1
EXHIBIT 2.2
SHARE EXCHANGE AGREEMENT
by and among
COCA-COLA ENTERPRISES INC.
("Enterprises")
and
THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC.
("Southwest")
and
TEXAS BOTTLING GROUP, INC.
("TBG")
June 5, 1998
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TABLE OF CONTENTS
PAGE
ARTICLE I EXCHANGE OF THE SHARES 1
1.01 The Exchange 1
(a) Generally 1
(b) The Exchange Consideration 1
(c) Tax-Free Reorganization 2
(d) Amendment 2
1.02 Conversion of Shares 3
(a) Conversion 4
(b) Notional Value; Adjustments 4
(c) Treasury Shares Canceled 4
(d) Shares Owned by Southwest 4
1.03 Estimated Exchange Consideration; Deliveries 4
(a) Computation 4
(b) Delivery 4
1.04 Final Computation of Exchange Consideration 5
(a) Closing Date Financial Statements 5
(b) Review/Objection Procedure As To Closing Date
Financial Statements and Certificate of
Adjustments 5
(c) Payment of Non-disputed Amounts 6
(d) Resolution of Open Items 6
(e) Payment Notice to the TBG Shareholders by the
Shareholders' Representative 7
(f) Open Items Under CCBG Agreement 8
(g) Calculations. No Fractional Shares 8
1.05 Unregistered Shares 8
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE TBG SHAREHOLDERS 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TBG CONCERNING TBG
AND ITS SUBSIDIARY 8
3.01 Organization and Authorization 9
(a) Due Organization, Etc 9
(b) Power and Authority 9
(c) Non-contravention 9
(d) Capitalization 10
(e) Subsidiaries 11
(f) Articles, Bylaws and Minutes 12
(g) Officers and Directors 12
3.02 Bottling Authorizations 12
(a) List 12
(b) Territories of Other Bottler 12
(c) Transshipment 12
3.03 Indebtedness 12
3.04 Financial Matters 13
(a) Financial Statements 13
(b) Other Liabilities 13
(c) Accounts Receivable 13
(d) Swaps 14
3.05 Absence of Certain Changes and Events 14
(a) Adverse Change 14
(b) Damage 14
(c) Distributions 14
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(d) Issuance 14
(e) Guaranty 15
(f) Merger 15
(g) Labor Dispute 15
(h) Capital Expenditure 15
(i) Franchises 15
(j) Raises 15
(k) Accounting Changes 15
(l) Liens 15
(m) Waivers 15
(n) Dispositions 15
(o) Transactions with Employees 15
(p) Write-downs 16
(q) Material Transactions 16
3.06 Tax Matters 16
(a) Definitions. 16
(b) Tax Representations and Warranties. 16
(c) Disclaimer as to NOLs 19
(d) Survival 19
3.07 Real Property 19
(a) Ownership 19
(b) Status of Title 19
(c) Restrictions Arising from Governmental
Authorities 20
(d) Condition 20
3.08 Personal Property 20
(a) Title 21
(b) Condition 21
(c) Inventory 21
3.09 Employee Benefit Plans 21
(a) Definition 21
(b) List 22
(c) Compliance 22
(d) Funding, Etc 22
(e) Liabilities; Claims; Audits 22
(f) Multi-employer Plan 22
(g) Termination Rights 22
(h) Payments in Stock 22
3.10 Labor Relations 23
(a) Status 23
(b) Plant Closing Issues 24
(c) Family and Medical Leave Act of 1993 24
3.11 Employees 24
3.12 Bank Accounts 25
3.13 Environmental Matters 25
(a) Status 26
(b) Definition 26
(c) Survival 26
3.14 Insurance Policies 26
(a) List 26
(b) Status 26
3.15 Specified Contracts and Commitments 26
(a) Specified Contracts 27
(b) Exceptions to Specified Contracts 27
3.16 Intellectual Property 28
(a) Status 28
(b) Definition 29
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3.17 Certain Violations of Law 29
(a) Investigations 29
(b) Generally 29
(c) Certain Limitations 29
3.18 Litigation 30
(a) List 30
(b) Status 30
3.19 No Defaults 30
(a) Enforceability 30
(b) Bankruptcy, Etc 30
3.20 Major Suppliers and Customers 31
(a) List 31
(b) Status 31
3.21 Required Governmental Licenses and Permits 31
3.22 Year 2000 Compliance 31
3.23 No Untrue Statements 32
3.24 Copies 32
3.25 Other 32
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYERS 32
4.01 Organization and Authorization 32
(a) Due Organization 32
(b) Power and Authority 32
(c) Non-contravention 32
4.02 Capital Stock 33
(a) Enterprises 33
(b) Enterprises Stock to be Issued in Exchange 33
4.03 Reports and Financial Statements 34
4.04 Absence of Certain Changes or Events 34
4.05 No Untrue Statements 34
4.06 Other 34
ARTICLE VOTHER AGREEMENTS 35
5.01 Continuing Operation of Business 37
(a) Conduct of Business 37
(b) Manner of Consent 37
5.02 Expenses 37
5.03 Bottling Authorizations 37
5.04 Access 37
(a) Pre-Closing 37
(b) After the Closing 38
5.05 Other Offers 38
5.06 Transfer Taxes 38
5.07 Tax Attributes, Returns and Audits. 38
(a) Tax Attributes 38
(b) Filing of Returns 38
(c) Control of Audits 39
(d) Cooperation 39
5.08 TBG Shareholders' Approval 39
5.09 Certain Obligations Under the Shareholders'
Representative Agreement 40
5.10 Certain Payments to Employees 40
5.11 Employee Matters 40
(a) Continued Employment 40
(b) Employee Benefit Plans 40
(c) Severance Payments 40
(d) Bonus Plan 41
5.12 No Cancellation of Officer and Director Insurance 41
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5.13 Public Announcements 41
5.14 Current Public Information 41
5.15 Brokers 42
5.16 Consent as to Representation 42
ARTICLE VI
CERTAIN POST-CLOSING EXCHANGE CONSIDERATION ADJUSTMENTS 42
6.01 Certain Definitions 42
6.02 Post-Closing Reduction of Exchange Consideration 43
(a) Certain CCBG and TBG Representations and
Warranties and Other Matters 43
(b) TBG Shareholder Representations, Warranties and
Covenants 43
(c) No Subrogation, Etc. 44
6.03 Limitations on Reduction of Exchange Consideration 44
(a) Reduction of Losses 44
(b) Maximum Liability and Payment -- Stock Claims 44
6.04 Increase in Exchange Consideration 44
6.05 Time Limitations for Assertion of Claims 44
(a) Survival 44
(b) Post-Closing Acts or Omissions 45
6.06 Procedure for Claims 45
(a) Generally 45
(b) To Whom Sent 45
(c) Response by Recipient 45
(d) Payment Notice to the TBG Shareholders by the
Shareholders' Representative 45
6.07 Third Party Action 46
6.08 Investigations 46
6.09 Exclusive Remedy 46
ARTICLE VII THE CLOSING 47
7.01 Time, Date and Place of Closing; Articles of
Exchange 47
7.02 Events Comprising the Closing 47
7.03 Conditions to Obligations of Buyers 47
(a) Representations and Warranties 47
(b) Compliance 47
(c) Governmental Actions 47
(d) Adverse Change 48
(e) Consents 48
(f) Satisfactory Documents 48
(g) Delivery of Shares 48
(h) Copies of Resolutions 48
(i) Opinion 48
(j) Approvals 49
(k) CCBG Merger 49
(m) Termination of Certain TBG Agreements. 49
7.04 Conditions to Obligations of ▇▇▇ ▇▇
(▇) ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇
(▇) Compliance 49
(c) Governmental Action 49
(d) Approval of TBG Shareholders 49
(e) Satisfactory Documents 49
(f) Opinion of Counsel 49
(g) Approvals 50
(h) CCBG Merger. 50
(i) Copies of Resolutions. 50
7.05 Deliveries by TBG at the Closing 50
(a) Certificate 50
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(b) Articles of Exchange 50
(c) Minute Books 50
(d) Resignation 50
(e) Other 50
7.06 Deliveries by Enterprises at the Closing 50
(a) Certificates 50
(b) Articles of Exchange 51
(c) Exchange Consideration 51
(d) Other Documents 51
ARTICLE VIII TERMINATION AND ABANDONMENT 51
8.01 Termination and Abandonment 51
(a) Mutual Agreement 51
(b) ▇▇▇ ▇▇
(▇) ▇▇▇▇▇▇▇▇▇▇▇ ▇▇
(▇) Governmental Authority 52
8.02 Rights and Obligations Upon Termination 52
8.03 Return of Confidential Information 52
ARTICLE IX MISCELLANEOUS PROVISIONS 52
9.01 Good Faith; Further Assurances 52
9.02 Notices 52
9.03 Definition of Knowledge 54
(a) TBG 54
(b) Enterprises 54
9.04 Assignment 54
9.05 Captions; Definitions 55
9.06 Amendment; Waiver; Remedies Cumulative 55
9.07 No Third-Party Beneficiaries 55
9.08 Exhibits; Disclosure Schedules 55
9.09 Counterparts; Entire Agreement 55
9.10 Time of the Essence; Computation of Time 56
9.11 Severability 56
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SHARE EXCHANGE AGREEMENT 1
THIS SHARE EXCHANGE AGREEMENT (this "Agreement") is
executed and delivered as of June 5, 1998, by and among COCA-COLA
ENTERPRISES INC., a Delaware corporation ("Enterprises"), THE
COCA-COLA BOTTLING GROUP (SOUTHWEST), INC., a Nevada corporation
which will, at the Closing Date, be a wholly owned subsidiary of
Enterprises (Southwest") (Enterprises and Southwest are
collectively the "Buyers"), and TEXAS BOTTLING GROUP, INC., a
Nevada corporation ("TBG").
IN CONSIDERATION of the representations, warranties,
covenants and agreements contained herein, the receipt and legal
sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:
ARTICLE I
EXCHANGE OF THE SHARES
1.1 The Exchange
(a) Generally. Subject to the terms and
conditions herein set forth, at the Effective Time and in
accordance with the Nevada General Corporation Law (the "Nevada
Act"), Southwest shall acquire all of the shares of capital stock
of TBG issued and outstanding immediately prior to the Effective
Time, excluding such shares already owned by Southwest as of such
time (the "TBG Exchange Shares"), in exchange (the "Exchange")
for Buyer's delivery of the Exchange Consideration in accordance
with the terms of this Agreement to the holders of TBG Exchange
Shares immediately prior to the Effective Time. On the Closing
Date, TBG and Southwest shall execute and file with the Secretary
of State of Nevada articles of exchange in the form of Exhibit A
(the "Articles of Exchange"). The "Effective Time" of the
Exchange shall be at the time and on the date the Articles of
Exchange are accepted for filing by the Secretary of State of
Nevada; provided, however, that in any event the Effective Time
shall be subsequent to the effective time of the merger (the
"Upstream Merger") of CCBG Corporation, a Nevada corporation
("CCBG"), with and into Enterprises in accordance with Applicable
Law.
(b) The Exchange Consideration. The exchange
consideration shall be:
(i) FIVE HUNDRED SIXTY MILLION DOLLARS
($560,000,000);
(ii) minus, the payoff balance of
principal (including the current maturities of (A) and
(B) below and any prepayment premium of TBG's 9% Senior
Subordinated Notes Due 2003, but excluding accrued
interest) at the Closing Date of
(A) Indebtedness for Borrowed Money,
(B) Capital Leases, and
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(C) obligations of TBG under the 2
loyalty payments (the "Loyalty
Payments") described on Exhibit B,
with the amount of such obligations
being computed pursuant to that
exhibit; and
(iii) plus or minus, as the case may be,
50% of the amount by which the sum of the consolidated
working capital of CCBG and of the consolidated working
capital of TBG at the Closing Date, as determined in
accordance with generally accepted accounting
principles applicable to the preparation of year-end
statements ("GAAP") consistent with past practices (to
the extent consistent with GAAP) or as otherwise
provided in Exhibit C (the "TBG Adjusted Consolidated
Working Capital"), is more or less than $21,531,450.
The foregoing amount, as adjusted after the Closing in accordance
with Section 1.04 and Article VI, is the "Exchange
Consideration." The Exchange Consideration divided by the
aggregate number of TBG Shares outstanding immediately prior to
the Effective Time is the "Exchange Consideration Per Share."
"TBG Shares" means shares of TBG's $2.00 par value Class A common
stock $2.00 par value Class B common stock (each a "TBG Share"
and collectively the "TBG Shares"). "TBG Shareholder" means any
holder of TBG Exchange Shares, and "TBG Shareholders" means all
holders of TBG Exchange Shares collectively.
(c) Tax-Free Reorganization. The Buyers and TBG
intend that the Exchange constitute a "reorganization" within the
meaning of IRC section 368(a), and that this Agreement constitute
a plan of reorganization thereunder. Neither the Buyers nor TBG
shall take any position inconsistent with such intentions.
(d) Amendment. This Article I may be modified or
amended in any manner at any time and from time to time prior to
the Effective Time by the boards of directors of Buyers and TBG
in accordance with Section 9.06 without any action by the
shareholders of the Buyers or TBG; provided, however, that no
modification or amendment may be made that:
(i) after approval of this Agreement
by the TBG Shareholders (and Southwest, in its capacity
as a holder of TBG Shares), reduces or changes the form
or composition of the consideration which the TBG
Shareholders shall be entitled to receive at the
Effective Time, without the further approval of the TBG
Shareholders (and Southwest, in its capacity as a
holder of TBG Shares), except to the extent
specifically authorized by the TBG Shareholders (and
Southwest, in its capacity as a holder of TBG Shares)
in connection with approving the execution, delivery
and performance of this Agreement;
(ii) alters or changes any term or
condition of this Agreement that would result in an
adverse effect on the holders of any class or series of
shares of the corporations party hereto, without the
approval of such holders; or
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(iii) alters or changes any term of the 3
articles of incorporation of Southwest, without the
approval of the shareholders of Southwest or TBG.
1.2 Conversion of Shares. At the Effective Time, by
virtue of the Exchange and without any further action on the part
of Southwest, TBG or any TBG Shareholder:
(a) Conversion. The parties acknowledge and
agree that, for purposes of converting each TBG Exchange Share
pursuant to the Exchange, each outstanding share of Class B
common stock of TBG shall be deemed to be converted into 2.455
outstanding shares of Class A common stock of TBG. Each TBG
Exchange Share issued and outstanding immediately prior to the
Effective Time shall be converted into the right to receive the
following, subject to the terms of this Agreement, including, but
not limited to, the adjustments to the Merger Consideration
pursuant to Section 1.04 and Article VI and the deliveries
contemplated by Section 7.03(g):
(i) that number of shares of Enterprises
Common Stock (valued at the Notional Value) equal in value
to: (1) $507,460 (the "Closing Adjustment Escrow Amount")
multiplied by (2) the percentage such TBG Exchange Share
represents of all of the TBG Exchange Shares issued and
outstanding immediately prior to the Effective Time, to be
delivered to the Shareholders' Representative;
(ii) that number of shares of Enterprises
Common Stock (valued at the Notional Value) equal in value
to: (1) $6,343,252 (the "Claims Escrow Amount") multiplied
by (2) the percentage such TBG Exchange Share represents of
all of the TBG Exchange Shares issued and outstanding
immediately prior to the Effective Time to be delivered to
the Shareholders' Representative;
(iii) that number of shares of Enterprises
Common Stock (valued at the Notional Value) equal in value
to: (1) the percentage such TBG Exchange Share represents
of all of the TBG Shares issued and outstanding immediately
prior to the Effective Time (the "Per Share Percentage"),
multiplied by (2) the Remaining Estimated Exchange
Consideration, to be delivered to the holder of the share
being converted. The "Remaining Estimated Exchange
Consideration" is (1) the Estimated Exchange Consideration
less (2) the Claims Escrow Amount and less (3) the Closing
Adjustment Escrow Amount.
(iv) additional shares of Enterprises Common
Stock to reflect positive adjustments (if any) to the
Exchange Consideration under Section 1.04 and/or Article
VI, to be delivered to the holder of the share being
converted,
all subject to the rights and obligations of the Shareholders'
Representative as set forth in this Agreement and that certain
agreement by and among ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (the "Shareholders'
Representative"), the TBG Shareholders and others in the form of
Exhibit D (the "Shareholders' Representative Agreement"); and
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without limiting the foregoing, the office of the Shareholders' 4
Representative, whose power and authority are set forth in this
Agreement and the Shareholders' Representative Agreement, is
established pursuant to this Agreement and the Exchange as an
integral part of the manner and basis of converting the TBG
Exchange Shares.
(b) Notional Value; Adjustments. Each of the
Closing Adjustment Escrow Amount and the Claims Escrow Amount
shall consist of shares of $1.00 par value common stock of
Enterprises (the "Enterprises Common Stock") having an agreed
value of $34.50 per share (the "Notional Value"); provided,
however, that in the event of any change after April 3, 1998 and
prior to the Effective Time in the number of issued and
outstanding shares of Enterprises Common Stock, through,
reorganization, recapitalization, stock split, dividends paid in
stock, split-up, split-off, spin-off, or other fundamental change
in the capital structure of Enterprises (the forgoing
specifically intending to exclude, without limitation, stock
repurchases or any dilution resulting from the issuance of
additional shares other than an issuance ratably to all
shareholders), an equitable adjustment (the "Equitable
Adjustment") shall be made to the Notional Value.
(c) Treasury Shares Canceled. Each share of
TBG's capital stock held in TBG's treasury as of the Effective
Time shall, by reason of the Exchange, be canceled without
payment of any consideration therefor.
(d) Shares Owned by Southwest. Each share of
TBG's capital stock held of record by Southwest as of the
Effective Time shall continue to represent a share of the capital
stock of TBG.
1.3 Estimated Exchange Consideration; Deliveries.
(a) Computation. At or prior to the Closing
Date, Enterprises and the Shareholders' Representative shall
jointly compute Exchange Consideration Per Share based upon a
good faith estimate agreed upon by TBG and Enterprises prior to
the Closing, using the same principles described in Section
1.01(b) (the "Estimated Exchange Consideration Per Share"), and
the Estimated Exchange Consideration Per Share shall be used in
making the deliveries and payments at the Closing as contemplated
by Section 7.06(c). The aggregate Estimated Exchange
Consideration Per Share for all TBG Shares is the "Estimated
Exchange Consideration."
(b) Delivery. At the Closing, or as soon as
practicable thereafter with respect to shares of Enterprises
Common Stock, Enterprises shall deliver and pay, to the
Shareholders' Representative or to the TBG Shareholders as
specified in Section 1.02, that portion of the Estimated Exchange
Consideration that is payable to those TBG Shareholders who have
satisfied the conditions of Section 7.03(g).
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1.4 Final Computation of Exchange Consideration. 5
(a) Closing Date Financial Statements. Within 90
days after the Closing Date, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP ("TBG's
Accountants") shall prepare and deliver to Enterprises, at the
TBG Shareholders' expense:
(i) Consolidated closing date financial
statements of TBG and its Subsidiary as of the close of
business on the Closing Date prepared in accordance with
GAAP consistent with TBG's practice with respect to its 1997
Financial Statements audited by TBG's Accountants and
accompanied by their unqualified report with respect thereto
except that such report may be qualified to the extent
acceptable to Buyers (the ATBG Closing Date Financial
Statements"); and
(ii) A certificate of adjustments setting
forth the computation of the TBG Adjusted Consolidated
Working Capital based on the TBG Closing Date Financial
Statements and otherwise in accordance with Section
1.01(b)(iii) and with such computation being set forth
generally in the format attached to Exhibit C (the ATBG
Certificate of Adjustments").
The TBG Closing Date Financial Statements and the TBG Certificate
of Adjustments are collectively the ATBG's Accountants' Post-
Closing Deliveries."
(b) Review/Objection Procedure As To Closing Date
Financial Statements and Certificate of Adjustments. Within 45
days of Enterprises' receipt of TBG's Accountants' Post-Closing
Deliveries, Enterprises shall notify the Shareholders'
Representative whether Enterprises agrees with them, or, if it
does not agree, it shall state specifically the extent to which
it disagrees and its reasons therefor. If the Shareholders'
Representative and Enterprises are unable to agree on the TBG's
Accountants' Post-Closing Deliveries within 30 days of such
notice, then all items other than those on which (and only to the
extent of the dollar amount in dispute) they do not agree shall
be conclusive and binding. To the extent Enterprises and the
Shareholders' Representative do not agree on one or more items in
(or excluded from) the TBG's Accountants' Post-Closing Deliveries
(and the Shareholders' Representative shall not be restricted
from raising any issue in such context, even if inconsistent with
a position taken by TBG's Accountants), the nature and amount of
such disputed items shall be the "Open Items", and their effect
on the Exchange Consideration as determined in Section 1.04(a)
shall be the "Effect of Open Items". The Merger Consideration
calculated using only the binding items shall constitute the
AUndisputed Redetermined Merger Consideration." The Open Items
and the Effect of Open Items shall be resolved as provided in
subsection (d) below. If Enterprises does not so notify the
Shareholders' Representative of any disagreements within such
45-day period, then TBG's Accountants' Post-Closing Deliveries as
received by Enterprises shall be conclusive and binding.
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(c) Payment of Non-disputed Amounts. 6
(i) Within 75 days of Enterprises'
receipt of the TBG's Accountants' Post-Closing
Deliveries, Enterprises and the Shareholders'
Representative:
(A) shall then calculate the difference
(the "Difference") between the Estimated Exchange
Consideration and the Undisputed Exchange
Consideration, which Difference shall be binding and
conclusive; and
(B) shall pay the Difference in
accordance with subsection (ii) or subsection (iii)
below, as applicable.
Enterprises and the Shareholders' Representative will coordinate
the foregoing process with the comparable process under the CCBG
Agreement to reflect the Exchange Consideration component set
forth in Section 1.01(b)(iii).
(ii) If the Undisputed Redetermined Exchange
Consideration is greater than the Estimated Exchange
Consideration, then Enterprises shall deliver to each TBG
Shareholder a number of shares of Enterprises Common Stock
(valued at the Notional Value) having a value equal to the
Difference multiplied by such shareholder's TBG Interest.
Enterprises shall deliver certificates representing such
shares to the TBG Shareholders within 10 Business Days after
the calculation of the Difference. A ABusiness Day" is a
day other than a day on which banks in Atlanta, Georgia are
required or authorized by law to close or a day on which
trading on the New York Stock Exchange is closed.
(iii) If the Undisputed Redetermined Exchange
Consideration is less than the Estimated Exchange
Consideration, then the TBG Shareholders shall deliver to
Enterprises a number of shares of Enterprises Common Stock
(valued at the Notional Value) having a value equal to the
Difference less the Effect of Open Items, with each TBG
Shareholder being liable for a percentage of such amount
equal to his TBG Interest. The TBG Shareholders shall make
such deliveries individually to Enterprises in accordance
with subsection (e) below.
(d) Resolution of Open Items.
(i) All Open Items (including the Effect of
Open Items) shall be decided in accordance with Exhibit C
and the following procedures. The Shareholders'
Representative shall select one accountant with expertise in
such matters and Enterprises shall select one accountant
with expertise in such matters, and the two so selected
shall attempt to resolve the Open Items. Each party shall
be responsible for the costs of any such accountant selected
by such party and any other expenses it may incur. All
amounts agreed upon by Enterprises and the Shareholders'
Representative or by the accountants (if the parties are
unable to agree) shall be conclusive and binding. If within
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30 days of the selection of the two accountants, the 7
accountants have not resolved all Open Items, then such
items as have not been resolved shall be submitted to a
third accountant selected by the Shareholders'
Representative and Enterprises within 15 days after the
expiration of the 30-day period. If Enterprises and the
Shareholders' Representative cannot agree upon a third
accountant within 15 days, then the accountant shall be
selected by the first two accountants (who shall not select
an accountant from TBG's Accountants or Ernst & Young LLP).
The third accountant shall render his decision on such
remaining Open Items as promptly as practicable, but in no
event more than 30 days after such accountant is selected.
The TBG Shareholders (considered as a single person) and
Enterprises shall each bear one-half of the fees and
expenses of the third accountant, whose decision shall be
the final determination of the Open Items submitted to him
and shall be conclusive and binding. If at any time before
a decision is delivered by the accountants to the
Shareholders' Representative and Enterprises pursuant to the
foregoing dispute resolution procedures the Shareholders'
Representative and Enterprises agree on the resolution of an
Open Item (and the parties shall give the accountants prompt
notice of any such agreement), then such resolution shall be
conclusive and binding even though the accountants may have
concluded otherwise and/or the Shareholders' Representative
and Enterprises receive a notice of the decision from the
accountants after the Shareholders' Representative and
Enterprises have reached an agreement.
(ii) As the Open Items are resolved as
provided in clause (i) immediately preceding, then:
(A) To the extent that the resolution is
that a payment is due Enterprises, then the TBG
Shareholders shall deliver to Enterprises a number of
shares of Enterprises Common Stock (valued at the
Notional Value) having a value equal to the amount of
such payment, with each TBG Shareholder being liable
for a percentage equal to his TBG Interest.
(B) To the extent that the resolution is
that a payment is due the TBG Shareholders, then
Enterprises shall deliver to each TBG Shareholder a
number of shares of Enterprises Common Stock (valued at
the Notional Value) having a value equal to the amount
of such payment times such TBG's Shareholder's TBG
Interest.
If clause "(A)" applies, then the procedures set forth in
subsection (e) below apply. If clause "(B)" applies, then
Enterprises shall deliver the appropriate number of shares of
Enterprises Common Stock within 10 Business Days of the
resolution.
(e) Payment Notice to the TBG Shareholders by the
Shareholders' Representative. Whenever an aspect of the
determinations pursuant to this Section 1.04 becomes binding and
conclusive, the Shareholders' Representative shall promptly
notify each TBG Shareholder of the amount of any payment required
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to be made by the TBG Shareholders pursuant to this Section 1.04 8
and that portion for which each TBG Shareholder is liable. Each
payment from the TBG Shareholders is due to Enterprises no later
than 10 Business Days from the date on which the foregoing notice
to the TBG Shareholders is given by the Shareholders'
Representative; provided, however, that payments may be deferred
until the earlier to occur of (1) the total payments of the TBG
Shareholders being at least $100,000 or (2) the next calendar
quarter end at least 10 Business Days after an Open Item becomes
conclusive and binding.
(f) Open Items Under CCBG Agreement. To the
extent that Open Items under the CCBG Agreement involve matters
other than the CCBG Adjusted Consolidated Working Capital and are
not taken into account in payments to or by the TBG Shareholders,
then the TBG Shareholders shall be paid, or shall pay,
50.7460136% of such amounts at the same time that the CCBG
Shareholders are paid, or pay, 49.2539864% of such amounts under
the CCBG Agreement.
(g) Calculations. No Fractional Shares. The
calculations in this Article I shall be made (1) aggregating all
of the shares of each holder of TBG Exchange Shares and (2) based
on numbers carried out to 8 decimal places, but the final amount
of payments to each holder shall be rounded down to the nearest
whole ▇▇▇▇▇, and any payment of shares shall be rounded down to
the nearest whole share.
1.5 Unregistered Shares. The shares of Enterprises
Common Stock to be issued pursuant to this Article I shall not be
registered under applicable federal and state securities laws,
and shall be issued with a legend noting restrictions on transfer
imposed under Applicable Law. Buyers have no obligation at any
time to effect any such registration.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE TBG SHAREHOLDERS
The representations and warranties of each TBG
Shareholder, and the respective rights and obligations of each
TBG Shareholder in the event of a breach of such representations
and warranties, are set forth in such shareholder's Transmittal
Letter.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TBG CONCERNING
TBG AND ITS SUBSIDIARY
TBG hereby represents and warrants to Buyers as follows
as of the date of this Agreement and as of the Closing Date, with
full knowledge that such representations and warranties being
true at those times are a material consideration and inducement
to the execution of this Agreement by Buyers and the consummation
of the transactions contemplated hereunder and that if they are
breached, such breach may (1) as specifically provided in Section
7.03, relieve the Buyers of their obligation to effect the
15
Exchange, and (2) as specifically provided in Article VI, form 9
the basis for a post-Closing reduction to the Exchange
Consideration:
3.1 Organization and Authorization. Except as
set forth in Disclosure Schedule 3.01:
(a) Due Organization, Etc. TBG is a corporation
duly organized, validly existing and in good standing under the
corporation laws of the State of Nevada. TBG has all requisite
corporate power and authority to carry on and conduct its
business as it is now being conducted and to own or lease its
properties and assets. TBG is duly qualified and in good
standing in every jurisdiction in which the conduct of its
business or the ownership of its properties and assets requires
TBG to be so qualified; and neither the property owned or
operated by TBG nor the nature of the business conducted by it
makes qualification necessary under Applicable Law in any other
jurisdiction.
(b) Power and Authority. TBG has the full
corporate power to execute, deliver and perform this Agreement
and all other agreements, documents and certificates executed and
delivered by TBG hereby (collectively, the "TBG Documents"),
subject to the Required Statutory Approvals. The execution,
delivery and performance of this Agreement and each TBG Document
by TBG has been duly authorized by the board of directors of TBG,
and, except for the approval of the TBG Shareholders (and
Southwest, in its capacity as a holder of TBG Shares), no other
corporate action on the part of TBG is necessary to approve and
authorize the execution, delivery and performance of this
Agreement and the TBG Documents. Each of the TBG Documents has
been duly and validly executed and delivered by TBG and
constitutes the valid and binding agreement of TBG, enforceable
against TBG in accordance with its terms.
(c) Non-contravention. The execution, delivery
and performance of each TBG Document by TBG and the consummation
by TBG and the TBG Shareholders of the transactions contemplated
hereby and thereby will not:
(i) violate or conflict with any
provision of the articles of incorporation or bylaws of
TBG or its Subsidiary;
(ii) breach, violate or constitute an
event of default (or an event which with the lapse of
time or the giving of notice or both would constitute
an event of default) under, or give rise to any right
of termination, cancellation, modification or
acceleration under, any note, bond, indenture,
mortgage, security agreement, lease, franchise or any
other material agreement, instrument or obligation to
which TBG or its Subsidiary is a party, or by which TBG
or its Subsidiary or any of their respective properties
or assets is bound (excluding for purposes of all of
the foregoing items of this clause (ii) the Bottling
Authorizations), or result in the creation of any lien,
claim or encumbrance or other right of any third party
of any kind whatsoever upon the properties or assets of
16
TBG or its Subsidiary pursuant to the terms of any such 10
instrument or obligation, which breach, violation, or
event of default would result in a material adverse
effect on TBG and its Subsidiaries taken as a whole;
(iii) violate or conflict with any law,
statute, ordinance, code, rule, regulation, judgment,
order, writ, injunction, decree or other decision of
any federal, state, city, county, parish or foreign
court or governmental or regulatory body, agency or
authority ("Governmental Authority") applicable to TBG
or its Subsidiary or by which any of their respective
properties or assets may be bound ("Applicable Law"),
where such violations or conflicts, individually or in
the aggregate, may reasonably be expected to result in
Losses to the Buyers greater than $100,000; or
(iv) require, on the part of TBG or its
Subsidiary, any filing or registration with, or permit,
license, exemption, consent, authorization or approval
of, or the giving of any notice to any Governmental
Authority, except for (1) the premerger notification
requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, (2) any required
actions under federal securities laws and any
applicable state securities and blue sky laws in
connection with the Exchange, and (3) the filing of the
Articles of Exchange with the Secretary of State of
Nevada and any other required state filings (the
foregoing (1) through (3) being referred to as the
"Required Statutory Approvals").
(d) Capitalization. The authorized capital stock
of TBG consists solely of 1,100,249 shares of $2.00 par value
Class A Common Stock and 228,357 shares of $2.00 par value Class
B Common Stock, of which 541,916 shares of Class A Common Stock
and 228,357 shares of Class B Common Stock are issued and
outstanding. Disclosure Schedule 3.01 lists the TBG Shareholders
of record and their percentage interests (such interest, as
adjusted pursuant to Section 9.04, being individually a "TBG
Interest" and collectively the "TBG Interests"). It also lists
those agreements known to TBG that impose a lien, claim or
encumbrance upon any TBG Shares or that restrict or limit the
ability of any TBG Shareholder to vote or transfer his TBG Shares
or any interest in them or otherwise to take the actions
contemplated by this Agreement. All of the issued and
outstanding shares of TBG capital stock are validly issued, fully
paid and non-assessable. TBG does not have outstanding, nor is
it bound by, any subscriptions, options, warrants, calls,
commitments or agreements to issue any additional shares of
capital stock or any other equity security, including any right
of conversion or exchange under any outstanding security or other
instrument or agreement. All issuances, transfers, purchases or
redemptions of the capital stock of TBG have complied with all
applicable agreements and all Applicable Laws, and all Taxes
thereon have been paid. No present or former holder of any
capital stock of TBG or its Subsidiary or any corporation which
has been merged into TBG or its Subsidiary has any legally
cognizable claim against TBG or such Subsidiary based upon any
17
issuance, sale, purchase, redemption or involvement in any 11
transfer of any capital stock by TBG or its Subsidiary or any
corporation which has been merged into TBG or its Subsidiary.
There are no outstanding obligations of TBG or its Subsidiary to
repurchase, redeem or otherwise acquire any outstanding shares of
capital stock of TBG or its Subsidiary.
(e) Subsidiaries. Disclosure Schedule 3.01
lists: (1) every entity in which TBG owns 50 percent or more of
the outstanding equity, directly or indirectly, or has the power
to vote or direct the voting of sufficient securities to elect a
majority of the board of directors or similar governing body or
otherwise has the power to direct the business and policies of
such entity (a "Subsidiary") (2) the jurisdiction of its
incorporation, (3) each state of the United States in which it is
required to qualify as a foreign corporation, and (4) the number
of shares authorized and outstanding. Except as set forth in
Disclosure Schedule 3.01:
(i) the Subsidiary is a corporation
duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of
incorporation,
(ii) the Subsidiary has the full
corporate power and authority to carry on and conduct
its business as it is now being conducted and to own or
lease its properties and assets,
(iii) the Subsidiary is duly qualified
in every state of the United States in which the
conduct of its business or the ownership of its
properties requires it to be so qualified,
(iv) all outstanding shares of capital
stock of the Subsidiary are owned by TBG free and clear
of any liens, restrictions, claims, equities, charges,
options, rights of first refusal or other encumbrances,
with no defects of title whatsoever except applicable
restrictions under federal and state securities laws,
(v) all of the issued and outstanding
shares of each Subsidiary are validly issued, fully
paid and non-assessable,
(vi) there are no outstanding
subscriptions, options, warrants, rights, calls,
contracts, voting trusts, proxies or other commitments,
understandings, restrictions or arrangements relating
to the issuance, sale, voting, transfer, ownership or
other rights with respect to any shares of capital
stock of any Subsidiary, including any right of
conversion or exchange under any outstanding security,
instrument or agreement,
(vii) TBG or its Subsidiary has the full
power, right and authority to vote all of the
outstanding shares of the capital stock of the
Subsidiary owned by TBG, and
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(viii) TBG is not a party to or bound 12
by any agreement affecting or relating to its right to
transfer the outstanding shares of any Subsidiary.
(f) Articles, Bylaws and Minutes. Copies of the
organizational documents and bylaws of TBG and its Subsidiary
previously made available to Buyers are the complete, true and
correct organizational documents and bylaws of TBG and its
Subsidiary in effect as of the date hereof. The minutes of
directors' and shareholders' meetings and the stock books of TBG
and, with respect to its Subsidiary, from the date of its
becoming a Subsidiary of TBG, that have previously been delivered
or otherwise made available to Buyers are the accurate records of
directors' and shareholders' meetings, actions taken by written
consent, and stock issuances through the date hereof and reflect
all transactions required by Applicable Law to be contained in
such records. To TBG's knowledge, nothing has been removed from
them in order to avoid disclosing information to Buyers.
(g) Officers and Directors. All current officers
and directors of TBG and its Subsidiary are listed in Disclosure
Schedule 3.01.
3.02 Bottling Authorizations.
(a) List. Disclosure Schedule 3.02 sets forth a
complete and accurate list of all persons or entities that have
granted TBG or its Subsidiary franchise agreements, either oral
or written ("Bottling Authorizations") under which TBG or its
Subsidiary conducts its soft drink business (excluding post-mix),
including a list of all brands covered by such agreements.
(b) Territories of Other Bottler. All Bottling
Authorizations giving TBG or its Subsidiary the temporary right
to sell soft drinks and other non-alcoholic beverage products
within the territory of another bottler are specifically
identified on Disclosure Schedule 3.02.
(c) Transshipment. To TBG's knowledge, no event
has occurred which would give rise to any liability of TBG or its
Subsidiary for transshipment across Bottling Authorizations
territorial lines, and neither TBG nor its Subsidiary has
sufficient grounds for any such claim against any other bottler.
Disclosure Schedule 3.02 lists all transshipment claims against
or by TBG or its Subsidiary which have been asserted since
December 31, 1997.
3.03 Indebtedness. Disclosure Schedule 3.03 lists all
(1) financing facilities other arrangements for Indebtedness For
Borrowed Money, (2) indebtedness of TBG and its Subsidiary by way
of lease-purchase arrangements and capital leases as determined
in accordance with GAAP, each such capital lease being
specifically identified in Disclosure Schedule 3.03 ("Capital
Leases"), (3) guarantees and other undertakings of TBG and its
Subsidiary on which others rely in extending credit other than
endorsements of negotiable instruments in the ordinary course of
business, and (4) all security interests with respect to personal
property owned by TBG and its Subsidiary. Except as set forth in
Disclosure Schedule 3.03, no loan payable by TBG or its
Subsidiary provides for any prepayment penalty or premium. As
19
used in this Agreement, "Indebtedness For Borrowed Money" means 13
all obligations of TBG and its Subsidiary evidenced by bonds,
debentures, notes or similar instruments or for the deferred
purchase price of property.
3.04 Financial Matters.
(a) Financial Statements. TBG has previously
delivered to Buyers true and correct copies of (1) the
consolidated balance sheets of TBG and its Subsidiary as of
December 31, 1997, 1996 and 1995 and the consolidated statements
of operations, consolidated statements of stockholders' equity
and consolidated statements of cash flows for the fiscal years
then ended, including the notes thereto (collectively the
"Financial Statements"; and the most recent of which are referred
to as the "1997 Financial Statements"), and (2) the interim
consolidated balance sheet of TBG and its Subsidiary as of March
31, 1998 and the consolidated statements of operations,
consolidated statements of stockholders' equity and consolidated
statements of cash flows for the three months then ended (the
"Interim Financial Statements"). Except as set forth in this
Agreement, in Disclosure Schedule 3.04 or in such Financial
Statements and Interim Financial Statements: (1) the Financial
Statements and Interim Financial Statements present fairly, in
all material respects, the financial position of TBG and its
Subsidiary as of their respective dates and the related results
of operations and cash flows for the respective periods, and (2)
the Financial Statements have been prepared in accordance with
GAAP applied consistently. All representations as to the Interim
Financial Statements are subject to the basis of presentation
described in Note (1) to the Interim Financial Statements and to
the fact that valuations, procedures and accounting estimates
used in the Interim Financial Statements while consistent with
past practices of TBG do not necessarily conform to those used in
the Financial Statements. Notwithstanding the foregoing, to the
extent that a specific representation or warranty in this Article
III is applicable to any act, omission, fact or circumstance
covered by this Section 3.04(a), then the specific representation
or warranty shall qualify this Section 3.04(a).
(b) Other Liabilities. Except as (and to the
extent) specifically reflected in the Financial Statements or the
Interim Financial Statements, or incurred in the ordinary course
of business since March 31, 1998 or as disclosed in Disclosure
Schedule 3.04, neither TBG nor its Subsidiary has any material
liability (whether known or unknown and whether accrued,
absolute, contingent or otherwise). Notwithstanding the
foregoing, to the extent that a specific representation or
warranty in this Article III is applicable to any act, omission,
fact or circumstance covered by this Section 3.04(b), then the
specific representation or warranty shall qualify this Section
3.04(b).
(c) Accounts Receivable. Except as set forth in
Schedule 3.04, the accounts receivable ("Accounts Receivable")
reflected in the Financial Statements or the Interim Financial
Statements, or existing on the date hereof or the Closing Date:
are or will be valid and existing; and represent or will
20
represent monies due for goods sold and delivered and services 14
rendered in the ordinary course of business. Unless paid prior
to the Closing Date, the Accounts Receivable (1) are, or will be
as of the Closing Date, current and collectible net of the
respective reserves shown on the 1997 Financial Statements, the
Interim Financial Statements or the accounting records of TBG as
of the Closing Date (which reserves are adequate and calculated
consistently with past practice and, in the case of the reserve
as of the Closing Date, will not be materially greater than the
reserve in the 1997 Financial Statements), and (2) will not as of
the Closing Date have materially and adversely changed in terms
of aging since December 31, 1997 or March 31, 1998. Subject to
such reserves, each of the Accounts Receivable either has been or
will be collected in full, without any set-off, within 90 days
after the date on which it first becomes due and payable. There
is no valid claim or right of set-off, other than returns in the
ordinary course of business, in excess of $5,000 individually or
$25,000 in the aggregate, asserted by any obligor under an
Account Receivable relating to the amount or validity of any of
such Accounts Receivable. Neither TBG nor its Subsidiary has
any liability pertaining to any previous factoring of any of its
accounts receivable. The foregoing representations and
warranties in this subsection (c) are made solely in relation to
whether the condition in Section 7.03(a) has been met, and are
not intended to affect in any way the Closing Date Financial
Statements.
(d) Swaps. Disclosure Schedule 3.04 lists all
interest rate, commodity or foreign currency exchange, swap,
collar, cap or similar outstanding agreements entered into by TBG
or its Subsidiary pursuant to which TBG or its Subsidiary has
hedged its interest rate, foreign currency or commodity exposure.
3.05 Absence of Certain Changes and Events. Except as
set forth in Disclosure Schedule 3.05 or as contemplated by
Sections 5.09 and 5.10 of this Agreement, since March 31, 1998,
there has not been:
(a) Adverse Change. Any material adverse change
in the working capital, assets, liabilities or financial
condition of TBG or its Subsidiary;
(b) Damage. Any damage, destruction or loss,
whether or not covered by insurance, materially and adversely
affecting the properties, assets, business or financial condition
of TBG or its Subsidiary;
(c) Distributions. Any declaration, setting
aside or payment of any dividend or other distribution of assets
in respect of the capital stock of TBG or its Subsidiary or any
direct or indirect redemption, purchase or other acquisition of
any such stock, or any sales or other transfers of assets for
less than fair market value to any TBG Shareholder;
(d) Issuance. Any issuance or sale, or agreement
to issue or sell, by TBG or its Subsidiary of any stock or other
equity securities, or any options, warrants, subscriptions, calls
or other rights or commitments with respect to the issuance of
capital stock or obligations convertible into other equity
securities of TBG or its Subsidiary;
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(e) Guaranty. Any guaranty of any kind 15
whatsoever by TBG or its Subsidiary for an amount in excess of
$10,000 other than endorsements of negotiable instruments in the
ordinary course of business;
(f) Merger. Any merger, consolidation or share
exchange or agreement to merge, consolidate or exchange shares
with any other corporation (or any transaction having a similar
effect) involving TBG or its Subsidiary, or any acquisition of,
or agreement to acquire, any business or a significant portion of
a business, of any other person or entity to which TBG or its
Subsidiary is or was a party;
(g) Labor Dispute. Any material labor dispute
involving TBG or its Subsidiary;
(h) Capital Expenditure. Any capital expenditure
in excess of $25,000 per item, or any new commitment for
additions to property, plant or equipment in excess of $25,000
per item, in each case except as may be provided in the budget
for TBG or its Subsidiary and except in the case of an
expenditure or commitment necessitated by a loss which is covered
by insurance (subject to deductibles);
(i) Franchises. Except in the ordinary course of
business, any sale or granting to any party or parties of any
license, franchise, option or other right of any nature
whatsoever to sell, distribute, or otherwise deal in or with
products, merchandise or services of TBG or its Subsidiary;
(j) Raises. Except for increases and bonuses
based on term of service or regular promotion of employees, any
granting of a salary increase to, or authorization or payment of
bonuses or material increases in other benefits payable or to
become payable under any bonus, insurance or other benefit plans
to, employees, officers, directors or retirees of TBG or its
Subsidiary;
(k) Accounting Changes. Any change in any method
of accounting or accounting practice or principle used by TBG or
its Subsidiary;
(l) Liens. Any asset of TBG or its Subsidiary
permitted by TBG or such Subsidiary to be subject to any
mortgage, lien, security interest, restriction or charge of any
kind other than Permitted Liens;
(m) Waivers. Any waiver by TBG or its Subsidiary
of any material claim or right except write-downs and write-offs
of receivables and inventory in the ordinary course of business;
(n) Dispositions. Any sale, transfer or other
disposition by TBG or its Subsidiary of any of its assets, except
in the ordinary course of business and except for such involving
real property required to be disclosed in Section 3.07;
(o) Transactions with Employees. Any amount
paid, loaned or advanced by TBG or its Subsidiary or asset
transferred or leased to any employee by TBG or its Subsidiary,
except for normal compensation involving salary, wages and
22
benefits and advances for work-related expenses; 16
(p) Write-downs. Any write-down in value of any
inventory of TBG or its Subsidiary other than in the ordinary
course of business, or any write-off as uncollectible of any
notes or accounts receivable other than in the ordinary course of
business; or
(q) Material Transactions. Any material
commitment or transaction entered into by TBG or its Subsidiary
other than in the ordinary course of business.
3.06 Tax Matters.
(a) Definitions. For purposes of this Agreement:
(i) "Taxes" means all taxes,
assessments, charges, duties, fees, levies or other
governmental charges, including federal, state, city,
county, parish, foreign or other income, franchise,
capital stock, real property, personal property,
tangible, withholding, FICA (or similar), unemployment
compensation, disability, welfare, stamp, occupation,
environmental (including taxes under Section 59A of the
Internal Revenue Code of 1986, as amended (the "IRC"),
transfer, sales, soft drink, use, excise, gross
receipts, alternative or add-on-minimum, estimated and
all other taxes of any kind for which TBG or its
Subsidiary may have any liability to any Governmental
Authority (including interest, penalties or additions
associated therewith), whether disputed or not, and
including any transferee or secondary liability in
respect of any tax (whether imposed by law,
contractual agreement or otherwise) and any liability
in respect of any tax as a result of being a member of
any affiliated, consolidated, combined, unitary or
similar group; and
(ii) "Returns" means all returns,
declarations, reports, statements and other documents
required to be filed in respect of Taxes, and any claims for
refunds of Taxes, including any amendments or supplements to
any of the foregoing.
(b) Tax Representations and Warranties. Except
as disclosed in Disclosure Schedule 3.06:
(i) all Returns of TBG or its
Subsidiary, including estimated returns and reports of
every kind with respect to Taxes, which are due to have
been filed in accordance with Applicable Law, have been
duly filed, and all such Returns are correct and
complete in all respects; no such Return contains any
position which is or would be subject to penalties
under IRC section 6662 (or any corresponding provision
of state, local or foreign Tax law);
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(ii) there are currently no extensions 17
of time in effect with respect to the dates on which
any Returns of TBG or its Subsidiary were or are due to
be filed;
(iii) all deficiencies asserted as a
result of any examination of any Return have been paid
in full, accrued on the books of TBG or its Subsidiary
as a current tax liability, or finally settled;
(iv) since December 31, 1992, no
claims have been asserted and, to the knowledge of TBG,
no proposals or deficiencies for any Taxes are being
asserted, proposed or threatened, and no audit or
investigation of any Return is currently being
conducted, is pending or, to TBG's knowledge,
threatened, against TBG or its Subsidiary;
(v) since December 31, 1992, there
have been no adjustments proposed by taxing
authorities in connection with any Return of TBG or its
Subsidiary;
(vi) there are no outstanding waivers
or agreements by TBG or its Subsidiary for the
extension of time for the assessment of any Taxes or
deficiency thereof, nor are there any waivers of the
statute of limitations in respect of Taxes for which
TBG or its Subsidiary may have any liability or any
requests for rulings, outstanding subpoenas or requests
for information, notice of proposed reassessment of any
property owned or leased by TBG or its Subsidiary or
any other matter pending between TBG or its Subsidiary
and any taxing authority;
(vii) there are no liens for Taxes
upon any property or assets of TBG or its Subsidiary
except liens for current Taxes not yet due, nor are
there any liens which are pending, or to TBG's
knowledge, threatened;
(viii) there are no outstanding rulings
issued since December 31, 1992 of, or outstanding
requests for rulings with, any Taxing authority
addressed to TBG or its Subsidiary that are binding on
TBG or its Subsidiary;
(ix) no assets of TBG or its Subsidiary
or of any "related person," as that term is defined in
IRC section 144(a)(3) (or section 103(b)(6)(C) of the
Internal Revenue Code of 1954, as amended (the "1954
IRC")), whether owned or leased pursuant to a Capital
Lease, have been financed by private activity bonds
within the meaning of IRC section 141 (or industrial
development bonds within the meaning of ▇▇▇▇ ▇▇▇
section 103(b)), and none of TBG, its Subsidiary or any
related person is a "principal user," as that term is
used in the context of IRC section 144(a) (or ▇▇▇▇ ▇▇▇
section 103(b)), of any building which has been so
financed;
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(x) neither TBG nor its Subsidiary has 18
made any payment which constitutes an "excess parachute
payment" within the meaning of IRC section 280G or any
similar provision of state or local law;
(xi) neither TBG nor its Subsidiary is
a party to or bound by (or prior to Closing, except as
contemplated by this Agreement, will become a party to
or bound by) any tax indemnity, tax sharing or tax
allocation agreement or arrangement;
(xii) except for the group of which
TBG is presently a member, TBG has not, within the last
five years, been a member of an affiliated group of
corporations, within the meaning of IRC section 1504,
other than as a common parent corporation, and no
Subsidiary has, within the last five years, been a
member of an affiliated group of corporations, within
the meaning of IRC section 1504, except where TBG was
the common parent corporation of such affiliated group;
(xiii) neither TBG nor its Subsidiary
is a party to any joint venture, partnership, or other
arrangement or contract which could be treated as a
partnership for federal income tax purposes which is
not evident in copies of the Returns and the supporting
work papers of TBG and its Subsidiaries made available
to Enterprises;
(xiv) each asset with respect to which
TBG or its Subsidiary claims depreciation, amortization
or similar expense for Tax purposes is owned for Tax
purposes by TBG or such Subsidiary;
(xv) neither TBG nor its Subsidiary
has executed any closing agreement pursuant to IRC
section 7121 or any predecessor provision thereof, or
any similar provision of state or local law;
(xvi) no claim has been made since
December 31, 1992 by any authority in a jurisdiction
where TBG or its Subsidiary does not file Returns that
such corporation is or may be subject to taxation by
that jurisdiction;
(xvii) neither TBG nor its Subsidiary
has, since December 31, 1992, agreed to any adjustments
pursuant to IRC section 481(a) or any similar provision
of state or local law by reason of a change in
accounting method, and no application requesting
permission for any change in accounting method by TBG
or its Subsidiary is pending with any taxing authority;
(xviii) neither TBG nor its Subsidiary
has been a United States real property holding
corporation (as defined in IRC section 897(c)(2))
during the applicable period specified in IRC section
897(c)(1)(A)(ii);
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(xix) copies of all federal and state 19
income tax returns and franchise tax returns of TBG or
its Subsidiary (where such Subsidiary is required to
file a separate return) for the last three years have
been delivered to Enterprises. Additionally, any audit
report issued by any federal, state, or local taxing
authority for taxable years ended in 1990 and
subsequent has been delivered or otherwise made
available to Enterprises;
(xx) all material elections with
respect to Taxes which are not evident in copies of the
Returns and the supporting work papers of TBG and its
Subsidiaries made available to Enterprises as of the
date hereof are set forth in the Disclosure Schedule;
after the date hereof, no election with respect to
Taxes will be made without the written consent of
Enterprises; and
(xxi) except as set forth in
Disclosure Schedule 3.06 since December 31, 1992: (1)
neither TBG nor its Subsidiary has filed a consent
pursuant to IRC section 341(f) and (2) neither TBG nor
its Subsidiary has filed, or may be deemed to have
filed, any election under IRC section 338.
(c) Disclaimer as to NOLs. Notwithstanding the
foregoing subsections, no representation or warranty is made as
to the amount and/or utilization of net operating losses, tax
credits (including minimum tax credits) or other tax attributes
of TBG or its Subsidiary.
(d) Survival. The representations and warranties
in subsections (viii), (ix), (x), (xi), (xiii), (xiv) and (xvii)
of Section 3.06(a) shall survive the Closing as provided in
Article VI (the "Surviving Tax Representations").
3.07 Real Property. Disclosure Schedule 3.07 contains
a complete list (and copies of the legal descriptions have been
made available to the Buyers) of all real property: (1) which is
owned by TBG or its Subsidiary, (2) which is leased by TBG or its
Subsidiary as lessee or lessor, or (3) as to which TBG or its
Subsidiary has either an option to purchase, sell or lease, or is
obligated to purchase, sell or lease. With respect to such real
property:
(a) Ownership. All real property which was
reflected in the 1997 Financial Statements is listed in
Disclosure Schedule 3.07, and except as set forth in the
Disclosure Schedule, no ownership interest in any real property
has been acquired or disposed of by TBG or its Subsidiary since
December 31, 1997.
(b) Status of Title. Except as set forth in
Disclosure Schedule 3.07(b), all real property owned by TBG or
its Subsidiary is owned in fee simple, free and clear of any
liens, encumbrances or restrictions whatsoever, except for:
26
(i) rights of lessors or lessees under 20
the terms of leases which have been disclosed to
Buyers;
(ii) liens for Taxes not yet due and
payable;
(iii) rights-of-way, building use
restrictions, exceptions, variances, reservations or
limitations of any nature whatsoever of public record;
(iv) liens reflected in the Financial
Statements;
(v) liens imposed by Applicable Law and
incurred in the ordinary course of business for
obligations not yet due and payable to laborers,
materialmen and the like;
(vi) zoning or other restrictions,
variances, covenants, rights-of-way, encumbrances,
easements and other minor irregularities of title, none
of which, individually or in the aggregate, interferes
in any material respect with the current use or
occupancy of any of the real property by TBG or its
Subsidiary, has a material adverse effect on the value
thereof, or would impair in any material respect the
ability of TBG or its Subsidiary to sell such property
for its current use; and
(vii) with respect to items of personal
property, unperfected purchase money security interests
existing in the ordinary course of business without the
execution of a security agreement
(each of the foregoing being a "Permitted Lien").
(c) Restrictions Arising from Governmental
Authorities. Except as set forth in Disclosure Schedule 3.07, no
real property owned or leased and used by TBG or its Subsidiary
is subject to any decree or order (or, to TBG's knowledge, any
threatened or proposed order) to be sold or taken by any
Governmental Authority.
(d) Condition. Except as set forth in Disclosure
Schedule 3.07, all plants and structures owned or leased and used
by TBG or its Subsidiary, including, without limitation, parking
areas, loading docks and roofs, are, to TBG's knowledge, in
operating condition with no defects that materially interfere
with the current use of such property.
3.08 Personal Property. Disclosure Schedule 3.08
contains a complete list of (1) all equipment leased by TBG or
its Subsidiary to others for which lease payments exceed $100,000
per year (but excluding Capital Leases disclosed pursuant to
Section 3.03) or which TBG or its Subsidiary has an option either
to purchase, sell or lease, or is obligated to purchase, sell or
lease for a cost individually in excess of $100,000. TBG has
made its fixed asset lists available to Enterprises. With
respect to such personal property and except as set forth in
Disclosure Schedule 3.08:
27
(a) Title. TBG or its Subsidiary has good and 21
valid title to all of its tangible personal property reflected in
the 1997 Financial Statements or acquired since December 31, 1997
(except, in both cases, as disposed of in the ordinary course of
business), free and clear of any liens, encumbrances,
restrictions, claims, charges, security interests, easements or
other encumbrances of any nature whatsoever, except for Permitted
Liens.
(b) Condition. All tangible personal property of
the type normally subject to depreciation owned or leased and
used by TBG or its Subsidiary (other than inventory) is, to TBG's
knowledge, in operating condition with no defects that materially
interfere with the current use of such property.
(c) Inventory. All inventory owned by TBG or its
Subsidiary is merchantable and of a quality usable and salable in
the ordinary course of business, and the quantity of each type of
inventory (whether raw materials, work-in-process or finished
product), is not excessive, but reasonable, adequate and
appropriate. No product included in inventory, whether owned by
TBG or its Subsidiary or out in the trade, is materially out-of-
date by applicable franchisor standards. No previously sold
inventory is subject to returns materially in excess of that
experienced by TBG or its Subsidiary during the 1997 fiscal year.
All of the inventories of TBG and any Subsidiary included in the
Financial Statements and Interim Financial Statements are valued
for the purposes thereof at the lower of cost or market. The
foregoing representations and warranties in this subsection (c)
are made solely in relation to whether the condition in Section
7.03(a) has been met and are not intended to affect in any way
the Closing Date Financial Statements. No food ingredient,
finished article of food, food packaging or food labeling
included in the inventories of TBG or its Subsidiary is
adulterated or misbranded within the meaning of the federal Food,
Drug and Cosmetic Act. To TBG's knowledge, there is no pending
investigation or regulatory action by the federal Food and Drug
Administration affecting any inventories of TBG or its
Subsidiary.
3.09 Employee Benefit Plans. Except as set forth in
Disclosure Schedule 3.09:
(a) Definition. This Section 3.09 relates to
each employment, collective bargaining or consulting contract or
deferred compensation, profit-sharing, pension, bonus, stock
option, stock purchase or other fringe benefit or compensation
contract, commitment, arrangement or plan (whether written or
oral), including each welfare plan (as defined in section 3(1) of
the Employment Retirement Income Security Act of 1974, as amended
("ERISA")), which TBG or its Subsidiary has established or
maintained or in which TBG or its Subsidiary participates or,
since December 31, 1992, has participated, or under which TBG or
its Subsidiary, since December 31, 1992, has had an obligation to
make contributions or to pay benefits for the benefit of persons
who are, were or will become in accordance with the terms of the
plan active employees, former employees, retirees, directors or
independent contractors (or their dependents, spouses or
beneficiaries) of TBG or its Subsidiary or their respective
predecessors in interest or any employer which would constitute
28
an ERISA Affiliate (collectively, the "Employee Benefit Plans"). 22
For purposes of this Agreement, the term "ERISA Affiliate"
includes all employers (whether or not incorporated) which by
reason of common control are treated together with TBG or its
Subsidiary as a single employer within the meaning of IRC section
414.
(b) List. Disclosure Schedule 3.09 lists each
Employee Benefit Plan which is currently in effect or as to which
TBG or its Subsidiary has any ongoing material liability or
material obligation.
(c) Compliance. TBG and its Subsidiary have
complied in all material respects since December 31, 1992 with
their respective obligations with respect to all Employee Benefit
Plans. Each Employee Benefit Plan has been maintained since
December 31, 1992 in all material respects with all Applicable
Laws.
(d) Funding, Etc. All contributions, premium
payments and other expenses required under each Employee Benefit
Plan or with respect thereto due on or before the Closing Date
will be paid or accrued by TBG or its Subsidiary. No Employee
Benefit Plan is funded by insurance subject to retroactive
premium adjustments.
(e) Liabilities; Claims; Audits. Neither TBG nor
a Subsidiary has incurred and no facts exist that could
reasonably result in any liability, Tax or penalty of any nature
whatsoever, whether known or unknown, to any person or entity for
failure to comply with Applicable Law or the plan documents, nor
any duty or obligation to indemnify or hold any other person or
entity harmless for any liability with respect to any Employee
Benefit Plan. Neither TBG nor a Subsidiary has received any
notice of any, and to TBG's knowledge there is no, proposed or
actual audit investigation by any Governmental Authority with
respect to any Employee Benefit Plan.
(f) Multi-employer Plan. Neither TBG nor a
Subsidiary nor any of their respective predecessors in interest
nor any ERISA Affiliate has ever contributed to any multi-
employer plan, as defined in section 3(37) of ERISA, to which TBG
or its Subsidiary has any continuing obligation whatsoever, and
neither TBG nor its Subsidiary nor any of their respective
predecessors in interest nor any ERISA Affiliate has incurred or
reasonably expects to incur any "withdrawal liability" (as
defined under section 4201 et seq. of ERISA).
(g) Termination Rights. TBG and its Subsidiary
have the right under the terms of each Employee Benefit Plan and
under Applicable Law to terminate such plan at any time
exclusively by action of TBG or its Subsidiary and complying with
Applicable Law.
(h) Payments in Stock. No Employee Benefit Plan
requires that any payments be made in the form of stock or other
securities in TBG or its Subsidiary.
29
Neither this provision nor any other provision of this Agreement 23
requires written disclosure of payroll practices (such as
overtime, jury duty and the like) or such fringe benefits as
service and participation awards, free beverages at the work
site, expense accounts, newspaper, magazine, newsletter and
journal subscriptions, or uniforms.
3.10 Labor Relations.
(a) Status. Except as disclosed in Disclosure
Schedule 3.10, since December 31, 1992:
(i) Neither TBG nor its Subsidiary is
subject to a collective bargaining agreement, and TBG
and its Subsidiary are in compliance in all material
respects with all Applicable Laws respecting employment
and employment practices (including Executive Order
11246) and the Fair Labor Standards Act, and neither
TBG nor its Subsidiary has engaged in any unfair labor
practice within the meaning of Section 8 of the
National Labor Relations Act or has fully remedied any
official finding of any such practice;
(ii) No breach of contract and/or
denial of fair representation claim has been filed or
is pending against TBG, its Subsidiary and/or, to TBG's
knowledge, any labor organization representing its
respective employees; no claim for unpaid wages or
overtime or for child labor or for record keeping
violations has been filed or is or was pending under
the Fair Labor Standards Act, ▇▇▇▇▇-▇▇▇▇▇ Act, ▇▇▇▇▇-
▇▇▇▇▇▇ Act or Service Contract Act or any other
Applicable Law; no citation has been issued by the
Occupational Safety and Health Administration ("OSHA")
against TBG or its Subsidiary; no notice of contest or
OSHA administrative enforcement proceeding involving
TBG or its Subsidiary has been filed or is pending; no
workers' compensation retaliation claim has been filed
or is pending against TBG or its Subsidiary; and no
citation of TBG or its Subsidiary has occurred and no
enforcement proceeding has been initiated or is pending
under federal immigration law.
(iii) There is no unfair labor
practice, charge or complaint or any other matter
against or involving TBG or its Subsidiary or any other
labor organization representing the employees of TBG or
its Subsidiary pending or threatened of which TBG or
its Subsidiary has received written notice before the
National Labor Relations Board ("NLRB") or any court of
law, and, to TBG's knowledge, the employees of TBG or
its Subsidiary have not been and are not represented by
a labor organization which was either NLRB certified or
voluntarily recognized;
(iv) There is no organized labor
strike, organized slowdown or organized stoppage
actually pending or, to TBG's knowledge, threatened
against TBG or its Subsidiary, and, to TBG's knowledge,
there is no organized handbilling, organized picketing
30
or organized work stoppage (sympathetic or otherwise) 24
involving the employees of TBG or its Subsidiary which
has occurred or is in progress;
(v) No certification question or
organizational drive has been filed with the NLRB of
which TBG has received written notice respecting the
employees of TBG or its Subsidiary;
(vi) No arbitration proceeding arising
out of or under any collective bargaining agreement is
or has been pending or, to TBG's knowledge, threatened
against TBG or its Subsidiary; and, to TBG's knowledge,
no basis for any such claim for arbitration exists;
(vii) No agreement, arbitration or
court decision or governmental order which is binding
on TBG or its Subsidiary in any way expressly limits or
restricts TBG or its Subsidiary from relocating or
closing any of its respective operations, excluding
Worker Adjustment and Retraining Notification Act
("WARN Act") and other generally applicable plant
closing laws to the extent the WARN Act and such laws
pertain to the acts or omissions of the Buyers after
the Closing; and
(viii) There are no charges, official
investigations, administrative proceedings or formal
complaints of discrimination (including discrimination
based upon sex, age, race, religion, national origin,
sexual preference, disability, veteran status or claims
under family or medical leave statutes) pending or, to
TBG's knowledge, threatened against TBG or its
Subsidiary before the Equal Employment Opportunity
Commission or any federal, state or local agency or
court; and there have been no audits of the equal
employment opportunity practices of TBG or its
Subsidiary by any governmental entity.
(b) Plant Closing Issues. Neither TBG nor its
Subsidiary has, within the last 90 days, terminated the
employment of or laid off any employees which would constitute a
"plant closing" or "mass layoff" (within the meaning of the WARN
Act).
(c) Family and Medical Leave Act of 1993.
Disclosure Schedule 3.10 lists all employees of TBG and its
Subsidiary who are on leave pursuant to the Family and Medical
Leave Act of 1993, each such employee's position, and the date
such leave is scheduled to expire.
3.11 Employees. Disclosure Schedule 3.11 contains the
complete list of annual salary, bonus and commission arrangements
(if applicable) and date of last raise of all employees of TBG
and its Subsidiary who earn $50,000 or more each year from
salary, bonus and commission arrangements with TBG and its
Subsidiary.
31
3.12 Bank Accounts. Disclosure Schedule 3.12 25
lists each bank or financial institution in which TBG or its
Subsidiary has an account or safe deposit box (giving the address
and account numbers) and the names of the persons authorized to
draw thereon or to have access thereto.
3.13 Environmental Matters.
(a) Status. Except as disclosed in Disclosure
Schedule 3.13, since December 31, 1992:
(i) TBG and its Subsidiary (1) have
obtained all material permits, licenses and other
authorizations and filed all material notices which are
required to be obtained or filed by them for the
operation of their respective businesses under
applicable Environmental Laws; (2) have been and are in
compliance in all material respects with all terms and
conditions of such required permits, licenses and
authorizations; and (3) have been and are in compliance
in all material respects with all other applicable
limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and
timetables contained in any Environmental Laws;
(ii) There are no ongoing, or, to TBG's
knowledge, threatened, governmental investigations of
TBG or its Subsidiary pursuant to the Environmental
Laws;
(iii) Neither TBG nor its Subsidiary is
liable for or has assumed responsibility for the
monitoring, investigation or cleanup of any
environmental contamination;
(iv) Neither TBG nor its Subsidiary
has been identified as a potentially responsible party
at, or received a request for information pursuant to
any Environmental Laws related to, any contaminated or
previously contaminated site;
(v) Neither TBG nor its Subsidiary has
been requested to indemnify another party or contribute
towards the monitoring, investigation or cleanup costs
of any contaminated or previously contaminated site;
(vi) There are no underground storage
tanks, above-ground storage tanks, or material surface
impoundments, landfills, polychlorinated biphenyls
and/or friable asbestos not currently encapsulated on,
under or within the real property owned or leased by
TBG or its Subsidiary; and
(vii) There are no past or current
events, conditions, circumstances, activities,
practices, incidents, actions or plans which have
materially interfered with or prevent current
compliance by TBG or its Subsidiary with Environmental
Laws in all material respects.
32
(b) Definition. As used in this Agreement, 26
"Environmental Laws" means any current Applicable Law, as well as
any plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder,
relating to (1) the emission of pollutants or hazardous
substances into the air, (2) the discharge of pollutants into the
waters, (3) the disposal of hazardous waste, (4) the release
and/or threatened release of hazardous substances into the
environment, or (5) the manufacture, processing, distribution,
presence (including, without limitation, any right-to-know laws
in the context of the foregoing), use, handling, treatment,
storage, transportation or disposal of any chemical, substance,
material or waste that has been listed as toxic or hazardous by
the Environmental Protection Agency or by any equivalent state or
local agency or bureau, (6) the protection of the environment,
and/or (7) the protection of public health and safety in the
context of the foregoing matters.
(c) Survival. The representations and warranties
in Section 3.13(a) shall survive the Closing but only with
respect to activities or operations conducted upon, or conditions
existing at, sites other than properties operated and/or owned by
TBG and its Subsidiary (the "Off-Site Environmental Matters").
3.14 Insurance Policies.
(a List. Disclosure Schedule 3.14 lists all
insurance policies in force (except as listed in Disclosure
Schedule 3.09) that either (1) names TBG or its Subsidiary as an
insured or beneficiary or as a loss payable payee or (2) for
which TBG or its Subsidiary has paid or is obligated to pay all
or part of the premiums.
(b Status. Except as set forth in Disclosure
Schedule 3.14, since December 31, 1992:
(i) neither TBG nor its Subsidiary has
received notice (excluding notice of a premium increase
or contract expiration date) of any pending or
threatened termination or retroactive premium increase
with respect thereto;
(ii) TBG and its Subsidiary is in
compliance in all material respects with all conditions
contained therein, the non-compliance with which could
result in termination of insurance coverage or
increased premiums for prior or future periods; and
(iii) there exists no material claim
under current insurance that has not been properly
filed by TBG or its Subsidiary.
3.15 Specified Contracts and Commitments.
(a) Specified Contracts. Disclosure Schedule
3.15 lists each written or oral contract to which either TBG or
its Subsidiary is a party or is bound or to which they or any of
their assets are subject (and each and every amendment,
modification or supplement to any of them) that is described by
any of the following:
33
(i) individually exceeds $100,000 27
(treating each purchase order as a separate agreement
and excluding agreements not required to be listed
pursuant to clause (iii) below);
(ii) for any matter not in the
ordinary course of business;
(iii) any marketing agreement or
understanding including any chain marketing agreement,
calendar marketing agreement, or promotional discount
letter, special arrangements, whether providing for
discounts, incentive awards or otherwise, which is not
materially consistent with practices since December 31,
1997;
(iv) restricting the right of either
TBG or its Subsidiary to compete, whether by
restricting territories, customers or otherwise, in any
line of business or territory;
(v) requiring either TBG or its
Subsidiary to purchase its requirements for any goods
or services from any one or more parties;
(vi) providing for payments based on
results;
(vii) with any officer, director or
shareholder of TBG or its Subsidiary, with any spouse,
child, sibling or parent of any such person, or with
any company or other organization in which any of the
foregoing has, to TBG's knowledge, a material direct or
indirect financial interest, excluding investments in
public companies and employment contracts disclosed in
any Disclosure Schedule;
(viii) relating to participation in a
cooperative, partnership or joint venture;
(ix) imposing confidentiality
requirements on TBG and its Subsidiary, excluding those
in computer software agreements generally available to
the public and those prohibiting disclosure of
agreement terms;
(x) consignments or "sale or return"
arrangements;
(xi) for political contributions or
for charitable contributions involving a commitment to
make contributions for more than one year or involving
more than $2,500 per recipient;
(xii) granting a power of attorney
(other than those to represent TBG and/or its
Subsidiary before the IRS);
34
(xiii) outstanding loans, loan 28
commitments, factoring or credit line agreements
(excluding credit extended in the ordinary course of
business to purchasers of inventory) to any person
("Third-Party Loans") or any subordination agreement
executed by TBG or its Subsidiary relating to any of
the Third-Party Loans;
(xiv) relating to the distribution of
products;
(xv) relating to capital expenditures
in excess of $25,000 per contract;
(xvi) guarantees, other than
guarantees listed in Disclosure Schedule 3.03 and other
than endorsements in the ordinary course of business;
or
(xvii) all contracts with canning
cooperatives (excluding ordinary course purchase
orders) not otherwise disclosed.
(b) Exceptions to Specified Contracts. All
contracts disclosed or to be disclosed on Disclosure Schedule
3.15 are referred to as "Specified Contracts." Disclosure
Schedule 3.15 describes all oral Specified Contracts required to
be disclosed in Disclosure Schedule 3.15. Notwithstanding the
foregoing, Disclosure Schedule 3.15 does not need to list (and
the phrase "Specified Contracts" does not include) Bottling
Authorizations, leases (including Capital Leases), Indebtedness
for Borrowed Money, insurance policies disclosed (or not required
to be disclosed) pursuant to this Agreement or employee-related
matters disclosed (or not required to be disclosed) pursuant to
this Agreement, and contracts, agreements or other arrangements
involving or relating to: (1) sales of soft drink products
pursuant to ordinary purchase orders; (2) arrangements with
respect to on-location cold drink equipment; or (3) purchases of
raw materials and packaging materials in the ordinary course of
business for the production of soft drinks necessary for the
continued operation of the business of TBG or its Subsidiary
(including providing a reasonable inventory of finished products,
raw materials and packaging materials).
3.16 Intellectual Property.
(a) Status. Except as set forth in Disclosure
Schedule 3.16:
(i) TBG and its Subsidiary own or have
the right to use pursuant to license, sublicense,
agreement, or permission all Intellectual Property
necessary for the operation of the business of TBG and
its Subsidiary as presently conducted.
(ii) Neither TBG nor its Subsidiary has
interfered with, infringed upon, misappropriated, or
otherwise violated any Intellectual Property rights of
third parties, and neither TBG nor its Subsidiary has
received any charge, complaint, claim, demand, or
notice alleging any such interference, infringement,
35
misappropriation, or violation (including any claim 29
that TBG or its Subsidiary must license or refrain from
using any Intellectual Property rights of any third
party).
To TBG's knowledge, no third party has interfered with,
infringed upon, misappropriated, or otherwise come into conflict
with any Intellectual Property rights of TBG or its Subsidiary.
(b) Definition. "Intellectual Property" means
(1) all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures,
together with all reissuances, continuations, continuations-in-
part, revisions, extensions, and reexaminations thereof, (2) all
trademarks, service marks, trade dress, logos, trade names, and
corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations, and
renewals in connection therewith, (3) all works containing or
displaying a statutory copyright notice and all applications,
registrations, and renewals in connection therewith, (4) all mask
works and all applications, registrations, and renewals in
connection therewith, (5) all trade secrets and confidential
business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals), (6)
all computer software (including data and related documentation),
(7) all other proprietary rights, and (8) all copies and tangible
embodiments thereof (in whatever form or medium).
3.17 Certain Violations of Law.
(a) Investigations. No grand jury or other state
or federal investigation is pending or, to TBG's knowledge,
threatened against TBG or its Subsidiary.
(b) Generally. Except as disclosed in Disclosure
Schedule 3.17, since December 31, 1992, neither TBG nor its
Subsidiary is, nor has it been (by virtue of any action, omission
to act, contract to which it is a party, or any occurrence or
state of facts whatsoever), in violation of any Applicable Law,
which violation would result in a liability of TBG or its
Subsidiary in excess of $50,000.
(c) Certain Limitations. Nothing in the
foregoing requires disclosure in Disclosure Schedule 3.17 with
respect to compliance with Applicable Law relating to Taxes or
any other matter covered by Section 3.06, compliance with
Applicable Law relating to employee matters or any other matter
covered by Section 3.10, compliance with Environmental Laws or
any other matter covered by Section 3.13, or compliance with
Applicable Law relating to any other matter covered by a section
of this Article III, it being acknowledged and agreed that all
representations and warranties with respect to matters described
in this subsection are specifically excluded from the
representations and warranties in this Section 3.17.
36
3.18 Litigation. 30
(a) List. Disclosure Schedule 3.18 lists all
litigation, claims, suits, actions, arbitrations, investigations
or administrative or other proceedings pending or, to TBG's
knowledge, threatened against TBG or its Subsidiary or involving
any of their respective properties or businesses which involves
(1) a stated claim that is not covered by insurance (excluding
claims not likely to exceed any applicable deductible),
(2) workers' compensation claims either more than $5,000 or
expected to exceed $5,000, or (3) a claim as to which insurers
have denied liability or are defending the matter under a
reservation of rights.
(b) Status. Except as stated in Disclosure
Schedule 3.18:
(i) none of the matters listed in
Disclosure Schedule 3.18 (singly or in the aggregate)
will result in a material adverse effect on the
business or financial condition of TBG or its
Subsidiary,
(ii) there are no unsatisfied
judgments no longer subject to appeal, orders,
injunctions, decrees, stipulations or awards (whether
rendered by a court, administrative agency, or by
arbitration, pursuant to a grievance or other
procedure) against TBG or its Subsidiary, and
(iii) no present or former officer or
director of TBG or its Subsidiary has any claim for
indemnification from TBG or its Subsidiary related to
any act or omission by such present or former officer
or director.
3.19 No Defaults. Except as otherwise disclosed in
this Agreement or in the Disclosure Schedule to this Agreement:
(a) Enforceability. All contracts and agreements
required to be referred to in any schedule delivered hereunder
are enforceable in all material respects in accordance with their
terms in a manner that obtains for, or imposes upon, the parties
the primary benefits and obligations of such agreements. Neither
TBG nor its Subsidiary has received (1) notice that it is in
default in connection with any such contract or agreement or (2)
any notice of cancellation or termination in connection
therewith; and
(b) Bankruptcy, Etc. To TBG's knowledge, (1)
there are no pending or threatened bankruptcy, insolvency, or
similar proceedings with respect to any party to such agreements,
and (2) no event has occurred which (whether with or without
notice, lapse of time or the happening or occurrence of any other
event) would constitute a default, violation or failure to comply
thereunder by either TBG or its Subsidiary or any other party
thereto.
37
3.20 Major Suppliers and Customers. 31
(a) List. Excluding relationships under Bottling
Authorizations, Disclosure Schedule 3.20 lists each of the 10
largest (by dollar volume) suppliers of goods or services to, and
each of the 10 largest (by dollar volume) customers of, TBG and
its Subsidiary (determined on a consolidated basis) during the
12-month period ended December 31, 1997, together with, in each
case, the amount paid or billed during such period.
(b) Status. Except as set forth in Disclosure
Schedule 3.20:
(i) to TBG's knowledge, no notice or
other communication (written or oral) has been received
since April 3, 1998 from any of the suppliers or
customers listed in Disclosure Schedule 3.20
terminating or reducing in any material respect, or
expressly stating an intention to terminate or reduce
in any material respect, or otherwise reflecting a
material adverse change in, the business relationship
between such customer or supplier, on the one hand, and
TBG or its Subsidiary on the other; and
(ii) none of the officers or directors
of TBG or its Subsidiary or spouse, child, parent or
sibling of any such officer or director, or any company
or other organization in which any officer or director
of TBG or its Subsidiary or spouse, child, parent or
sibling of any such officer or director has a direct or
indirect financial interest, has any material financial
interest in any supplier or customer of TBG or its
Subsidiary, excluding the ownership of less than five
percent (5%) of the shares of a publicly-held
corporation engaged in business with TBG or its
Subsidiary.
3.21 Required Governmental Licenses and Permits. TBG
and its Subsidiary have (and Disclosure Schedule 3.21 lists) all
material licenses, permits or other authorizations of
Governmental Authorities necessary to produce and sell their
respective products and to conduct their respective businesses;
provided, however, that the foregoing shall not require
disclosure of state and local business or similar licenses
required of businesses generally; and provided, further, that
nothing in the foregoing requires disclosure in Disclosure
Schedule 3.21 with respect to such licenses, permits or other
authorizations required by Environmental Laws or any other matter
covered by Section 3.13 above, or compliance with Applicable Law
or any other matter covered by Section 3.17 above, it being
acknowledged and agreed that all representations and warranties
with respect to matters described in this proviso are
specifically excluded from the representations and warranties in
this Section 3.21.
3.22 Year 2000 Compliance. TBG has delivered to
Enterprises copies of all reports prepared by or for TBG and/or
its Subsidiary relating to Year 2000 compliance.
38
3.23 No Untrue Statements. To TBG's knowledge, no 32
representation or warranty by TBG in this Agreement (including
the Disclosure Schedules) contains any untrue statement of a
material fact, or omits to state a material fact, necessary to
make the representations and warranties of TBG herein (giving
full effect to any dollar, time or other limitation specified in,
and only with respect to the subject matter contained in, such
representations and warranties) not materially misleading. The
foregoing does not impose any obligation to disclose the
implications of disclosed facts.
3.24 Copies. True and correct copies of all documents
listed in the Disclosure Schedules (other than Bottling
Authorizations) have been delivered or made available by TBG to
the Buyers.
3.25 Other. No representation or warranty is made by
TBG except as expressly set forth in this Article III.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYERS
Buyers, jointly and severally, hereby represent and
warrant to TBG and the TBG Shareholders as follows, with full
knowledge that such representations and warranties are a material
consideration and inducement to the execution of this Agreement
by TBG and the TBG Shareholders and the consummation of the
transactions contemplated hereunder:
4.01 Organization and Authorization.
(a) Due Organization. Enterprises is a
corporation duly organized, validly existing and in good standing
under the Corporation laws of Delaware, and has all requisite
corporate power and authority to carry on and conduct its
business as it is now being conducted and to own or lease its
properties and assets.
(b) Power and Authority. Each of Enterprises and
Southwest has the full corporate power and authority to execute,
deliver and perform this Agreement and all other agreements,
documents and certificates contemplated or required of it hereby
(collectively, the "Buyers' Documents"), subject to the Required
Statutory Approvals. The execution, delivery and performance by
the Buyers of each of Buyers' Documents have been, or will by the
Closing be, duly approved by the respective boards of directors
of the Buyers and the shareholders of Southwest, and no other
corporate action on the part of the Buyers is necessary to
approve and authorize the execution, delivery and performance of
this Agreement and the Buyers' Documents. Each of Buyers'
Documents has been duly and validly executed and delivered by the
Buyers party thereto and constitutes the valid and binding
agreement of such Buyer, enforceable against such Buyer in
accordance with its terms.
(c) Non-contravention. The execution, delivery
and performance of each of Buyers' Documents by the Buyers and
the consummation by the Buyers of the transactions contemplated
hereby and thereby will not
39
(i) violate or conflict with any 33
provision of the articles of incorporation or bylaws of
Enterprises;
(ii) breach, violate or constitute an
event of default (or an event which with the lapse of
time or the giving of notice or both would constitute
an event of default) under, or give rise to any right
of termination, cancellation, modification or
acceleration under, any note, bond, indenture,
mortgage, security agreement, lease, franchise or other
material agreement, instrument or obligation to which
Enterprises is a party, or by which Enterprises or any
of its respective properties or assets is bound, or
result in the creation of any lien, claim or
encumbrance or other right of any third party of any
kind whatsoever upon the properties or assets of
Enterprises pursuant to the terms of any such
instrument or obligation, which breach, violation, or
event of default would result in a material adverse
effect on Enterprises;
(iii) violate or conflict with any
Applicable Law applicable to Enterprises, where such
violations or conflicts, viewed individually or in the
aggregate, may reasonably be expected to result in
Losses to the TBG Shareholders greater than $1.5
million; or
(iv) require, on the part of
Enterprises, any filing or registration with, or
permit, license, exemption, consent, authorization or
approval of, or the giving of any notice to, any
Governmental Authority, except for the Required
Statutory Approvals.
4.02 Capital Stock.
(a) Enterprises. The authorized capital stock of
Enterprises consists of 1,000,000,000 shares of Enterprises
Common Stock of the par value of $1.00 per share, and 100,000,000
shares of preferred stock. As of April 3, 1998, 444,248,170
shares of Enterprises Common Stock were issued and outstanding,
all of which issued and outstanding shares are validly issued,
fully paid and non-assessable. As of April 3, 1998 there were no
shares of preferred stock issued and outstanding.
(b) Enterprises Stock to be Issued in Exchange.
The Enterprises Common Stock to be issued to the TBG Shareholders
in the Exchange will be at the Effective Time duly authorized,
validly issued, fully paid and non-assessable and free of
preemptive rights, and will not be subject to any lien, charge,
claim, encumbrance, restriction or adverse right or interest
whatsoever, except applicable restrictions under federal and
state securities laws, and except that those shares that are to
be deposited with the Shareholders' Representative pursuant to
Article I shall be subject to the terms of the Shareholders'
Representative Agreement.
40
4.03 Reports and Financial Statements. Since November 34
21, 1986, Enterprises has filed with the Securities and Exchange
Commission ("SEC") all material forms, statements, reports and
documents (including all exhibits, amendments and supplements
thereto) required to be filed by it under the Securities Act of
1933, as amended (the "Securities Act"), the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the Trust
Indenture Act of 1939, as amended, and the respective rules and
regulations thereunder, all of which complied in all material
respects with all applicable requirements of the appropriate acts
and the rules and regulations thereunder. Enterprises has
previously delivered to TBG copies of (1) its Annual Reports on
Form 10-K for the fiscal years ended December 31, 1995, December
31, 1996 and December 31, 1997 (the "Enterprises 10-K"), together
with a copy of the annual reports to stockholders for each such
year, and (2) its Proxy Statement for the annual meeting of
stockholders held April 17, 1998 (collectively, the "Enterprises
SEC Reports"). As of their respective dates, the Enterprises SEC
Reports 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. Each
of the audited consolidated financial statements and unaudited
interim consolidated financial statements, including any related
notes and schedules, of Enterprises included in or incorporated
by reference in such reports (the "Enterprises Financial
Statements") have been prepared in accordance with GAAP applied
on a consistent basis (except as may be indicated therein or in
the notes thereto) and fairly present the financial position of
Enterprises and its subsidiaries as of the dates thereof and the
results of their operations and changes in financial position for
the periods then ended, subject, in the case of the unaudited
interim financial statements, to normal year-end and audit
adjustments and any other adjustments described therein.
4.04 Absence of Certain Changes or Events. Except as
set forth in the Enterprises 10-K or the other Enterprises SEC
Reports, from December 31, 1997 through the date hereof: (a)
there has not been any material adverse change in the business,
operations, properties, assets, liabilities, condition (financial
or other), results of operations or prospects of Enterprises and
its subsidiaries, taken as a whole, and (b) Enterprises has not
made any declaration, setting aside or payment of any dividend or
other distribution with respect to any of Enterprises' capital
stock, except for regular quarterly cash dividends.
4.05 No Untrue Statements. To the knowledge of the
Buyers, no representation or warranty by the Buyers in this
Agreement or the schedules to this Agreement contains any untrue
statement of a material fact, or omits to state a material fact,
necessary to make the representations and warranties of the
Buyers herein or therein (giving full effect to any dollar, time
or other limitation specified in, and only with respect to the
subject matter contained in, such representations and warranties)
not materially misleading. The foregoing does not impose any
obligation to disclose the implications of disclosed facts.
4.06 Other. No representation or warranty is made by
Buyers except as expressly set forth in this Article IV.
41
ARTICLE V 35
OTHER AGREEMENTS
5.01 Continuing Operation of Business.
(a) Conduct of Business. TBG covenants and
agrees that TBG and its Subsidiary will each do or refrain from,
as the case may be, the following, on and after the date of this
Agreement and until the Closing hereunder (except as contemplated
by Section 5.09 below or upon the prior written consent of
Enterprises):
(i) Carry on its business in the
ordinary and regular course and not engage in any
material transaction or material activity or enter into
any material agreement or make any material commitment
except in the ordinary and regular course of business;
(ii) Carry on its business in all
material respects in the same manner as currently
conducted, and not institute or commit to institute any
material new methods of manufacture, purchase, sale,
lease, management or operations;
(iii) Not change or amend its articles
of incorporation or bylaws (except as necessary to
consummate the transactions contemplated by this
Agreement) or appoint or elect any person or director
or officer who is not serving as such on the date
hereof;
(iv) Not declare, pay or set aside or
pay any dividend (except for scheduled dividends paid
in cash) or other distribution of assets in respect of
its capital stock except for (1) distributions from the
Subsidiary to TBG, or (2) those permitted by this
Agreement;
(v) Not issue, sell, grant options,
warrants or rights to purchase or subscribe to, or
enter into any arrangement or contract with respect to
the issuance, sale, purchase or redemption of, any of
its capital stock or any securities or obligations
convertible into or exchangeable for any shares of its
capital stock, or otherwise make changes in its capital
structure;
(vi) Not organize any subsidiary,
acquire any capital stock or other equity securities of
any other corporation, or acquire any equity or
ownership interest in any business, and not merge with
(except as contemplated by this Agreement), liquidate
into or otherwise combine with any other business,
person or entity;
(vii) Preserve its corporate existence,
and use its reasonable commercial efforts to preserve
in all material respects its business organization and
its relationships with suppliers, customers and others
having business relations with it;
42
(viii) Not incur any material 36
Indebtedness For Borrowed Money, or make drawings under
any line of credit other than in the ordinary course of
business, not guarantee any material obligation (other
than endorsements of negotiable instruments in the
ordinary course of business), and not permit or suffer
any of its assets to be subjected to any mortgage,
pledge, lien, security interest, encumbrance,
restriction or charge of any kind, except for Permitted
Liens or endorsements of negotiable instruments in the
ordinary course of business;
(ix) Not grant or announce any increase
in the compensation of or benefits to (including,
without limitation, deferred compensation) its
officers, directors, or employees, or retirees, whether
now or hereafter payable, except customary increases
and bonuses based on policies currently in effect and
the regular promotion of employees and as otherwise
provided in this Agreement;
(x) Not make any capital expenditure
and not make any new commitment for additions to
property, plant or equipment in excess of $25,000 per
item, in each instance except as may be provided in the
budget for TBG or its Subsidiary and except in the case
of an expenditure or commitment necessitated by a loss
which is covered by insurance (subject to deductibles);
(xi) Not enter into material marketing
commitments with significant soft drink franchisors or
customers, except for marketing agreements which are
materially consistent with current practice;
(xii) Use reasonable commercial efforts
to keep available the services of all employees (Buyers
acknowledging that some employees have terminated their
employment and others, including certain management,
will probably terminate their employment) and not enter
into any collective bargaining or other labor
agreements or commit to hire or terminate any employee
except for cause or otherwise in the ordinary course of
business;
(xiii) Not dispose of any asset having
a value in excess of $50,000, except in the ordinary
course of business or which is currently for sale;
(xiv) Not issue substitute stock
certificates to replace certificates which have been
lost, misplaced, mutilated, destroyed, stolen or are
otherwise irretrievable, unless an adequate bond or
indemnity agreement has been duly executed and
delivered to the issuer;
(xv) Not make any change in any method
of accounting or accounting principle or practice used
by it;
43
(xvi) Not defer beyond the Closing Date 37
any capital expenditures which, in accordance with the
current budget and the normal practice of TBG or its
Subsidiary, would have been made prior to the Closing
Date, and not defer any expenditures to fund benefit
plans which, in accordance with the normal practice of
TBG or its Subsidiary, would have been made prior to
the Closing Date;
(xvii) Not enter into any commitment
with third parties under which TBG or its Subsidiary is
obligated to purchase raw materials or inventory except
in the ordinary course of business consistent with
prior practice; and
(xviii) Not enter into any material
leases (whether as lessor or lessee) of real or
personal property.
(b) Manner of Consent. Any consent of
Enterprises shall be in writing, and shall not be unreasonably
withheld or delayed.
5.02 Expenses. Except as otherwise specifically
provided in this Agreement, the Buyers, TBG and the TBG
Shareholders shall each pay all costs and expenses incurred by
such party or on such party's behalf in connection with this
Agreement and the transactions contemplated hereby (including
those of investment bankers or other investment advisors);
provided, however, that TBG may pay the TBG Shareholders'
expenses so long as such payment is properly accounted for in the
TBG Adjusted Consolidated Working Capital.
5.03 Bottling Authorizations. At the request of
Enterprises, TBG and its Subsidiary will authorize the issuers of
soft drink franchises it holds to discuss such franchises and
related agreements with Enterprises and its representatives
(including without limitation the status of such franchises and
related agreements) and will also authorize such franchisors to
provide Enterprises with copies of such franchises and related
agreements.
5.04 Access.
(a) Pre-Closing. For the purpose of conducting,
at Enterprises' expense, a financial, business, environmental,
and legal due diligence review of TBG and its Subsidiary and
their respective operations, TBG shall: (1) provide Enterprises
with such information as Enterprises may from time to time
reasonably request with respect to TBG and its Subsidiary; (2)
provide Enterprises and its authorized representatives access
during regular business hours and upon reasonable prior notice to
the facilities, books, records, officers and employees of TBG and
its Subsidiary, as Enterprises may from time to time reasonably
request; and (3) permit Enterprises to make such investigation
thereof as Enterprises may reasonably request. All such
information which Enterprises receives which is treated as
confidential information by TBG or its Subsidiary shall be held
by the Buyers in confidence, shall not be disclosed to third
parties (except as required by Applicable Law) and shall not be
44
used by Buyers except for purposes of evaluating the Exchange. 38
(b) After the Closing. Enterprises will cause
TBG upon reasonable prior notice to provide the Shareholders'
Representative with reasonable access to TBG's books and records
relating to periods ending on or before the Closing Date and
TBG's personnel in connection with the exercise of the rights of
the Shareholders' Representative and the TBG Shareholders under
this Agreement or any agreement executed and delivered in
connection with this Agreement.
5.05 Other Offers. So long as this Agreement shall not
have been terminated, TBG shall not solicit or entertain any
offer for, or sell or agree to sell, or participate in any
business combination with respect to, any TBG Shares or any
shares of its Subsidiary, or any of the material assets of TBG or
its Subsidiary, except as contemplated by this Agreement and
except sales of inventory in the usual and ordinary course of
business.
5.06 Transfer Taxes. Each of the parties will use
their reasonable, good faith efforts legally to minimize any
sales, use and/or transfer Taxes associated with the transactions
contemplated in this Agreement. All such Taxes will be the sole
responsibility of the TBG Shareholders.
5.07 Tax Attributes, Returns and Audits.
(a) Tax Attributes. The following information
with respect to TBG and any Subsidiary has been, or prior to the
Closing will be, made available to Enterprises, to the extent
available in TBG's Dallas offices (but no representation or
warranty is made regarding the accuracy thereof): (1) the basis
of assets, (2) the current and accumulated earnings and profits,
(3) the amount of any net operating loss, net capital loss,
unused investment credit or other credit, and excess charitable
contributions, (4) the amount of any deferred gain or loss
arising out of any intercompany transaction, and (5) all items of
income or gain reported for financial accounting purposes in any
pre-Closing period that is required to be included in taxable
income for any post-Closing period (in accordance with Statement
of Financial Accounting Standards 109).
(b) Filing of Returns. The Shareholders'
Representative shall be responsible, at the TBG Shareholders'
expense, for preparing and filing, or causing TBG's Accountants
to prepare and file, all Returns for the taxable periods ending
on or before the Closing Date. In preparing such Returns, the
Shareholders' Representative (or such accounting firm, as the
case may be) shall not, without Enterprises' prior consent,
deviate from the manner in which any item of income or expense of
TBG or its Subsidiary was reported in the prior period, except as
required by changes in Applicable Law. Without the prior consent
of Enterprises or except as required by the preceding sentence,
the Shareholders' Representative shall not propose on or in any
such Returns to make any election to take any action or position
which might have an adverse impact on TBG or any consolidated
group of which it is considered a part for tax purposes with
respect to any period ending after the Closing Date. Such
45
Returns shall be submitted to Enterprises for review at least 15 39
Business Days before the earlier of the filing or due date for
any such Returns. Enterprises shall cause an appropriate officer
of TBG or its Subsidiary or the legal successor thereof to sign
such Returns (which officer may, by appointment by Enterprises
and at Enterprises' direction, be a former officer of TBG).
Enterprises shall be responsible for filing or causing TBG to
file all Returns for taxable periods ending subsequent to the
Closing Date.
(c) Control of Audits. Notwithstanding Section
6.07, the Shareholders' Representative shall, at the expense of
the TBG Shareholders, control and conduct any audit of, and
settle any matter relating to, liability for Taxes, refunds or
adjustments related to the Taxes of TBG and any Subsidiary for
all taxable periods ending on or before the Closing Date;
provided, however, that, without Enterprises' consent (which
shall not be unreasonably withheld or delayed), (1) any matter in
connection with any tax return of TBG or its Subsidiary which
could affect TBG's or its Subsidiary's liabilities, refunds or
adjustments for any period following the Closing Date shall not
be changed or adjusted; and (2) the Shareholders' Representative
will not consent to or acquiesce to any action which would
increase the liabilities of TBG or its Subsidiary for Taxes in
excess of the amount accrued as current liabilities for Taxes in
the TBG Adjusted Consolidated Working Capital.
(d) Cooperation. Enterprises and the
Shareholders' Representative shall, upon reasonable notice,
provide each other with the right to have access to, and to copy
and use, any records or information that may be relevant in
connection with the preparation of any Tax returns, or any audit
or other examination by any authority or any judicial or
administrative proceeding relating to liability for Taxes.
Enterprises and the Shareholders' Representative shall provide
each other with such additional cooperation and assistance in
matters related to Taxes as may be reasonably requested. Without
limiting the foregoing, promptly after the Closing the
Shareholders' Representative shall cause to be delivered to
Enterprises copies of all federal and state income Tax Returns of
TBG and any Subsidiary for taxable periods ending on December 31,
1986 through and including December 31, 1994. The party
requesting access or assistance hereunder shall reimburse the
other party for reasonable out-of-pocket expenses incurred by it
in providing such access or assistance. Any position taken by
Enterprises on a Tax return with respect to an item for which the
TBG Shareholders bear economic responsibility under the
provisions of this Agreement shall be defended by Enterprises in
good faith.
5.08 TBG Shareholders' Approval. This Agreement and
the transactions contemplated hereby will be submitted to the TBG
Shareholders (and Southwest, in its capacity as a holder of TBG
Shares) for their approval. Subject to the fiduciary duties of
the Board of Directors of TBG under Applicable Law, TBG shall use
its best efforts to obtain TBG shareholder approval and adoption
of this Agreement and the transactions contemplated hereby (the
"TBG Shareholders' Approval").
46
5.09 Certain Obligations Under the Shareholders' 40
Representative Agreement. Enterprises acknowledges and agrees to
its obligations set forth in Section 4.4 and Section 4.6 of the
Shareholders' Representative Agreement as binding on it even
though it is not a party to such agreement.
5.10 Certain Payments to Employees. Promptly after the
Closing, Enterprises shall cause TBG to make payments to
employees in the amounts specified in Exhibit B.
5.11 Employee Matters.
(a) Continued Employment. Enterprises
acknowledges and agrees that it shall cause TBG and its
Subsidiary to continue to employ their respective employees
immediately after the Closing subject to compliance with
Enterprises' written policies distributed to employees (the
"Continuing TBG Employees"), but the foregoing does not give any
person the right to be employed or restrict in any way TBG's
and/or its Subsidiary's and/or Enterprises' right to terminate
any person's employment after the Closing.
(b) Employee Benefit Plans. Except as
specifically provided in this Section 5.11: (i) nothing in this
Agreement obligates Enterprises to cause TBG and/or its
Subsidiary to continue any existing Employee Benefit Plan for the
Continuing TBG Employees; and (ii) without limiting the
foregoing, TBG and/or its Subsidiary may amend or terminate any
existing plan subject to applicable law and the plan terms. If
Enterprises offers Continuing TBG Employees participation in an
Enterprises plan in lieu of (or in addition to) an Employee
Benefit Plan maintained by TBG or its Subsidiary, then
Enterprises will give such employees credit for years of service
with TBG or its Subsidiary or any predecessor in interest for
purposes of participation, vesting and eligibility for early
retirement benefits, but not necessarily for purposes of accrual
of benefits.
(c) Severance Payments. Enterprises agrees that
it will cause TBG and/or its Subsidiary to make payments in
accordance with the severance policy in a lump sum amount to each
Continuing TBG Employee terminated after the Closing pursuant to
the following formula:
Four days pay for each year of service (the daily
rate is calculated by dividing 260 into the
employee's salary)
Four days pay for each year over age 40
Five days pay for each $10,000 of base pay
Receipt of a separation package is contingent upon the terminated
employee signing a release and waiver of liability for his or her
termination. Also, separation packages will not be made
available to employees terminated for fraud, misconduct, or other
acts of bad faith.
Such payments shall not be reduced or otherwise affected by
the fact that any otherwise eligible person obtains employment
with another person during the period in which severance payments
47
are being made. Upon the termination of employment of any of the 41
Continuing TBG Employees entitled to such severance payments, TBG
or its Subsidiary shall inform such terminated employees of their
rights to such severance payments.
(d) Bonus Plan. Enterprises will cause TBG
and/or its Subsidiary to make payments under the Company-wide
"Annual Performance Incentive" bonus plan described in Disclosure
Schedule 5.11(d) to be made in such amount accrued on TBG's books
at the Closing Date and such payments relating to periods through
the Closing Date shall be taken into account in determining the
adjustment to the Exchange Consideration pursuant to
Section 1.04.
5.12 No Cancellation of Officer and Director Insurance.
Enterprises will not, and it shall cause each of its current and
future subsidiaries and affiliates not to, cancel any insurance
providing coverage to TBG and its Subsidiary for officers' and
directors' acts and omissions in such capacity.
5.13 Public Announcements. No public announcement
shall be made with regard to the transactions contemplated by
this Agreement without the prior consent of TBG and the Buyers;
provided, however, that either TBG or the Buyers may make such
disclosure if it is required to do so by Applicable Law. TBG and
the TBG Shareholders, on the one hand, and the Buyers, on the
other, agree that they will not make any disclosures about the
contents of this Agreement or cause the contents hereof to be
publicized in any manner whatsoever by way of interviews,
responses to questions or inquiries, press releases or otherwise,
or otherwise disclose any aspect of the transactions provided for
hereunder, without prior notice to and approval of the other
party, except for disclosure to the employees as coordinated with
TBG and the Buyers and otherwise to employees, attorneys,
accountants and advisors to the parties having a need to know, to
the TBG Shareholders, and except as may otherwise be required by
Applicable Law; provided, further, that if either party
determines that it is required by Applicable Law or its prior
disclosure practices to make any such disclosure, then it will
notify the other party prior to making such disclosure in order
to permit the other party to obtain an appropriate protective
order. TBG and the Buyers will in all events discuss any public
announcements or disclosures concerning the transactions
contemplated by this Agreement with the other party prior to
making such announcements or disclosures.
5.14 Current Public Information. At all times after
the Effective Time, Enterprises shall file the reports required
to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations promulgated thereunder, and will
take such further action as any holder of Enterprises Common
Stock issued in the Exchange may reasonably request, all to the
extent required from time to time to enable such holder to sell
Enterprises Common Stock without registration under the
Securities Act within the limitation of the exemptions provided
by Rule 144 promulgated under the Securities Act. Upon the
request of any holder of Enterprises Common Stock issued in the
Exchange, Enterprises shall deliver to such holder a written
statement as to whether it has complied with such reporting
requirements.
48
5.15 Brokers. TBG and the TBG Shareholders hereby 42
represent and warrant for the benefit of Buyers that all
negotiations relative to this Agreement and the transactions
described herein have been conducted by TBG and the TBG
Shareholders directly with Buyers, without the assistance or
intervention on behalf of TBG or the TBG Shareholders by any
other person which would give rise to any valid claim against
Buyers, TBG or the TBG Shareholders for a finder's fee, brokerage
commission, investment adviser's fee or other like payment,
except for any fees and expenses due ▇▇▇▇▇▇▇ & Company, Inc.,
which shall be paid by the TBG Shareholders.
5.16 Consent as to Representation. Enterprises and
Southwest each acknowledge that the law firm of ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP is expected, after the Exchange, to
represent the TBG Shareholders and the Shareholders'
Representative in connection with this Agreement and agrees that
it shall be entitled to represent the TBG Shareholders and the
Shareholders' Representative in any disputes that arise
concerning this Agreement or any other agreement to be delivered
pursuant to this agreement and waives any conflict of interest
that may result from its representing TBG under this Agreement or
otherwise.
ARTICLE VI
CERTAIN POST-CLOSING EXCHANGE CONSIDERATION ADJUSTMENTS
To provide for a return of some or all of the Exchange
Consideration to Enterprises under certain circumstances, and to
provide for the payment of increased Exchange Consideration to
the TBG Shareholders under other circumstances, based upon
breaches of certain representations and warranties and non-
compliance with certain covenants and as otherwise provided in
this Article VI or under Article VI of the CCBG Agreement, the
parties agree to the following limitations and procedures for a
post-Closing Exchange Consideration adjustment, which shall be in
addition to and not in lieu of the post-Closing adjustments
provided for in Section 1.04 of this Agreement. The TBG
Shareholders acknowledge that they are obligated to make
adjustments to the "Merger Consideration" (as defined in the CCBG
Agreement) with respect to matters involving TBG and its
Subsidiary, but only to the extent provided in the CCBG
Agreement.
6.01 Certain Definitions. For the purposes of this
Article VI, the following definitions apply:
"Buyers' Protected Parties" means Enterprises, the TBG
Companies, the CCBG Companies, and their affiliated
companies and any successors or assigns thereto.
"Claim" or "Claims" means, as the context may require,
a claim or claims for Losses asserted under this Article VI.
"Claimant" means the person or entity asserting a
Claim.
49
"Finally Resolved" means that the amount due to the 43
Claimant has been finally determined under the provisions of
Section 6.06 or by the decision of a court of competent
jurisdiction from which there is no further appeal.
"Loss" or "Losses" means losses, liabilities, damages,
costs (including required (but not permissive)
indemnification expenses to officers, directors, employees
and agents of any of Buyers' Protected Parties and court
costs) and expenses (including the reasonable fees and
expenses of attorneys and accountants relating to Claims
based on Third Party Actions).
"Recipient of Claim" means (1) the Shareholders'
Representative, if the Claim is asserted under Section
6.02(a), (2) the TBG Shareholder against whom the Claim is
asserted, if the Claim is asserted under Section 6.02(b),
and (3) Enterprises, if the Claim is asserted under Section
6.04.
"Stock Claims" means a Claim based upon a breach
of a Stock Representation.
"Stock Representations" means the several
representations and warranties of the TBG Shareholders in
the Transmittal Letters.
"Third Party" means a person or entity other than the
parties to this Agreement and/or the CCBG Agreement and
their affiliates.
"Third Party Action" means a proceeding, demand or
controversy (1) in which an asserted Loss arises from a
Claim by a Third Party and (2) which is the basis for a
Claim. The Tax matters dealt with specifically in Section
5.07(b) shall not be subject to Section 6.07.
6.02 Post-Closing Reduction of Exchange Consideration.
(a) Certain CCBG and TBG Representations and
Warranties and Other Matters. The TBG Shareholders acknowledge
that they are obligated to make adjustments to the Merger
Consideration with respect to matters involving TBG and its
Subsidiary, but only to the extent provided in the CCBG merger
agreement.
(b) TBG Shareholder Representations, Warranties
and Covenants. Subject to the limitations contained herein, the
Exchange Consideration otherwise payable to any individual TBG
Shareholder shall be reduced by the amount of any Losses actually
suffered or incurred by any of Buyers' Protected Parties arising
out of or with respect to any breach or inaccuracy of the Stock
Representations of such TBG Shareholder and any breach or non-
compliance by such TBG Shareholder with respect to any covenant
or agreement made in such TBG Shareholder's Transmittal Letter.
(c) No Subrogation, Etc. Except as provided in
Section 6.03(a), no TBG Shareholder shall have any rights
whatsoever against any of the TBG Companies or the CCBG
50
Companies, by way of subrogation or otherwise, for contribution 44
or indemnity or any other payment whatsoever for any reduction to
the Exchange Consideration that may occur under this Article VI.
6.03 Limitations on Reduction of Exchange
Consideration.
(a) Reduction of Losses. The amount of Losses
suffered by Buyers' Protected Parties shall be reduced by the
amount, if any, of the recovery (reduced by the cash Taxes
actually payable with respect to such recovery and any reasonable
expenses actually incurred in obtaining such recovery) Buyers'
Protected Parties shall have received with respect thereto from
any other person or entity (including any insurance recovery and
the present value of any income tax benefit). If such a recovery
is received by any of Buyers' Protected Parties after it receives
a payment or other credit under this Agreement with respect to
Losses, then a refund equal in aggregate amount of the recovery,
net of cash Taxes actually payable and expenses actually
incurred, shall be made promptly to the TBG Shareholders in
accordance with their respective TBG Interests.
(b) Maximum Liability and Payment -- Stock
Claims. The maximum liability of the TBG Shareholders for Stock
Claims, and the manner of payment, shall be as follows:
(i) the maximum liability of any TBG
Shareholder for any Losses for Stock Claims shall be the
aggregate amount of the Exchange Consideration received by
such TBG Shareholder.
(ii) Within 10 Business Days after a Stock
Claim has been Finally Resolved, such TBG Shareholder shall
pay to Enterprises the full amount of such Claim.
6.04 Increase in Exchange Consideration. The Exchange
Consideration shall be increased by the amount of any Losses
suffered or incurred by the TBG Shareholders as a result of or
with respect to any breach of any representation, warranty,
covenant or agreement by the Buyers contained in this Agreement
or any other agreement or instrument executed and delivered by
Buyers in connection with the transactions contemplated herein.
Such increase shall be paid by Enterprises in Enterprises common
stock (valued at the Notional Value) to the TBG Shareholders in
accordance with their respective TBG Interests. In no event
shall the Buyers' aggregate liability for Losses hereunder and
under the CCBG Agreement exceed $25,000,000 (but not with respect
to the payment of the Exchange Consideration pursuant to Section
1.03 or Section 1.04 or claims that may exist under applicable
securities laws).
6.05 Time Limitations for Assertion of Claims.
(a) Survival. Only the Stock Claims, Tax Claims,
Environmental Claims and Competition Claims shall survive the
Closing, as follows:
(i) Stock Claims will survive the Closing
indefinitely;
51
(ii) Tax Claims will survive the Closing for 45
the longest applicable statute of limitations, plus 90
days, it being specifically understood that a Tax Claim
may be made prior to the Claimant's having made actual
payment, as contemplated under Section 6.02(a)(i)(B) or
Section 6.02(a)(i)(C), and
(iii) Environmental and Competition Claims
shall survive the Closing for 18 months.
(b) Post-Closing Acts or Omissions. There shall
be no reduction of the Exchange Consideration for Losses accruing
after the Closing Date which arise from Claims made with respect
to acts or omissions occurring after the Closing Date even though
those acts or omissions are consistent with, or a continuation
of, those preceding the Closing Date; provided, however, that
nothing in the foregoing sentence shall in any way limit the
ability of the Buyers to achieve a reduction of the Exchange
Consideration for Losses accruing from Claims made with respect
to such pre-Closing acts or omissions.
6.06 Procedure for Claims.
(a) Generally. Claimants must assert Claims as
promptly as practicable and no later than the expiration of the
applicable period provided in Section 6.05(a). Each Claim must
be in writing and set forth in reasonable detail the basis for
the Claim and the Section of this Agreement under which the Claim
arises.
(b) To Whom Sent. For Claims against one or more
individual TBG Shareholders pursuant to Section 6.02(b), the
Notice of a Claim shall be sent to the individual TBG
Shareholder(s). Notice of a Claim by one or more TBG
Shareholders for an increase of the Exchange Consideration shall
be sent to Enterprises.
(c) Response by Recipient. The Recipient of a
Claim shall, within 30 days after receipt of the Claim, give
notice to the Claimant either that he accepts the Claim or
objects to the Claim. If no notice is given within such period,
it shall be conclusively presumed that the Recipient of Claim has
accepted the Claim. If the Recipient of Claim timely objects to
the Claim, the Claimant and the Recipient of Claim shall
negotiate in good faith to determine the amount, if any, of the
Loss. If no resolution of the Claim has occurred within 90 days
after the receipt of the Claim by the Recipient of Claim, then
either party may institute proceedings in a court of competent
jurisdiction to resolve the Claim.
(d) Payment Notice to the TBG Shareholders by the
Shareholders' Representative. Whenever a Loss becomes Finally
Resolved, the Shareholders' Representative shall promptly notify
each TBG Shareholder of the amount of any payment required to be
made by the TBG Shareholders pursuant to this Article VI and that
portion for which each TBG Shareholder is liable. Each payment
from the TBG Shareholders is due to Enterprises no later than 10
Business Days from the date on which the foregoing notice to the
TBG Shareholders is given by Enterprises; provided, however, that
payments may be deferred until the earlier to occur of (1) the
52
total payments being at least $100,000 and (2) the next calendar 46
quarter end at least 10 Business Days after an Open Item becomes
conclusive and binding.
6.07 Third Party Action. When a Claim involves a Third
Party Action, the Recipient of Claim shall have the option to
prosecute or defend, at its expense, the Third Party Action,
unless the potential liability of the Claimant in the Third Party
Action exceeds the maximum liability of the Recipient of Claim
established under Section 6.03 or Section 6.04. If the Recipient
of Claim does not or cannot elect this option, the Claimant shall
diligently prosecute or defend such claim as if it were paying
any Losses arising from the Claim, but the Claimant shall not
settle such Claim without the consent of the Recipient of Claim,
which shall not be unreasonably withheld or delayed. If the
Recipient of Claim has undertaken to prosecute or defend the
Third Party Action, as permitted herein, then (1) the Claimant
may participate, at its own expense, in any and all proceedings
related to the Third Party Action and shall be entitled to
receive copies of all notices and pleadings or other submissions
in any judicial or regulatory proceeding, (2) there shall be no
settlement of the Third Party Action without the consent of the
Claimant (which shall not be unreasonably withheld or delayed),
and (3) if the Claim is fully satisfied, the Recipient of Claim
shall be subrogated to all rights and remedies of the Claimant.
If the Recipient of Claim submits to the Claimant a bona fide
settlement offer from the Third Party Claimant (which settlement
offer shall include as an unconditional term of it the release by
such Third Party of the Claimant from all liability in respect of
such Claim) and the Claimant refuses to consent to such
settlement, then thereafter the Recipient of Claim's liability to
the Claimant under this Article VI with respect to such Third
Party Action shall not exceed the settlement amount included in
said bona fide settlement offer, and the Claimant shall either
assume the defense of such Third Party Action or pay the
Recipient of Claim's attorney's fees and other out-of-pocket
costs incurred thereafter in continuing the defense of such Third
Party Action. All parties to this Agreement shall cooperate in
the defense and prosecution of Third Party Actions and shall
furnish such records, information and testimony, and shall attend
such conferences, discovery proceedings, hearings, trials and
appeals, as may be reasonably requested in connection therewith.
6.08 Investigations. No investigation or other
examination of TBG or its Subsidiary by the Buyers or of the
Buyers by TBG shall affect the survival of any representations,
warranties or covenants contained herein.
6.09 Exclusive Remedy. If the Closing occurs, then the
remedies provided in this Article VI constitute the sole and
exclusive remedies for recoveries against another party for
breaches or failures to comply with or non-fulfillment of the
representations, warranties, covenants and agreements in this
Agreement or in the exhibits, schedules and other attachments to
this Agreement or in any agreement, instrument or document
executed and delivered by a party pursuant to this Agreement and
for the matters specifically listed in this Article VI; provided,
however, that nothing in this Agreement shall limit the right of
53
a party to ▇▇▇ at law or in equity, without following the 47
procedures set forth in Section 6.06 of this Agreement: (1) to
enforce the performance of the procedures of this Article VI or
any other covenant or agreement in this Agreement or of any
contract, document or other instrument executed and delivered
pursuant to this Agreement by any remedy available to it at law
or in equity; (2) to recover damages suffered by the failure of a
party to pay expenses required to be paid related to the
transactions contemplated by this Agreement; or (3) to recover
for common law fraud.
ARTICLE VII
THE CLOSING
7.01 Time, Date and Place of Closing; Articles of
Exchange. The payments and deliveries contemplated by this
Agreement to be made at the Closing shall be made at the offices
of ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, at 2:00 p.m., local time, on June 5, 1998, or,
if later, one Business Day after all the conditions to Closing
have been satisfied or such other date and location as may be
mutually agreeable, and immediately thereafter the Articles of
Exchange to be executed and delivered pursuant to Section 7.05(b)
and Section 7.06(b) shall be filed with the Secretary of State of
Nevada. The date on which the last of such payments, deliveries
and filings occurs is the "Closing Date," and the events
comprising such payments, deliveries and filings are collectively
the "Closing."
7.02 Events Comprising the Closing. The Closing shall
not be deemed to have occurred unless and until the payments,
deliveries and filings contemplated by Section 7.01 have been
made, and none of these items shall have been deemed to be paid,
delivered or filed unless and until all of them have been paid,
delivered or filed.
7.03 Conditions to Obligations of Buyers. The
obligations of Buyers to make the deliveries and payments under
this Article VII are subject to the fulfillment prior to or at
the Closing Date of each of the following conditions, any one or
more of which may be waived by Enterprises:
(a) Representations and Warranties. The
representations and warranties of the TBG Shareholders contained
in the Transmittal Letters and of TBG contained in Article III
hereof shall be true as of the date when made and again as of the
Closing Date as if made on such date (except for changes
permitted or contemplated by this Agreement and disregarding any
time, materiality or knowledge qualifiers) and the Buyers shall
not be aware of any Competition Claims as of the Closing Date,
or, to the extent they are not true or Buyers are aware of such
Competition Claims, the Buyers' aggregate Losses from such
breach(es) and from such Competition Claims of which Buyers are
aware would not reasonably be expected to exceed $1 million. In
making the estimation of expected Losses, the otherwise
applicable Deductibles shall not be considered.
(b) Compliance. The TBG Shareholders and TBG
shall have performed and complied in all material respects with
all agreements and conditions required by this Agreement to be
54
performed or complied with by them prior to or at the Closing 48
Date.
(c) Governmental Actions. No Governmental
Authority shall have instituted any action, suit or proceeding,
or given notice of its intent to do so, that has not subsequently
been withdrawn, dismissed with prejudice or otherwise eliminated,
which in the reasonable opinion of Enterprises and its counsel
has or is likely to have a material and adverse effect on the
transactions contemplated by this Agreement.
(d) Adverse Change. Neither TBG nor its
Subsidiary has suffered any material adverse change in its
respective business, prospects, financial condition, working
capital, assets, liabilities (absolute, secured, contingent or
otherwise), reserves or operations; provided, however, that a
material adverse change shall not be deemed to have occurred by
reason of (1) the seasonal nature of the business, (2) a change
in the business or assets of TBG after the date of this Agreement
either contemplated by this Agreement or its Exhibits and
Schedules or relating solely to market conditions beyond the
control of TBG, or (3) damage or destruction to the property or
assets that is reasonably insured and can be replaced or restored
without long-term disruption of the business of TBG or its
Subsidiary taken as a whole.
(e) Consents. Buyers shall have received (1)
commitments from ▇▇ ▇▇▇▇▇▇ Company that it will consent to the
Exchange and will enter into its standard form production, sale
and distribution agreements for such soft drink products with
Southwest, TBG or Enterprises, including any special provisions
which Enterprises has in its other agreements with it in other
territories, and (2) any other consents required as a result of
the Exchange, the failure to obtain would have a material adverse
effect on TBG and its Subsidiaries taken as a whole.
(f) Satisfactory Documents. All agreements,
certificates, opinions and other documents delivered by TBG or
the TBG Shareholders to Buyers hereunder, the form of which is
not prescribed in this Agreement or an Exhibit hereto, shall be
in form and substance reasonably satisfactory to Enterprises.
(g) Delivery of Shares. Each holder of a
certificate or certificates representing TBG Exchange Shares
shall have (1) surrendered such certificate(s) to Enterprises,
and (2) delivered to Enterprises (A) an executed Transmittal
Letter in the form of Exhibit E (the "Transmittal Letter") and
(B) such other documents as may be necessary to establish an
exemption from registration for the Enterprises Common Stock
under the Securities Act and any applicable state blue sky laws.
(h) Copies of Resolutions. TBG shall have
delivered certified copies of the resolutions of the TBG Board of
Directors and the TBG Shareholders authorizing the consummation
of the transactions herein contemplated.
(i) Opinion. TBG and its Subsidiary shall have
delivered an opinion of counsel, dated the Closing Date, in the
form of Exhibit F.
55
(j) Approvals. All governmental approvals 49
regarding the proposed transaction shall have been obtained and
all waiting periods shall have expired without further requests
for information.
(k) CCBG Merger. The Merger (as defined in the
CCBG Agreement) shall be effective.
(l) Upstream Merger. The Upstream Merger shall be
effective.
(m) Termination of Certain TBG Agreements. The
agreements listed in Disclosure Schedule 7.03(m) shall have been
terminated.
7.04 Conditions to Obligations of TBG. The obligations
of TBG to make the deliveries under this Article VII and to close
this transaction are subject to the fulfillment prior to or at
the Closing Date of each of the following conditions, any one or
more of which may be waived by TBG:
(a) Representations and Warranties. The
representations and warranties of Buyers contained in Article IV
shall be true as of the date when made and as of the Closing Date
as if made on such date or, to the extent they are not true, the
TBG Shareholders' aggregate Losses from such breach(es) would not
reasonably be expected to exceed $1 million.
(b) Compliance. Buyers shall have performed and
complied in all material respects with all agreements and
conditions required by this Agreement to be performed or complied
with by them prior to or at the Closing Date.
(c) Governmental Action. No Governmental
Authority shall have instituted any action, suit or proceeding,
or given notice of its intent to do so, that has not subsequently
been withdrawn, dismissed with prejudice or otherwise eliminated,
which in the reasonable opinion of TBG and its counsel has or is
likely to have a material and adverse effect on the transactions
contemplated by this Agreement.
(d) Approval of TBG Shareholders. The execution,
delivery and performance of this Agreement (including the
payments contemplated by this Agreement) and the Exchange shall
have been approved by all of the TBG shareholders (including
Southwest).
(e) Satisfactory Documents. All agreements,
certificates, opinions and other documents delivered by Buyers to
TBG hereunder, the form of which is not prescribed in this
Agreement or an exhibit hereto, shall be in form and substance
reasonably satisfactory to TBG.
(f) Opinion of Counsel. Buyers shall have
delivered an opinion of counsel dated the Closing Date, in the
form of Exhibit G.
56
(g) Approvals. All governmental approvals 50
regarding the proposed transaction shall have been obtained and
all waiting periods shall have expired without further requests
for information.
(h) CCBG Merger. The Merger shall be effective.
(i) Copies of Resolutions. Buyers shall have
delivered certified copies of the resolutions of the respective
Board of Directors of the Buyers and of the sole shareholder of
Southwest authorizing the consummation of the transactions herein
contemplated.
7.05 Deliveries by TBG at the Closing. TBG shall
deliver the following at the Closing:
(a) Certificate. A certificate dated the Closing
Date executed by a Co-Chairman and the Secretary of TBG
certifying to the best of TBG's knowledge that (1) solely for
purposes of the Buyers determining whether the Closing conditions
in Section 7.03 have been met, the representations and warranties
of TBG hereunder are true and correct on the Closing Date as if
made on and as of such date except for changes contemplated by
this Agreement or permitted by this Agreement or if not, to what
extent they are not and that there are no Competition Claims or
if there are, the extent to which there are such Competition
Claims, (2) the TBG Shareholders and TBG have performed and
complied with all agreements and covenants required by this
Agreement to be performed or complied with by them prior to or at
the Closing or if not in what respects they have not, (3) the
applicable conditions precedent to the obligations of TBG
hereunder have been fulfilled or waived or if not in what
respects they are not, and (4) the Shareholders' Representative
Agreement has been signed by each TBG Shareholder.
(b) Articles of Exchange. The Articles of
Exchange, executed by TBG.
(c) Minute Books. The minute books, stock books
and corporate seal of TBG and its Subsidiary.
(d) Resignation. The resignation, dated as of
the Closing Date, of each director and officer of TBG and its
Subsidiary, as such, [but not as an employee].
(e) Other. Such other documents, certificates
and opinions as the Buyers may reasonably and timely request to
document or to consummate more effectively the transactions
contemplated by this Agreement or to evidence the compliance by
TBG, the TBG Shareholders or TBG's Subsidiary with any condition
or obligation in this Agreement.
7.06 Deliveries by Enterprises at the Closing.
Enterprises shall deliver the following at the Closing:
(a) Certificates. A certificate dated the
Closing Date executed by the Chairman, President or Vice
President and the Secretary or Assistant Secretary of each of the
Buyers certifying to the best of Enterprises' knowledge that (1)
the representations and warranties of each of the Buyers
57
hereunder are true and correct on the Closing Date as if made on 51
and as of such date or if not, to what extent they are not, (2)
each of the Buyers has performed and complied with all
agreements, covenants and conditions required by this Agreement
to be performed or complied with by Buyers prior to or at the
Closing or if not in what respects they have not, and (3) the
applicable conditions precedent to the obligations of Buyers
hereunder have been fulfilled or waived or if not in what
respects they are not.
(b) Articles of Exchange. The Articles of
Exchange, executed by Southwest.
(c) Exchange Consideration. The Estimated
Exchange Consideration, delivered in accordance with Section 1.03
(b).
(d) Other Documents. Such other documents,
certificates and opinions as TBG may reasonably and timely
request to document or to consummate more effectively the
transactions contemplated by this Agreement or to evidence the
compliance by the Buyers with any condition or obligation in the
Agreement.
ARTICLE VIII
TERMINATION AND ABANDONMENT
8.01 Termination and Abandonment. This Agreement may
be terminated at any time and the Exchange abandoned at any time
prior to the Closing without liability of any party to any other
party, except as provided in Section 8.02 below, under the
following circumstances:
(a) Mutual Agreement. The mutual written
agreement of TBG, pursuant to a resolution approved by its board
of directors, and Enterprises.
(b) TBG. By the board of directors of TBG if the
Closing has not occurred before July 15, 1998 because all
conditions to TBG's obligations have not been satisfied or waived
or because Buyers have not made all required deliveries, unless
the Closing has not occurred solely because of a Governmental
Objection.
(c) Enterprises. By Enterprises if the Closing
has not occurred before July 15, 1998 because all conditions to
Buyers' obligations have not been satisfied or waived or because
TBG has not made all required deliveries, unless the Closing has
not occurred solely because of a Governmental Objection.
(d) Governmental Authority. Either TBG or
Enterprises may terminate by written notice to the other if any
action or proceeding shall have been instituted before any
Governmental Authority or, to the knowledge of the party giving
such notice, shall have been threatened formally in writing by
any Governmental Authority with requisite jurisdiction, to
restrain or prohibit the transactions contemplated by this
Agreement or to subject one or more of the parties or their
directors or their officers to liability on the grounds that it
58
or they have breached any law or regulation or otherwise acted 52
improperly in connection with such transactions (a "Governmental
Objection"), and such action or proceeding shall not have been
dismissed or otherwise eliminated or such written threat shall
not have been withdrawn or rescinded or otherwise eliminated
before July 15, 1998.
8.02 Rights and Obligations Upon Termination. Upon the
termination of this Agreement, no party shall have any further
obligation to the other, except that (1) unless terminated by
mutual agreement or pursuant to Section 8.01(d), no termination
of this Agreement under any provision of this Article VIII shall
prejudice any claim a party may have under this Agreement that
arises prior to the effective date of such termination, and (2)
termination of this Agreement shall not terminate or otherwise
affect the rights and obligations set forth in Section 5.02 and
Section 5.13 of this Agreement (which shall survive termination
as independent obligations).
8.03 Return of Confidential Information. If this
Agreement is terminated and abandoned as provided in this Article
VIII, each party will, at the request of the other, return all
documents, work papers and other material of the requesting
party, including all copies thereof, relating to the transactions
contemplated by this Agreement, whether so obtained before or
after the execution of this Agreement, to the party furnishing
the same, and all information received by any party to this
Agreement with respect to the business of any other party shall
not at any time be used for the advantage of, or disclosed to
third parties by, such party to the detriment of the party
furnishing such information except as may be required by law;
provided, however, that this shall not apply to any document,
work paper, material, or any other information which is a matter
published in any publication for public distribution or filed as
public information with any Governmental Authority or is
otherwise in the public domain.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.01 Good Faith; Further Assurances. The parties
to this Agreement shall in good faith undertake to perform their
obligations under this Agreement, to satisfy all conditions, and
to cause the transactions contemplated by this Agreement to be
carried out promptly in accordance with the terms of this
Agreement. Upon the execution of this Agreement and thereafter,
the parties hereto shall do such things as may be reasonably
requested by the other parties hereto in order more effectively
to consummate or document the transactions contemplated by this
Agreement.
9.02 Notices. All notices, communications and
deliveries under this Agreement: (1) shall be made in writing,
signed by the party making the same; (2) shall specify the
Section of this Agreement pursuant to which it is given; (3)
shall either be delivered in person or by telecopier or a
nationally recognized next business day delivery service for next
business day delivery; (4) shall be deemed given (x) if delivered
in person, on the date delivered, (y) if sent by telecopier, on
59
the date transmitted (if the party, or its employee or agent, 53
giving the notice has no reason to believe that the transmission
was not made or received); or (z) if sent by a nationally
recognized next business day delivery service for next business
day delivery (with cost prepaid), on the first Business Day after
so sent; and (5) shall be deemed received (x) if delivered in
person, on the date of personal delivery, (y) if telecopied, on
the first Business Day after transmitted (if the party giving the
notice, or its employee or agent, has no reason to believe that
the transmission was not made or received), or (z) if sent by a
nationally recognized next business day delivery service for next
business day delivery, on the first Business Day after so sent.
Such notice shall not be effective unless copies are provided
contemporaneously as specified below, but neither the manner nor
the time of giving notice to those to whom copies are to be given
shall control the date notice is given or received. The
addresses and requirements for copies are as follows:
To Buyers:
▇▇. ▇▇▇▇ ▇. ▇▇▇
Executive Vice President
and Chief Financial Officer
Coca-Cola Enterprises Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇. ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ III
▇▇▇▇▇▇ & ▇▇▇▇▇▇
1000 Volunteer Building
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
* * * * * * *
To TBG (prior to Closing):
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
To the Shareholders' Representative or to the TBG
Shareholders, in care of the Shareholders'
Representative:
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Suite 3300
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
To individual TBG Shareholders, at the addresses
stated in their respective Transmittal Letters.
60
in either case with a copy to: 54
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
and
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ & Company, Inc.
Suite 200 -- Building B
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
or to such representative or to such other address as the parties
hereto may furnish to the other parties in writing. If notice is
given pursuant to this Section 9.02 of a permitted successor or
assign of a party to this Agreement, then notice shall be given
as set forth above to such successor or assign of such party.
9.03 Definition of Knowledge. For the purposes of
this Agreement:
(a) TBG. The phrases "to TBG's knowledge" or "to
its knowledge" and variations of them when used with respect to
TBG shall refer to all matters actually known to any of ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, E. T. ▇▇▇▇▇▇▇
III and ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ or which any of them had any reason to
know.
(b) Enterprises. The phrases "to Buyers'
knowledge" and variations thereof when used with respect to
Buyers shall refer to all matters actually known to any of ▇▇▇▇
▇. ▇▇▇, G. ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇ ▇. ▇▇▇▇ or which any
of them had reason to know.
9.04 Assignment. This Agreement is binding upon
the parties hereto, and their respective legal representatives,
heirs, successors and assigns, and inures to the benefit of the
parties and their respective legal representatives, heirs,
legatees, devisees, beneficiaries and other permitted successors
and assigns (and to or for the benefit of no other person
whatsoever). No assignment or transfer of rights and obligations
hereunder shall be made except with the prior written consent of
the parties hereto, except that Enterprises need not obtain TBG's
or TBG Shareholders' consent to Enterprises' assignment of rights
and delegation of obligations under this Agreement to an
affiliated corporation of Enterprises (which, for purposes of
this Agreement, shall be limited to any of Enterprises' direct
wholly-owned subsidiaries) that expressly assumes such
liabilities and obligations and except that a TBG Shareholder
need not obtain any other party's consent to any transfer or
assignment of rights and obligations under this Agreement, in
whole or in part, upon the death of a TBG Shareholder or upon
distributions from a non-individual TBG Shareholder to the heirs,
legatees or devisees of a deceased TBG Shareholder or to such
other distributees (who take subject to the representations,
warranties, covenants and agreements of this Agreement). In the
event of a successor to a TBG Shareholder, his TBG Interest as
61
reflected in Disclosure Schedule 3.01 shall be allocated among 55
his successors as certified to the parties and to the
Shareholders' Representative by an appropriate party. Without
limiting the foregoing or any other provision of this Agreement
or the agreements to be delivered pursuant to it (and thus
acknowledging that the failure or refusal to accomplish the
following does not affect the foregoing), the TBG Shareholders
shall undertake in good faith to have any heir, legatee, devisee,
beneficiary, personal representative or other successor or assign
of a deceased or incapacitated TBG Shareholder ratify and confirm
the agreements and obligations of such TBG Shareholder (including
the authority of the Shareholders' Representative) under this
Agreement and under the other agreements to be delivered pursuant
to this Agreement (including the Shareholders' Representative
Agreement). Enterprises shall remain liable for the prompt
payment and performance of all the assigned, transferred or
assumed obligations under this Agreement, which obligation shall
be a primary obligation for full and prompt payment and
performance rather than a secondary guaranty of collection.
9.05 Captions; Definitions. The titles or
captions of articles, sections and subsections contained in this
Agreement are inserted only as a matter of convenience and for
reference and in no way define, limit, extend or describe the
scope of this Agreement or the intent of any provision hereof and
shall not be considered in the interpretation or construction of
this Agreement in any proceeding. The parties agree to all
definitions in the statement of parties to this Agreement.
Without limiting the foregoing, the captions in the Disclosure
Schedules and the descriptive language in such captions to them
do not alter, expand or otherwise affect the scope of the
representations and warranties in this Agreement.
9.06 Amendment; Waiver; Remedies Cumulative. This
Agreement may not be altered or amended except in writing signed
by Buyers, TBG (until the Closing) and the Shareholders'
Representative, subject to the proviso of Section 1.01(d). The
failure of any party hereto at any time to require performance of
any provisions hereof shall in no manner affect the right to
enforce the same. No waiver by any party hereto of any
condition, or of the breach of any term, provision, warranty,
representation, agreement or covenant contained in this
Agreement, whether by conduct or otherwise, in any one or more
instances shall be deemed or construed as a further or continuing
waiver of any such condition or breach or a waiver of any other
condition or of the breach of any other term, provision,
warranty, representation, agreement or covenant herein contained.
9.07 No Third-Party Beneficiaries. With the
exception of the parties to this Agreement and the TBG
Shareholders and each of their legal representatives, heirs, and
permitted successors and assigns, there shall exist no right of
any person to claim a beneficial interest in this Agreement or
any rights arising by virtue of this Agreement.
9.08 Exhibits; Disclosure Schedules. All Exhibits
and Disclosure Schedules to this Agreement are hereby
incorporated into this Agreement and hereby are made a part of
this Agreement as if set out in full in the first place that
reference is made thereto.
62
9.09 Counterparts; Entire Agreement. This 56
Agreement may be executed by each party upon a separate copy, and
in such case one counterpart of this Agreement shall consist of
enough of such copies to reflect the signatures of all of the
parties to this Agreement. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original,
and it shall not be necessary in making proof of this Agreement
or the terms of this Agreement to produce or account for more
than one of such counterparts. One or more execution pages may
be detached from one copy of this Agreement and attached to
another copy in order to form one or more counterparts. This
Agreement shall become effective when one or more counterparts
have been executed by the Buyers and TBG and delivered to such
parties. This Agreement together with all schedules and exhibits
hereto and all other agreements and undertakings provided for
hereunder shall constitute the entire agreement of the parties
and supersedes any and all prior agreements, oral or written,
with respect to the subject matter contained herein. There are
no other agreements, representations, warranties or other
understandings between the parties in connection with this
transaction which are not set forth in this Agreement or the
schedules and exhibits hereto.
9.10 Time of the Essence; Computation of Time.
Time is of the essence of each and every provision of this
Agreement. If the last day for the exercise of any privilege or
the discharge of any duty under this Agreement shall fall upon a
Saturday, Sunday or any public or legal holiday, whether federal
or of a state in which the party having such privilege or duty
resides or has its principal place of business, then the party
having such privilege or duty shall have until 5:00 p.m. local
time on the next succeeding regular Business Day to exercise such
privilege or to discharge such duty.
9.11 Severability. Any determination by any court
of competent jurisdiction of the invalidity of any provision of
this Agreement that is not essential to accomplishing its
purposes shall not affect the validity of any other provision of
this Agreement, which shall remain in full force and effect and
which shall be construed as valid under Applicable Law.
63
DULY EXECUTED by the parties hereto, under seal, as of 57
the date first above written.
COCA-COLA ENTERPRISES INC.
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, Executive Vice
President and General Counsel
THE COCA-COLA BOTTLING GROUP
(SOUTHWEST), INC.
By:
------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
TEXAS BOTTLING GROUP, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, PRESIDENT
-------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
64
58
INDEX OF DEFINED TERMS
Page
Defined Term Number
1954 IRC 18
1997 Financial Statements 1, 13
Accounts Receivable 14
Agreement 1
Applicable Law 10
Articles of Exchange 1
Bottling Authorizations 13
Business Day(s) 6
Buyers 1
Buyers' Documents 34
Buyers' Protected Parties 44
Capital Leases 13
CCBG 1
CCBG Share 2
CCBG Shareholder 2
CCBG Shareholders 2
CCBG Shares 2
CCBG's Accountants 5
Claim 44
Claimant 44
Claims 44
Claims Escrow Amount 4
Closing 49
Closing Adjustment Escrow Amount 3
Closing Date 49
Continuing TBG Employees 41
Difference 6
Effect of Open Items 6
Effective Time 1
Employee Benefit Plans 22
Enterprises 1
Enterprises 10-K 35
Enterprises Common Stock 4
Enterprises Financial Statements 35
Enterprises SEC Reports 35
Environmental Laws 27
Equitable Adjustment 4
ERISA 22
ERISA Affiliate 22
Estimated Merger Consideration 5
Estimated Merger Consideration Per Share 5
Exchange 1
Exchange Act 35
Finally Resolved 44
Financial Statements 13
GAAP 2
Governmental Authority 10
Governmental Objection 54
Indebtedness For Borrowed Money 13
Intellectual Property 30
Interim Financial Statements 13
Loss 44
Losses 44
65
Loyalty Payments 2
Merger Consideration 2
Merger Consideration Per Share 2
Nevada Act 1
NLRB 24
Notional Value 4
Off-Site Environmental Matters 27
Open Items 6
OSHA 24
Permitted Lien 21
Recipient of Claim 44
Remaining Estimated Exchange Consideration 4
Required Statutory Approvals 11
Returns 17
SEC 35
Securities Act 35
Shareholders' Representative 4
Shareholders' Representative Agreement 4
Specified Contracts 29
Stock Claims 45
Stock Representations 45
Subsidiary 11
Surviving Tax Representations 20
Taxes 17
TBG Adjusted Consolidated Working Capital 2
TBG Certificate of Adjustments 5
TBG Closing Date Financial Statements 5
TBG Documents 9
TBG Exchange Shares 1
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇
▇▇▇ Interests 11
TBG Shareholders' Approval 41
TBG Shares 2
TBG's Accountants' Post-Closing Deliveries 5
Third Party 45
Third Party Action 45
Third-Party Loans 29
to Buyers' knowledge 56
to its knowledge 56
to TBG's knowledge 56
Transmittal Letter 50
Upstream Merger 1
WARN Act 25
66
INDEX OF EXHIBITS
Exhibit Page
Description of Exhibit Designation Number
----------------------- ----------- ------
Articles of Exchange Exhibit A 1
Certain Deductions Exhibit B 2
TBG Adjusted Consolidated Working Capital Exhibit C 2
Shareholders' Representative and Exhibit D 4
Escrow Agreement
Transmittal Letter Exhibit E 50
TBG's Lawyers' Opinion of Counsel Exhibit F 50
Buyers' Lawyers' Opinion of Counsel Exhibit G 51