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Exhibit 2.1
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AGREEMENT AND PLAN OF MERGER
BETWEEN
REDHOOK ALE BREWERY, INCORPORATED
AND
WIDMER BROTHERS BREWING COMPANY
November 13, 2007
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<PAGE>
TABLE OF CONTENTS
Page
1.
Definitions.............................................................1
2. Basic
Transaction.......................................................8
(a) The
Merger........................................................8
(b) The
Closing.......................................................8
(c) Merger
Consideration..............................................8
3. Effect of
Merger........................................................8
(a)
General...........................................................8
(b) Articles of
Incorporation.........................................8
(c)
Bylaws............................................................8
(d)
Directors.........................................................9
(e) Conversion of Target
Shares.......................................9
(f) Fractional
Shares.................................................9
(g) Exchange of
Certificates..........................................9
4. The
Closing............................................................10
5. Representations and Warranties of
Target...............................11
(a) Organization, Qualification, and Corporate
Power.................11
(b)
Capitalization...................................................11
(c) Authorization of
Transaction.....................................12
(d)
Noncontravention.................................................12
(e) Brokers'
Fees....................................................13
(f) Title to Properties; Encumbrances; Condition of
Properties.......13
(g)
Subsidiaries.....................................................13
(h) Financial
Statements.............................................13
(i) Internal
Controls................................................13
(j) No Undisclosed
Liabilities.......................................14
(k) Books and
Records................................................14
(l) Absence of Certain
Changes.......................................14
(m) Legal
Compliance.................................................16
(n) Licenses and
Permits.............................................16
(o) Tax
Matters......................................................16
(p) Real
Property....................................................16
(q) Intellectual
Property............................................17
(r)
Contracts........................................................17
(s) Customers and
Suppliers..........................................18
(t) Accounts
Receivable..............................................19
(u) Disputed Accounts
Payable........................................19
(v) Affiliate
Transactions...........................................19
i
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TABLE OF CONTENTS
(continued)
Page
(w)
Litigation.......................................................19
(x) Employee
Benefits................................................19
(y)
Employees........................................................22
(z) Environmental, Health, and Safety
Matters........................23
(aa)
Insurance........................................................23
(bb) Bank
Accounts....................................................24
(cc) Product
Liability................................................24
(dd) Outstanding
Indebtedness.........................................24
(ee) Keg
Deposits.....................................................24
(ff) Product
Quality..................................................24
(gg) Correctness of Representations and
Warranties....................24
6. Representations and Warranties of
Buyer................................24
(a)
Organization.....................................................24
(b) Authorization of
Transaction.....................................25
(c)
Noncontravention.................................................25
(d)
Capitalization...................................................25
(e) Brokers'
Fees....................................................26
(f) No Buyer Material Adverse
Effect.................................26
(g) Tax
Matters......................................................26
(h) Tax
Treatment....................................................26
(i) Licenses and
Permits.............................................26
(j) Product
Quality..................................................27
(k) Correctness of Representations and
Warranties....................27
(l) SEC Filings; Buyer Financial
Statements..........................27
7.
Covenants..............................................................28
(a) From Execution through
Closing...................................28
(b) From and After the Date of
Closing...............................33
8. Conditions to Obligation to
Close......................................34
(a) Conditions to Obligation of
Buyer................................34
(b) Conditions to Obligation of
Target...............................36
9. Specific
Performance...................................................38
10.
Termination............................................................38
(a) Termination of
Agreement.........................................38
(b) Effect of
Termination............................................39
ii
<PAGE>
TABLE OF CONTENTS
(continued)
Page
11.
Miscellaneous..........................................................39
(a) Nonsurvival of Representations, Warranties, and
Agreements.......39
(b) Press Releases and Public
Announcements..........................39
(c) No Third-Party
Beneficiaries.....................................39
(d) Entire
Agreement.................................................39
(e) Succession and
Assignment........................................40
(f)
Counterparts.....................................................40
(g)
Headings.........................................................40
(h)
Notices..........................................................40
(i) Governing Law and
Disputes.......................................40
(j) Consent to Jurisdiction; Waivers of Trial by
Jury................41
(k) Amendments and
Waivers...........................................41
(l)
Severability.....................................................41
(m) Fees and
Expenses................................................41
(n)
Construction.....................................................41
(o) Further
Assurances...............................................42
Exhibit A: Form of Articles of Merger
Exhibit B: Form of Shareholder Lock-Up Agreements
Exhibit C: Form of Non-Competition and Non-Solicitation
Agreements
Exhibit D: Form of Opinion of Target's Counsel
Exhibit E: Form of Opinion of Buyer's Counsel
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Agreement") is entered
into
effective as of November 13, 2007, by and between Redhook Ale
Brewery,
Incorporated, a Washington corporation ("Buyer"), and Widmer
Brothers Brewing
Company, an Oregon corporation ("Target"). Buyer and Target are
referred to
collectively herein as the "Parties."
WHEREAS, the respective Boards of Directors of Buyer and Target
deem
it advisable and in the best interests of their respective
shareholders to
consummate the business combination provided for herein;
WHEREAS, in furtherance thereof, the respective Boards of
Directors
of Buyer and Target have approved this Agreement and the Merger,
upon the terms
and subject to the conditions set forth in this Agreement;
WHEREAS, the Board of Directors of Buyer has authorized, and
shall
recommend to the shareholders of Buyer, for their approval, the
issuance of
shares of Buyer Common Stock pursuant to the Merger;
WHEREAS, the Board of Directors of Target has authorized and
shall
recommend to the shareholders of Target, for their approval, the
Merger and this
Agreement; and
WHEREAS, for federal income tax purposes, it is intended that
the
acquisition of Target by Buyer pursuant to this Agreement shall
qualify as a
reorganization under the provisions of Section 368(a) of the
Code;
NOW, THEREFORE, in consideration of the premises and the
mutual
promises herein made, and in consideration of the
representations, warranties,
and covenants herein contained, and intending to be legally
bound hereby, the
Parties agree as follows.
1. Definitions.
"A-B" means Anheuser-Busch, Incorporated, and its Affiliate,
Busch
Investment Corporation.
"A-B Agreements" means the Exchange and Recapitalization
Agreement
dated June 30, 2004 between Target and A-B, Letter Agreement
regarding the
Exchange and Recapitalization Agreement dated July 1, 2004
between Target and
A-B, and the Registration Rights Agreement dated July 1, 2004
between Target and
A-B.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
Exchange
Act.
"Affiliate Transactions" means any contract or other
arrangement
between or among Target on the one hand, and an Affiliate, or
employees,
directors or family members of an Affiliate, on the other
hand.
<PAGE>
"Articles of Merger" shall mean the Articles of Merger filed
to
consummate the Merger and substantially in the form attached
hereto as Exhibit
A.
"Balance Sheet" means the audited balance sheet of Target as
of
December 31, 2006.
"Balance Sheet Date" means December 31, 2006.
"Bonus Plans" has the meaning set forth in Section 5(y).
"Business" means the business conducted by Target prior to and
as of
the Closing Date.
"Buyer" has the meaning set forth in the preface above.
"Buyer Common Stock" means the Common Stock, Par Value $0.005
Per
Share, of Buyer.
"Buyer Disclosure Schedule" has the meaning set forth in Section
6.
"Buyer Material Adverse Effect" means any fact,
circumstance,
occurrence, change, or development which has a material adverse
effect on the
business, assets, liabilities, prospects, capitalization, or
condition
(financial or otherwise), of Buyer and its Subsidiaries, taken
as a whole, or on
the ability of Buyer to consummate the Transactions in
accordance with the terms
of this Agreement and the Documents; provided, however, that
none of the
following shall be deemed, either alone or in combination, to
constitute, and
none of the following shall be taken into account in determining
whether there
has been or will be a Buyer Material Adverse Effect: any fact,
circumstance,
occurrence, change or development primarily arising out of or
resulting from:
(A) changes, after the date hereof, in laws, rules or
regulations of general
applicability or interpretations thereof by any courts or
Governmental
Authority; (B) changes, after the date hereof, in global or
national political
conditions or in general U.S. economic or market conditions
affecting Buyer's
business; or (C) public disclosure of the transactions
contemplated hereby,
including the impact thereof on customers, suppliers, licensors,
and employees.
"Buyer Nondisclosure Agreement" means that Non-Disclosure
Agreement
dated January 3, 2007 between Buyer and Target relating to the
confidential
information of Buyer.
"CBA" means Craft Brands Alliance LLC, an Oregon limited
liability
company, of which Buyer and Target are the sole members.
"CBA Agreements" means the CBA Restated Operating Agreement
dated
July 1, 2004, as amended; the Supply, Distribution and Licensing
Agreement dated
July 1, 2004 between CBA and Target; the Management Services
Agreement dated
July 1, 2004 between CBA and Target; the Consulting Services
Agreement dated
July 1, 2004 between CBA and Target, and the Cross-Indemnity
Agreement dated
July 1, 2004 between CBA, Target and Buyer.
2
<PAGE>
"Certificates" means the stock certificates issued to the
Target
Shareholders representing the Target Shares.
"Claim" means any claim, demand, cause of action, chose in
action,
right of recovery or right of set-off of whatever kind or
description against
any Person.
"Closing" has the meaning set forth in Section 2(b).
"Closing Date" has the meaning set forth in Section 2(b).
"Code" means the Internal Revenue Code of 1986, as amended.
"Consulting Agreement" means a one-year Consulting Agreement
between
Buyer and Paul Shipman.
"Copyrights" has the meaning set forth in the definition of the
term
"Intellectual Property Rights".
"Dissenting Share" means any Target Share as to which the holder
of
record thereof has exercised his, her or its appraisal rights
under the Oregon
Business Corporation Act.
"Documents" means the Buyer Disclosure Schedule, the
Consulting
Agreement, the Non-Competition and Non-Solicitation Agreements,
the Shareholder
Lock-Up Agreements, the Target Disclosure Schedule, the
Employment Agreements,
the Articles of Merger and any other agreements or certificates
required to be
executed or delivered by Target or Buyer in accordance with
Section 4 or Section
8.
"Effective Time" means the date and time specified in the
Articles
of Merger as the effective date of the consummation of the
Merger.
"Employee Benefit Plan" means any employment, bonus,
deferred
compensation, incentive compensation, stock purchase, stock
option, stock
appreciation right or other stock-based incentive, severance,
change-in-control,
or termination pay, hospitalization or other medical,
disability, life or other
insurance, supplemental unemployment benefits, profit-sharing,
pension, or
retirement plan, program, agreement or arrangement and each
other employee
benefit plan, program, agreement or arrangement, sponsored,
maintained or
contributed to or required to be contributed to by Target, or
any ERISA
Affiliate for the benefit of any current or former employee,
consultant or
director of Target, or any ERISA Affiliate.
"Employment Agreements" means employment agreements between
Buyer
and each of Kurt Widmer, Robert Widmer, Terry Michaelson, David
Mickelson,
Timothy McFall, Martin Wall, and Sebastian Pastore.
"Encumbrances" means any and all encumbrances, liens,
charges,
security interests, easements, servitudes, rights of others,
assessments, zoning
or planning limitations, or any similar limitations and
restrictions,
restrictions on transfer, rights of first refusal or first
offer, options,
claims, mortgages or pledges of any nature whatsoever.
3
<PAGE>
"Environmental Claim" means any written claim, action, cause
of
action, suit, proceeding, investigation, order, demand, notice
or other
communications by any Person alleging potential Liability
(including, without
limitation, potential liability for investigatory costs, cleanup
costs,
governmental response costs, natural resources damages, property
damages,
personal injuries, or penalties) arising out of, based on or
resulting from (a)
the presence, or release into the environment, of, or exposure
to, any Material
of Environmental Concern at any location, whether or not owned
or operated by
Target or (b) circumstances forming the basis of any violation,
or alleged
violation, of any Environmental Law, and any enforcement order
or injunction
relating to or arising under any Environmental Law.
"Environmental Laws" means all federal, state, local and
foreign
laws, regulations, ordinances, requirements of governmental
authorities, and
common law regulating the protection or clean up of the
environment or relating
to pollution or protection, health or safety of human health,
wildlife or the
environment (including, without limitation, ambient air, surface
water, ground
water, land surface or subsurface strata, and natural
resources), including,
without limitation, laws and regulations relating to emissions,
discharges,
releases or threatened releases of, or exposure to, Materials of
Environmental
Concern, or otherwise relating to the manufacture, processing,
distribution,
use, treatment, storage, disposal, transport or handling of
Materials of
Environmental Concern.
"ERISA" means the Employee Retirement Income Security Act of
1974,
as amended.
"ERISA Affiliate" means any trade or business, whether or
not
incorporated, that together with Target would be deemed a
"single employer"
within the meaning of Section 414(b), (c), (m) or (o) of the
Code.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Agent" has the meaning set forth in Section
3(g)(i).
"Financial Statements" has the meaning set forth in Section
5(h).
"FSB" means Fulton Street Brewery, LLC, an Illinois limited
liability company.
"GAAP" means United States generally accepted accounting
principles.
"Governmental Authority" means any court, administrative agency
or
commission or other federal, state or local governmental
authority or
instrumentality.
"Indebtedness" means (i) all indebtedness (including any
current
portion) for borrowed money or for the deferred purchase price
of property or
services (other than current trade liabilities incurred in the
ordinary course
of business and payable in accordance with customary practices),
(ii) any other
indebtedness (including any current portion) that is evidenced
by a note, bond,
debenture or similar instrument, (iii) all obligations
(including any current
portion) under financings (other than operating leases), (iv)
all liabilities
secured by any Encumbrances on any property, and (v) all
guarantee obligations.
4
<PAGE>
"Intellectual Property Rights" means intellectual property
rights
arising from or in respect of the following, whether protected,
created or
arising under the laws of the United States or any other
jurisdiction: (i) trade
names, trademarks and service marks (whether registered or
unregistered,
including any applications for registration of any of the
foregoing), logos,
Internet domain names, trade dress rights, together with the
goodwill associated
with any of the foregoing; (ii) patents and applications
therefor, including
continuation, divisional, continuation in part, or reissue
patent applications
and patents issuing thereon (collectively, "Patents"); (iii)
copyrights and
registrations and applications therefor (collectively,
"Copyrights") and mask
work rights; (iv) know how, inventions, discoveries, concepts,
ideas, methods,
processes, designs, formulae, technical data, drawings,
specifications, and
databases to the extent proprietary and confidential to Target,
including
customer lists, in each case excluding any rights in respect of
any of the
foregoing that comprise or are protected by Copyrights, mask
work rights or
Patents (collectively, "Trade Secrets"); (v) all other
proprietary rights, (vi)
all copies and tangible embodiments thereof (in whatever form or
medium), and
(vii) License Agreements.
"Interim Balance Sheet" means the unaudited balance sheet of
Target
as of September 30, 2007.
"Interim Balance Sheet Date" means September 30, 2007.
"Knowledge of Buyer" (or any formulation thereof) means the
actual
knowledge of any of Paul Shipman, David Mickelson and Jay
Caldwell.
"Knowledge of Target" (or any formulation thereof) means the
actual
knowledge of any of: (i) Kurt Widmer, Robert Widmer, and Terry
Michaelson; (ii)
Timothy McFall, Martin Wall, and Sebastian Pastore with respect
to Sections
5(l), 5(r) and 5(s) only; and (iii) Rich Shawen with respect to
Sections 5(l),
5(r), 5(s), and 5(x) only.
"Kona" means Kona Brewery LLC, a Hawaii limited liability
company.
"Lease" has the meaning set forth in Section 5(p).
"Leased Real Property" has the meaning set forth in Section
5(p).
"Liability" means any liability or obligation (whether known
or
unknown, whether asserted or unasserted, whether absolute,
contingent, fixed or
otherwise, whether accrued or unaccrued, whether liquidated or
unliquidated, and
whether due or to become due), including any liability for
Taxes.
"License Agreements" means all material written agreements
between
Target, and third parties, other than those which have expired
or been
terminated by the parties thereto, and in which: (i) such third
party has
licensed or granted to Target any right to use, exploit or
practice any of such
third party's Intellectual Property Rights or technology; or
(ii) Target (x) has
granted to such third party any right to use, exploit or
practice any of
Target's Intellectual Property Rights or technology, or (y) has
agreed to any
restriction on the right of Target to use or enforce any of
Target's
Intellectual Property Rights or technology owned by Target.
5
<PAGE>
"Material Contract" has the meaning set forth in Section
5(r).
"Materials of Environmental Concern" means chemicals,
pollutants,
contaminants, wastes, toxic substances, hazardous substances,
petroleum and
petroleum products, asbestos or asbestos-containing materials or
products,
polychlorinated biphenyls, lead or lead-based paints or
materials, radon,
fungus, mold or other substances that may have an adverse effect
on human
health.
"Merger" has the meaning set forth in Section 2(a).
"Merger Consideration" has the meaning set forth in Section
2(c).
"Multiemployer Plan" has the meaning set forth in ERISA
Section
3(37).
"Non-Competition and Non-Solicitation Agreements" means the
agreements attached hereto as Exhibit C, to be executed by Kurt
Widmer and
Robert Widmer.
"Oregon Business Corporation Act" means the Business Corporation
Act
of the State of Oregon, as amended.
"Owned Real Property" has the meaning set forth in Section
5(p).
"Patents" has the meaning set forth in the definition of the
term
"Intellectual Property Rights."
"Party" has the meaning set forth in the preface above.
"Per Share Consideration" means 2.1551 shares of Buyer Common
Stock.
"Person" means an individual, a partnership, a corporation,
a
limited liability company, an association, a joint stock
company, a trust, a
joint venture, an unincorporated organization, a governmental
entity (or any
department, agency, or political subdivision thereof) or any
other entity or
organization.
"Portland Brewery Project" means the expansion of the
brewing
facility owned by Target located at 2511 N. Mississippi,
Portland, Oregon.
"Requisite Shareholder Approval" means the affirmative vote
or
written consent of the holders of at least a majority of the
outstanding shares
of Target Common Stock in favor of this Agreement and the
Merger, voting as a
single class.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended.
"Shareholder Lock-Up Agreements" means Shareholder Lock-Up
Agreements in substantially the form attached hereto as Exhibit
B.
6
<PAGE>
"Subsidiary" means any Person with respect to which a
specified
Person (or a Subsidiary thereof) owns a majority of the common
stock or other
securities or has the power to vote or direct the voting of
sufficient
securities to elect a majority of the board of directors or
similar body.
"Surviving Corporation" has the meaning set forth in Section
2(a).
"Target" has the meaning set forth in the preface above.
"Target Common Stock" means the Common Stock, $.01 par value
per
share, of Target.
"Target Disclosure Schedule" has the meaning set forth in
Section 5.
"Target Material Adverse Effect" means any fact,
circumstance,
occurrence, change, or development which has a material adverse
effect on the
Business, assets, liabilities, prospects, capitalization, or
condition
(financial or otherwise), of Target, or on the ability of Target
to consummate
the Transactions in accordance with the terms of this Agreement
and the
Documents, or on the ability of Buyer to operate the Business
immediately after
the Closing; provided, however, that none of the following shall
be deemed,
either alone or in combination, to constitute, and none of the
following shall
be taken into account in determining whether there has been or
will be a Target
Material Adverse Effect: any fact, circumstance, occurrence,
change or
development primarily arising out of or resulting from: (A)
changes, after the
date hereof, in laws, rules or regulations of general
applicability or
interpretations thereof by any courts or Governmental Authority;
(B) changes,
after the date hereof, in global or national political
conditions or in general
U.S. economic or market conditions affecting the Business; or
(C) public
disclosure of the transactions contemplated hereby, including
the impact thereof
on customers, suppliers, licensors, and employees.
"Target Nondisclosure Agreement" means that Non-Disclosure
Agreement
dated January 3, 2007 between Buyer and Target relating to the
confidential
information of Target.
"Target Series D Preferred Stock" means the Series D
Preferred
Stock, $.01 par value per share, of Target.
"Target Shareholder" means any Person who or which holds any
Target
Shares.
"Target Shares" means collectively, outstanding shares of the
Target
Common Stock and the Target Series D Preferred Stock.
"Tax" or "Taxes" means any federal, state, local, or foreign
income,
gross receipts, license, payroll, employment, excise, severance,
stamp,
occupation, premium, windfall profits, environmental (including
taxes under Code
Section 59A), customs duties, capital stock, franchise, profits,
withholding,
social security (or similar), unemployment, workers
compensation, disability,
real property, personal property, sales, use, transfer,
registration, value
added, alternative or add-on minimum, estimated, or other tax of
any kind
whatsoever, including any interest, penalty, or addition
thereto, whether
disputed or not.
7
<PAGE>
"Tax Return" means any return, declaration, report, claim
for
refund, or information return or statement relating to Taxes,
including any
schedule or attachment thereto, and including any amendment
thereof.
"Trade Secrets" has the meaning set forth the definition of the
term
"Intellectual Property Rights."
"Transactions" means all the transactions provided for by
this
Agreement and the other Documents.
"TTB" means the Alcohol and Tobacco Tax and Trade Bureau of the
U.S.
Department of the Treasury.
"Washington Business Corporation Act" means the Business
Corporation
Act of the State of Washington, as amended.
2. Basic Transaction.
(a) The Merger. On and subject to the terms and conditions of
this
Agreement, Target will merge with and into Buyer (the "Merger")
at the Effective
Time. Buyer shall be the corporation surviving the Merger (the
"Surviving
Corporation").
(b) The Closing. The closing of the Transactions (the
"Closing")
as provided in Section 4 shall take place at the offices of
Riddell Williams
P.S., 1001 Fourth Avenue, Suite 4500, in Seattle, Washington,
commencing at 9:00
a.m. local time on a day agreeable to Buyer and Target and no
later than three
business days following the satisfaction or waiver of all
conditions to closing
set forth in Section 8. The date on which the Closing occurs is
referred to
herein as the "Closing Date".
(c) Merger Consideration. Subject to the terms and conditions
of
this Agreement, the merger consideration payable by Buyer
hereunder is the
number of shares of Buyer Common Stock calculated by multiplying
2.1551 times
the number of Target Shares that are outstanding at the
Effective Time and are
not Dissenting Shares (the "Merger Consideration").
3. Effect of Merger.
(a) General. The Merger shall have the effect set forth in
the
Articles of Merger and the Washington Business Corporation
Act.
(b) Articles of Incorporation. The Restated Articles of
Incorporation set forth in the Articles of Merger shall be the
articles of
incorporation of the Surviving Corporation until further amended
in accordance
with the terms thereof and the laws of the State of
Washington.
(c) Bylaws. The Amended and Restated Bylaws of Buyer dated
April
7, 2004, amended as provided in the Articles of Merger, shall be
the bylaws of
the Surviving Corporation until further duly amended in
accordance with the
terms thereof, Buyer's Restated Articles of Incorporation and
the laws of the
State of Washington.
8
<PAGE>
(d) Directors. The directors of the Surviving Corporation at
and
as of the Effective Time shall be the directors listed in the
Articles of
Merger.
(e) Conversion of Target Shares. At and as of the Effective
Time,
by virtue of the Merger and without any action on the part of
Target or the
Target Shareholders, all of the Target Shares shall be canceled
and converted
into and represent the right to receive the following
consideration:
(i) Target Shares. Each Target Share that is not a
Dissenting Share shall be converted into the right to receive
the Per Share
Consideration. Each Target Share converted into the right to
receive the Per
Share Consideration will automatically be canceled and retired
and cease to
exist as of the Effective Time, and each Certificate shall
thereafter represent
only the right to receive the portion of the Merger
Consideration, and any cash
to be paid in lieu of fractional shares, payable with respect to
the Target
Shares previously represented by such Certificate, in each case
without any
interest.
(ii) Dissenting Shares. Each Dissenting Share shall be
automatically canceled and retired and cease to exist as of the
Effective Time
and shall thereafter solely have the rights set forth in ORS
60.551 to 60.594 of
the Oregon Business Corporation Act.
(f) Fractional Shares. No fractional shares of Buyer Common
Stock
will be issued by virtue of the Merger and any Target
Shareholder otherwise
entitled hereunder to receive a fractional share of Buyer Common
Stock (after
aggregating all fractional shares of Buyer Common Stock that
would otherwise be
received by such holder) will be entitled to receive in lieu of
such fractional
share (rounded to the nearest ten thousandth of a share) a cash
payment in an
amount, rounded to the nearest cent, equal to such fraction
multiplied by the
closing price of the Buyer Common Stock reported on the Nasdaq
Stock Market on
the last trading day before the Closing Date.
(g) Exchange of Certificates.
(i) At or prior to the Closing Date, Buyer will enter into
an agreement with Mellon Investor Services (or such other bank
or trust company
in the United States as may be designated by Buyer, the
"Exchange Agent"), which
will provide that Buyer will, as part of the Closing, deliver to
the Exchange
Agent the shares of Buyer Common Stock representing the Merger
Consideration.
Buyer will pay the fees and expenses of the Exchange Agent.
(ii) As soon as reasonably practicable after the Effective
Time, Buyer will cause the Exchange Agent to deliver or mail to
each holder of
record of an outstanding Certificate: (i) a letter of
transmittal specifying
that delivery of each Certificate is effected, and risk of loss
and title to the
Certificate passes, only upon actual delivery of the Certificate
to the Exchange
Agent, which transmittal letter will be in such form as Buyer
and Target may
reasonably specify or the Exchange Agent may reasonably request;
and (ii)
instructions for surrendering Certificates. Upon surrender of a
Certificate to
the Exchange Agent, together with a duly executed transmittal
letter and other
documents reasonably required by the Exchange Agent, the holder
of such
Certificate will receive in exchange therefor the portion of the
Merger
Consideration, and any cash to be paid in lieu of fractional
shares, payable
with respect to the Target Shares previously represented by such
Certificate, in
each case without any interest.
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(iii) All Merger Consideration paid upon the surrender of
Certificates will be deemed to have been paid in full
satisfaction of all rights
pertaining to Target Shares represented by such Certificates.
If, after the
Effective Time, Certificates are presented to Buyer or the
Exchange Agent for
any reason, they will be exchanged as provided in this Section
3, except as
otherwise provided by law.
(iv) None of Buyer or any of its Affiliates or the Exchange
Agent is liable to any person in respect of any shares of Buyer
Common Stock or
cash delivered to a public official in accordance with any
applicable abandoned
property, escheat or other similar law. If any Certificate is
not surrendered
within three years of the Effective Time (or immediately prior
to such earlier
date on which any amounts payable in accordance with this
Section 3 would
otherwise escheat to or become the property of any governmental
entity), any
such amounts will, to the extent permitted by applicable law,
become the
property of Buyer, free and clear of all claims or interest of
any Person
previously entitled thereto.
(v) If any Certificate is lost, stolen or destroyed, upon
the execution and delivery to the Exchange Agent by the holder
of record of such
Certificate of such additional documentation that the Exchange
Agent may
reasonably request, the payment to the Exchange Agent by such
holder of any
indemnity/surety bond in such amount as required by the Exchange
Agent and the
payment to the Exchange Agent by such holder of any handling or
other fee
required by the Exchange Agent, the Exchange Agent will pay and
issue in
exchange for such lost, stolen or destroyed Certificate the
portion of the
Merger Consideration, and any cash to be paid in lieu of
fractional shares,
payable with respect to the Target Shares previously represented
thereby, in
each case without any interest.
4. The Closing. At the Closing,
(i) Target shall deliver to Buyer the various certificates,
instruments and documents referred to in Section 8(a) below, to
the extent not
previously delivered;
(ii) Buyer shall deliver to Target the various certificates,
instruments and documents referred to in Section 8(b) below, to
the extent not
previously delivered;
(iii) The Surviving Corporation shall file with the
Secretary
of State of the State of Washington and the Secretary of State
of the State of
Oregon the Articles of Merger; and
(iv) Buyer shall deposit the Merger Consideration with the
Exchange Agent.
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5. Representations and Warranties of Target. Target represents
and
warrants to Buyer that the statements contained in this Section
5 are: (x)
correct and complete as of the date of this Agreement; and (y)
will be correct
and complete as of the Closing Date (as though made then and as
though the
Closing Date were substituted for the date of this Agreement
throughout this
Section 5) except as set forth in the disclosure schedule
accompanying this
Agreement (the "Target Disclosure Schedule"). The Target
Disclosure Schedule is
arranged in paragraphs and subparagraphs corresponding to the
lettered and
numbered paragraphs and subparagraphs contained in this Section
5, as
applicable, and any fact or item disclosed on any disclosure
schedule shall be
deemed disclosed on all other disclosure schedules to which such
disclosure is
appropriately cross-referenced and otherwise full, fair, and in
sufficient
detail to enable a reasonable person to identify the other
article, section, or
subsection of this Agreement to which the disclosure is
responsive.
(a) Organization, Qualification, and Corporate Power. Target is
a
corporation duly organized, validly existing, and in good
standing under the
laws of the jurisdiction of its incorporation. Target is duly
authorized to
conduct business and is in good standing and holds all material
licenses and
registrations required to conduct its Business in the
jurisdictions set forth in
Section 5(a) of the Target Disclosure Schedule, which are all of
the
jurisdictions in which the character of the property owned or
leased by it or
the conduct of its Business makes such qualification necessary,
except where the
failure to be so duly qualified and in good standing would not
materially and
adversely affect the ongoing Business of Target. Target has not
received notice
from any jurisdiction in which it is not duly qualified of a
requirement to
register in such jurisdiction. Target has full corporate power
and authority to
carry on the businesses in which it is engaged as such are being
conducted and
to own and use the properties owned and used by it. Target has
made available to
Buyer complete and correct copies of the Articles of
Incorporation and Bylaws or
other applicable organizational documents of Target as presently
in effect.
(b) Capitalization. The entire authorized capital stock of
Target
consists of 25,000,000 shares of Target Common Stock, $0.01 par
value, with
3,793,603 shares outstanding; 2,000,000 shares of preferred
stock, $.01 par
value, of which 120,000 shares have been designated as Target
Series A Shares,
with zero issued and outstanding, 1,404,398 shares have been
designated as
Target Series B Shares, with zero shares issued and outstanding,
42,730.6 shares
have been designated as Target Series C Shares, with zero shares
issued and
outstanding, and 78,155 shares have been designated as Target
Series D Preferred
Stock, with 78,155 shares issued and outstanding. All of the
issued and
outstanding Target Shares have been duly authorized and are
validly issued,
fully paid, and nonassessable. Target is not obligated to
purchase, and Target
does not own, directly or indirectly, any equity securities or
securities
convertible into or exchangeable or exercisable for equity
securities of any
Person. Except for Target's ownership interests in CBA, FSB, and
Kona, Target
does not have any direct or indirect equity or ownership
interest in any Person.
All securities of Target have been issued in compliance with
applicable laws.
There are no voting trusts or other agreements or understandings
in respect of
the voting of the securities of Target. Section 5(b) of the
Target Disclosure
Schedule sets forth the name of each shareholder of Target and
opposite the name
of each such shareholder, the number and type of Target Shares
held by such
Person, as of the date of this Agreement. Except as set forth in
Section 5(b) of
the Target Disclosure Schedule, there are no outstanding or
authorized options,
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warrants, purchase rights, subscription rights, conversion
rights, exchange
rights, or other securities, contracts or commitments that could
require Target
to: (i) issue, sell, or otherwise cause to become outstanding
any of its
securities (equity, debt, convertible or otherwise); (ii)
acquire any of its
securities (equity, debt, convertible or otherwise); (iii) pay
any dividends on
any of its securities (equity, debt, convertible or otherwise);
or (iv)
purchase, redeem or retire any outstanding shares of any of its
securities
(equity, debt, convertible or otherwise). There are no
outstanding or authorized
restricted stock, restricted units, stock appreciation, phantom
stock, stock
options, stock warrants or similar rights with respect to
Target.
(c) Authorization of Transaction. Target has the requisite
corporate power and authority to execute and deliver each of
this Agreement and
the Documents, to perform its obligations hereunder and
thereunder and to
consummate the Transactions. Upon execution and delivery by
Target, each of this
Agreement and the Documents to which Target is a party will
constitute the
legal, valid and binding obligation of Target, enforceable
against Target in
accordance with its terms, except as enforceability may be
limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the
enforcement of creditors' rights generally and by general
principles of equity
(regardless of whether enforcement is sought in a proceeding in
equity or at
law). The Board of Directors of Target has: (i) adopted
resolutions approving
this Agreement and the Transactions; (ii) determined that this
Agreement and the
Transactions are in the best interests of the Target
Shareholders and
recommended approval of this Agreement and the Transactions to
the Target
Shareholders; and (iii) authorized the submission of this
Agreement to the
Target Shareholders for their approval.
(d) Noncontravention. Neither the execution and delivery of
this
Agreement or any Document, nor the performance by Target of its
obligations
hereunder or thereunder and consummation of the Transactions
will: (i) violate
any constitution, statute, law, regulation, rule, injunction,
judgment, order,
decree, ruling, charge, or other restriction of any government
or Governmental
Authority to which Target is subject or any provision of the
Articles of
Incorporation or Bylaws of Target; (ii) contravene, conflict
with, or result in
a violation of any of the terms or requirements of, or give any
Governmental
Authority the right to revoke, withdraw, suspend, cancel,
terminate, or modify,
any Permit that is held by Target or that otherwise relates to
the Business of,
or any of the assets owned or used by, Target, except such as
would not
constitute a Target Material Adverse Effect; or (iii) conflict
with, result in a
breach of, constitute a default under, result in the
acceleration of, create in
any party the right to accelerate, terminate, materially modify,
or cancel, or
require any notice under any agreement, contract, lease,
license, instrument, or
other arrangement to which Target is a party or by which Target
is bound or to
which any of its assets is subject, except such as would not
result in a Target
Material Adverse Effect (but this exception shall not apply to
Affiliate
Transactions). Section 5(d) of the Target Disclosure Schedule
lists all notices,
filings, authorizations, consents and approvals required to be
given by Target
to, made by Target with or obtained by Target from any
Governmental Authority or
third party in order for the Parties to consummate the
Transactions, except such
as relate to the regulation of alcoholic beverages or would not
result in a
Target Material Adverse Effect.
12
<PAGE>
(e) Brokers' Fees. Target does not have any Liability or
obligation to pay any fees or commissions to any broker, finder,
or agent with
respect to the Transactions.
(f) Title to Properties; Encumbrances; Condition of
Properties.
Target has good, valid and marketable title to all the
properties and assets
reflected in the Interim Balance Sheet and all of the properties
and assets
purchased or otherwise acquired by Target since the Interim
Balance Sheet Date,
in each case free and clear of all Encumbrances, except for: (i)
any of such
properties or assets sold or otherwise disposed of in the
ordinary course of
business and consistent with past practice; (ii) liens for
current taxes not yet
due or which are being contested in good faith by appropriate
proceedings and
for which appropriate reserves have been established and
disclosed on the Target
Disclosure Schedule; (iii) Encumbrances which are not material
to the value of
the properties or assets encumbered and which do not impair in
any material
respect the current use or operation of such properties and
assets; (iv) liens
and security interests securing Indebtedness incurred in the
ordinary course of
business, including, without limitation, all Indebtedness
incurred in connection
with the Portland Brewery Project; and (v) mechanics',
materialmen's, carriers',
warehousemen's and other like liens arising in the ordinary
course of business
in respect of obligations not overdue for a period in excess of
90 days or that
are being contested in good faith by appropriate proceedings and
for which
appropriate reserves have been established and disclosed on the
Target
Disclosure Schedule. Target has the right to use all assets and
properties not
owned by Target but utilized in connection with its Business.
The rights,
properties and other assets presently owned, leased, licensed or
otherwise used
by Target include all such rights, properties and other assets
necessary to
permit Target to conduct its Business in all material respects
in the same
manner as such Business has been conducted prior to the date
hereof or the
Closing Date, as applicable. The equipment and other tangible
property or assets
owned or used by Target are in the aggregate in sufficient
condition and
adequate for the uses to which they are being put, and conform
with applicable
laws.
(g) Subsidiaries. Target has no Subsidiaries.
(h) Financial Statements. Copies of the following financial
statements of Target have been provided to Buyer: (i) audited
consolidated
balance sheets and statements of income, changes in
stockholders' equity and
cash flows as of and for the fiscal years ended December 31,
2004, 2005 and
2006; and (ii) the Interim Balance Sheet and an unaudited
consolidated statement
of income as of the Interim Balance Sheet Date and for the
partial fiscal year
then ended (collectively the "Financial Statements"). The
Financial Statements
(including the notes thereto) have been prepared from, are in
accordance with
and accurately reflect the books and records of Target, have
been prepared in
accordance with GAAP applied on a consistent basis throughout
the periods
covered thereby and fairly present the financial condition of
Target as of such
dates and the results of operations of Target for such periods;
provided,
however, that the Financial Statements for periods subsequent to
January 1, 2007
are subject to normal year-end adjustments in accordance with
past practice and
do not contain complete footnotes.
(i) Internal Controls. Target's internal accounting controls
are
effective to provide reasonable assurance that: (a) transactions
are executed in
accordance with management's general or specific authorization;
(b) transactions
are recorded as necessary to permit preparation of financial
statements in
conformity with GAAP and to maintain accountability for assets;
(c) material
misstatements in Target's annual and interim financial
statements will be
prevented or detected on a timely basis; (d) access to assets is
permitted only
in accordance with management's general or specific
authorization; and (e) the
recorded accountability for assets is compared with existing
assets at
reasonable intervals and appropriate action is taken with
respect to any
differences.
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<PAGE>
(j) No Undisclosed Liabilities. Target does not have any
Liabilities, except: (a) as and to the extent reflected or
reserved against on
the Interim Balance Sheet; and (b) Liabilities incurred in the
ordinary course
of business and consistent with past practice since the Interim
Balance Sheet
Date. The reserves reflected in the Financial Statements are
reasonable and have
been calculated consistent with past practice.
(k) Books and Records. The books and records of Target are
complete and correct in all material respects and have been
maintained in
accordance with sound business practices. True and complete
copies of all minute
books and stock record books of Target have heretofore been made
available to
Buyer, except for minutes relating to the Transaction and the
consideration of
other potential transactions similar to the transactions
contemplated by this
Agreement.
(l) Absence of Certain Changes. Since the Balance Sheet
Date,
there has not occurred any event or circumstance constituting or
giving rise to
a Target Material Adverse Effect and Target is not aware of any
events or
circumstances which could, upon the passage of time or
otherwise, give rise to a
Target Material Adverse Effect. During the period commencing on
July 1, 2007,
and ending on the date of this Agreement, Target has conducted
its Business only
in the normal and ordinary course in a manner consistent with
past practice and
there has not been any:
(i) change in Target's authorized or issued equity
securities; grant of any option or right to purchase equity
securities of
Target; issuance of or grant of any option or right to purchase,
any security
convertible into or exchangeable or exercisable for such equity
securities;
grant of any registration rights; purchase, redemption,
retirement, or other
acquisition by Target of any equity securities; or declaration
or payment of any
dividend or other distribution or payment by Target in respect
of equity
securities;
(ii) amendment to the Articles of Incorporation or Bylaws of
Target;
(iii) labor dispute or claim of unfair business practices
involving Target; entry into or change in the compensation
payable or to become
payable to any of the officers, directors or employees of Target
who have total
annual compensation in excess of $50,000; any change of
compensation payable to
or to become payable to a class or category of employees of
Target other than in
the ordinary course of business, consistent with past practices;
any change, or
to the Knowledge of Target any prospective change (other than
changes which may
occur in connection with the Transactions) with respect to the
employment status
or compensation of any officer or director of Target; any grant
of any severance
or termination pay to any officer, director or employee of
Target; or any change
in benefits payable under any existing severance or termination
pay policies,
employment agreements or other generally applicable compensation
policies;
14
<PAGE>
(iv) grant, issuance, acceleration, payment, accrual or
agreement to pay or make any accrual or arrangement for payment
of salary or
other payments or benefits pursuant to, or adoption or amendment
of, any new or
existing Employee Benefit Plan;
(v) entry into, termination or amendment of, or receipt of
notice (oral or written) of termination of or reduction of
business under any
Material Contract;
(vi) change in any method of calculating any bad debt,
contingency or other reserves, or any other change in the
accounting methods or
practices used by Target;
(vii) cancellation or waiver of any claims or rights with a
value to Target greater than $25,000 individually;
(viii) new election or change in any existing election
relating to Taxes, settlement of any claim or assessment
relating to Taxes,
consent to any claim or assessment relating to Taxes, or waiver
of the statute
of limitations for any such claim or assessment;
(ix) write-down or write-off of any notes or accounts
receivable, either individually or in the aggregate, in excess
of $25,000;
(x) disposal or lapse of or material amendment to any
material Intellectual Property Rights;
(xi) declaration, payment or setting aside for payment of
any dividend or other distribution in respect of equity
securities of Target or
redemption, purchase or other acquisition, directly or
indirectly, of any equity
securities or other securities of Target;
(xii) payment, loan or advance of any amount to, or sale,
transfer or lease of any properties or assets (real, personal or
mixed, tangible
or intangible) to, agreement or arrangement with, or change in
its existing
borrowing or lending arrangements for or on behalf of, Target's
officers or
directors or any Affiliate of any of its officers or directors
except for
directors' fees and compensation to officers as disclosed to
Buyer;
(xiii) change in the methods, practices, or timing of
Target's
collection of receivables or payment of payables;
(xiv) material destruction, damage or loss (casualty or
other)
to any properties or other assets of Target;
(xv) purchase, sale or other disposition, or any agreement
or
other arrangement for the purchase, sale or other disposition,
of any of the
properties or assets of Target other than in the ordinary course
of business
consistent with past practice; or
15
<PAGE>
(xvi) agreement, whether oral or written, by Target or any
of
its Affiliates to do any of the foregoing.
(m) Legal Compliance. Target has materially complied, and is
in
material compliance, with all applicable laws (including rules,
regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings,
and charges
thereunder) of federal, state, local, and foreign governments
(and all agencies
thereof), including but not limited to laws and regulations
applicable to the
production and sale of alcoholic beverage products, "dram shop"
laws, safety
laws or regulations, or laws or regulations relating to illegal
payments,
kickbacks or commercial bribery. Target has provided to Buyer a
copy of the
audit report from its recent audit by the TTB.
(n) Licenses and Permits. All governmental, agency or
commission
licenses, approvals, registrations and permits (the "Permits")
required by
applicable law to be held or secured by Target are listed on
Section 5(n) of the
Target Disclosure Schedule. Target is and at all times has been,
in material
compliance with all of the terms and requirements of such
Permits. Each Permit
is in full force and effect, and will continue to be so upon
consummation of the
Transaction, and all necessary renewals have been, and upon
consummation of the
Transaction will be, duly filed.
(o) Tax Matters.
(i) All Tax returns, statements, reports, forms and similar
statements (including estimated Tax returns, claims for refunds,
amended returns
and reports and information returns and reports) required to be
filed with any
taxing authority by or on behalf of Target (the "Target
Returns"), were filed
when due (including any applicable extension periods) in
accordance with all
applicable laws and were correct and complete. In the past six
years, no Claim
has been made by an authority in a jurisdiction where Target
does not file Tax
returns that Target may be subject to taxation in that
jurisdiction.
(ii) Target has timely paid, or withheld and remitted to the
appropriate taxing authority, all Taxes due and payable by
Target under any
applicable law.
(iii) The charges, accruals and reserves for Taxes on the
Interim Balance Sheet (whether or not due and whether or not
shown on any Target
Return but excluding any provision for deferred income Taxes)
are adequate under
GAAP to cover Taxes accruing through the date thereof.
(iv) There is no action or audit now pending or threatened
in
writing against or in respect of any Tax or "tax asset" of
Target. For purposes
of this Section 5(o)(iv), the term "tax asset" shall include any
net operating
loss, net capital loss, investment tax credit, foreign tax
credit, charitable
deduction or any other credit or tax attribute which could
reduce Taxes.
(v) Target is not party to any tax sharing agreement.
(p) Real Property. Section 5(p) of the Target Disclosure
Schedule
contains a list of any real property owned by Target (the "Owned
Real Property")
or otherwise occupied by Target, and all leases and agreements
for the rental of
16
<PAGE>
real property to which Target is a party (as lessor or lessee)
or by which such
real property may be bound (the "Leased Real Property"). Neither
the execution
or delivery of this Agreement or any Document, nor the
performance by Target of
its obligations hereunder or thereunder and consummation of the
Transactions
will accelerate, modify, or terminate any of the arrangements
with respect to
the Leased Real Property, except as otherwise provided herein.
Target has good
and marketable fee simple title to the Owned Real Property, and
has valid and
existing leasehold interests in all of the real property that it
possesses,
operates or occupies (or has similar rights to possess, operate
or occupy). All
Owned Real Property is free and clear of all Encumbrances. No
part of the Owned
Real Property is subject to any assignment, lease, license or
other similar
agreement for the enjoyment of such Owned Real Property. Target
has provided to
Buyer copies of all existing title policies held in its files
relating to Owned
Real Property, and to the Knowledge of Target, no exceptions,
reservations, or
encumbrances have arisen or been created since the date of
issuance of those
policies (other than Liens for taxes not yet delinquent). A
true, correct and
complete copy of each lease relating to Leased Real Property
(each, a "Lease")
has heretofore been made available to Buyer. Each Lease is
valid, binding and
enforceable in accordance with its terms and is in full force
and effect. There
are no existing defaults by Target under any of the Leases. No
event has
occurred that (whether with or without notice, lapse of time or
the happening or
occurrence of any other event) would constitute a default by
Target under any
Lease. To the Knowledge of Target, there is no material default
by the landlord
under any Lease. No condemnation, eminent domain, or similar
proceeding exists,
is pending or, to the Knowledge of Target, is threatened, with
respect to or
that could affect, any Real Property. The Owned Real Property
and Leased Real
Property and the business conducted thereon comply in all
material respects with
the terms of the applicable Leases and applicable laws.
(q) Intellectual Property. Target owns, or is licensed or
otherwise has the right to use, all Intellectual Property Rights
which are
material to the Business, financial condition or results of
operations of Target
taken as a whole. No claims are pending or, to the Knowledge of
Target,
threatened that Target is infringing or otherwise adversely
affecting the rights
of any Person with regard to any Intellectual Property Rights.
To the Knowledge
of Target, no person is infringing the rights of Target with
respect to any
Intellectual Property Rights. There are no Claims pending which
challenge the
legality, validity, enforceability, use or ownership of any of
Target's
Intellectual Property Rights. Section 5(q) of the Target
Disclosure Schedule
lists all of Target's Intellectual Property Rights.
(r) Contracts.
(i) Section 5(r)(i) of the Target Disclosure Schedule sets
forth a complete and accurate list and (in the case of oral
contracts)
description of each contract, whether written or oral, (i) with
Persons to whom
Target is required to make aggregate payments in any
twelve-month period in
excess of $100,000 other than with respect to Leases; (ii) with
Persons to whom
Target received revenues in excess of $100,000 during the year
ended December
31, 2006 or for which the lump sum or fixed price thereunder is
in excess of
$100,000; (iii) that relates to Indebtedness of Target; (iv) for
capital
expenditures in excess of $100,000; (v) for consulting services
to Target with
Persons to whom Target has made (or is likely to make) aggregate
payments in any
twelve-month period in excess of $50,000; (vi) providing for the
purchase of all
17
<PAGE>
or substantially all of its requirements of a particular product
or service from
a supplier; or (vii) with suppliers providing for aggregate
payments in any
twelve-month period in excess of $100,000 (each of the contracts
listed in
clauses (i) through (vii), together with the Leases, the License
Agreements, the
A-B Agreements and the CBA Agreements, and the contracts
disclosed under Section
5(s), a "Material Contract"). Each Material Contract is in full
force and effect
and is enforceable in accordance with its terms. Upon the
consummation of the
Transactions, each such contract will remain in full force and
effect. With
respect to each Material Contract, there is not any default or
event that, with
notice or lapse of time or both, would constitute a default on
the part of
Target (nor, to the Knowledge of Target, on the part of any
other party
thereto).
(ii) Target has made available to Buyer a complete and
accurate copy of each written Material Contract.
(iii) Target has not received any notice, and Target has no
Knowledge, that any party to a Material Contract intends to
cancel or otherwise
materially modify its relationship with Target (or Buyer
following the Closing)
as a result of the Transactions.
(iv) Target does not have any outstanding contracts with
shareholders, directors, officers or employees that are not
cancelable by Target
on notice of not longer than thirty (30) days and without
Liability, penalty or
premium.
(v) Target is not party to any employment agreement,
separation agreement, retention agreement, change in control
agreement,
collective bargaining agreement or any other agreement that
contains any
severance or termination pay Liabilities or obligations.
(vi) There are no outstanding loans from Target to any
Person. Target is not party to any agreement requiring it to
acquire or
guarantee any debt obligations of, or make any loan or capital
contribution to,
any Person.
(vii) Target is not restricted by agreement from carrying on
its Business anywhere in the world.
(viii) Section 5(r)(viii) of the Target Disclosure Schedule
sets forth a complete list of all powers of attorney granted by
or to Target.
(ix) Target does not have any Liabilities, as guarantor,
surety, co-signer, endorser, co-maker, indemnitor or otherwise,
in respect of
the obligation of any Person (including pursuant to any
indemnification
agreements) other than indemnification obligations under
Material Contracts.
(s) Customers and Suppliers.
(i) Section 5(s)(i) of the Target Disclosure Schedule sets
forth (x) a list of each customer from whom Target received
aggregate revenues
in excess of $500,000 during the twelve months ended December
31, 2006. No
Person listed in Section 5(s)(i) of Target Disclosure Schedule
has suspended,
canceled or otherwise terminated its relationship with Target or
to the
Knowledge of Target materially decreased its usage or purchase
of the services
or products of Target. To Target's Knowledge, no Person listed
in Section
5(s)(i) of the Target Disclosure Schedule has any intention to
suspend,
terminate or cancel its relationship with Target.
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<PAGE>
(ii) Section 5(s)(ii) of the Target Disclosure Schedule sets
forth a list of each supplier from whom Target received
aggregate products or
services in excess of $250,000 during the twelve months ended
December 31, 2006
(the "Material Suppliers"). Target's relationship with each of
the Material
Suppliers is a good commercial working relationship, and since
the Balance Sheet
Date, no Material Supplier has canceled, suspended, materially
modified, or
otherwise terminated its relationship with Target, or to the
Knowledge of Target
materially decreased availability of its services, supplies or
materials to
Target. To Target's Knowledge, no Material Supplier has any
intention to do any
of the foregoing.
(t) Accounts Receivable. All accounts receivable reflected in
the
Financial Statements represent valid obligations arising from
sales actually
made or services actually performed in the ordinary course of
business, and are
properly reflected in the Financial Statements in accordance
with GAAP and the
accounts receivables reserves are reasonable and calculated
consistent with past
practice. Since the Balance Sheet Date, Target has collected its
accounts
receivable in the ordinary course of business and in a manner
which is
consistent with past practices and has not accelerated any such
collections.
(u) Disputed Accounts Payable. There are no material
(individually
or in the aggregate) unpaid invoices or bills, representing
amounts alleged to
be owed by Target, or other alleged obligations of Target, which
Target has
disputed or determined to dispute or refuse to pay. All accounts
payable and
notes payable of Target arose in bona fide arm's length
transactions in the
ordinary course of business and no material account payable or
note payable is
delinquent in its payment. Since the Balance Sheet Date, Target
has paid its
accounts payable in the ordinary course of its business and in a
manner which is
consistent with its past practices.
(v) Affiliate Transactions. Target has not entered into and is
not
subject or a party to any Affiliate Transaction.
(w) Litigation. There is no action, suit, proceeding,
dispute
resolution proceeding, charge, grievance or investigation (each,
a
"Proceeding"), by or before any Governmental Authority or other
regulatory or
administrative agency or commission or arbitration panel or
dispute resolution
board or other adjudicative entity pending, or, to the Knowledge
of Target,
threatened against or involving Target, or which questions or
challenges or
could reasonably be expected to have the effect of preventing,
delaying, making
illegal or otherwise interfering with, any of the Transactions.
Target is not
subject to any judgment, order or decree.
(x) Employee Benefits.
(i) Section 5(x) of the Target Disclosure Schedule contains
a true and complete list of each Employee Benefit Plan.
19
<PAGE>
(ii) With respect to each Employee Benefit Plan, Target has
heretofore made available to Buyer true and complete copies of
each of the
following documents, as applicable:
(1) a copy of the Employee Benefit Plan documents
(including all amendments thereto) for each written Employee
Benefit Plan or a
written description of any Employee Benefit Plan that is not
otherwise in
writing;
(2) a copy of the annual report or Internal Revenue
Service Form 5500 Series, if required under ERISA, with respect
to each Employee
Benefit Plan for the last three plan years ending prior to the
date of this
Agreement for which such a report was filed;
(3) a copy of the actuarial report, if required under
ERISA, with respect to each Employee Benefit Plan for the last
three plan years
ending prior to the date of this Agreement;
(4) a copy of the most recent Summary Plan Description
("SPD"), together with all Summaries of Material Modification
issued with
respect to such SPD, if required under ERISA, with respect to
each Employee
Benefit Plan, and all other material employee communications
relating to each
Employee Benefit Plan;
(5) if the Employee Benefit Plan is funded through a
trust or any other funding vehicle, a copy of the trust or other
funding
agreement (including all amendments thereto) and the latest
financial statements
thereof, if any;
(6) all contracts relating to the Employee Benefit
Plan with respect to which Target or any ERISA Affiliate may
have any liability,
including insurance contracts, investment management agreements,
subscription
and participation agreements and record keeping agreements;
and
(7) the most recent determination letter received from
the IRS with respect to each Employee Benefit Plan that is
intended to be
qualified under Section 401(a) of the Code.
(iii) No liability under Title IV of ERISA has been incurred
by Target or any ERISA Affiliate that has not been satisfied in
full, and no
condition exists that presents a material risk to Target or any
ERISA Affiliate
of incurring any liability under such Title, other than
liability for premiums
due the Pension Benefit Guaranty Corporation ("PBGC"), which
payments have been
or will be made when due. To the extent this representation
applies to Sections
4064, 4069 or 4204 of Title IV of ERISA, it is made not only
with respect to the
Employee Benefit Plans but also with respect to any employee
benefit plan,
program, agreement or arrangement subject to Title IV of ERISA
to which Target
or any ERISA Affiliate made, or was required to make,
contributions during the
past six years.
(iv) The PBGC has not instituted proceedings pursuant to
Section 4042 of ERISA to terminate any of the Employee Benefit
Plans subject to
Title IV of ERISA, and no condition exists that presents a
material risk that
such proceedings will be instituted by the PBGC.
20
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