquisition Subsidiary of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action. This Agreement constitutes a valid and binding obligation of
Buyer and Acquisition Subsidiary, enforceable against Buyer and Acquisition
Subsidiary in accordance with its terms, and the Transaction Documents to which
Buyer and Acquisition Subsidiary is a party, when executed and delivered by
Buyer or Acquisition
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Subsidiary, will constitute valid and binding obligations of Buyer or
Acquisition Subsidiary, enforceable against Buyer or Acquisition Subsidiary in
accordance with their terms.
6.3 BROKERAGE
Buyer has not retained any broker or finder in connection with the
transactions contemplated by this Agreement. Any brokerage or finder's fee due
to any broker or finder in violation of the foregoing representation shall be
paid by Buyer.
6.4 FULL DISCLOSURE
Since January 1, 2001, Buyer has filed with the SEC all required forms,
reports, registration statements and documents required to be filed by it with
the SEC (collectively, all such forms, reports, registration statements, and
documents filed are referred to herein as "BUYER SEC REPORTS"), all of which
complied as to form when filed in all material respects with the applicable
provisions of the Securities Act and the Exchange Act, as the case may be.
Accurate and complete copies of Buyer SEC Reports have been made available to
Seller. As of their respective dates, Buyer SEC Reports (including documents
incorporated by reference therein and all exhibits and schedules thereto) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
The representations and warranties contained in this Section 6 do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements and information contained in this
Section 6, in the light of the circumstances under which they were made, not
misleading.
6.5 ISSUANCE OF PYRAMID STOCK
The Pyramid Stock when issued, will constitute the duly authorized,
validly issued, fully paid and nonassessable shares of the common stock of Buyer
with no statutory or other liability attached to the ownership thereof, free and
clear of any and all Encumbrances created by or through Buyer, other than the
transfer restrictions set forth and described in Section 5.29 of the Agreement.
6.6 NO CONFLICT
The execution, delivery and performance by Buyer and Acquisition
Subsidiary of this Agreement or the Transaction Documents to which Buyer or
Acquisition Subsidiary, as applicable, is a party and the consummation of the
transactions contemplated hereby or thereby, will not (a) violate, conflict
with, or result in any breach of, any provision of Buyer's or Acquisition
Subsidiary's articles of incorporation or by-laws; or (b) violate, conflict
with, result in any breach of, or constitute a default (or an event that, with
notice or lapse of time or both, would constitute a default) under any material
contract filed as an exhibit to any Buyer SEC Report or Judgment to which Buyer
or Acquisition Subsidiary is a party or by which it is bound or which relates to
its business, which, violation, conflict, breach or default is reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect; or
(c) violate any applicable law, statute, rule, ordinance or regulation of any
Governmental Body (a "LAW"), which violation is reasonably likely, individually
or in the aggregate, to have a Material Adverse Effect.
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6.7 FINANCIAL STATEMENTS
Buyer has made available to Seller the following financial statements
(collectively, the "BUYER'S FINANCIAL STATEMENTS"): (i) an audited consolidated
balance sheet as of December 31, 2002, and audited statements of operations,
cash flows and stockholders equity for the years ended December 31, 2002 and
2001 and (ii) an unaudited balance sheet as of September 30, 2003 and the
related unaudited statements of operation for the nine-month period then ended.
The Buyer's Financial Statements were prepared from the books and records kept
by Buyer and fairly present the financial condition of Buyer as of their
respective dates and the results of operations of Buyer for the respective years
or periods then ended, in accordance with generally accepted accounting
principles consistently applied (other than, with respect to the Buyer's
Financial Statements at and for the nine-month period ended September 30, 2003,
the accompanying notes, year end adjustments and other presentation items).
6.8 NO MATERIAL ADVERSE CHANGE
Since the date of the last financial statement contained in Buyer's
Form 10-Q for the period ended September 30, 2003, there has not been any
Material Adverse Change with respect to Buyer.
7. CERTAIN COVENANTS
7.1 ACCESS AND CONFIDENTIALITY
From the date of this Agreement until and including the Closing, Seller
shall grant Buyer and its agents, employees, accountants, attorneys and other
representatives ("REPRESENTATIVES") access to the officers, employees, agents,
properties, offices, plants, other facilities, customers, vendors and other
third parties with whom Seller does business and to such information as such
Representatives reasonably request, and the opportunity to examine and make
copies of the books and records of Seller. The parties acknowledge the
Confidentiality Agreement dated as of August 11, 2003 and agree that such
agreement continues with respect to information provided by or on behalf of
Seller pursuant to this Section 7.1. Buyer will not contact third parties, such
as Sellers' customers, distributors, suppliers, creditors, etc., without the
prior consent of the Chief Executive Officer of Seller.
7.2 ASSIGNMENT OF CONTRACTS
(a) Subject to the terms and conditions of this
Agreement, as of the Closing Date, Seller shall assign to Buyer all of the
right, title and interest of Seller in and under all Assumed Contracts, and
Buyer shall assume the liabilities and obligations of Seller arising under such
Assumed Contracts after the Closing Date; provided, however, that Buyer shall
not succeed to or assume, and Seller shall be responsible for, any liability or
obligation arising out of any or all of the following: (i) any breach by Seller
of any such Assumed Contract or any failure by Seller to discharge or perform
any liability or obligation arising on or prior to the Closing Date under any
such Assumed Contract; and (ii) any Claim resulting from any act or omission of
Seller on or prior to the Closing Date.
(b) If any Assumed Contract is not assignable by Seller
to Buyer without the consent of a third party, or will not continue in effect
after the Closing and such assignment without
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the consent of a third party, then Seller shall use its commercially reasonable
efforts to provide Buyer with such third-party consent prior to the Closing Date
to the satisfaction of Buyer (but if Seller's assignment or attempted assignment
of any such Assumed Contract prior to obtaining the third-party consent would
constitute a breach of such Assumed Contract, then such assignment or attempted
assignment shall not be or be deemed effective unless and until the third-party
consent is obtained). Buyer shall render such cooperation as is reasonably
required to assist Seller in obtaining such third-party consent.
7.3 CONDUCT OF BUSINESS PRIOR TO CLOSING
Except for actions taken with the prior consent of Buyer, from the date
of this Agreement until the Closing Date, Seller shall conduct the Business in
the ordinary course consistent with Seller's past practice, Seller shall not
take or permit to exist any action or condition specified in Sections 5.6(a)
through 5.6(j), and Seller shall:
(a) maintain the Business intact, manufacture, market,
promote, sell and distribute the Products consistently with Seller's past
practice, and preserve the goodwill of the Business and present relationships
with the customers, distributors and suppliers of the Business and others with
whom the Business has business relations;
(b) maintain the Real Property, buildings, structures and
other improvements and machinery and equipment constituting any of the Assets in
good operating condition and repair;
(c) meet the contractual obligations of the Business and
perform and pay its obligations as they mature in the ordinary course of
business;
(d) make payments and filings required to continue the
Intellectual Property and continue to prosecute and maintain all pending
applications therefor in all jurisdictions in which such applications are
pending;
(e) comply with all Judgments, all laws, statutes, rules,
ordinances and regulations promulgated by any Governmental Body and all Permits
applicable to the conduct of the Business or the ownership or operation of the
Assets or the Facilities, and maintain, and prosecute applications for, such
Permits and pay when due all Taxes, assessments and other charges applicable
thereto;
(f) promptly advise Buyer in writing of any Material
Adverse Change with respect to the Business;
(g) not take any action, or omit to take any action, that
would result in any of Seller's representations and warranties made herein being
inaccurate at the time of such action or omission as if made at and as of such
time; and
(h) give notice to Buyer promptly upon becoming aware of
any inaccuracy of any of Seller's representations or warranties made herein or
in the Disclosure Schedule or of any event or state of facts that would result
in any such representation or warranty being inaccurate at the time of such
event or state of facts as if made at and as of such time (any such notice to
describe such inaccuracy, event or state of facts in reasonable detail).
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7.4 COVENANTS TO SATISFY CONDITIONS
Each party shall proceed with all reasonable diligence and use its
commercially reasonable efforts to satisfy or cause to be satisfied all of the
conditions precedent to the other party's obligation to purchase or sell the
Assets that are set forth in Section 8 or 9, as the case may be.
7.5 BOARD RECOMMENDATIONS
(a) In connection with the purchase and sale of the
Assets and the Shareholders' Meeting, the Board of Directors of Seller and the
special committee of independent directors formed in connection with the
transactions contemplated by this Agreement shall (i) subject to Section 7.5(b),
recommend to Seller's shareholders to vote in favor of this Agreement and the
purchase and sale of the Assets and use commercially reasonable efforts to
obtain the necessary approvals by Seller's shareholders of this Agreement and
(ii) otherwise comply with all legal requirements applicable to such meeting.
(b) Neither the Board of Directors of Seller nor any
committee thereof shall, except as expressly permitted by this Section 7.5(b),
(i) withdraw, qualify or modify, or propose publicly to withdraw, qualify or
modify, in a manner adverse to Buyer, the approval or recommendation of such
Board of Directors or such committee of the purchase and sale of the Assets by
Buyer or this Agreement, (ii) approve or recommend, or propose publicly to
approve or recommend, any transaction involving an Acquisition Proposal (as
hereinafter defined) from a third party (an "ALTERNATIVE TRANSACTION"), or (iii)
cause Seller to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement (each, an "ACQUISITION
AGREEMENT") related to any Alternative Transaction. Notwithstanding the
foregoing, the Board of Directors of Seller determines in good faith, after it
has received a Superior Proposal (as hereinafter defined) in compliance with
Section 7.6 and after taking into consideration advice from outside counsel with
respect to its fiduciary duties to Seller's shareholders under applicable Law,
that such action is required for the Board of Directors of Seller to comply with
its fiduciary obligations to Seller's shareholders under applicable Law, the
Board of Directors of Seller may (subject to this and the following sentences)
inform Seller's shareholders that it no longer believes that the sale of the
Assets is advisable and no longer recommends approval of this Agreement (a
"SUBSEQUENT DETERMINATION") and may enter into an Acquisition Agreement with
respect to a Superior Proposal, but only at a time that is after the third
business day (or the second business day, in the case of a material amendment to
a Superior Proposal) following Buyer's receipt of written notice advising Buyer
that the Board of Directors of Seller is prepared to accept a Superior Proposal.
Such written notice shall specify the material terms and conditions of such
Superior Proposal (and include a copy thereof with all accompanying
documentation, if in writing), identify the person making such Superior Proposal
and state that the Board of Directors of Seller intends to make a Subsequent
Determination. During such three business day period (or two business day period
in the case of a material amendment), Seller shall provide an opportunity for
Buyer to propose such adjustments to the terms and conditions of this Agreement
as would enable Seller to proceed with its recommendation to its shareholders
without a Subsequent Determination. For purposes of this Agreement, a "SUPERIOR
PROPOSAL" means any proposal (or its most recently amended or modified terms, if
amended or modified) made by a third party to enter into an Alternative
Transaction which the Board of Directors of Seller determines in its good faith
judgment (based on, among other things, the advice of an independent financial
advisor) to be, from a financial point of view, more favorable to Seller's
shareholders than the transactions contemplated by this Agreement (taking into
account (i) whether, in the good faith
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judgment of the Board of Directors of Seller, after obtaining the advice of such
independent financial advisor, the third party is reasonably able to finance the
transaction, and (ii) any changes to this Agreement that may be proposed by
Buyer in response to such Alternative Transaction).
(c) Nothing contained in this Section 7.5 shall prohibit
Seller from taking and disclosing to its shareholders a position contemplated by
Rule 14(d)-9 or Rule 14(e)-2(a) promulgated under the Exchange Act or from
making any disclosure to Seller's shareholders if, in the good faith judgment of
the Board of Directors of Seller, after consultation with outside counsel,
failure to so disclose would be inconsistent with applicable Law; provided,
however, neither Seller nor its Board of Directors nor any committee thereof
shall, except as specifically permitted by Section 7.5(b), withdraw, qualify or
modify, or propose to withdraw, qualify or modify, its position with respect to
the sale of the Assets or this Agreement or approve or recommend, or propose to
approve or recommend, an Alternative Transaction.
7.6 ACQUISITION PROPOSALS
Except with respect to this Agreement and the transactions contemplated
by this Agreement, Seller shall not, nor shall it authorize or permit any of its
officers, directors, financial advisors or other agents ("REPRESENTATIVES") to,
directly or indirectly, (a) solicit, initiate or encourage the submission of, or
enter into any agreement or understanding with respect to any Acquisition
Proposal or (b) participate in or encourage any discussion or negotiations
regarding, or furnish to any person any non-public information with respect to,
or take any other action to assist or facilitate any inquiries or the making of,
any proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal; provided, however, that the foregoing shall not prohibit
the Board of Directors of Seller from furnishing information to, or entering
into discussions or negotiations with, any person or entity that makes an
unsolicited Acquisition Proposal, if, and to the extent that, (i) prior to
taking such action, Seller receives from such person or entity an executed
agreement in reasonably customary form relating to the confidentiality of
information to be provided to such person or entity and (ii) the Board of
Directors of Seller, after taking into consideration advice of outside legal
counsel, determines in good faith that such action is required for the Board of
Directors of Seller to comply with its fiduciary obligations under applicable
Law, and (iii) the Board of Directors of Seller determines in good faith,
following consultation with its independent financial advisor, that the
Acquisition Proposal is reasonably likely to be a Superior Proposal. Seller
shall provide immediate oral and written notice to Buyer of (a) the receipt of
any such Acquisition Proposal or any inquiry which could reasonably be expected
to lead to any Acquisition Proposal, (b) the material terms and conditions of
such Acquisition Proposal or inquiry, (c) the identity of such person or entity
making any such Acquisition Proposal or inquiry and (d) Seller's intention to
furnish information to, or enter into discussions or negotiations with, such
person or entity. Seller shall continue to keep Buyer informed of the status and
details of such Acquisition Proposal or inquiry. For purposes of this Agreement,
"ACQUISITION PROPOSAL" means any proposal with respect to a merger,
consolidation, share exchange, tender offer, exchange offer, business
combination or similar transaction involving Seller, or any purchase or other
acquisition of all or any significant portion of the assets of Seller or
substantial equity interest in Seller, or any other transaction which could
reasonably be viewed as being inconsistent with the transactions between Buyer
and Seller contemplated by this Agreement.
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7.7 SELLER'S SHAREHOLDERS' MEETING
(a) Seller shall cause a special meeting of its
shareholders (the "SHAREHOLDERS' MEETING") to be duly called and held as soon as
practicable for the purpose of voting on the approval and adoption of this
Agreement and the sale of the Assets to Buyer. Seller shall take all action
necessary in accordance with applicable Law and Seller's articles of
incorporation and bylaws to duly call, give notice of, and convene the
Shareholders' Meeting.
(b) Seller shall solicit from holders of shares of
Seller's common stock and preferred stock entitled to vote at the Shareholders'
Meeting proxies in favor of such approval and shall take all other reasonable
action necessary or, in the reasonable judgment of Buyer, helpful to secure the
vote or consent of such holders required by Law or this Agreement to effect the
sale of the Assets to Buyer.
7.8 PROXY STATEMENT
(a) Seller will as promptly as practicable following the
execution of this Agreement prepare and file the Proxy Statement with the SEC
and will use all commercially reasonable efforts to respond to the comments of
the SEC and to cause the Proxy Statement to be mailed to Seller's Shareholders
at the earliest possible time. Seller shall provide Buyer and its counsel
reasonable opportunity to review and comment on the Proxy Statement, including
any amendments or supplements thereto, prior to filing with the SEC, and shall
furnish all information concerning it and the holders of its capital stock as
Buyer may reasonably request in connection with such actions. Each party to this
Agreement will notify the other parties and the Board of Directors of Seller
promptly of the receipt of the comments of the SEC, if any, and of any request
by the SEC for amendments or supplements to the Proxy Statement or for
additional information with respect thereto, and will supply the other parties
with copies of all correspondence between such party or its representatives, on
the one hand, and the SEC or members of its staff, on the other hand, with
respect to the Proxy Statement or the purchase and sale of the Assets. If (A) at
any time prior to the Shareholders' Meeting, any event should occur relating to
Seller which should be set forth in an amendment of, or a supplement to, the
Proxy Statement, Seller will promptly inform Buyer and (B) if at any time prior
to the Shareholders' Meeting, any event should occur relating to Buyer that
should be set forth in an amendment of, or a supplement to, the Proxy Statement,
Buyer will promptly inform Seller, and in the case of (A) or (B) Seller will,
upon learning of such event, promptly prepare and file and, if required, mail
such amendment or supplement to Seller's shareholders; provided, however, that
prior to such filing or mailing, Seller shall consult with Buyer with respect to
such amendment and shall incorporate Buyer's comments thereon to the extent
reasonably acceptable to Seller.
(b) Seller and its counsel will use their reasonable
efforts to include Buyer and its counsel in all communications with the SEC and
its staff, including any meetings and telephone conferences, relating to the
Proxy Statement.
7.9 REVOLVING LINE OF CREDIT; PAYMENTS WITH RESPECT TO LONG-TERM
DEBT
Seller shall not allow the outstanding balance under the Revolving
Credit Facility attributable to the Business to exceed $1,000,000. Seller shall
not make any payments with respect to the Real Estate Facility, Related Party
Debt or other long-term indebtedness of Seller other than
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regular periodic payments of interest and/or principal as set forth in the
instruments governing such indebtedness.
7.10 NOTICE OF SELLER'S BREACH
From the date of this Agreement through the Closing Date, Buyer will
notify Seller promptly if Buyer acquires knowledge of any development, change,
circumstance or other information that may reasonably be construed to constitute
a breach of any of Seller's representations or warranties contained in Section
5, other than information brought to Buyer's attention by Seller pursuant to
Section 7.3(h).
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligation of Buyer to purchase the Assets at the Closing shall be
subject to the satisfaction at or prior to the Closing of each of the following
conditions, any one or more of which may be waived by Buyer:
8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS
(a) The representations and warranties of Seller made in
Section 5 of this Agreement, the Transaction Documents and any certificate
furnished pursuant hereto or thereto shall be true, complete and correct in all
material respects on and as of the Closing Date, except to the extent that such
representations and warranties are qualified by terms such as "material" or
"Material Adverse Effect" in which case such representations and warranties
shall be true, complete and correct in all respects on and as of the Closing
Date;
(b) Seller shall have performed and complied with the
covenants and agreements required by this Agreement in all material respects to
be performed and complied with by it on or prior to the Closing Date; and
(c) Seller shall have delivered to Buyer a certificate
dated the Closing Date to the foregoing effects, signed by a duly authorized
executive officer of Seller.
8.2 NO ADVERSE CHANGES
From the date of this Agreement to the Closing Date, there shall not
have been any Material Adverse Change with respect to the Business. Seller shall
have delivered to Buyer a certificate dated the Closing Date to the foregoing
effects signed by a duly authorized executive officer of Seller.
8.3 CONSENTS AND APPROVALS
Seller shall have received third-party consent under each of the
Material Contracts identified in the Disclosure Schedule as requiring consent in
connection with the purchase and sale of the Assets. All consents or approvals
of, or notices to, all Governmental Bodies, the granting or delivery of which is
necessary for the consummation of the transactions contemplated hereby, shall
have been obtained.
This Agreement shall have been approved and adopted at the
Shareholders' Meeting by the Requisite Shareholder Approval.
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8.4 TAXES
All Taxes and other assessments applicable to the Assets that are due
and owing as of the Closing Date shall have been paid, except for Taxes and
assessments to be apportioned between the parties as of the Closing pursuant to
Section 11.3 or paid pursuant to Section 11.1.
8.5 DELIVERY OF DOCUMENTS
Seller shall have delivered the following documents, agreements and
instruments to Buyer:
(a) Xxxx of Sale executed by Seller;
(b) Assignment and Assumption Agreement executed by
Seller;
(c) one or more assignments of trademarks, in a form
reasonably acceptable to Buyer and Seller, covering each of the trademarks
described in SCHEDULE 2.1.6 of the Disclosure Schedule, in due form for
recordation with the appropriate Governmental Body and executed by Seller;
(d) the Debt Exchange and Stock Purchase Agreement
regarding certain related party debt, a form of which is attached hereto as
EXHIBIT 8.5(d) ("DEBT EXCHANGE AGREEMENT"), executed by the parties thereto
other than Buyer;
(e) the Brewery Facility Lease and the Alehouse Facility
Lease, forms of which are attached hereto as EXHIBITS 8.5(e)(1) and (2),
executed by the parties thereto other than Buyer, together with an executed
Subordination, Non-Disturbance and Attornment Agreement, in recordable form and
otherwise in a form reasonably acceptable to Buyer, from Sterling Savings Bank,
the lender holding the mortgage or deed of trust relating to the Real Estate
Facility;
(f) employment agreements with Xxxxxx Xxxxxxxx, Xxxx
Xxxxxx, Xxxxx Xxxxxx and Xxxx Xxxxx in such forms as is reasonably acceptable to
Buyer and each of the parties thereto;
(g) the Voting Agreements, in the form attached hereto as
EXHIBIT 8.5(g), executed by the MacTarnahan Portland Brewing Company Voting
Trust;
(h) the Escrow Agreement, in the form attached hereto as
EXHIBIT 8.5(h), executed by the parties thereto other than Buyer;
(i) any and all certificates of title relating to
Personal Property included within the Assets;
(j) written consent to assignment (in form and substance
reasonably satisfactory to Buyer) of all agreements listed on SCHEDULE 8.5(j) of
the Disclosure Schedule; and
(k) the Noncompete Agreements, in the form attached as
EXHIBIT 8.5(k), executed by Xxxxx XxxXxxxxxxx and Xxxxxx XxxXxxxxxxx.
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8.6 TRADEMARK LICENSE AGREEMENT
The License Agreement by and among Xxxxxx XxxXxxxxxxx, Black Lake
Investments, LLC and the Seller, originally dated as of July 1, 1994, as amended
through the date of this Agreement, shall be in full force and effect and shall
not have been amended in any material respect without Buyer's written consent.
8.7 LEGAL OPINION
Seller shall have delivered to Buyer the opinion of Seller's
counsel, Xxxxxxx, Xxxxxxxxxx & Xxxxx, P.C., dated the Closing Date,
substantially in the form of EXHIBIT 8.7 hereto.
8.8 SATISFACTION OF CONDITIONS
All agreements and other documents required to be delivered by Seller
hereunder on or prior to the Closing Date shall be satisfactory in the
reasonable judgment of Buyer and its counsel. Buyer shall have received such
other agreements, documents and information as it may reasonably request in
order to establish satisfaction of the conditions set forth in this Section 8.
8.9 NO INJUNCTION OR LITIGATION
As of the Closing Date, there shall not be any Claim or Judgment of any
nature or type threatened, pending or made by or before any Governmental Body
that questions or challenges the lawfulness of or seeks to delay or restrain the
transactions contemplated by this Agreement or the Transaction Documents.
8.10 RESTRUCTURING OF RELATED PARTY DEBT AND RELEASE OF SECURITY
INTERESTS
The Buyer shall have restructured the Related Party Debt by giving
effect to the transfer of the Excluded Real Property (subject to a mortgage or
deed of trust securing the Real Estate Facility) to the holder(s) of the Related
Party Debt in return for the cancellation of a portion of the Related Party
Debt, and that certain security agreement between Portland Brewing Company and
MacTarnahan Limited Partnership dated November 1, 2001, as amended, shall have
been terminated and all security interests related thereto shall have been
released. In addition, all security interests held by Capital Crossing Bank and
Xxxxx Brewing Company shall have been released.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligation of Seller to sell the Assets to Acquisition Subsidiary
at the Closing shall be subject to the satisfaction at or prior to the Closing
of each of the following conditions, any one or more of which may be waived by
Seller:
9.1 REPRESENTATIONS, WARRANTIES AND COVENANTS
(a) The representations and warranties of Buyer and
Acquisition Subsidiary made in Section 6 of this Agreement, the Transaction
Documents or any certificate furnished pursuant hereto or thereto shall be true,
complete and correct in all material respects on and as of the Closing Date,
except to the extent such representations and warranties are qualified by terms
such as
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"material" or "Material Adverse Effect," in which case such representations and
warranties shall be true, complete and correct in all respects on and as of the
Closing Date;
(b) Buyer and Acquisition Subsidiary shall have performed
and complied with the covenants and agreements required by this Agreement to be
performed and complied with by it on or prior to the Closing Date; and
(c) Buyer shall have delivered to Seller a certificate
dated the Closing Date to the foregoing effects signed by a duly authorized
executive officer of Buyer.
9.2 NO ADVERSE CHANGES
From the date of this Agreement to the Closing Date, there shall not
have been any Material Adverse Change with respect to Buyer. Buyer shall have
delivered to Seller a certificate dated the Closing Date to the foregoing
effects signed by a duly authorized executive officer of Buyer.
9.3 DELIVERY OF DOCUMENTS
Buyer or Acquisition Subsidiary, as applicable, shall have delivered
the following documents, agreements and instruments to Seller:
(a) the Assignment and Assumption Agreement executed by
Acquisition Subsidiary;
(b) the Debt Exchange Agreement, executed by Buyer and
Acquisition Subsidiary;
(c) the Brewery Facility Lease and the Alehouse Facility
Lease, executed by Acquisition Subsidiary; and
(d) the Escrow Agreement, executed by Buyer.
9.4 CONSENTS AND APPROVALS
Seller shall have received third-party consent under each of the
Material Contracts identified in the Disclosure Schedule as requiring consent in
connection with the purchase and sale of the Assets. All consents or approvals
of, or notices to, all Governmental Bodies, the granting or delivery of which is
necessary for the consummation of the transactions contemplated hereby, shall
have been obtained.
9.5 SHAREHOLDER VOTE
This Agreement shall have been approved and adopted at the
Shareholders' Meeting by the Requisite Shareholder Approval.
9.6 SATISFACTION OF CONDITIONS
All agreements and other documents required to be delivered by Buyer or
Acquisition Subsidiary hereunder on or prior to the Closing Date shall be
satisfactory in the reasonable judgment
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of Seller and its counsel. Seller shall have received such other agreements,
documents and information as it may reasonably request in order to establish
satisfaction of the conditions set forth in this Section 9.
9.7 NO INJUNCTION OR LITIGATION
As of the Closing Date, there shall not be any Claim or Judgment of any
nature or type threatened, pending or made by or before any Governmental Body
that questions or challenges the lawfulness of or seeks to delay or restrain the
transactions contemplated by this Agreement or the Transaction Documents.
9.8 LEGAL OPINION
Buyer shall have delivered to Seller the opinion of Buyer's counsel,
Xxxxxxx Coie LLP, dated the Closing Date, substantially in the form of EXHIBIT
9.8 hereto.
10. CERTAIN POST-CLOSING COVENANTS
10.1 FURTHER ASSURANCES
After the Closing Date, each of the parties shall from time to time at
the other party's request execute and deliver, or cause to be executed and
delivered, such further instruments of conveyance, assignment and transfer or
other documents, and perform such further acts and obtain such further consents,
approvals and authorizations, as the requesting party may reasonably require in
order to fully effect the conveyance and transfer to Buyer or Acquisition
Subsidiary of, or perfect Buyer's or Acquisition Subsidiary's right, title and
interest in, any of the Assets, to assist Buyer in obtaining possession of any
of the Assets, or to otherwise comply with the provisions of this Agreement and
consummate the transactions contemplated by this Agreement and the Transaction
Documents.
10.2 BOOKS AND RECORDS; COOPERATION WITH RESPECT TO PREPARATION AND
AUDIT OF FINANCIAL STATEMENTS
(a) Not later than 15 days after the Closing Date, Seller shall
deliver to Buyer (i) all of the technical information and data and other
intellectual property rights to be transferred hereunder (including all of the
assets referenced in Section 2.1.6) which have been reduced to writing, (ii) all
of the original Contracts referenced in Section 2.1.8, and (iii) all of Seller's
information and materials referenced in Section 2.1.10.
(b) Seller shall engage its independent auditor, Xxxx Xxxxx LLP
("XXXX XXXXX") to audit the financial statements of the Business as of and for
the year ended December 31, 2003 no later than March 31, 2004, and shall bear
all costs associated with such audit. Seller shall use its commercially
reasonable efforts to obtain such consents from Xxxx Xxxxx as may be necessary
to enable Buyer to include Xxxx Xxxxx' audit reports in Buyer's filings with the
SEC, to the extent that the rules and regulations of the SEC require audited
financial statements of the Business to be included (or incorporated by
reference) in such filings.
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10.3 POST-CLOSING COOPERATION
After the Closing Date, each party shall provide the other party with
such reasonable assistance (without charge) as may be requested by the other
party in connection with any Claim or audit of any kind or nature whatsoever or
the preparation of any response, demand, inquiry, filing, disclosure or the like
(including, but not limited to, any tax return or form) relating to the
Products, the Assets or the Business. Such assistance shall include, but not be
limited to, permitting the party requesting assistance to have reasonable access
to the employees, books and records of the other party.
10.4 DISSOLUTION
For a period of at least two years following the Closing Date, Seller
shall not enter into a plan of dissolution or liquidation or take any steps in
furtherance of such a plan.
10.5 BOARD REPRESENTATION
Effective at the Closing, Buyer shall cause its Board of Directors to
be expanded by one member, and shall appoint a representative designated by
Seller (the "SELLER DIRECTOR") to fill the vacancy on Buyer's Board of Directors
created by such increase. The Seller Director will serve on Buyer's Board of
Directors until the next annual meeting of Buyer's shareholders. In connection
with the annual meeting of Buyer next following the Closing (the "NEXT ANNUAL
MEETING"), Buyer shall nominate the Seller Director for election as directors by
the shareholders of Buyer, to continue serving as director, in the class of
directors whose term expires at Buyer's 2007 annual meeting, and Buyer shall
solicit proxies for his election at the Next Annual Meeting. If the Seller
Director does not become or ceases to be a director of Buyer because of death,
disability or otherwise, Buyer agrees, after consultation with Seller, to cause
a person who is a member of the Board of Directors of Seller as of the date of
this Agreement to be elected or appointed to the Board of Directors of Buyer, as
the new Seller Director.
So long as the Seller Director is on the Buyer's Board, the Seller
Director may also designate one other representative to attend meetings of
Buyer's board of directors as a non-voting observer, subject to reasonable
restrictions on attendance by such observer in order to preserve confidentiality
of information presented to or actions taken by Buyer's board of directors.
10.6 EMPLOYEES AND 401(k) PLANS
A reasonable time prior to Closing, Buyer will notify Seller which
employees of Seller will be employed as at-will employees of Buyer or
Acquisition Subsidiary ("HIRED EMPLOYEES"). From and after the Closing, the
Hired Employees will be entitled to participate in the 401(k) plan, employee
benefit and similar plans then maintained by Buyer or Acquisition Subsidiary
(the "BUYER PLANS") on substantially the same terms and conditions as similarly
situated employees of Buyer or Acquisition Subsidiary. For the purpose of
determining eligibility to participate in the Buyer Plans (including vacation
accruals), Buyer and Acquisition Subsidiary shall give credit to years of
service with Seller as if such service were with Buyer or Acquisition
Subsidiary, but only to the extent that Seller provides to Buyer at or prior to
Closing a written schedule that identifies each Hired Employee's years of
service with the Seller. Hired Employees will be entitled to carry over any
unused vacation days and sick leave accrued as of the Closing, but only to the
extent that Seller
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provides to Buyer at or prior to Closing a written schedule that identifies the
amount of vacation days and sick leave for each of the Hired Employees accrued
through the Closing.
10.7 SHAREHOLDER CARDS AND DISCOUNTS
Buyer will honor shareholder cards held by shareholders of Seller as of
a date to be specified in the Proxy Statement, which date shall not be later
than the Closing Date, for a minimum period of three years after Closing
relating to free "pints," discounts on merchandise and events, discounts on dock
sales and other items.
11. TAXES AND COSTS; APPORTIONMENTS
11.1 TRANSFER TAXES
Seller shall be responsible for the payment of all transfer, sales and
use and documentary Taxes, filing and recordation fees and similar charges
relating to the sale or transfer of the Assets hereunder ("TRANSFER TAXES").
Buyer shall cooperate with Seller to the extent reasonably requested and legally
permissible to minimize any Transfer Taxes.
11.2 TRANSACTION COSTS
Each party shall be responsible for its own costs and expenses incurred
in connection with the preparation, negotiation and delivery of this Agreement
and the Transaction Documents, including but not limited to attorneys' and
accountants' fees and expenses.
11.3 APPORTIONMENTS
Any and all real property Taxes, personal property Taxes, assessments,
lease rentals, fuel, and other charges applicable to the Assets will be
pro-rated to the Closing Date, and such Taxes and other charges shall be
allocated between the parties by adjustment at the Closing, or as soon
thereafter as the parties may agree. All such Taxes shall be allocated on the
basis of the fiscal year of the Tax jurisdiction in question.
11.4 COOPERATION
To the extent relevant to the Business or the Assets, each party shall
(i) provide the other with such assistance as may reasonably be required in
connection with the preparation of any Tax Return and the conduct of any audit
or other examination by any taxing authority or in connection with judicial or
administrative proceedings relating to any liability for Taxes and (ii) retain
and provide the other with all records or other information that may be relevant
to the preparation of any Tax Returns, or the conduct of any audit, examination,
or other proceeding relating to Taxes. Seller shall retain all documents,
including prior years' Tax Returns, supporting work schedules and other records
or information with respect to all sales, use and employment tax returns and,
absent the receipt by Seller of the relevant tax clearance certificates, shall
not destroy or otherwise dispose of any such records until the earlier of (i)
six (6) years after Closing or (ii) the expiration of the applicable statute of
limitations, without the prior written consent of Buyer.
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11.5 EMPLOYEE WITHHOLDING
Buyer shall prepare and furnish to each of Seller's employees that will
be employed by Buyer following the Closing a Form W-2 that shall reflect all
wages and compensation paid to such employee for the entire calendar year in
which the Closing Date occurs. Seller shall furnish to Buyer the Forms W-4 and
W-5 of each such employee. Buyer shall send to the appropriate Social Security
Administration office a duly completed Form W-3 and accompanying copies of the
duly completed Forms W-2. It is the intent of the parties hereunder that the
obligations of Buyer and Seller under this Section 11.5 shall be carried out in
accordance with Section 5 of Revenue Procedure 96-60.
12. INTENTIONALLY LEFT BLANK
13. COVENANTS NOT TO COMPETE
13.1 COVENANT
(a) Except as described in SCHEDULE 13.1 of the
Disclosure Schedule, during the five-year period commencing on the Closing Date,
Seller shall not engage in any Restricted Activities (as such term is defined
below), whether directly or indirectly, for its account or otherwise, or as a
shareholder, owner, partner, principal, agent, joint venturer, consultant,
advisor, franchisor or franchisee, independent contractor or otherwise, in, with
or of any person or entity that engages directly or indirectly in any Restricted
Activities. As used herein, "RESTRICTED ACTIVITIES" shall mean the manufacture,
marketing, promotion, sale or distribution of any soda or alcoholic beverage
(other than whiskey or other spirits), including but not limited to the
Products, or any Products that compete with such products, or the development or
operation of any brewery or alehouse facilities in Arizona, California,
Colorado, Idaho, Oregon and Washington.
(b) During the five-year period commencing on the Closing
Date, Seller shall not, directly or indirectly, hire, or solicit or encourage to
leave the employment of Buyer or any of its Affiliates, any former employee of
the Business hired by Buyer or its Affiliates or any employee of Buyer or its
Affiliates engaged in any Restricted Activities, or have any arrangement
(financial, consulting or otherwise) with any such individual.
13.2 REMEDIES
Seller acknowledges that compliance with the provisions of this Section
13 is necessary and proper to preserve and protect the Assets acquired by Buyer
under this Agreement and to assure that the parties receive the benefits
intended to be conveyed pursuant to this Section 13. Seller agrees that any
failure by Seller to comply with the provisions of this Section 13 shall entitle
Buyer and its Affiliates, in addition to such other relief and remedies as may
be available, to equitable relief, including, but not limited to, the remedy of
injunction. Resort to any remedy shall not prevent the concurrent or subsequent
employment of any other remedy, or preclude the recovery by Buyer and its
Affiliates of monetary damages and compensation.
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14. SURVIVAL AND INDEMNIFICATION
14.1 SURVIVAL
All representations and warranties of Seller and Buyer and Acquisition
Subsidiary contained in this Agreement or in the Transaction Documents or in any
certificate delivered pursuant hereto or thereto shall survive the Closing for a
period of one year after the Closing; provided, however, that the
representations and warranties of Seller contained in Sections 5.7 (Taxes) and
5.22 (Employee Plans) and Buyer contained in Section 6.5 (Issuance of Pyramid
Stock) shall survive the Closing until the expiration of the applicable statute
of limitations plus 30 days for the matters addressed in each such
representation and warranty. The covenants and agreements of Seller and Buyer
contained in this Agreement or in the Transaction Documents shall survive the
Closing and shall continue until all obligations with respect thereto shall have
been performed or satisfied or shall have been terminated in accordance with
their terms.
14.2 INDEMNIFICATION BY SELLER
From and after the Closing Date, Seller shall indemnify and hold Buyer
and its officers, directors and employees harmless from and against, and shall
reimburse Buyer and its officers, directors and employees for, any and all
Losses arising out of or in connection with:
(a) any inaccuracy in any representation or warranty made
by Seller in this Agreement or in the Transaction Documents or in any
certificate delivered pursuant hereto or thereto;
(b) any failure by Seller to perform or comply with any
covenant or agreement of Seller in this Agreement or in the Transaction
Documents;
(c) any Claim by any person or entity for brokerage or
finders' fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by such person or entity directly or
indirectly with Seller or any of its officers, directors or employees in
connection with any of the transactions contemplated by the Agreement or the
Transaction Documents; or
(d) Excluded Liabilities.
14.3 INDEMNIFICATION BY BUYER
From and after the Closing Date, Buyer shall indemnify and hold
harmless Seller and its Affiliates from and against, and shall reimburse Seller
and its Affiliates for, any and all Losses arising out of or in connection with:
(a) any inaccuracy in any representation or warranty made
by Buyer in this Agreement or in the Transaction Documents or in any certificate
delivered pursuant hereto or thereto;
(b) any failure by Buyer or Acquisition Subsidiary to
perform or comply with any covenant or agreement of Buyer or Acquisition
Subsidiary in this Agreement or the Transaction Documents;
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(c) any Claim by any person or entity for brokerage or
finders' fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by such person or entity directly or
indirectly with Buyer or any of its officers, directors or employees in
connection with any of the transactions contemplated by the Agreement or the
Transaction Documents;
(d) the ownership or operation of the Assets or the
Facilities or the sale of the Products after the Closing Date; or
(e) Assumed Liabilities.
14.4 LIMITATIONS ON INDEMNIFICATION
The following limitations will apply to this Section 14:
(a) Except for Misrepresentation Claims, no party entitled to
indemnification under this Agreement (an "INDEMNIFIED PARTY") shall be entitled
to recover any amount in respect of Losses as to which claims for
indemnification are made under this Section 14 ("INDEMNIFICATION CLAIMS"),
unless and until the aggregate amount of all Losses as to which indemnification
otherwise would be required under this Agreement exceeds $37,500 for such party
("DEDUCTIBLE"), after which point the indemnifying party will be obligated to
indemnify the indemnified party from and against Losses exceeding the
Deductible.
(b) Except for matters covered by insurance and any
Misrepresentation Claims, Seller will have no obligation to indemnify Buyer from
and against any Losses which exceed a $1,250,000 aggregate ceiling ("CAP").
(c) The Basket and Cap will not apply to (i) Seller's obligations
for Excluded Liabilities or (ii) Buyer's obligations for Assumed Liabilities or
liabilities associated with Section 14.3(d).
(d) In no event shall any party be indemnified for any Claim to
the extent that such Claim is actually reimbursed by insurance.
(e) No party will be entitled to assert after the Closing Date any
Claim based upon a breach of any representation or warranty under this Agreement
to the extent such representation or warranty otherwise would survive the
Closing Date, if the party asserting such a claim had knowledge of the facts
constituting the breach prior to the Closing Date. Any such Claim will be deemed
waived and the party asserting such Claim will be estopped from asserting after
the Closing Date, any Claim or remedy based upon such breach. For purposes of
this Section 14.4, "knowledge" of a party means the actual, conscious awareness
of the facts constituting the breach by one or more executive officers of the
party against whom knowledge is charged and will include the knowledge of the
respective parties' officers.
(f) In the event Buyer is indemnified by Seller based on the
uncollectability of any accounts receivable, the uncollected account receivable
shall be re-assigned to Seller for Seller's collection.
(g) The parties agree that with respect to Claims against Seller,
Buyer will first seek recovery from the Indemnity Escrow, and then by reducing
the amount of the Earn Out Payments
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then due and owing (and notifying Seller of the reduction). Any amounts owing by
Seller after such reductions may be satisfied by Seller by returning Pyramid
Stock (based on the value that is the higher of the Fair Market Value for
purposes of Section 3.1 or the average closing price per share of Pyramid Stock,
as reported on the exchange or quotation system on which the Pyramid Stock is
then traded, for the thirty trading days ending the trading date immediately
preceding the date on which the indemnification payment is made) or cash, at the
option of Seller.
14.5 PROCEDURE
(a) An indemnified party shall give written notice of any
Indemnification Claim under this Section 14 to the party or parties required to
indemnify ("INDEMNIFYING PARTY") as promptly as practicable, but in any event
(i) with respect to any Indemnification Claim arising out of the indemnifying
party's breach of representations and warranties under this Agreement, prior to
the expiration of the survival period provided in Section 14.1 above and (ii)
(A) if such Indemnification Claim relates to the assertion against the
indemnified party of any claim or dispute by a third party (a "THIRD PARTY
CLAIM"), within 20 days after the assertion of such Third Party Claim, or (B) if
such Indemnification Claim is not in respect of a Third Party Claim, within 30
days after the discovery by the indemnified party of the facts on which such
Indemnification Claim is to be based. Any such notice shall describe the nature
of the Indemnification Claim, the amount thereof if then ascertainable and, if
not then ascertainable, the estimated maximum amount thereof, and the provision
or provisions of this Agreement on which the Indemnification Claim is based.
(b) (i) The indemnifying party shall have the right, upon
written notice given to the indemnified party at any time after receipt of the
notice from the indemnified party of any Third Party Claim, to assume the
defense or handling of such Third Party Claim, at such indemnifying party's sole
expense, in which case the provisions of Section 14.5(b)(ii) below shall govern.
(ii) The indemnifying party shall select counsel
to conduct the defense or handling of such Third Party Claim. The indemnifying
party shall defend or handle such Third Party Claim in consultation with the
indemnified party and shall keep each indemnified party timely apprised of the
status of such Third Party Claim. The indemnifying party shall not, without the
prior written consent of each indemnified party, agree to a settlement of any
Third Party Claim, unless the settlement (A) provides an unconditional release
and discharge of such indemnified party, (B) imposes no material liabilities or
obligations on such indemnified party and (C) with respect to any non-monetary
provisions of such settlement, could not have a material adverse effect on such
indemnified party. The indemnified party shall cooperate with the indemnifying
party and shall be entitled to participate in the defense or handling of such
Third Party Claim with its own counsel and at its own expense. An indemnified
party shall not, without the prior written consent of the indemnifying party(s),
agree to a settlement of any Third Party Claim, unless the indemnified party
shall also waive any right to indemnification for the applicable Indemnification
Claim. Notwithstanding any other provision of this Agreement, any violation of
the terms of the foregoing sentence shall relieve any indemnifying party from
any liability to indemnify in respect of the subject matter of the Third Party
Claim so settled.
(c) (i) If the indemnifying party does not give written
notice to the indemnified party, within 30 days after receipt of the notice from
the indemnified party of a Third
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Party Claim, that the indemnifying party has elected to assume the defense or
handling of such Third Party Claim, the provisions of Section 14.5(c)(ii) shall
govern.
(ii) The indemnified party may select counsel in
connection with conducting the defense or handling of such Third Party Claim and
defend or handle such Third Party Claim in such manner as is reasonable under
the circumstances; provided, however, that the indemnified party shall keep the
indemnifying party timely apprised of the status of such Third Party Claim and
shall not settle such Third Party Claim without the prior written consent of the
indemnifying party. Notwithstanding any other provision of this Agreement, any
violation of the terms of the foregoing sentence shall relieve any indemnifying
party from any liability to indemnify in respect of the subject matter of the
Third Party Claim so settled. If the indemnified party defends or handles such
Third Party Claim, the indemnifying party shall cooperate with the indemnified
party and shall be entitled to participate in the defense or handling of such
Third Party Claim with its or their own counsel and at its or their own expense.
14.6 ELECTION OF REMEDIES
In the event that any party or any of its Affiliates alleges that it is
entitled to indemnification hereunder, and that its Indemnification Claim is
covered under more than one provision of this Section 14, such party or
Affiliate shall be entitled to elect the provision or provisions under which it
may bring a claim for indemnification.
14.7 EXCLUSIVE REMEDIES
Except with respect to claims based on fraud in the inducement, willful
misconduct or securities laws violations ("MISREPRESENTATION CLAIMS"), the
indemnification remedies set forth under this Section 14 shall constitute the
sole and exclusive remedies of the parties with respect to any matters arising
under or relating to this Agreement.
15. TERMINATION
15.1 TERMINATION
This Agreement may be terminated before the Closing:
(a) by mutual written consent duly authorized by the
boards of directors of Seller and Buyer;
(b) by either Seller or Buyer if the Closing shall not
have occurred by April 30, 2004, unless the failure of the consummation of the
transactions to occur shall be due to the failure of the party seeking to
terminate to perform or observe in all material respects the covenants and
agreements to be performed or observed by such party; provided, however, that
neither party may terminate this Agreement, if such delay results from
amendments to the proxy statement or a resolicitation of proxies as a
consequence of the transaction;
(c) by either Seller or Buyer if a Governmental Entity
shall have issued an order, decree or ruling or taken any other action, in any
case having the effect of permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated hereby, which order, decree or ruling
is final and nonappealable;
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(d) by either Seller or Buyer if the required approvals
of the shareholders of Seller (as contemplated in Section 8.3 and 9.5 above)
shall not have been obtained by reason of the failure to obtain the required
vote upon a vote taken at the Shareholders' Meeting or at any adjournment
thereof;
(e) by either Buyer or Seller (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained in this Agreement), if there has
been a material breach of any representations or warranties set forth in this
Agreement on the part of the other party, which breach is not cured within
thirty (30) days following written notice to the party committing such breach,
or which breach, by its nature, cannot be cured prior to the Closing; provided,
however, that neither party shall have the right to terminate this Agreement
pursuant to this Section 15.1(e) unless the breach of representation or
warranty, together with all other such breaches, would entitle the party
receiving such representation not to consummate the transactions contemplated
under Section 8.2 (in the case of a breach of representation or warranty by
Buyer) or Section 9.2 (in the case of a breach of representation or warranty by
Seller);
(f) by either Buyer or Seller (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained in this Agreement), if there has
been a material breach of any covenant or agreement set forth in this Agreement
on the part of the other party, which breach shall not have been cured within
thirty (30) days following receipt by the breaching party of written notice of
such breach from the other party, or which breach, by its nature, cannot be
cured prior to the Closing Date; or
(g) by Buyer if a Triggering Event (as defined below)
shall have occurred.
For the purposes of this Agreement, a "TRIGGERING EVENT" shall be
deemed to have occurred if: (i) the Board of Directors of Seller or any
committee thereof shall for any reason have withdrawn or shall have amended or
modified in a manner adverse to Buyer its recommendation in favor of the
adoption and approval of this Agreement; (ii) Seller shall have failed to
include in the Proxy Statement the recommendation of the Board of Directors of
Seller in favor of the adoption and approval of this Agreement; (iii) the Board
of Directors of Seller fails to reaffirm its recommendation in favor of the
adoption and approval of the Agreement within ten (10) business days after Buyer
requests in writing that such recommendation be reaffirmed at any time following
the announcement of an Acquisition Proposal; (iv) the Board of Directors of
Seller or any committee thereof shall have approved or recommended any
Acquisition Proposal; (v) Seller shall have entered into any letter of intent or
similar document or any agreement, contract or commitment accepting any
Acquisition Proposal; (vi) a tender or exchange offer relating to securities of
Seller shall have been commenced by a person unaffiliated with Buyer and Seller
shall not have sent to its securityholders pursuant to Rule 14e-2 promulgated
under the Securities Act, within ten business days after such tender or exchange
offer is first published sent or given, a statement disclosing that Seller
recommends rejection of such tender or exchange offer; or (vii) Seller shall
have failed to comply in any material respect with the provisions of Section 7.6
of this Agreement.
15.2 EFFECT OF TERMINATION
Any termination of this Agreement under Section 15.1 above, except with
respect to subsections (e) and (f), will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement as
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provided in Section 15.1, this Agreement shall be of no further force or effect,
except (i) as set forth in this Section 15.2, Section 15.3 and Section 16, each
of which shall survive the termination of this Agreement, and (ii) nothing
herein shall relieve any party from liability for any willful breach of, or
fraud in connection with, this Agreement.
15.3 FEES AND EXPENSES
(a) Except as set forth in this Section 15.3, all fees
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, whether
or not the transactions contemplated by this Agreement are consummated.
(b) Seller shall pay to Buyer in immediately available
funds, within two (2) business days after demand by Buyer, an amount equal to
$250,000 (the "SELLER TERMINATION FEE") (i) if this Agreement is terminated by
Buyer pursuant to Section 15.1(g) or (ii) if this Agreement has been terminated
by Seller pursuant to Section 15.1(b) or Section 15.1(d), Seller's action or
failure to act has been a principal cause of, or resulted in, the failure of the
transactions contemplated hereby to occur on or before the date set forth
therein, and such action or failure to act constitutes a breach of this
Agreement, and (in the case of this 15.3(b)(ii)) either of the following shall
have occurred:
(A) following the date hereof and prior to the
termination of this Agreement, a third party has publicly announced an
Acquisition Proposal and within twelve (12) months following the termination of
this Agreement an Acquisition (as defined below) is consummated; or
(B) following the date hereof and prior to the
termination of this Agreement, a third party has publicly announced an
Acquisition Proposal and within twelve (12) months following the termination of
this Agreement Seller enters into an agreement or letter of intent providing for
an Acquisition.
Payment of the fees described in this Section 15.3(b) shall not be in
lieu of damages incurred in the event of breach of this Agreement. For the
purposes of this Agreement, "ACQUISITION" shall mean any of the following
transactions (other than the transactions contemplated by this Agreement): (i) a
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving Seller pursuant to which the
shareholders of Seller immediately preceding such transaction hold less than 60%
of the aggregate equity interests in the surviving or resulting entity of such
transaction, (ii) a sale or other disposition by Seller of assets representing
in excess of 40% of the aggregate fair market value of Seller's total assets
immediately prior to such sale or (iii) the acquisition by any person or group
(including by way of a tender offer or an exchange offer or issuance by Seller),
directly or indirectly, of beneficial ownership or a right to acquire beneficial
ownership of shares representing in excess of 40% of the voting power of the
then outstanding shares of capital stock of Seller immediately after such
issuance.
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16. MISCELLANEOUS
16.1 CONFIDENTIALITY OBLIGATIONS OF SELLER FOLLOWING THE CLOSING
From and after the Closing, Seller shall keep confidential and not use
or disclose to any party any confidential information relating to the assets,
business or affairs of Buyer or the Assets or the Business. The confidentiality
and non-use obligations set forth in this Section 16.1 shall not apply to any
information which is available to the public through no breach of this Agreement
by Seller, or is disclosed to Seller by third parties who are not under any duty
of confidentiality with respect thereto, or is required to be disclosed by
Seller in connection with pending litigation or investigation; provided,
however, that in the event Seller becomes required in connection with pending
litigation or investigation to disclose any of the confidential information
relating to the assets, business or affairs of Buyer or the Assets or the
Business, then Seller shall provide Buyer with reasonable notice so that Buyer
may seek a court order protecting against or limiting such disclosure or any
other appropriate remedy; and in the event such protective order or other remedy
is not sought, or is sought but not obtained, Seller shall furnish only that
portion of the information that is required and shall endeavor, at Buyer's
expense, to obtain a protective order or other assurance that the portion of the
information furnished by Seller will be accorded confidential treatment.
16.2 PUBLIC ANNOUNCEMENTS
Each party agrees not to make any public announcement in regard to the
transactions contemplated by this Agreement and the Transaction Documents
without the other party's prior consent, except as may be required be law, in
which case the parties shall use reasonable efforts to coordinate with each
other with respect to the timing, form and content of such required disclosures.
16.3 SEVERABILITY
If any court determines that any part or provision of this Agreement is
invalid or unenforceable, the remainder of this Agreement shall not be affected
thereby and shall be given full force and effect and remain binding upon the
parties. Furthermore the court shall have the power to replace the invalid or
unenforceable part or provision with a provision that accomplishes, to the
extent possible, the original business purpose of such part or provision in a
valid and enforceable manner. Such replacement shall apply only with respect to
the particular jurisdiction in which the adjudication is made. Without in any
way limiting the generality of the foregoing, it is understood and agreed that
this Section 16.3 shall apply to the provisions of Section 13 and that the
provisions of Section 13, as they relate to each jurisdiction within their
geographical scope, constitute separate and distinct covenants.
16.4 MODIFICATION AND WAIVER
This Agreement may not be amended or modified in any manner, except by
an instrument in writing signed by each of the parties hereto. The failure of
any party to enforce at any time any of the provisions of this Agreement shall
in no way be construed to be a waiver of any such provision, or in any way
affect the right of such party thereafter to enforce each and every such
provision. No waiver of any breach of this Agreement shall be deemed to be a
waiver of any other or subsequent breach.
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16.5 NOTICES
All notices and other communications required or permitted to be given
under this Agreement shall be in writing and shall be mailed postage prepaid by
first-class certified or registered mail, or mailed by a nationally recognized
express courier service, or hand-delivered, addressed as follows:
if to Buyer: Pyramid Breweries Inc.
00 Xxxxx Xxxxx Xxxxxxxx Xxx
Xxxxxxx, XX 00000
Attention: Chief Financial Officer
with a copy to: Xxxxxxx Coie LLP
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxx X. XxXxxx
if to Seller: Portland Brewing Company
0000 XX 00xx Xxx
Xxxxxxxx, XX 00000
Attention: Chief Executive Officer and President
with a copy to: Xxxxxxx Xxxxxxxxxx & Xxxxx
0000 XX Xxxxx Xxxxxx, Xxxxxx 0000-0000
Xxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxxx
Either party may change the persons or addresses to which any notices
or other communications to it should be addressed by notifying the other party
as provided above. Any notice or other communication, if addressed and sent,
mailed or delivered as provided above, shall be deemed given or received three
days after the date of mailing as indicated on the certified or registered mail
receipt, or on the next business day if mailed by express courier service, or on
the date of delivery or transmission if hand-delivered or sent by facsimile
transmission.
16.6 ASSIGNMENT
Neither Seller nor Buyer may assign any of its rights or obligations
hereunder without the prior written consent of the other party. This Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns.
16.7 CAPTIONS
The captions and headings used in this Agreement have been inserted for
convenience of reference only and shall not be considered part of this Agreement
or be used in the interpretation thereof.
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16.8 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement and understanding
between the parties with respect to the subject matter hereof and supersedes all
prior agreements, understandings, negotiations, representations and statements,
whether oral, written, implied or expressed, relating to such subject matter.
16.9 NO THIRD-PARTY RIGHTS
Nothing in this Agreement is intended, nor shall be construed, to
confer upon any person or entity other than Buyer and Seller (and only to the
extent expressly provided herein, their respective Affiliates) any right or
remedy under or by reason of this Agreement. Without limiting the foregoing,
nothing in this Agreement is intended to confer upon any current or former
employee of Seller or any Affiliate of Seller the right to employment by Buyer
or Acquisition Subsidiary or any Claim for compensation, benefits, severance or
other amounts.
16.10 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
agreement.
16.11 GOVERNING LAW
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Washington as though made and to be fully performed in
that State.
16.12 ATTORNEYS' FEES
The prevailing party in any action or other proceeding brought to
enforce a provision of, or in connection with a default under, this Agreement or
any Transaction Document shall be entitled to recover its attorneys' fees and
costs from the non-prevailing party.
16.13 RECORDS
Buyer agrees that for a period of two (2) years following the Closing,
Seller may store at the Facilities the records described on SCHEDULE 16.13 of
the Disclosure Schedule without charge.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective representatives hereunto authorized as of the day
and year first above written.
PORTLAND BREWING COMPANY
By: /s/ Xxxxxx X. Xxxxxxxx
Name: Xxxxxx X. Xxxxxxxx
Title: CEO
PYRAMID BREWERIES INC.
By: /s/ R. Xxxxxx Xxxxx
Name: R. Xxxxxx Xxxxx
Title: President and Chief Executive Officer
PBC ACQUISITION, LLC
By: /s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: Manager
EXHIBIT 3.3
SCHEDULE OF EARN OUT PAYMENTS
Pursuant to Section 3.3 of that certain Asset Purchase Agreement to which this
Schedule of Earn Out Payments is an exhibit (the "ASSET PURCHASE AGREEMENT"),
Portland Brewing Company ("SELLER") may be entitled to additional payments
(collectively, the "EARN OUT PAYMENTS") from Pyramid Breweries Inc. ("BUYER").
Capitalized terms not defined herein, shall have the meaning attributed to them
in Asset Purchase Agreement.
1. Annually, beginning in 2005, Buyer will pay Seller an Earn Out Payment,
as more fully described below, with respect to the number of barrels of
Earn Out Products (as defined below) shipped in excess of the Baseline
Amount (as defined below) during the preceding calendar year.
2. For purposes of this Schedule, "EARN OUT PRODUCTS" mean the beer, ale
and soda products produced under the Seller's labels or brands in
existence as of the Closing Date (including, but not limited to,
"MacTarnahan," "Nor'Xxxxxx" and "Xxxxx") and Contract Production
arrangements in existence as of the Closing Date. "Contract Production"
means labels or brands owned by third parties other than the Seller or
Buyer and "existence" means contract arrangements, whether or not in
production, listed on SCHEDULE A (to be provided as of the Closing
Date).
3. For the purposes of calculating the Earn Out Payments, the "BASELINE
AMOUNT" will be 45,000 barrels.
4. "EARN OUT PERIOD" means the period beginning on the Closing Date and
ending on December 31, 2008.
5. Buyer will pay Seller the Earn Out Payments on shipments of Earn Out
Products during the relevant calendar year in excess of the Baseline
Amount in the amounts indicated on the table below. As indicated in the
table below, the Earn Out Payments will double (on a per barrel basis)
for volumes shipped in excess of 50,000 barrels of Earn Out Product per
year. The per barrel rate of Earn Out Payment will decline ratably
(i.e., 20% per year) over the Earn Out Period, and Seller will not be
entitled to any Earn Out Payments for shipments made after December 31,
2008.
EARN OUT PAYMENTS PER BARREL
BETWEEN 45,001 AND
Year 50,000 BBLS OVER 50,000 BBLS
2004 $25 Per barrel $50 per barrel
2005 $20 Per barrel $40 per barrel
2006 $15 Per barrel $30 per barrel
2007 $10 Per barrel $20 per barrel
2008 $ 0 Per barrel $10 per barrel
For the purpose of illustration, the table below shows aggregate Earn
Out Payments for production and shipment of Earn Out Product in two
situations, assuming a Baseline Amount of 45,000 barrels.
EXAMPLE A
Year Number of Bbls Aggregate Amount of Earn Out Payment
2004 48,000 $ 75,000
2005 50,000 100,000
2006 52,000 135,000
2007 54,000 130,000
2008 56,000 60,000
TOTAL: $ 500,000
EXAMPLE B
2004 55,000 $ 375,000
2005 56,500 360,000
2006 58,000 315,000
2007 59,500 240,000
2008 61,000 110,000
TOTAL: $1,400,000
6. For purposes of 2004, the Baseline Amount, number of barrels of Earn
Out Products shipped and the amount of Earn Out Payment to which Seller
may be entitled shall be pro rated for the actual number of days
remaining in 2004 following the Closing Date under the Asset Purchase
Agreement.
7. Earn Out Payments for each calendar year will be paid the earlier of
(a) 30 days after the filing of Buyer's annual report on Form 10-K for
the relevant year or (b) April 30th. Each payment will be accompanied
with a written report setting forth the computation of the Earn Out
Payments.
8. Buyer will pay Earn Out Payments to Seller in cash.
9. Buyer has complete discretion to discontinue any of Seller's brands or
labels at any time. However, if Buyer discontinues a Seller brand or
label prior to or on December 31, 2008, Buyer will be responsible to
account for the shipment volume of the discontinued brand or label as
follows:
a. If the discontinued brand or label's total sales in
the twelve months preceding the month in which the
brand or label was discontinued exceeded 1,200
barrels, then Buyer will give credit to Seller for
the production level of the discontinued brand or
label in the calendar year preceding such
discontinuance for the remaining calendar years in
the Earn Out Period.
b. If the discontinued brand or label's annual sales had
dropped below 1,200 barrels during the twelve months
preceding the month in which the brand or label was
discontinued, then for any portion of the Earn Out
Period that follows the discontinuance of such brand
or label Buyer will not be required to give credit
for or provide any Earn Out Payments to Seller based
on production levels of such discontinued brand or
label.
10. In order to enable Seller to evaluate the Earn Out Payments Report,
Buyer agrees, upon Seller's request, which request will be made within
30 days of receipt of the Earn Out Payment and report, to provide
Seller or Seller's representatives reasonable access to Buyer's
accounting books and records and to employees or other agents or
representatives involved in Buyer's accounting function or in the
preparation or review of the report of Earn Out Payments.
11. Within 30 days of receipt of the payment and report, Seller may deliver
a notice of dispute of the Earn Out Payment and report (a "DISPUTE
NOTICE"). A Dispute Notice will set forth in reasonable detail a
written explanation of the basis for Seller's dispute with Buyer's
determination of the Earn Out payment amount and report. If Seller
fails to give a Dispute Notice within the prescribed time period (in
which case Seller will be deemed to have accepted Buyer's determination
of Earn Out Payment), the amount of the Earn Out Payment set forth in
the report shall be final and binding upon the parties.
If Seller delivers a Dispute Notice to Buyer within the time set forth
above, Buyer and Seller shall meet, as soon as practicable (but in any
event no later than 10 days) after delivery of a Dispute Notice, to
attempt to reconcile the parties' differences with regard to the amount
of the Earn Out Payment. If the parties are able to reconcile such
differences within 30 days after the date of delivery of the Dispute
Notice, the amount of the Earn Out Payment agreed to in writing shall
be final and binding upon the parties.
If Seller and Buyer fail to reach agreement within 30 days after the
date of delivery of the Dispute Notice, either Seller or Buyer may
refer the final determination of the Earn Out Payment to the
Independent Accountant, who will determine the amount of the Earn Out
Payment as promptly as practicable, but in any event within 45 days
after being engaged. The fees and costs of the Independent Accountant
will be shared equally by Buyer and Seller. The determination of the
Earn Out Payment by the Independent Accountant will be final and
binding upon the parties.
If the amount of the Independent Accountant's final determination of
the Earn Out Payment results in an increase to the Earn Out Payment,
Buyer shall remit to Seller cash in the amount by which the Independent
Accountant's determination of the final Earn Out Payment exceeded the
Earn Out Payment made by Buyer. If the amount of the Independent
Accountant's final determination of the Earn Out Payment results in a
decrease to the Earn Out Payment, Seller shall remit to Buyer, in cash,
that portion
of the Earn Out Payment which exceeded the Independent Account's
determination of the final Earn Out Payment.
EXHIBIT 8.5(d)
DEBT EXCHANGE AND STOCK PURCHASE AGREEMENT
BETWEEN
PYRAMID BREWERIES, INC.
AND
[LIST HOLDERS OF RELATED PARTY DEBT]
DATED ___________, 2004
EXHIBIT 8.5(d)
DEBT EXCHANGE AND STOCK PURCHASE AGREEMENT
THIS DEBT EXCHANGE AND STOCK PURCHASE AGREEMENT (this "AGREEMENT") is
made as of the __ day of ________ 2004, by and between Pyramid Breweries, Inc.,
a Washington corporation (the "COMPANY"), and the persons listed on SCHEDULE A
hereto (each, an "INVESTOR").
A. The Investors are the holders of certain indebtedness of
Portland Brewing Company ("PBC"), as evidenced by [describe promissory notes or
other instruments evidencing related party debt after giving effect to
restructuring contemplated in Term Sheet] (the "EXISTING NOTES");
B. The Company and PBC are parties to that certain Asset Purchase
Agreement dated as of _________, 200_ (the "ASSET PURCHASE AGREEMENT") pursuant
to which PBC has agreed to sell, and the Company has agreed to purchase, certain
assets of PBC used in its brewery and alehouse operations. Under the Asset
Purchase Agreement, the Company has agreed to assume certain liabilities of PBC,
including the Existing Notes; and
C. The Company desires to issue an aggregate of _______ shares of
Common Stock to the Investors in accordance with the terms and conditions set
forth herein in exchange for the cancellation of the Existing Notes.
NOW, THEREFORE, in consideration of the covenants and agreements set
forth herein, the parties hereby agree as follows:
1. EXCHANGE OF CERTAIN EXISTING NOTES COMMON STOCK
1.1 EXCHANGE
Subject to the terms and conditions of this Agreement, each Investor
agrees, severally, to exchange the Existing Notes held by such Investor, in the
principal amount set forth opposite each such Investor's name on SCHEDULE A
hereto, for that number of shares of the Company's Common Stock set forth
opposite each such Investor's name on SCHEDULE A hereto. The total number of
shares of Common Stock to be issued in exchange for the Existing Notes will be
equal to the Remaining Related Party Debt, as that term is defined in the Asset
Purchase Agreement, divided by the Common Stock's Fair Market Value, as that
term is defined in the Asset Purchase Agreement. For purposes hereof, the
purchase price for the Common Stock issued hereby shall be deemed paid by the
exchange of the Existing Notes in the stated amounts set forth on SCHEDULE A.
1.2 CLOSING
(a) The exchange of the Existing Notes for the Common Stock shall
take place at the offices of Xxxxxxx Coie LLP, in Portland, Oregon, on the same
date as the closing under the Asset Purchase Agreement or at such other time and
place as the Company and Investors mutually agree (which time and place are
designated as the "CLOSING"). The date and time of Closing is referred to herein
as the "TIME OF EXCHANGE."
(b) Not later than the Time of Exchange, each Investor shall
deliver his/her/its Existing Notes to the Company for cancellation and shall
execute and deliver any instruments or agreements reasonably requested to effect
such cancellation.
(c) At the Closing, against delivery or cancellation of the
Existing Notes as further provided in Section 1.2(b) and in exchange therefor,
the Company shall deliver to each Investor a share certificate evidencing the
shares of Common Stock to be issued to such Investor, as set forth on SCHEDULE
A, hereto registered in the name of such Investor.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each Investor that:
2.1 ORGANIZATION; EXISTENCE; AND POWER
The Company is a corporation duly organized and validly existing under
the laws of the State of Washington and has all requisite corporate power and
authority to own or lease its assets and to carry on its business as now
conducted. The execution and delivery by the Company of this Agreement, the
issuance of the Common Stock pursuant hereto and the performance of the
Company's obligations hereunder have been duly authorized by all necessary
corporate action. The Company has full corporate power to execute and deliver
this Agreement, to issue Common Stock and to carry out and perform its
obligations under the terms of this Agreement. This Agreement constitutes a
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms.
2.2 VALID ISSUANCE COMMON STOCK
The Common Stock which is being received by the Investors hereunder,
when issued, and delivered in accordance with the terms hereof for the
consideration expressed herein, will be duly and validly issued, fully paid and
nonassessable and, assuming the accuracy of the representations of the Investors
in this Agreement, will be issued in compliance with all applicable federal and
state securities laws and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and under applicable state and
federal securities law.
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2.3 BROKERAGE
The Company has not retained any broker or finder in connection with
the transactions contemplated by this Agreement. Any brokerage or finder's fee
due to any broker or finder in violation of the foregoing representation shall
be paid by the Company.
2.4 FULL DISCLOSURE
The Company has filed with the Securities and Exchange Commission (the
"SEC") all required forms, reports, registration statements and documents
required to be filed by it with the SEC (collectively, all such forms, reports,
registration statements, and documents filed after [January 1, 2001] are
referred to herein as "COMPANY SEC REPORTS"), all of which complied as to form
when filed in all material respects with the applicable provisions of the
Securities Act and the Exchange Act, as the case may be. Accurate and complete
copies of the Company SEC Reports have been made available to the Investors. As
of their respective dates, the Company SEC Reports (including documents
incorporated by reference therein and all exhibits and schedules thereto) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor hereby represents and warrants (solely as to such
Investor) that:
3.1 AUTHORIZATION
This Agreement will constitute as of the Closing such Investor's valid
and legally binding obligation, enforceable in accordance with its terms.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT
The Common Stock to be received by such Investor will be acquired for
investment for such Investor's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and such Investor
has no present intention of selling, granting any participation in, or otherwise
distributing the same. Each such Investor further represents that such Investor
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or to any third
person, with respect to any of the Common Stock received pursuant to this
Agreement.
3.3 DISCLOSURE OF INFORMATION
Investor believes he/she/it has received all the information he/she/it
considers necessary or appropriate for deciding whether to acquire the Common
Stock pursuant to this Agreement. Each such Investor further represents that
he/she/it has had an opportunity to ask
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questions and receive answers from the Company regarding the terms and
conditions of the purchase and sale of the Common Stock hereunder.
3.4 INVESTMENT EXPERIENCE; SOPHISTICATION
Each such Investor acknowledges that he/she/it is able to fend for
himself/herself/itself and can bear the economic risk of his/her/its investment
in the Common Stock (including a complete loss of such investment). Each
Investor has obtained, to the extent he/she/it deems necessary, his/her/its own
professional advice with respect to an investment in the Common Stock, and
alone, or together its professional advisor, has such knowledge and experience
in financial or business matters that he/she/it is capable of evaluating the
merits and risks of the investment in the Common Stock acquired pursuant to this
Agreement. Each such Investor that is a corporation, partnership or other entity
also represents it has not been organized for the purpose of acquiring the
Common Stock.
3.5 RISK FACTORS
Each Investor recognizes that the investment represented by the Common
Stock involves a high degree of risk, including the risks described in the
Company's Annual Report on Form 10-K for the year ended December 31, 2003, and
its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2003, June
30, 2003 and September 30, 2003.
3.6 ACCREDITED INVESTOR
Each Investor is an "accredited investor" within the meaning of
Securities and Exchange Commission Rule 501(a) of Regulation D, as presently in
effect.
3.7 RESTRICTED SECURITIES
Each Investor understands that the shares of Common Stock he/she/it is
acquiring pursuant to this Agreement are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
without registration under the Securities Act of 1933, as amended (the "ACT"),
only in certain limited circumstances. In this connection, each such Investor
represents that it is familiar with SEC Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Act.
3.8 LEGENDS
Each Investor understands that the certificates evidencing the Common
Stock issued to such Investor may bear one or all of the following legends (or
legends in substantially similar form):
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(a) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with respect
to the securities under such Act or an opinion of counsel satisfactory to the
Company that such registration is not required or unless sold pursuant to Rule
144 of such Act."
(b) Any legend required by applicable state securities laws.
3.9 OWNERSHIP OF EXISTING NOTES
Each Investor has good and valid title to the Existing Notes, subject
to no liens or other encumbrances that will not be released prior to the Time of
Exchange.
4. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING
The obligations of each Investor under Section 1.1 of this Agreement
are subject to the fulfillment on or before the Closing of each of the following
conditions, the waiver of which shall not be effective against any Investor who
does not consent thereto:
4.1 REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Company contained in Section
2 shall be true on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the date of Closing.
4.2 PERFORMANCE
The Company shall have performed and complied with all other
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before Closing in all
material respects.
4.3 ASSET PURCHASE AGREEMENT
The parties to the Asset Purchase Agreement shall be prepared to close
the transaction contemplated thereby (it being understood that this agreement
shall be effective only if the Closing contemplated in the Asset Purchase
Agreement occurs).
4.4 NO INJUNCTION, ETC.
No injunction or other restraining order shall have been issued or
threatened and no hearing to cause an injunction or other restraining order to
be issued shall be pending or noticed with respect to any action, suit or
proceeding seeking to enjoin or otherwise prevent the consummation of any of the
transactions contemplated by this Agreement.
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5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT THE CLOSING
The obligations of the Company to each Investor under this Agreement
are subject to the fulfillment on or before the Closing of each of the following
conditions by that Investor:
5.1 REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Investors contained in
Section 3 shall be true on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the Closing.
5.2 PERFORMANCE
The Investors shall have performed and complied with all agreements,
obligations and conditions contained in this Agreement that are required to be
performed or complied with by it on or before Closing.
5.3 EXISTING NOTES
The Company shall have received the original Existing Notes from the
Investors in accordance with Section 1.2(b).
5.4 ASSET PURCHASE AGREEMENT
The parties to the Asset Purchase Agreement shall be prepared to close
the transaction contemplated thereby (it being understood that this Agreement
shall be effective only if the Closing contemplated in the Asset Purchase
Agreement occurs).
5.5 NO INJUNCTION ETC.
No injunction or other restraining order shall have been issued or
threatened and no hearing to cause an injunction or other restraining order to
be issued shall be pervading or noticed with respect to any action, suit or
proceeding seeking to enjoin or otherwise prevent the consummation of any of the
transactions contemplated by this Agreement.
6. MISCELLANEOUS
6.1 SURVIVAL OF WARRANTIES
The warranties, representations and covenants of the Company and
Investors contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing.
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6.2 SUCCESSORS AND ASSIGNS
Except as otherwise provided herein, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
6.3 GOVERNING LAW
This Agreement shall be governed by and construed under the laws of the
State of Washington as applied to agreements among Washington residents entered
into and to be performed entirely within Washington.
6.4 COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
6.5 TITLES AND SUBTITLES
The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
6.6 NOTICES
All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be deemed to have been given for all
purposes (a) upon personal delivery, (b) one day after being sent, when sent by
professional overnight courier service from and to locations within the United
States, (c) five days after posting when sent by registered or certified mail,
or (d) on the date of confirmation of transmission when sent by facsimile,
addressed (i) if to the Company at the address set forth on the signature pages
hereto; or (ii) if to the Investors at the addresses set forth on the signature
pages hereto. Any party hereto may from time to time by notice in writing to the
other parties as provided herein, designate a different mailing address or a
different person to which such notices or demands are thereafter to be addressed
or delivered.
6.7 AMENDMENTS AND WAIVERS
Any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and Investors then owning a majority of the Common Stock
issued pursuant to this Agreement. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
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securities purchased under this Agreement at the time outstanding, each future
holder of all such securities, and the Company.
6.8 SEVERABILITY
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
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EXHIBIT 8.5(d)
IN WITNESS WHEREOF, the parties hereto have executed this Debt Exchange
and Stock Purchase Agreement as of the date first written above.
THE COMPANY:
PYRAMID BREWERIES, INC.
By:____________________________________
Name:__________________________________
Title:_________________________________
INVESTORS:
[Signature blocks for each Investor]
