Exhibit 10.1
EXECUTION COPY
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INVESTMENT AGREEMENT
Between
XXXXXX INTERNATIONAL BREWING GROUP, LLC
And
XXXXXXXXX BREWING CO.
Dated August 24, 1999
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TABLE OF CONTENTS
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ARTICLE I - AUTHORIZATION, ISSUANCE, PURCHASE AND SALE OF
SECURITIES ...............................................................................................1
Section 1.1 Authorization of Issuance of the Shares and the Warrants ...................................1
Section 1.2 Agreement to Purchase and Sell .............................................................1
Section 1.3 Closing ....................................................................................1
Section 1.4 Delivery and Payment .......................................................................1
Section 1.5 Legend . ...................................................................................3
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY ....................................................3
Section 2.1 Due Organization . .........................................................................3
Section 2.2 Capital Structure ..........................................................................4
Section 2.3 Issuance, Sale and Delivery of Shares and Warrant Shares ...................................5
Section 2.4 Authority, Due Execution ...................................................................5
Section 2.5 Consents ...................................................................................6
Section 2.6 SEC Documents ..............................................................................6
Section 2.7 Compliance with Applicable Laws ............................................................7
Section 2.8 Litigation .................................................................................7
Section 2.9 Taxes ......................................................................................7
Section 2.10 [Intentionally Omitted] ....................................................................9
Section 2.11 Employee Benefit Plans; ERISA ..............................................................9
Section 2.12 Absence of Undisclosed Liabilities ........................................................12
Section 2.13 Permits ...................................................................................12
Section 2.14 Absence of Certain Changes or Events ......................................................12
Section 2.15 Environmental Matters .....................................................................13
Section 2.16 Contracts and Commitments .................................................................15
Section 2.17 Title to Properties; Encumbrances .........................................................16
Section 2.18 Intellectual Property .....................................................................17
Section 2.19 Labor Matters .............................................................................18
Section 2.20 Insurance .................................................................................18
Section 2.21 Brokers ...................................................................................18
Section 2.22 Opinion of Financial Advisor ..............................................................19
Section 2.23 Disclosure ................................................................................19
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE INVESTOR..................................................19
Section 3.1 Due Organization ..........................................................................19
Section 3.2 Authority, Due Execution ..................................................................19
Section 3.3 No Violation ..............................................................................19
Section 3.4 Consents ..................................................................................20
Section 3.5 Investment Representation .................................................................20
Section 3.6 Accredited Investor Status ................................................................20
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ARTICLE IV - INDEMNIFICATION .................................................................................20
Section 4.1 Survival of Representations and Warranties ................................................20
Section 4.2 Indemnification ...........................................................................21
Section 4.3 Defenses of Claim .........................................................................21
ARTICLE V - MISCELLANEOUS ....................................................................................22
Section 5.1 Entire Agreement; Modification.............................................................22
Section 5.2 Assignment; Binding Effect.................................................................22
Section 5.3 Severability...............................................................................22
Section 5.4 Notices....................................................................................23
Section 5.5 Public Announcement........................................................................23
Section 5.6 No Third-Party Beneficiaries...............................................................24
Section 5.7 Governing Law..............................................................................24
Section 5.8 Consent to Jurisdiction....................................................................24
Section 5.9 Counterparts...............................................................................24
Section 5.10 Certain Definitions .......................................................................24
Section 5.11 Fees and Expenses .........................................................................26
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INVESTMENT AGREEMENT
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THIS INVESTMENT AGREEMENT (this "Agreement") is dated as of this 24th
day of August, 1999, by and between Xxxxxx International Brewing Group, LLC, an
Ohio limited liability company (the "Investor"), and Frederick Brewing Co., a
Maryland corporation (the "Company").
A. The Company has requested the Investor to make an investment in the
Company in the form of newly issued shares of Common Stock, par value $.0004 per
share, of the Company (the "Company Common Stock") and warrants to purchase
shares of Company Common Stock.
B. In connection with the Investor's investment in the Company, the
parties to this Agreement desire to establish certain rights and obligations
among themselves.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, the Company and the Investor hereby agree as follows:
ARTICLE I
AUTHORIZATION, ISSUANCE, PURCHASE AND SALE OF SECURITIES
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Section 1.1 Authorization of Issuance of the Shares and the Warrants.
The Company has authorized the issuance to Investor of (a) 4,278,691 shares of
newly issued Company Common Stock (the "Shares" and (b) warrants to purchase
shares of Company Common Stock (the "Warrants").
Section 1.2 Agreement to Purchase and Sell. Subject to the terms and
conditions of this Agreement, at the Closing (as defined in Section 1.3), the
Company shall sell to the Investor, and the Investor shall purchase from the
Company the Shares and the Warrants, free and clear of all Liens (as defined in
Section 5.10(f)). In consideration of the sale of the Shares and the Warrants by
the Company to the Investor, the Investor shall pay to the Company an aggregate
cash purchase price of $2,000,000 (the "Purchase Price") for the Shares and the
Warrants.
Section 1.3 Closing. The closing of the, issuance, sale and purchase of
the Shares and the Warrants (the "Closing") will take place at the offices of
Xxxxx, Day, Xxxxxx & Xxxxx, 000 Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxx at 9:00 a.m.,
local time, on August 24, 1999, or at such other place and/or time as the
Investor and the Company mutually agree (the "Closing Date"), simultaneously
with the execution and delivery of this Agreement.
Section 1.4 Delivery and Payment.
(a) At the Closing, the Company shall deliver or cause to be delivered
to the Investor the following documents:
(i) One or more stock certificates evidencing the Shares,
issued in the name of the Investor;
(ii) A common stock purchase warrant evidencing the Warrants,
issued in the name of the Investor, and the related Warrant Agreement;
(iii) A cross receipt ("Cross Receipt"), executed by the
Company, evidencing payment of the Purchase Price by the Investor;
(iv) Transition Agreements, executed by Xxxxx X. Xxxxxxx and
Xxxxxxxx X. XxXxxxxx;
(v) Resignations of the following directors of the Company
effective as of the Closing Date: Xxxxxxxx X. Xxxxx, Xxxx X.
Xxxxxxxxxx, Xxxxx X. Xxxxxxx, Xxxxxxxx X. XxXxxxxx and Xxxxxxxx Xxxxx;
(vi) A legal opinion of XxXxxxx Xxxx, a Professional
Corporation, legal counsel to the Company, addressed to the Investor,
in form and substance reasonably satisfactory to Investor;
(vii) A copy of the fairness opinion of Westfinance
Corporation, addressed to the Board of Directors of the Company, with
respect to the transactions contemplated by this Agreement;
(viii) Articles of Incorporation of the Company, FBC
Acquisition Corporation doing business as Wild Goose Brewing, Inc.
("Wild Goose") and BB Acquisition Corporation doing business as
Brimstone Brewing Company ("Brimstone"), each certified by the
Secretary of State of Maryland;
(ix) Good standing certificates issued by the Secretary of
State of Maryland with respect to the Company, Wild Goose and
Brimstone;
(x) A Certificate of the Secretary of the Company certifying
as to (a) the board resolutions authorizing this Agreement, the
Transaction Documents and the transactions contemplated hereby and
thereby, including the issuance of the Shares and the Warrants, (b) the
by-laws of the Company and (c) the incumbency and the genuineness of
the signature of each officer of the Company executing this Agreement
or any other Transaction Document;
(xi) All documents requested by Investor in order to
reconstitute the Board of Directors of the Company; and
(xii) Confirmation, in form and substance reasonably
satisfactory to Investor, that (a) the Investor or any Affiliate of
Investor has acquired all of the membership interests of Blue II, LLC;
(b) the holders of the Company's Class F and Class G Preferred Stock
shall have converted their preferred stock
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into Company Common Stock and executed an agreement, in form and
substance satisfactory to the Investor, with the Company with respect
to such conversion and related matters; (c) the holders of the
Company's Convertible Notes issued on June 2, 1999 in the aggregate
principal amount of $500,000 shall have sold the indebtedness evidenced
thereby and assigned all of their rights thereunder to Investor or an
Affiliate of Investor; and (d) the creditors listed on Schedule 1.4
shall have entered into debt modification or compromise arrangements
with the Company on terms reasonably satisfactory to Investor.
(b) At the Closing, the Investor shall deliver or cause to be delivered
to the Company the following:
(i) The Purchase Price, by wire transfer of immediately
available funds to an account of the Company designated by the Company;
and
(ii) The Cross Receipt, executed by the Investor, evidencing
receipt from the Company of the certificate or certificates
representing the Shares and the warrant certificate or certificates
representing the Warrants.
Section 1.5 Legend. Any certificate or certificates representing the
Shares must bear the following legend, together with any and all other legends
as may be required pursuant to any Transaction Document (as defined in Section
2.4 or applicable Law:
The securities represented by this certificate or instrument have not
been registered under the Securities Act of 1933, as amended (the
"Act", or under any applicable state law and may not be transferred,
sold or otherwise disposed of unless either (a) they are registered
under the Act pursuant to an effective registration statement or (b)
the Company has received evidence satisfactory to it (which may include
an opinion of counsel) that such proposed disposition is exempt from
registration.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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The Company hereby represents and warrants to the Investor as follows:
Section 2.1 Due Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Maryland, has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted and is duly
qualified and in good standing to conduct business in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification necessary, other than in such jurisdictions where the failure
to so qualify would not have a Material Adverse Effect (as defined below). Each
of the Subsidiaries (as defined in Section 5.10(1)) of the Company is a
corporation duly
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organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted and is duly qualified and in good standing to conduct business in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary, other than in such
jurisdictions where the failure to so qualify would not have a Material Adverse
Effect. The entities identified on Schedule 2.1 represent all of the
Subsidiaries of the Company, and the Company does not own any equity interest in
any other Person (as defined in Section 5.10(h)) other than such Subsidiaries.
The Company has heretofore made available to the Investor complete and correct
copies of its Amended and Restated Articles of Incorporation and Amended and
Restated Bylaws and the Articles of Incorporation and Bylaws (or other
comparable documents) of each of its Subsidiaries, as currently in effect. As
used in this Agreement, a "Material Adverse Effect" means a material adverse
effect, or any development that is reasonably likely to result in a material
adverse effect, on the business, assets, properties, prospects, financial
condition or results of operations of the Company and its Subsidiaries, taken as
a whole, or on the ability of the Company to consummate the transactions
contemplated hereby.
Section 2.2 Capital Structure. The authorized capital stock of the
Company consists of 19,000,000 shares of Common Stock and 1,000,000 shares of
preferred stock, $.01 par value per share ("Preferred Stock"), of which (a)
1,848 shares have been designated Series A Convertible Preferred Stock, par
value $.01 per share (the "Series A Preferred"), (b) 3,750 shares have been
designated Series B Convertible Preferred Stock, par value $.01 per share
("Series B Preferred"), (c) 2,100 shares have been designated Series C
Convertible Preferred Stock, par value $.01 per share ("Series C Preferred"),
(d) 1,045 shares have been designated Series D Convertible Preferred Stock, par
value $.01 per share ("Series D Preferred"), (e) 2,910 shares have been
designated Series E Convertible Preferred Stock, par value $.01 per share
("Series E Preferred"), (f) 1,000 shares have been designated Series F
Convertible Preferred Stock, par value, $.01 per share ("Series F Convertible
Preferred"), and (g) 500 shares have been designated Series G Convertible
Preferred Stock, par value $.01 per share ("Series G Preferred"). As of the date
hereof: (a) 1,929,791 shares of Common Stock are issued and outstanding and
except as set forth on Schedule 2.2, there are no agreements providing for the
issuance of shares of Common Stock, (b) 2,549.5 shares of Preferred Stock are
issued and outstanding, of which 1,455 shares of Series A Preferred are issued
and outstanding, 0 shares of Series B Preferred are issued and outstanding, 0
shares of Series C Preferred are issued and outstanding, 0 shares of Series D
Preferred are issued and outstanding, 0 shares of Series E Preferred are issued
and outstanding, 776 shares of Series F Preferred are issued and outstanding and
230.5 shares of Series G Preferred are issued and outstanding, (c) 0 shares of
Common Stock are held by the Company or its direct or indirect wholly-owned
Subsidiaries, and (d) except for $500,000 in aggregate principal amount of the
Company's 10% Convertible Notes, issued June 7, 1999, no bonds, debentures,
notes or other instruments or evidence of indebtedness having the right to vote
(or convertible into, or exercisable or exchangeable for, securities having the
right to vote) on any matters on which the Company stockholders may vote
("Company Voting Debt") are issued or outstanding. All outstanding shares of
Common Stock and Preferred Stock were duly authorized and are validly issued,
fully paid and nonassessable and are not subject to preemptive or other similar
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rights. All outstanding shares of capital stock of the Subsidiaries of the
Company are owned by the Company or a direct or indirect Subsidiary of the
Company, free and clear of all Liens. As of the date hereof, except as set forth
in this Section 2.2 or Schedule 2.2, there are outstanding: (i) no shares of
capital stock, Company Voting Debt or other voting securities of the Company;
(ii) no securities of the Company or any Subsidiary of the Company convertible
into, or exchangeable or exercisable for, shares of capital stock, Company
Voting Debt or other voting securities of the Company or any Subsidiary of the
Company; (iii) no stock appreciation rights, phantom stock awards or similar
rights or awards; and (iv) no options, warrants, calls, rights (including
preemptive rights), commitments or agreements to which the Company or any
Subsidiary of the Company is a party or by which any of them is bound, in any
case obligating the Company or any Subsidiary of the Company to issue, deliver,
sell, purchase, redeem or acquire, or cause to be issued, delivered, sold,
purchased, redeemed or acquired, additional shares of capital stock or any
Company Voting Debt or other voting securities of the Company or of any
Subsidiary of the Company, or obligating the Company or any Subsidiary of the
Company to grant, extend or enter into any such option, warrant, call, right,
commitment or agreement. Set forth on Schedule 2.2 is a list of all options,
warrants, stock appreciation rights and rights to purchase shares of the Common
Stock outstanding as of the date hereof and the exercise prices relating
thereto. There are no restrictions on the Company to vote the stock of any of
its Subsidiaries.
Section 2.3 Issuance, Sale and Delivery of Shares and Warrant Shares.
The Shares have been duly and validly authorized and, when issued and delivered
against payment therefor as provided herein at the Closing, will be duly and
validly issued, fully paid and nonassessable, free and clear of all Liens and
not subject to preemptive or similar rights of any third party. The Company
Common Stock to be issued upon exercise of the Warrants will be validly
authorized and, when issued upon due exercise of the Warrants, will be fully
paid and be assessable, free and clear of all Liens and not subject to
preemptive or similar rights of any third party.
Section 2.4 Authority, Due Execution. The Company has all requisite
corporate power and authority to (a) enter into this Agreement and each other
agreement, certificate, instrument and document required to be executed by the
Company in connection herewith (collectively, the "Transaction Documents"), (b)
consummate the transactions contemplated hereby and thereby and (c) perform its
obligations hereunder and thereunder. The execution and delivery of this
Agreement and the Transaction Documents and the consummation of the transactions
contemplated hereby and thereby (i) have been duly authorized by all necessary
corporate action on the part of the Company, and (ii) do not require any
approval of the stockholders of the Company, including, without limitation,
shareholder approval of the issuance of the Shares. This Agreement has been duly
and validly executed and delivered by the Company and constitutes a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as enforcement may be limited by bankruptcy, insolvency
or other similar Laws affecting the enforcement of creditors' rights generally
and except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before any proceeding
therefor may be brought. The execution and delivery of this Agreement and the
Transaction Documents by the Company do not, and the consummation
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of the transactions contemplated hereby or thereby by the Company will not, (a)
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or the loss of a benefit under,
or the creation of a Lien on assets or property, or right of first refusal with
respect to any asset or property (any such conflict, violation, default, right
of termination, cancellation or acceleration, loss, creation or right of first
refusal, a "Violation"), pursuant to any provision of the Amended and Restated
Articles of Incorporation or the Amended and Restated Bylaws of the Company or
the equivalent constituent documents of any of its Subsidiaries or (b) except as
set forth on Schedule 2.4 hereto and assuming the consents, approvals,
authorizations, permits, filings and notifications referred to in Section 2.5
are duly and timely obtained or made, result in any Violation of any (i) loan or
credit agreement, note, mortgage, indenture, lease, Employee Plan (as defined in
Section 2.11), or other agreement, obligation, instrument, Permit (as defined in
Section 2.13), concession, franchise or license applicable to the Company or any
of its Subsidiaries or their respective properties or assets or (ii) Order or
Law (each as defined in Section 5.10(g) and (d), respectively) applicable to the
Company or any of its Subsidiaries or their respective properties or assets. The
Board of Directors of the Company (the "Company Board") has taken all actions
necessary (a) under the Maryland General Corporation Law ("MGCL"), including
approving the transactions contemplated by this Agreement to ensure that Title
3, Subtitles 6 and 7 of the MGCL do not, and will not, apply to the transactions
contemplated in this Agreement, and (b) under Article 10 of the Company's
Amended and Restated Articles of Incorporation, including approving the
transactions contemplated by this Agreement, to ensure that such Article 10 does
not, and will not, apply to the transactions contemplated in this Agreement. No
other "fair price," "merger moratorium," "control share acquisition" or other
anti-takeover statute or similar statute or regulation applies or purports to
apply to this Agreement or any of the transactions contemplated hereby. A
resolution of the Company Board approving the issuance of the Shares is the only
approval under the MGCL or the Company's Amended and Restated Articles of
Incorporation or Amended and Restated Bylaws required to authorize the issuance
of the Shares and the Warrants.
Section 2.5 Consents. Except as set forth in Schedule 2.5 hereto, no
consent, approval, Order or authorization of, or registration, declaration or
filing with, notice to, or permit from any federal, state or local court,
tribunal or arbitrator or any federal, state or local government or any
subdivision, department, board, bureau, administrative agency, commission,
authority or instrumentality thereof, domestic or foreign (a "Governmental
Entity"), is required by or with respect to the Company or any of its
Subsidiaries in connection with the execution and delivery of this Agreement and
the Transaction Documents by the Company or the consummation by the Company of
the transactions contemplated hereby or thereby, except for such reports under
and such other compliance with the Securities Exchange Act of 1934 (the
"Exchange Act") and the rules and regulations thereunder as may be required in
connection with this Agreement and the transactions contemplated hereby.
Section 2.6 SEC Documents. The Company has made available to the
Investor a true and complete copy of each report, schedule, registration
statement and definitive proxy statement filed by the Company with the SEC since
January 1, 1996 and
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prior to the date of this Agreement (the "Company SEC Documents"), which are all
the documents (other than preliminary material) that the Company was required to
file with the SEC since such date. As of their respective dates, (a) the Company
SEC Documents complied in all material respects with the requirements of the
Securities Act of 1933 (the "Securities Act"), or the Exchange Act, as the case
may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such Company SEC Documents, and (b) none of the Company SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The consolidated financial statements of the Company
included in the Company SEC Documents complied as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and present fairly in
accordance with applicable requirements of GAAP (subject, in the case of the
unaudited statements, to normal, recurring adjustments, none of which are
material) the consolidated financial position of the Company and its
consolidated Subsidiaries as of their respective dates and the consolidated
results of operations and the consolidated cash flows of the Company and its
consolidated Subsidiaries for the periods presented therein.
Section 2.7 Compliance with Applicable Laws. The business of the
Company and its Subsidiaries is not currently being conducted, and has not been
conducted, in violation of any Laws. No investigation or review by any
Governmental Entity with respect to the Company or any of its Subsidiaries is
pending or, to the knowledge of the Company, threatened.
Section 2.8 Litigation. Except as disclosed in the Company SEC
Documents or in Schedule 2.8, there are no Actions (as defined in Section
5.10(a)) pending against the Company or any Subsidiary of the Company or, to the
knowledge of the Company, threatened against the Company or any Subsidiary of
the Company, nor to the knowledge of the Company, is there any valid basis for
any such Action, nor is there any Order outstanding against the Company or any
Subsidiary of the Company. Except as set forth on Schedule 2.8 hereto, there are
no consent decrees (including any affirmative action plan) of any Governmental
Entity to which the Company or any Subsidiary of the Company is a party or by
which the assets of the Company or any Subsidiary of the Company are bound.
Section 2.9 Taxes.
(a) Except as disclosed on Schedule 2.9:
(i) All Tax returns, statements, reports and forms (including
estimated Tax or information returns and reports) required to be filed
with any Taxing Authority on or before the date hereof by or on behalf
of the Company and each Subsidiary (collectively, the "Returns") have
been filed when due in accordance with all applicable Laws;
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(ii) The Returns correctly reflected in all material respects,
the facts regarding the income, business, assets, operations,
activities and status of the Company or any Subsidiary, as applicable;
(iii) All Taxes owed by the Company and each Subsidiary (which
are shown as due and payable on Returns filed on or before the date
hereof) have been timely paid or withheld and remitted to the
appropriate Taxing Authority;
(iv) Any accruals established for Taxes with respect to the
Company and each Subsidiary, as applicable, for any period ending on or
before the date hereof reflected on the books of such company
(excluding any provision for deferred income Taxes) are adequate;
(v) Neither the Company nor any of its Subsidiaries is
delinquent in the payment of any Tax or has requested any extension of
time within which to file any Return which has not been previously
filed except for extensions granted as a matter of right;
(vi) Neither the Company nor any of its Subsidiaries (nor any
member of any affiliated, consolidated, combined or unitary group of
which the Company or any Subsidiary is or has been a member) has
granted any extension or waiver of the statute of limitations period
applicable to any Return, which period (after giving effect to such
extension or waiver) has not yet expired;
(vii) There is no Action or audit now pending or, to the
knowledge of the Company or any Subsidiary, any Action or audit
threatened against or with respect to the Company or any Subsidiary in
respect of any Tax;
(viii) Neither the Company nor any of its Subsidiaries owns
any real property in any jurisdiction in which a Tax is imposed on the
transfer of a controlling interest in any entity that owns any interest
in real property;
(ix) None of the Company, any Subsidiary or any other Person
on behalf of the Company or any Subsidiary has entered into any
agreement or consent pursuant to Section 341(f) of the Code;
(x) There are no Liens for Taxes upon the assets of the
Company or any Subsidiary, except Liens for current Taxes not yet due;
(xi) Neither the Company nor any Subsidiary will be required
to include any adjustment in taxable income for any Post-Closing Tax Period
under Section 481(c) of the Code (or any similar provision of the Tax Laws of
any jurisdiction) as a result of a change in the method of accounting for a
Pre-Closing Tax Period or pursuant to the provisions of any agreement entered
into
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with any Taxing Authority with regard to the Tax liability of such
company for any Pre-Closing Tax Period;
(xii) Neither the Company nor any Subsidiary has been a member
of an affiliated, consolidated, combined or unitary group or
participated in any other arrangement whereby any income, revenues,
receipts, gain or loss of such company was determined or taken into
account for Tax purposes with reference to or in conjunction with any
income, revenues, receipts, gain, loss, asset or liability of any other
Person; and
(xiii) Neither the Company nor any Subsidiary has made any Tax
deposit with the U.S. Government or any other Taxing Authority in
respect of any Pre-Closing Tax Period or Post-Closing Tax Period.
Section 2.10 [Intentionally Omitted].
Section 2.11 Employee Benefit Plans: ERISA.
(a) Schedule 2.11 sets forth a complete list of, with respect to the
Company and each of its Subsidiaries, (i) all "employee benefit plans," as
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), (ii) all other severance pay, salary
continuation, bonus, incentive, stock option, retirement, pension, profit
sharing or deferred compensation plans, contracts, programs, funds, or
arrangements of any kind, and (iii) all other employee benefit plans,
contracts, programs, funds, or arrangements (whether written or oral,
qualified or nonqualified, funded or unfunded, foreign or domestic,
currently effective or terminated) and any trust, escrow, or similar
agreement related thereto, whether or not funded, in respect of any present
or former employees, directors, officers, shareholders, consultants, or
independent contractors of the Company or any of its Subsidiaries, (or,
where indicated below, any trade or business (whether or not incorporated)
(i) under common control within the meaning of Section 4001(b)(1) of ERISA
with the Company or (ii) which together with the Company is treated as a
single employer under Section 414(t) of the Code (the "Controlled Group"))
or with respect to which the Company (or, where indicated below, the
Controlled Group) has made or is required to make payments, transfers, or
contributions (all of the above being hereinafter individually or
collectively referred to as "Employee Plan" or "Employee Plans,"
respectively). The Company has no liability with respect to any plan,
arrangement or practice of the type described in the preceding sentence
other than the Employee Plans.
(b) Copies of the following materials have been delivered or made
available to Investor: (i) all current and prior plan documents for each
Employee Plan or, in the case of an unwritten Employee Plan, a written
description thereof, (ii) all determination letters from the Internal
Revenue Service ("IRS") with respect to any of the Employee Plans, (iii)
all current and prior summary plan descriptions, summaries of material
modifications, annual reports, and summary annual reports,
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(iv) all current and prior trust agreements, insurance contracts, and other
documents relating to the funding or payment of benefits under any Employee
Plan, and (v) any other documents, forms or other instruments relating to
any Employee Plan reasonably requested by Investor.
(c) Each Employee Plan has been maintained, operated, and administered
in material compliance with its terms and any related documents or
agreements and in compliance with all applicable Laws. There have been no
prohibited transactions or breaches of any of the duties imposed on
"fiduciaries" (within the meaning of Section 3(21) of ERISA) by ERISA with
respect to the Employee Plans that could result in any liability or excise
tax under ERISA or the Code being imposed on the Company or any of its
Subsidiaries.
(d) Each Employee Plan intended to be qualified under Section 401(a) of
the Code is so qualified and has heretofore been determined by the IRS to
be so qualified, and each trust created thereunder has heretofore been
determined by the IRS to be exempt from tax under the provisions of Section
501(a) of the Code, and nothing has occurred since the date of any such
determination that could reasonably be expected to give the IRS grounds to
revoke such determination.
(e) The Company does not currently have and at no time in the past has
had an obligation to contribute to a "defined benefit plan" as defined in
Section 3(35) of ERISA, a pension plan subject to the funding standards of
Section 302 of ERISA or Section 412 of the Internal Revenue Code of 1986,
as amended (the "Code"), a "multiemployer plan" as defined in Section 3(37)
of ERISA or Section 414(f) of the Code or a "multiple employer plan" within
the meaning of Section 210(a) of ERISA or Section 413(c) of the Code.
(f) With respect to each group health plan benefitting any current or
former employee of the Company or any of its Subsidiaries or any member of
the Controlled Group that is subject to Section 4980B of the Code, or was
subject to Section 162(k) of the Code, the Company, each of its
Subsidiaries and each member of the Controlled Group has complied with (i)
the continuation coverage requirements of Section 4980B of the Code and
Section 162(k) of the Code, as applicable, and Part 6 of Subtitle B of
Title I of ERISA and (ii) the Health Insurance Portability and
Accountability Act of 1996, as amended.
(g) With respect to each group health plan that is subject to Section
1862(b)(1) of the Social Security Act (42 U.S.C. ss. 1395y(b)), the Company
and its Subsidiaries has complied with the secondary payer requirements of
Section 1862(b)(1) of such Act.
(h) No Employee Plan is or at any time was funded through a "welfare
benefit fund" as defined in Section 419(e) of the Code, and no benefits
under any Employee Plan are or at any time have been provided through a
voluntary employees' beneficiary association (within the meaning of
subsection 501(c)(9) of the Code) or a
10
supplemental unemployment benefit plan (within the meaning of Section
501(c)(17) of the Code).
(i) All contributions, transfers and payments in respect of any
Employee Plan, other than transfers incident to an incentive stock option
plan within the meaning of Section 422 of the Code, have been or are fully
deductible under the Code.
(j) There is no pending or threatened assessment, complaint,
proceeding, or investigation of any kind in any court or government agency
with respect to any Employee Plan (other than routine claims for benefits),
nor, to the knowledge of the Company, is there any basis for one.
(k) All (i) insurance premiums required to be paid with respect to,
(ii) benefits, expenses and other amounts due and payable under, and (iii)
contributions, transfers or payments required to be made to, any Employee
Plan prior to the Closing will have been paid, made or accrued on or before
the Closing.
(l) With respect to any insurance policy providing funding for benefits
under any Employee Plan, (i) there is no liability of the Company or any of
its Subsidiaries, in the nature of a retroactive rate adjustment, loss
sharing arrangement, or other actual or contingent liability, nor would
there be any such liability if such insurance policy was terminated on the
date hereof, and (ii) no insurance company issuing any such policy is in
receivership, conservatorship, liquidation or similar proceeding and, to
the knowledge of the Company, no such proceedings with respect to any
insurer are imminent.
(m) No Employee Plan provides benefits, including, without limitation,
death or medical benefits, beyond termination of service or retirement
other than (i) coverage mandated by law, (ii) death or retirement benefits
under any qualified Employee Plan, or (iii) deferred compensation benefits
reflected on the books of the Company and its Subsidiaries.
(n) The execution and performance of this Agreement will not (i)
constitute a stated triggering event under any Employee Plan that will
result in any payment (whether of severance pay or otherwise) becoming due
from the Company or any of its Subsidiaries to any officer, employee or
former employee (or dependents of such employee), or (ii) accelerate the
time of payment or vesting, or increase the amount of compensation due to
any employee, officer or director of the Company or any of its
Subsidiaries.
(o) Neither the Company nor any of its Subsidiaries has agreed or
committed to institute any plan, program, arrangement or agreement for the
benefit of employees or former employees of the Company or any of its
Subsidiaries other than the Employee Plans, or to make any amendments to
any of the Employee Plans.
11
(p) Each of the Company and its Subsidiaries has reserved all rights
necessary to amend or terminate each of the Employee Plans without the
consent of any other person.
(q) No Employee Plan provides benefits to any individual who is not a
current or former employee of the Company or any of its Subsidiaries, or
the dependents or other beneficiaries of any such current or former
employee.
(r) All contributions required to be paid with respect to workers'
compensation arrangements of the Company and its Subsidiaries have been
made or accrued as a liability on the Company's financial statements
included the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999.
(s) No amount that could be received (whether in cash or property or
the vesting of property) as a result of any of the transactions
contemplated by this Agreement by any employee, officer or director of the
Company or any of its Subsidiaries or Affiliates who is a "disqualified
individual" (as such term is defined in proposed Treasury Regulation
Section 1.280G-1) under any employment, severance or termination agreement,
other compensation arrangement or Employee Plan currently in effect would
not be characterized as an "excess parachute payment" (as such term is
defined in Section 280G(b)(1) of the Code). The disallowance of a
deduction under Section 162(m) of the Code for employee remuneration will
not apply to any amount paid or payable by the Company or any of its
Subsidiaries under any contract, Employee Plan, program, arrangement or
understanding currently in effect.
Section 2.12 Absence of Undisclosed Liabilities. Except as disclosed in
the Company SEC Documents or Schedule 2.12, neither the Company nor any of its
Subsidiaries has any material liabilities or obligations (whether absolute,
accrued, contingent, or otherwise, or due or to become due), other than
liabilities incurred in the ordinary course of business consistent with past
practice subsequent to January 1, 1999.
Section 2.13 Permits. The Company and each Subsidiary of the Company
have all licenses, permits, approvals, variances and other governmental
authorizations required by or from any Governmental Entity ("Permits")
necessary for the conduct of their respective businesses as they are currently
conducted, including, without limitation, liquor, air emission and wastewater
discharge permits. Except as set forth on Schedule 2.13, the Company and each
Subsidiary of the Company have been and presently are operating in compliance
with all such Permits, any necessary renewal or extension requests have been
filed, and no proceeding is pending, or to the knowledge of the Company,
threatened to revoke, limit or not to renew any Permit.
Section 2.14 Absence of Certain Changes or Events. Except as set forth
on Schedule 2.14 hereto, as disclosed in the Company SEC Documents filed prior
to the date of this Agreement, or as contemplated by this Agreement, since the
date of the most recent audited financial statements included in the Company SEC
Documents, the Company and its
12
Subsidiaries have conducted their respective businesses only in the ordinary
course, and there has not been any (i) Material Adverse Effect, (ii) damage,
destruction or loss, whether covered by insurance or not, which has or could
have a Material Adverse Effect, (iii) declaration, setting aside, making or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to any of the Company's capital stock or any redemption,
purchase or other acquisition, direct or indirect, of any capital stock of the
Company, (iv) capital investment in, any loan to or any acquisition by the
Company or its Subsidiaries (by merger, consolidation or acquisition of stock or
assets) of any corporation, partnership or other business organization or
division thereof, or the entering into by the Company or its Subsidiaries of any
contract, agreement, commitment or arrangement with respect thereto, (v) change
by the Company in accounting principles except to the extent required by a
change in GAAP, (vi) labor dispute, litigation or governmental investigation
which has or could have a Material Adverse Effect, (vii) obligations or
liabilities (whether absolute, accrued, contingent or otherwise and whether due
or to become due) created or incurred or entered into (including, without
limitation, the incurrence of debt), other than such items created or incurred
in the ordinary course of business and consistent with past practices, (viii)
any increase in or any change in the method of computing the compensation of
employees of the Company or any of its Subsidiaries or any increase in
compensation payable to any officer, employee, consultant or agent of the
Company or any of its Subsidiaries, or the entering into of an employment
contract with or loan to, any officer or employee of the Company or any of its
Subsidiaries, (ix) amendments or other changes to the Amended and Restated
Articles of Incorporation or Amended and Restated By Laws of the Company or
equivalent constituent documents of any of its Subsidiaries, (x) sale,
assignment, transfer, mortgage, pledge or other encumbrance of any tangible or
intangible asset of the Company or any of its Subsidiaries, except in the
ordinary course of business, (xi) voluntary release, compromise or cancellation
of any debts owed to the Company or any of its Subsidiaries or claims against
others exceeding $5,000 individually, issuance of any debt securities or
entering into or modifying of any material contract, agreement, commitment or
arrangement, (xii) amendment to any credit arrangements with any bank or other
institution, (xiii) issuance, sale or authorization for issuance or sale, of any
additional shares of any class of capital stock or issue, grant or enter into
any subscription, option, warrant, right, convertible security or other
agreement or commitment of any character obligating the Company or any of its
Subsidiaries to issue securities, or (xiv) except as required by Law, adoption,
amendment or termination of any Plans for the benefit or welfare of any past or
present executive officers of the Company, or (xv) agreement to do any of the
foregoing.
Section 2.15 Environmental Matters.
(a) For purposes of this Agreement:
(i) "Environmental Law" means any applicable Law regulating,
prohibiting or otherwise imposing liability with respect to Releases or
threatened Releases into any part of the environment (indoor or
outdoor), or pertaining to the protection of human health, natural
resources or the environment including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA") (42 U.S.C. ss. ss. 9601,
13
et seq.), the Hazardous Materials Transportation Act (49 U.S.C.
xx.xx. 1801, et seq.), the Resource Conservation and Recovery Act (42
X.X.X.xx.xx. 6901, et seq.), the Clean Water Act (33 U.S.C. xx.xx.
1251, et seq.), the Clean Air Act (33 U.S.C. xx.xx. 7401, et seq.), the
Toxic Substances Control Act (15 U.S.C. xx.xx. 7401, et seq.), the Safe
Drinking Water Act (42 U.S.C. xx.xx. 300f, et seq.) and the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. xx.xx. 136, et
seq.), and the regulations promulgated pursuant thereto, and any such
similar foreign or domestic state or local statutes, and the
regulations promulgated pursuant thereto, as such laws are in effect on
the date hereof;
(ii) "Hazardous Material" means any substance, material or
waste which is regulated by any public or Governmental Entity in the
jurisdictions in which the Company or its Subsidiaries conducts
business, or the United States, including, without limitation, any
material or substance which is defined as a "hazardous waste,"
"hazardous material," "hazardous substance," "extremely hazardous
waste," "restricted hazardous waste" "contaminant," "toxic waste" or
"toxic substance" under any provision of any Environmental Law;
(iii) "Release" means any release, spill, effluent, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into, within or from the indoor or outdoor
environment, including, without limitation, any property owned,
operated or leased by the Company or any of its Subsidiaries; and
(iv) "Remedial Action" means all actions, including, without
limitation, any capital expenditures, required by a Governmental Entity
or required under any Environmental Law, or voluntarily undertaken to
(A) clean up, remove, treat, or in any other way ameliorate or address
any Hazardous Materials or other substance in the indoor or outdoor
environment; (B) prevent the Release or threat of Release, or minimize
the further Release of any Hazardous Material so it does not endanger
or threaten to endanger the public health or welfare of the indoor or
outdoor environment; (C) perform pre-remedial studies and
investigations or post-remedial monitoring and care pertaining or
relating to a Release; or (D) achieve or maintain compliance with any
Environmental Law.
(b) Except (i) as disclosed in the Company SEC Documents, or (ii) as
set forth in Schedule 2.15, the operations of the Company and its
Subsidiaries have materially complied and currently materially comply with
all Environmental Laws, and neither the Company nor any of its Subsidiaries
has received any written or oral notice, claim or demand with respect to
any of its facilities, whether owned or leased, of any alleged violation of
any Environmental Law or any possible liability or remediation obligation
arising under any Environmental Law nor, to the Company's knowledge, are
there any facts upon which such a notice, claim or demand could be based.
14
(c) The Company and its Subsidiaries are not subject to any outstanding
Orders, agreements or contracts with or issued by any Governmental Entity
or other Person respecting (i) Environmental Laws, (ii) any Remedial Action
or (iii) any Release or threatened Release of a Hazardous Material, except
as described in Schedule 2.15.
(d) There have been no Releases of any Hazardous Material to, within or
from any of the Company's or its Subsidiaries' facilities, whether owned or
leased, in quantity or concentration that would require either reporting or
Remedial Action under any Environmental Law.
(e) To the Company's knowledge, there have been no Releases of
Hazardous Materials generated by the Company or any of its Subsidiaries at
any site or property not owned or occupied by the Company or any of its
Subsidiaries.
(f) The Company has made available to the Investor for review and
copying true and complete copies of all (A) audits, reports, studies, data
or analysis in the Company's possession or control relating to the
condition of any sites currently or previously owned or occupied by the
Company and its Subsidiaries, including, without limitation, any
environmental site assessments or compliance audits, and (B) all records
and documents in the Company's or any of its, Subsidiaries' possession or
control related to the Company's or any of its Subsidiaries' use, handling,
generation, treatment, recycling, storage or disposal of Hazardous
Materials.
(g) To the Company's knowledge, there are no conditions related to a
release of a Hazardous Material on property not within the control of the
Company or any of its Subsidiaries which will or could result in Remedial
Action on property owned or leased by the Company or any of its
Subsidiaries.
Section 2.16 Contracts and Commitments. Except as set forth on Schedule
2.16 hereto and except as filed as an exhibit to the Company SEC Documents or
incorporated by reference therein neither the Company nor any Subsidiary of the
Company is a party to any written or oral contract, agreement, commitment or
arrangement that would be required to be filed as a material contract (as
described in Section 601 of Regulation S-K promulgated by the SEC), in an Annual
Report on Form 10-K of the Company. Except as set forth on Schedule 2.16 hereto,
neither the Company nor any Subsidiary of the Company is a party to or bound by
any of the following written or oral contracts, agreements, commitments or
instruments: (a) employment agreements, consulting agreements or other similar
agreements, arrangements or understandings with any employee or other Person,
(b) indentures, mortgages, notes, installment obligations, capital leases,
agreements or other instruments relating to the borrowing of money or the
guarantee of any obligation or (c) agreements that commit the Company or any
Subsidiary of the Company to capital expenditures of more than $10,000. No
purchase commitment of the Company or of any Subsidiary of the Company, or by
which the Company or any Subsidiary of the Company is bound, is in excess of the
normal, ordinary and usual requirements of the businesses of the Company and its
Subsidiaries or at an excessive price. During the past two years, neither the
15
Company nor any Subsidiary of the Company has lost or been notified of any
possible loss of any customer that accounted for more than 5% of the aggregate
services and products provided or sold by the Company and its Subsidiaries
during such period, or lost or been notified of any possible loss of any
supplier that accounted for more than 5% of the aggregate services and products
supplied to the Company and its Subsidiaries during such period.
Section 2.17 Title to Properties: Encumbrances.
(a) Each of the Company and its Subsidiaries has good, valid and
marketable title to, or valid and enforceable leasehold interests in, all
of its properties and assets (real, personal and mixed, tangible and
intangible), including, without limitation, all of the properties and
assets reflected in the consolidated balance sheet of the Company and its
Subsidiaries as of March 31, 1999 included in the Company's Quarterly
Report on Form 10-Q for the period ended on such date (except for
properties and assets disposed of in the ordinary course of business and
consistent with past practices since March 31, 1999). None of such
properties or assets are subject to any liability, obligation or Lien
(whether absolute, accrued, contingent or otherwise), except as set forth
in Schedule 2.17 hereto.
(b) With respect to the premises (the "Leased Premises") leased by Blue
II, LLC ("Blue II") to the Company pursuant to the Lease Agreement and
Option to Purchase, dated July 17, 1996, by and between Blue II and FBC
(the "Lease Agreement"), as more particularly described in the Lease
Agreement:
(i) The Company has not received notice that any portion of
the Leased Premises is subject to any pending condemnation proceeding
or any other Action adverse to the Leased Premises and, to the
knowledge of the Company, there is no threatened condemnation
proceeding or other Action with respect to the Leased Premises;
(ii) The structures, improvements and fixtures at or upon the
Leased Premises, including, without limitation, roofs and structural
elements thereof and the electrical, plumbing, heating, ventilation,
air conditioning and similar units and systems, have to date been
reasonably maintained, are structurally sound without material defects
and are in good operating condition for their intended use subject to
the provision of usual and customary maintenance and repair performed
in the ordinary course of business with respect to similar properties
of like age and construction;
(iii) To the knowledge of the Company, there is no water
diffusion or other intrusion into any buildings, structures or other
improvements included in the Leased Premises that would impair the
value or use of the Leased Premises in connection with the conduct of
the business currently operated thereon;
16
(iv) No notice of any increase in the assessed valuation of
the Leased Premises and no notice of any contemplated special
assessment has been received by the Company and, to the knowledge of
the Company, there is no threatened special assessment pertaining to
the Leased Premises;
(v) There are no contracts or agreements to which the Company
is a party or by which the Leased Premises are bound, granting to any
person or entity the right of use or occupancy of any portion of the
Leased Premises, except for the Lease Agreement, and the Lease
Agreement is in full force and effect and there are no defaults
thereunder or matters which, upon the passage of time or giving of
notice, would rise to the level of a default under the Lease Agreement;
and
(vi) There is no person or entity (other than FBC) in
possession of the Leased Premises.
Section 2.18 Intellectual Property.
(a) The "Intellectual Property" means all of the following which is
owned by, issued or licensed to Company or its Subsidiaries which is used
in the business of the Company or its Subsidiaries, including, without
limitation, (i) all patents, trademarks, trade names, trade dress, assumed
names, service marks, logos, copyrights, Internet domain names and
corporate names together with all applications, registrations, renewals and
all goodwill associated therewith; and (ii) all trade secrets and
confidential information (including, without limitation, customer lists,
know-how, formulae, manufacturing and production processes, research,
financial business information, and marketing plans) owned or used by the
Company or its Subsidiaries; (iii) information technologies (including,
without limitation, software programs, data and related documentation); and
(iv) other intellectual property rights and all copies and tangible
embodiments of the foregoing in whatever form or medium
(b) The Company represents and warrants that, except as specifically
set forth on Schedule 2,18: (i) the Company or its Subsidiaries owns and
possess all right, title and interest in and to, or has a valid and
enforceable license to use, the Intellectual Property necessary for the
operation of the business as currently conducted; (ii) no claim by any
third party contesting the validity, enforceability, use or ownership of
any of the Intellectual Property has been made, is currently outstanding or
is threatened, and, to the Company's knowledge, there are no grounds for
the same; (iii) neither the Company nor any of its Subsidiaries have
received any notices of, or is aware of any facts which indicate a
likelihood of, any infringement or misappropriation by, or conflict with,
any third party with respect to the Intellectual Property; (iv) neither the
Company nor its Subsidiaries have infringed, misappropriated or otherwise
conflicted with any intellectual property rights or other rights of any
third parties and neither the Company nor any of its Subsidiaries is aware
of any infringement, misappropriation or conflict which will occur as a
result of
17
the continued operation of the business as currently conducted or as
currently proposed to be conducted.
(c) The Company represents and warrants that: (i) the transactions
contemplated by this Agreement will have no material adverse effect on the
right, title and interest in and to the Intellectual Property; and (ii) the
Company and each of its Subsidiaries have taken all necessary and desirable
action to maintain and protect the Intellectual Property and will continue
to maintain and protect the Intellectual Property so as to not materially
adversely affect the validity or enforceability of the Intellectual
Property.
Section 2.19 Labor Matters. Except as set forth in Schedule 2.19, (a)
the Company and each Subsidiary of the Company is in material compliance with
all applicable Laws respecting employment and employment practices, wages, hours
of work and occupational safety and health and is not engaged in any unfair
labor practice; (b) there is no unfair labor practice charge or complaint
pending or, to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries; (c) the Company and each Subsidiary of the Company have
not experienced any strike, work stoppage, slowdown, lockout or other dispute
involving their respective employees in the past five years and there is no such
action currently pending, or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries; (d) the Company and
each Subsidiary of the Company are not parties to or bound by any collective
bargaining agreement or other contract or arrangement with any labor
organization; (e) the Company and each Subsidiary of the Company do not know of
any union organizational campaign presently in progress with respect to their
respective employees and no question concerning representation exists with
respect to such employees; and (f) there are no written personnel policies,
rules or procedures applicable to employees of the Company or any of its
Subsidiaries.
Section 2.20 Insurance. All current primary, excess and umbrella
policies of insurance owned or held by or on behalf of, or providing insurance
coverage to, the Company or its Subsidiaries are in full force and effect and
are valid, outstanding, collectible and enforceable policies. Schedule 2.20 sets
forth a list of all such policies and a summary of their respective terms. With
respect to such policies (a) no premiums are in arrears, (b) no notices of
cancellation or termination have been received, and (c), to the Company's
knowledge, the insurance coverage of the Company and its Subsidiaries is
adequate and sufficient to cover claims.
Section 2.21 Brokers. Except as set forth on Schedule 2.21, the
Company has not, and the Company's officers, directors and employees have not,
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
hereby. No amendment may be made to any agreement described on Schedule 2.21
that would increase the amount of the payment thereunder in connection with the
transactions contemplated by this Agreement. The obligations described on
Schedule 2.21 are solely the responsibility of the Company, and the Company
shall indemnify the Investor from and against any and all claims, liabilities
and costs and expenses (including attorneys' fees) incurred by the Investor
directly or indirectly
18
arising out of any breach of the representations, warranties and agreements of
the Company contained in this Section 2.21.
Section 2.22 Opinion of Financial Advisor. The Company Board has
received the opinion of Westfinance Corporation to the effect that, as of the
date hereof, the Purchase Price to be received by the Company in connection with
the issuance of the Shares and the Warrants is fair, from a financial point of
view, to the Company and its stockholders.
Section 2.23 Disclosure. No representation, warranty or statement of
the Company set forth in this Agreement (including the Schedules attached
hereto) or in any Transaction Document contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
necessary, in the light of the circumstances under which it was made, in order
to make the statements herein or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
----------------------------------------------
The Investor hereby represents and warrants to the Company as follows:
Section 3.1 Due Organization. The Investor is a limited liability
company duly organized, validly existing and in good standing under the laws of
Ohio, has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
Section 3.2 Authority, Due Execution. The Investor has all requisite
power and authority to (a) enter into and perform this Agreement and each
Transaction Document to which it is a party, (b) consummate the transactions
contemplated hereby and thereby and (c) perform its obligations hereunder and
thereunder. The execution and delivery by the Investor of this Agreement and
Transaction Documents, and the consummation by the Investor of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
action on the part of the Investor. This Agreement has been duly and validly
executed and delivered by the Investor and constitutes a valid and binding
obligation of the Investor enforceable against the Investor in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency or
other similar Laws affecting the enforcement of creditors' rights generally and
except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before any proceeding
therefor may be brought.
Section 3.3 No Violation. The execution and delivery of this Agreement
and each other Transaction Document to which it is a party do not, and the
consummation of the transactions contemplated hereby and thereby and compliance
with the provisions hereof and thereof will not result in any Violation of, any
material obligation or the loss of a material benefit under, any provision of
(a) the Operating Agreement of the Investor, or (b) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement to which
the Investor is a party or by which it or its properties or assets are bound.
19
Section 3.4 Consents. No consent, approval, Order or authorization of,
or registration, declaration or filing with, any Governmental Entity is required
by or with respect to the Investor in connection with the execution and delivery
of this Agreement and the Transaction Documents by the Investor or the
consummation by the Investor of the transactions contemplated hereby and
thereby, except for such reports under the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated hereby.
Section 3.5 Investment Representation. The Investor is acquiring the
Shares and the Warrants for its own account for investment purposes only, and
not with a view to, or for resale in connection with, any distribution thereof
within the meaning of the Securities Act. The Investor understands that the
Shares have not been registered under the Securities Act or any blue sky or
other state securities Law (hereinafter collectively referred to as "blue sky
laws"). The Investor also understands that it cannot offer for sale, sell or
transfer the Shares or any of the Company Common Stock to be issued upon
exercise of the Warrants unless such offer, sale or transfer thereof has been
registered under the Securities Act and under any applicable blue sky laws or
unless an exemption from such registration is available with respect to any such
proposed offer, sale or transfer.
Section 3.6 Accredited Investor Status. Investor is an "accredited
investor" as such term is defined in Rule 501 of Regulation D promulgated under
the Securities Act and has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
investments to be made by it hereunder.
ARTICLE IV
INDEMNIFICATION
---------------
Section 4.1 Survival of Representations and Warranties. The
representations and warranties of the parties contained in this Agreement
survive the Closing, but expire on the third anniversary of the Closing Date,
except that (a) the expiration date for any claim relating to a breach of the
representations and warranties set forth in Sections 2.9 and 2.11 will be the
expiration of the statutes of limitations applicable to such claims, and (b)
there will be no expiration date for any claim relating to a breach of the
representations and warranties set forth in Sections 2.1, 2.2, 2.3, 2.4, 2.15
and 2.21. The covenants and agreements of the parties contained herein will
survive the Closing and will remain in full force and effect in accordance with
their terms. No party to this Agreement has any rights to indemnification under
Section 4.2 unless notice of any claim pursuant to Section 4.3 is given to an
indemnifying party prior to the expiration of the applicable representation or
warranty.
Section 4.2 Indemnification.
(a) The Company shall indemnify, defend and hold the Investor harmless
from and against any and all demands, damages, losses, liabilities,
diminution of value of the Shares (including any Shares received or to be
received upon exercise of the Warrants), claims, obligations, charges,
penalties, costs and expenses (including
20
all reasonable attorneys' fees and other expenses incurred in investigating
and preparing for any litigation or proceeding) (collectively, "Losses")
that the Investor may sustain, insofar as such Losses (i) arise out of a
breach by the Company of any covenant or agreement, or the inaccuracy of
any representation or warranty, of the Company contained herein, or (ii)
arise out of, or relate to, the operation of, or actions taken by, the
Company prior to the Closing Date. At Investor's option, Investor may
receive from the Company as payment for any Losses the number of shares of
Company Common Stock (the "Indemnification Shares") equal to the amount of
any such Losses divided by the closing bid price of the Company Common
Stock on the trading day immediately preceding the date of receipt of the
Investor's written notice exercising this option (the "Exercise Notice").
The Indemnification Shares shall be issued to the Investor within 5
Business Days of receipt by the Company of the Exercise Notice. Any
Indemnification Shares issued by the Company to Investor shall be duly and
validly issued, fully paid and nonassessable, free and clear of all Liens
and not subject to preemptive or similar rights of any third party.
(b) The Investor shall indemnify, defend and hold the Company harmless
from and against any and all Losses that the Company may sustain, insofar
as such Losses arise out of a breach by the Investor of any covenant or
agreement, or the inaccuracy of any representation or warranty, of the
Investor contained herein.
(c) The remedies provided herein are cumulative and do not preclude the
assertion by any party hereto of any other rights or the seeking of any
remedies against the other party hereto.
Section 4.3 Defenses of Claim. If a claim for Losses is to be made by
an indemnified party, such indemnified party shall give written notice to the
indemnifying party as soon as practicable after such indemnified party becomes
aware of any fact, condition or event which may give rise to Losses for which
indemnification may be sought under Section 4.2. If any claim is brought by a
third party against an indemnified party for which indemnification may be sought
under Section 4.2, the indemnified party shall promptly notify the indemnifying
party. The party against whom indemnification is sought may (or, if requested,
shall) assume the defense of such claim, including the employment of counsel
reasonably satisfactory to the indemnified party and the payment of all
expenses, unless in the reasonable judgment of the other party a conflict of
interest may exist with respect to such claim or differing or additional
defenses may be available to the other party. If defense of a claim is assumed
by an indemnifying party, the indemnified party will not be liable for any
settlement for such action or proceedings effected without its prior written
consent. Any party entitled to indemnification hereunder agrees to give prompt
written notice to the other party of any written notice of the commencement of
any Action or threat thereof made in writing for which such party may claim
indemnification under Section 4.2; provided, however, that the failure to give
such notice does not limit any party's right to indemnification hereunder.
Notwithstanding the foregoing, an indemnified party hereunder always has the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel will be at the
expense of such indemnified party, unless: (a) the indemnifying party has failed
promptly to assume the
21
defense and employ counsel or (b) the named parties to any such action
(including any impleaded parties) include such indemnified party and the
indemnifying party and such indemnified party has been advised by counsel that a
conflict of interest may exist with respect to such claims or there may be one
or more legal defenses available to it that are different from one or in
addition to those available to the indemnifying party; provided, that the
indemnifying party will not in such event be responsible hereunder for the fees
and expenses of more than one firm of separate counsel in connection with any
action in the same jurisdiction, in addition to any local counsel.
ARTICLE V
MISCELLANEOUS
-------------
Section 5.1 Entire Agreement; Modification. This Agreement (together
with the documents delivered pursuant hereto) supersedes all prior documents,
understandings and agreements, oral or written, related to these transactions
contemplated by this Agreement and constitutes the entire agreement and
understanding between the parties with respect to the subject matter hereof;
provided, however, that until the Closing the Confidentiality Agreement remains
in full force and effect in accordance with the terms thereof. Any modification
or amendment to, or waiver of, any provision of this Agreement may be made only
by an instrument in writing executed by the party against whom enforcement
thereof is sought.
Section 5.2 Assignment Binding Effect. Neither this Agreement nor any
of the rights or obligations hereunder may be assigned by the Company without
the prior written consent of the Investor, or by the Investor without the prior
written consent of the Company, except that the Investor may, without such
consent, assign, in whole or in part, the right to acquire the Shares and the
Warrants hereunder to an Affiliate of such Investor. Subject to the foregoing,
this Agreement is binding upon and inures to the benefit of the parties hereto
and their respective successors and assigns, and no other Person has any right,
benefit or obligation hereunder.
Section 5.3 Severability. If any one or more provisions of this
Agreement is held to be illegal, invalid or unenforceable under present or
future Laws, then, if possible, such illegal, invalid or unenforceable provision
will be modified to such extent as is necessary to comply with such present or
future Laws and such modification will not affect any other provision of this
Agreement; provided, that if such provision may not be so modified, such
illegality, invalidity or unenforceability will not affect any other provision,
but this Agreement will be reformed, construed and enforced as if such invalid,
illegal or unenforceable provision had never been contained in this Agreement.
Section 5.4 Notices. Any notices required or permitted to be given
under this Agreement (and, unless otherwise expressly provided therein, under
any other Transaction Document delivered pursuant to this Agreement) must be
given in writing and will be deemed to have been duly given or made as of the
date delivered if (a) sent by first-class registered or certified mail, postage
prepaid, return receipt requested, (b) delivered
22
personally or by a nationally recognized overnight courier service, or (c) sent
by telecopy (with prompt written confirmation of receipt thereof), to the
address given below:
The Investor: Xxxxxx International Brewing Group, LLC
c/o Crooked River Brewing Company
0000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: C. Xxxxx Xxxxxx
Telecopy: (000) 000-0000
With a copy to: Xxxxx, Day, Xxxxxx & Xxxxx
North Point
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx
Telecopy: (000) 000-0000
The Company: Xxxxxxxxx Brewing Co.
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx
Telecopy: (000) 000-0000
With a copy to: XxXxxxx Xxxx, A Professional Corporation
000 Xxxx Xxxx Xxxxxx
Xxxxx 0000
Xxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx
Telecopy: (000) 000-0000
Each party may change its address for purposes of this Section 5.4 by proper
notice to the other party in accordance with the provisions of this Section 5.4.
Section 5.5 Public Announcement. The Investor and the Company shall
notify the other party prior to any public announcement of the transactions
contemplated by this Agreement and allow the other party reasonable time to
review the contents of such public announcement. Neither the Company nor the
Investor shall issue or cause the publication of any press release or other
public announcement with respect to the transactions contemplated by this
Agreement that is not required by Law without the consent of the other party,
which consent may not be unreasonably withheld.
Section 5.6 No Third-Party Beneficiaries. No Person not a party to this
Agreement is to be deemed to be a third-party beneficiary hereunder or entitled
to any rights hereunder.
23
Section 5.7 Governing Law. This Agreement is to be governed by and
construed in accordance with the laws of the State of Ohio, without regard to
principles of conflicts or choice of law.
Section 5.8 Consent to Jurisdiction. Any legal action or proceedings
arising out of this Agreement may be brought only in the courts of the State of
Ohio, or in the courts of the United States of America sitting in the State of
Ohio. The Investor and the Company, irrevocably submit to the exclusive
jurisdiction of each such court, together with courts having appellate
jurisdiction therefrom, and waive all requirements of personal jurisdiction or
venue with respect thereto, and any writ, judgment or other notice of legal
process will be sufficiently served on the Investor or the Company if delivered
pursuant to Section 5.4 of this Agreement.
Section 5.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which may be executed by one or more of the parties
hereto, but all of which, when taken together, will constitute but one agreement
binding upon all of the parties hereto.
Section 5.10 Certain Definitions.
(a) "Action" means any suit, action, charge, claim, inquiry,
investigation, grievance or proceeding (including any condemnation
proceeding).
(b) "Affiliate" of any Person means any Person directly or indirectly
controlling, controlled by, or under common control with, any such Person.
(c) "Business Day" means any day on which securities listed on the
National Association of Securities Dealers ("NASD") Automated Quotation
System ( "NASDAQ") SmallCap Market System ("NASDAQ/SMS") are quoted for
trading.
(d) "Knowledge" of any Person that is not an individual means the
knowledge of such Person's executive officers after reasonable inquiry.
(e) "Law" means any federal, state, local or foreign law, principle of
common law, statute, ordinance, rule, order or regulation of any
Governmental Entity.
(f) "Lien" means, with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind in
respect of such property or asset. For the purposes of this Agreement, a
Person will be deemed to own, subject to a Lien, any property or asset
which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such property or asset.
(g) "Outstanding Interest" I means, with respect to any Person, the
percentage of the voting power of the outstanding shares of Common Stock
(other than voting power with respect to the election of specified
directors or a class vote on
24
specified matters) represented by the shares of Common Stock beneficially
owned by such Person.
(h) "Order" means any judgment, decree, injunction, rule or order of
any Governmental Entity.
(i) "Person" means any individual, corporation, partnership, limited
liability company, joint venture, trust, Governmental Entity,
unincorporated association or any other entity or organization.
(j) "Post-Closing Tax Period" means any Tax period (or portion thereof)
ending after the Closing Date.
(k) "Pre-Closing Tax Period" means any Tax period (or portion thereof)
ending on or before the Closing Date.
(l) "Subsidiary" means, with respect to any Person, any entity of which
securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing
similar functions are, at any time, directly or indirectly, owned by such
Person.
(m) "Tax" means (i) any net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem, value added,
transfer, franchise, profits, license, withholding on amounts paid to or by
the Company or any Subsidiary, payroll, equipment, excise, severance,
stamp, occupation, premium, property, environmental or windfall profit tax,
custom, duty or other tax, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest, penalty,
addition to tax or additional amount imposed by any Taxing Authority, (ii)
any liability of the Company or any Subsidiary for the payment of any
amounts of any of the foregoing types as a result of being a member of an
affiliated, consolidated, combined or unitary group, or being a party to
any agreement or arrangement whereby liability of the Company or any
Subsidiary for payment of such amounts was determined or taken into account
with reference to the liability of any other Person, and (iii) any
liability of the Company or any Subsidiary for the payment of any amounts
as a result of being a party to any Tax-Sharing Agreement or with respect
to the payment of any amounts of any of the foregoing types as a result of
any express or implied obligation to indemnify any other Person.
(n) "Tax-Sharing Agreement" means any existing Tax-sharing agreement or
arrangement (whether or not written) binding on the Company or any
Subsidiary.
(o) "Taxing Authority" means any Governmental Authority responsible for
the imposition of any Tax.
25
Section 5.11 Fees and Expenses. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses.
26
IN WITNESS WHEREOF, the Company and the Investor have duly executed
this Agreement as of the date first above written.
XXXXXX INTERNATIONAL BREWING
GROUP, LLC
By: /s/ Xxxxx Xxxxxx
------------------------------------
Name: Xxxxx Xxxxxx
Title: Chairman and CEO
XXXXXXXXX BREWING CO.
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chairman and CEO
27
