<PAGE>
Exhibit 10.14
EXECUTION COPY
-----------------------------------------------------------------
INVESTMENT AGREEMENT
By and Among
ANHEUSER-BUSCH COMPANIES, INC.,
ANHEUSER-BUSCH INTERNATIONAL, INC.
and
ANHEUSER-BUSCH INTERNATIONAL HOLDINGS, INC.
and
GRUPO MODELO, S.A. DE C.V.,
DIBLO, S.A. DE C.V.
and
CERTAIN SHAREHOLDERS THEREOF
Dated as of June 16, 1993
<TABLE>
TABLE OF CONTENTS
-----------------
<S>
<C>
I.
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . 2
II. TERMS OF THE
SUBSCRIPTION OF SERIES P-C SHARES AND
THE PURCHASE AND SALE OF INITIAL DIBLO COMMON SHARES
2.1
Subscription of Series P-C Shares
and Purchase and Sale of the Initial
Diblo Common Shares. . . . . . . . . . . . . 7
2.2
The Closing. . . . . . . . . . . . . . . . . 8
2.3
Purchase Price . . . . . . . . . . . . . . . 8
2.4
Deliveries at the Closing. . . . . . . . . . 8
III. REPRESENTATIONS AND
WARRANTIES OF THE G-MODELO
SIGNATORIES
3.1
Capital Stock of G-Modelo. . . . . . . . . . 11
3.2
Capital Stock of Diblo and the G-Modelo
Corporations . . . . . . . . . . . . . . . . 13
3.3
USA
Export . . . . . . . . . . . . . . . . . 15
3.4
Power and Authority; Effect of Agreement . . 16
3.5
Investments. . . . . . . . . . . . . . . . . 17
3.6
Organization; Assets . . . . . . . . . . . . 17
3.7
Financial Information. . . . . . . . . . . . 18
3.8
Undisclosed Liabilities; Absence of
Certain Changes. . . . . . . . . . . . . . . 19
3.9
Title and Related Matters. . . . . . . . . . 20
3.10
Patents, Trademarks, Etc.. . . . . . . . . . 20
3.11
Litigation . . . . . . . . . . . . . . . . . 22
3.12
Compliance with Laws . . . . . . . . . . . . 22
3.13 Tax
Matters. . . . . . . . . . . . . . . . . 23
3.14
Shareholder Agreements . . . . . . . . . . . 24
3.15
Consents . . . . . . . . . . . . . . . . . . 25
3.16
Environmental Matters. . . . . . . . . . . . 25
3.17
Absence of Certain Changes or Events . . . . 26
3.18
Material Contracts . . . . . . . . . . . . . 26
3.19
Employee Benefits; Employment Contracts. . . 27
3.20 Real
Property. . . . . . . . . . . . . . . . 28
3.21 Tied
House Prohibitions. . . . . . . . . . . 29
3.22
Insurance. . . . . . . . . . . . . . . . . . 29
i
IV. REPRESENTATIONS
AND WARRANTIES OF A-B, A-BI AND
THE INVESTOR
4.1
Corporate Power and Authority; Effect
of Agreement . . . . . . . . . . . . . . . . 30
4.2
Consents . . . . . . . . . . . . . . . . . . 31
4.3
Availability of Funds. . . . . . . . . . . . 31
4.4
Management of G-Modelo and the G-Modelo
Corporations . . . . . . . . . . . . . . . . 31
V. COVENANTS
OF THE PARTIES
5.1
Access to Information. . . . . . . . . . . . 32
5.2
Further Assurances . . . . . . . . . . . . . 33
5.3
Filings; Tax Returns . . . . . . . . . . . . 34
5.4
Internal Reorganization. . . . . . . . . . . 35
5.5
Election of A-B Director . . . . . . . . . . 36
5.6
Environmental and Safety Laws. . . . . . . . 36
5.7
USA Export Agreement . . . . . . . . . . . . 37
5.8
Consummation of Public Offerings;
Registration of Shares . . . . . . . . . . . 37
5.9
Dividend Policies. . . . . . . . . . . . . . 38
5.10
Equity Participations. . . . . . . . . . . . 41
5.11
Operation of G-Modelo. . . . . . . . . . . . 41
5.12
Government Officials . . . . . . . . . . . . 41
5.13 Sale
of Series C Shares to Employees . . . . 42
5.14 Real
Estate Transfers. . . . . . . . . . . . 42
5.15
Technical Committees . . . . . . . . . . . . 42
5.16
Failure by the Investor to Acquire
all Diblo Option Shares. . . . . . . . . . . 43
VI. TRANSFER, SALE
AND PURCHASE RIGHTS
6.1
General. . . . . . . . . . . . . . . . . . . 44
6.2
Offer to Sell; Right of First Refusal. . . . 45
6.3
The Investor's Option to Purchase
Shares of G-Modelo Capital Stock . . . . . . 49
6.4
The Investor's Option to Purchase
Diblo Common Shares. . . . . . . . . . . . . 52
6.5
Consequences of Failure to Convert
Series P-C Shares. . . . . . . . . . . . . . 54
6.6
Restriction on Dispositions to
Competitors. . . . . . . . . . . . . . . . . 59
6.7
Restrictions on Acquiring Series C
Shares . . . . . . . . . . . . . . . . . . . 59
6.8
Extension of Time Periods. . . . . . . . . . 59
ii
VII. BOARDS OF DIRECTORS;
VOTING
7.1
Boards of Directors. . . . . . . . . . . . . 60
7.2
Corporate Actions. . . . . . . . . . . . . . 62
VIII. CONDITIONS TO THE INVESTOR'S
OBLIGATIONS
8.1
Representations, Warranties of the
G-Modelo
Signatories . . . . . . . . . . . . 68
8.2
No Prohibition . . . . . . . . . . . . . . . 68
8.3
No Action. . . . . . . . . . . . . . . . . . 69
8.4
HSR Act. . . . . . . . . . . . . . . . . . . 69
8.5
Certificates . . . . . . . . . . . . . . . . 69
8.6
Opinion. . . . . . . . . . . . . . . . . . . 69
IX. CONDITIONS TO
THE G-MODELO SIGNATORIES' AND THE
BANAMEX TRUST'S OBLIGATIONS
9.1
Representations and Warranties of A-B,
A-BI and the Investor. . . . . . . . . . . . 69
9.2
No Prohibition . . . . . . . . . . . . . . . 70
9.3
No Action. . . . . . . . . . . . . . . . . . 70
9.4
HSR Act. . . . . . . . . . . . . . . . . . . 70
9.5
Certificates . . . . . . . . . . . . . . . . 70
9.6
Opinion. . . . . . . . . . . . . . . . . . . 70
X.
INDEMNIFICATION
10.1 The
Controlling Shareholders', G-Modelo
and Diblo Indemnification. . . . . . . . . . 71
10.2 The
Investor's Indemnification . . . . . . . 71
10.3
Conditions of Indemnification. . . . . . . . 72
10.4
Remedies Cumulative. . . . . . . . . . . . . 73
XI. TERMINATION
PRIOR TO CLOSING
11.1
Termination. . . . . . . . . . . . . . . . . 73
11.2
Procedure and Effect of Termination. . . . . 74
XII. DISPUTE RESOLUTION
12.1
Arbitration. . . . . . . . . . . . . . . . . 75
12.2
Business Disagreements . . . . . . . . . . . 76
XIII. MISCELLANEOUS
13.1
Survival of Representations, Warranties
and Covenants. . . . . . . . . . . . . . . . 78
13.2
Entire Agreement . . . . . . . . . . . . . . 78
iii
13.3
Successors and Assigns . . . . . . . . . . . 78
13.4
Counterparts . . . . . . . . . . . . . . . . 79
13.5
Interpretation . . . . . . . . . . . . . . . 79
13.6
Amendment and Modification . . . . . . . . . 79
13.7
Waiver of Compliance; Consents . . . . . . . 79
13.8
Broker's Fees. . . . . . . . . . . . . . . . 80
13.9
Expenses . . . . . . . . . . . . . . . . . . 80
13.10 Notices. .
. . . . . . . . . . . . . . . . . 80
13.11 Governing
Law. . . . . . . . . . . . . . . . 82
13.12 Public
Announcements . . . . . . . . . . . . 82
SIGNATURES . .
. . . . . . . . . . . . . . . . . . . . 83
EXHIBIT A -- Capital Stock of G-Modelo as
of
Closing
EXHIBIT B -- Calculation of G-Modelo Free
Cash
Flow
EXHIBIT C -- Procermex Pricing
Policies
EXHIBIT D -- Opinion of Santamarina Y
Steta, S.C.
EXHIBIT E -- Opinion of Stephen J.
Volland, Esq.,
Senior Associate General Counsel of
Anheuser-Busch Companies, Inc.
EXHIBIT F -- Opinion of Skadden, Arps,
Slate,
Meagher & Flom
EXHIBIT G -- Opinion of Creel,
Garcia-Cuellar y
Muggenburg
SCHEDULES
---------
Schedule 3.2(a)
Schedule 3.2(c)
Schedule 3.10
Schedule 3.11
Schedule 3.17
Schedule 3.18
Schedule 3.19
</TABLE>
iv
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT, made and entered
into as of this
16th day of June, 1993, by and among
ANHEUSER-BUSCH
COMPANIES, INC., a Delaware corporation
("A-B"),
ANHEUSER-BUSCH INTERNATIONAL, INC., a Delaware
corporation
("A-BI"), ANHEUSER-BUSCH INTERNATIONAL HOLD-
INGS, INC., a
Delaware corporation (the "Investor"), and
the other
signatories hereto set forth on the signature
pages of this
Investment Agreement (such signatories
other than the
Option Trust and the Banamex Trust are
hereinafter
referred to collectively as the "G-Modelo
Signatories");
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Srs. Antonino Fernandez R., Pablo
Aramburuzabala,
Nemesio Diez R., Juan Sanchez-Navarro y
P. and Valentin
Diez M. have transferred and caused each
of the other
shareholders (collectively, the "Controlling
Shareholders")
of Diblo, S.A. de C.V., a Mexican corpora-
tion ("Diblo"),
to transfer to Grupo Modelo, S.A. de
C.V., a Mexican
corporation ("G-Modelo"), approximately
75 percent of
the issued and outstanding shares of capi-
tal stock of
Diblo, in exchange for 169,701,202 common
shares of
G-Modelo; and
WHEREAS, the Controlling Shareholders have
caused each of
Consorcio Distributivo, S.A. de C.V., a
Mexican
corporation ("Consorcio"), and Expansion Inte-
gral, S.A. de
C.V., a Mexican corporation ("Expansion"),
to merge into
Diblo, which is now the owner of all of the
outstanding
shares of capital stock of all of the former
subsidiaries of
Consorcio and Expansion which the latter
two owned prior
to such merger; and
WHEREAS, A-B and the Controlling Shareholders
desire to create
an association or joint venture to
conduct and
expand G-Modelo's and Diblo's current busi-
nesses, which
shall be managed by the Controlling Share-
holders, with
the participation of A-B, A-BI and the
Investor as
provided in this Agreement; and
WHEREAS, in furtherance of and in consideration
for the creation
of such association or joint venture,
the Investor
desires, among other things, (i) to sub-
scribe and fully
pay for 20,323,498 shares of Series P-C
Convertible
Preferred Stock, no par value (the "Series P-
C Shares"), of
G-Modelo, representing all of the autho-
rized Series PC
Shares of GModelo, which Series P-C
Shares represent in
excess of 10 percent of the total
outstanding
capital stock of G-Modelo and which shall be
part of
G-Modelo's Class II capital stock, and (ii) to
purchase from
Banco Nacional de Mexico, S.A., as Trustee
of the Trust
(the "Banamex Trust") established under the
Trust Agreement
dated as of November 28, 1991, as amended
and restated on
June 11, 1993 (the "Banamex Trust Agree-
ment"), among
the Controlling Shareholders and the Trust-
ee of the
Banamex Trust, and the Trustee of the Banamex
Trust desires to
sell to the Investor, 24,329,922 shares
(the "Initial
Diblo Shares") of Series B Common Stock, no
par value (the
"Diblo Series B Shares"), of Diblo, which
Initial Diblo
Shares represent in excess of 10 percent of
the total
outstanding capital stock of Diblo and which
shall be part of
Diblo's Class II capital stock;
NOW, THEREFORE, in consideration of the forego-
ing premises and
the respective representations, warran-
ties, covenants
and agreements, and upon the terms and
subject to the
conditions hereinafter set forth, and
intending to be
legally bound hereby the parties do
hereby agree as
follows:
ARTICLE I
DEFINITIONS
-----------
Capitalized terms used herein shall have the
meaning ascribed
to them in this Article I unless such
terms are
defined elsewhere in this Agreement.
1.1. A-B. "A-B" shall have the meaning
set
---
forth in the
first paragraph of this Agreement.
1.2. A-BI.
"A-BI" shall have the
meaning set
----
forth in the
first paragraph of this Agreement.
1.3. Amended Diblo
By-laws. "Amended
Diblo
---------------------
By-laws" shall
mean the By-laws of Diblo as amended and
provided to the
Investor pursuant to Section 2.4(b)(v).
1.4. Amended G-Modelo
By-laws. "Amended
------------------------
G-Modelo
By-laws" shall mean the By-laws of G-Modelo as
amended and
provided to the Investor pursuant to Section
2.4(b)(v).
2
1.5. Banamex Trust.
"Banamex Trust"
shall
-------------
have the meaning
set forth in the fourth preamble of this
Agreement.
1.6. Banamex Trust
Agreement. "Banamex
Trust
-----------------------
Agreement" shall
have the meaning set forth in the fourth
preamble of this
Agreement.
1.7. Closing.
"Closing" shall mean
the com-
-------
pletion of the
purchase and sale of the Series P-C Shares
and the Initial
Diblo Shares.
1.8. Closing Date.
"Closing Date" shall
mean
------------
the date on
which the Closing occurs.
1.9. C&L.
"C&L" shall mean
Despacho Roberto
---
Casas Alatriste,
S.C., the Mexican affiliate of Coopers &
Lybrand,
independent certified public accountants for
G-Modelo and the
G-Modelo Corporations or such other
Mexican
affiliate of a "Big 6" international accounting
firm appointed
by the G-Modelo Board of Directors to
audit the
accounts of G-Modelo and the G-Modelo Corpora-
tions.
1.10. Consorcio.
"Consorcio" shall have
the
---------
meaning set
forth in the second preamble of this Agreement.
1.11. Controlling
Shareholders.
"Controlling
------------------------
Shareholders"
shall have the meaning set forth in the
first preamble
of this Agreement.
1.12. Control Trust.
"Control Trust"
shall
-------------
mean the trust
established under the Control Trust Agree-
ment.
1.13. Control Trust
Agreement. "Control
Trust
-----------------------
Agreement" shall
mean the agreement dated as of June 11,
1993, among the
Controlling Shareholders, A-B and Banco
Nacional de
Mexico, S.A., as Trustee for the Control Trust.
1.14. Diblo.
"Diblo" shall have the meaning
-----
set forth in the
first preamble of this Agreement.
1.15. Diblo Series A
Shares. "Diblo Series
A
---------------------
Shares" shall be
the Class I authorized shares of Series
A Common Stock,
no par value, of Diblo.
3
1.16. Diblo Series B
Shares. "Diblo Series
B
---------------------
Shares" shall
have the meaning set forth in the fourth
preamble of this
Agreement.
1.17. Diblo P-C
Shares. "Diblo P-C
Shares"
----------------
shall mean the
Class II authorized shares of Series P-C
Convertible
Preferred Stock, no par value, of Diblo.
1.18. Encumbrances.
"Encumbrances" shall
mean
------------
all liens,
claims, options, security interests or other
encumbrances of
any character whatsoever.
1.19. Expansion.
"Expansion" shall have
the
---------
meaning set
forth in the second preamble of this Agree-
ment.
1.20. Free Exchange
Rate. "Free
Exchange
------------------
Rate" shall mean
the average of the U.S. dollar/Mexican
Peso free
exchange rates for the sale of U.S. dollars
based on the
amount of money to be converted quoted by
Banco Nacional
de Mexico, S.A. and Bancomer, S.A. at
10:00 a.m. on
the date of payment for which such free
exchange rate is
being used.
1.21. G-Modelo.
"G-Modelo" shall have
the
--------
meaning set
forth in the first preamble of this Agree-
ment.
1.22. G-Modelo
Corporations.
"G-Modelo Corpo-
---------------------
rations" shall
mean Diblo and the other Subsidiaries of
G-Modelo.
1.23. G-Modelo
Signatories. "G-Modelo
Signa-
--------------------
tories" shall
have the meaning set forth in the first
paragraph of
this Agreement.
1.24. Heads of
Agreement. "Heads of
Agree
------------------
ment" shall mean
the Heads of Agreement dated as of March
24, 1993, among
A-B, A-BI, G-Modelo, Diblo and certain
Controlling
Shareholders.
1.25. HSR Act.
"HSR Act" shall mean
the
-------
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
4
1.26. Initial Diblo
Shares. "Initial
Diblo
--------------------
Shares" shall
have the meaning set forth in the fourth
preamble of this
Agreement.
1.27. Internacionales. "Internacionales"
---------------
shall mean
Cervezas Internacionales, S.A. de C.V., a
Mexican
corporation and a Subsidiary of Diblo.
1.28. Investor.
"Investor" shall have
the
--------
meaning set
forth in the first
paragraph of this Agree-
ment.
1.29. LRMI.
"LRMI" shall mean the
Law and
----
Regulations to
Promote Mexican Investment and Regulate
Foreign
Investment.
1.30. Mexican GAAP.
"Mexican GAAP"
shall
------------
mean Mexican
generally accepted accounting principles.
1.31. Mexican Pesos.
"Mexican Pesos"
shall
-------------
mean New Mexican
pesos as of the date of this Agreement.
1.32. Option Shares.
"Option Shares"
shall
-------------
have the meaning
set forth in Section 6.3.
1.33. Option Trust.
"Option Trust" shall
mean
------------
the trust
established under the Option Trust Agreement.
1.34. Option Trust
Agreement. "Option
Trust
----------------------
Agreement" shall
mean the agreement dated as of June 11,
1993, among the
Controlling Shareholders and Banco
Nacional de
Mexico, S.A., as Trustee for the Option
Trust.
1.35. Person.
The term "person"
shall mean
------
and include an
individual, a partnership, a joint ven-
ture, a
corporation, a trust, an unincorporated organiza-
tion and a
government or any department or agency there-
of.
1.36. Prime Rate.
"Prime Rate" shall
mean the
----------
rate published
by the New York City Branch of Citibank,
N.A. as its
prime rate on the date on which interest is
to begin to
accrue.
5
1.37. PW. "PW" shall mean Price
Waterhouse,
--
independent
certified public accountants for A-B and its
Subsidiaries or
such other "Big 6" international account-
ing firm
appointed by the A-B Board of Directors to audit
the accounts of
A-B and its Subsidiaries.
1.38. Real Estate
Trust. "Real Estate
Trust"
-----------------
shall mean the
trust established under the Real Estate
Trust
Agreement.
1.39. Real Estate
Trust Agreement. "Real
---------------------------
Estate Trust
Agreement" shall mean the agreement dated as
of January 22,
1993, among Diblo and Banco Nacional de
Mexico, S.A., as
Trustee of the Real Estate Trust.
1.40. Related Person.
"Related Person"
shall
--------------
mean when used
in reference to any other Person any
Person who owns
or holds ten percent or more of the
outstanding
capital stock of such other Person or is an
officer,
director or sole administrator of such other
Person or in the
case of a natural Person, his spouse,
his or his
spouse's children (including by adoption), his
siblings
(including half and step siblings), his estate
and any trust
entirely for the benefit of any one or more
of himself or
any of the foregoing individuals.
1.41. Series A Shares.
"Series A Shares"
---------------
shall mean the
Class I and Class II authorized shares of
Series A Common
Stock, no par value, of G-Modelo.
1.42. Series B Shares.
"Series B Shares"
---------------
shall mean the
71,376,124 Class II shares of Series B
Common Stock, no
par value, of G-Modelo authorized for
issuance upon
conversion of shares of G-Modelo capital
stock as
provided in the Amended G-Modelo By-laws.
1.43. Series C Shares.
"Series C Shares"
---------------
shall mean the
40,646,995 authorized Class II shares of
Series C
Non-Voting Stock, no par value, of G-Modelo.
1.44. Series P-C
Shares. "Series P-C
Shares"
-----------------
shall have the
meaning set forth in the fourth preamble
of this
Agreement.
1.45. Subsidiary.
The term "Subsidiary"
when
----------
used in
reference to any other Person shall mean (x) any
corporation of
which 50 percent or more of the outstand-
6
ing capital
stock is owned, directly or indirectly, by
such other
Person, or (y) any corporation of which out-
standing
securities having ordinary voting power to elect
a majority of
the members of the Board of Directors of
such corporation
are owned, directly or indirectly, by
such other
Person, or (z) any Person or entity, directly
or indirectly,
controlling, controlled by or under common
control with
such other Person.
1.46. USA Export.
"USA Export" shall
mean
----------
Extrade, S.A. de
C.V., a Mexican corporation formed by
certain
Controlling Shareholders prior to Closing as con-
templated in
Section 2.4(b)(ii).
1.47.
U.S. GAAP.
"U.S. GAAP" shall
mean
---------
United States
generally accepted accounting principles.
1.48. Other
Definitional Provisions. Whenever
-----------------------------
the context so requires,
each of the neuter, masculine or
feminine forms
of any pronoun shall include all such
forms. When used
in this Agreement, the phrase "to the
Controlling
Shareholders' best knowledge after due inqui-
ry" shall mean
the collective knowledge of all of the
Controlling
Shareholders after at least one of the Con-
trolling
Shareholders has made due inquiry of one or more
employees or
representatives of G-Modelo or a G-Modelo
Corporation who
has access to or knowledge of the infor-
mation being
sought. When used in
this Agreement, the
phrase
"consolidated after-tax net earnings" of G-Modelo
calculated in
accordance with Mexican GAAP shall mean
"utilidad neta
consolidada."
ARTICLE II
TERMS OF THE SUBSCRIPTION OF SERIES
P-C SHARES AND THE PURCHASE AND SALE OF
INITIAL DIBLO COMMON SHARES
---------------------------------------
2.1. Subscription of
Series P-C Shares and
-------------------------------------
Purchase and
Sale of the Initial Diblo Common Shares.
----------------------------------------------------
Upon the terms
and subject to the conditions of this
Agreement, at
the Closing (i) G-Modelo shall sell to the
Investor, and
the Investor shall subscribe and purchase
from G-Modelo,
the Series P-C Shares and (ii) the Trustee
of the Banamex
Trust shall sell to the Investor, and the
Investor shall
purchase from the Banamex Trust, the
7
Initial Diblo
Shares (which shall be "ex" the previously
declared
dividend that is referred to in clause (iv) of
paragraph (b) of
Section 2.04).
2.2. The Closing.
The Closing of the
transac-
-----------
tions
contemplated by this Article II shall take place at
the offices of
G-Modelo, Campos Eliseos 400, 19th Floor,
Colonia Lomas de
Chapultepec, 11000 Mexico, D.F., com-
mencing at 11:00
a.m. (Mexico time) on the date hereof
provided that
all of the conditions to the parties'
obligations set
forth in Articles VIII and IX have been
satisfied or
waived or such other place, time and date as
the Controlling
Shareholders and the Investor may mutual-
ly agree upon.
All matters at Closing
shall be consid-
ered to take
place simultaneously and no delivery of any
document shall
be deemed complete until all transactions
and deliveries
of documents are completed.
2.3. Purchase Price.
The aggregate
purchase
--------------
price to be paid
by the Investor for the Series P-C
Shares (the
"Series P-C Purchase Price") shall be 207.225
million United
States dollars and the aggregate purchase
price to be paid
by the Investor for the Initial Diblo
Shares (the
"Diblo Purchase Price") shall be 270 million
United States
dollars. Payment of
the Series P-C Pur-
chase Price and
the Diblo Purchase Price shall be made at
the Closing by
the Investor in immediately available
United States
funds.
2.4. Deliveries at the
Closing.
-------------------------
(a) Deliveries by the
Investor. At the
--------------------------
Closing, the
Investor or A-B shall deliver or cause to be
delivered the
following:
(i) the Series P-C Purchase
Price to G-Modelo and the Diblo Purchase Price
to the Banamex Trust;
(ii) copies of a duly executed
amendment to the Distribution Agreement dated
as of the Closing Date between A-B and Interna
cionales (the "Internacionales Distribution
Agreement"), providing, among other things,
that, subject to the terms and conditions
thereof, for so long as the Investor owns ten
per cent or more of the total outstanding shares of
8
G-Modelo capital stock, Internacionales shall
continue to be the exclusive distributor of A-B
beers in Mexico;
(iii) the opinions
referred to in
Section 9.6; and
(iv) any other
documents, in-
struments and writings required to be delivered
by the Investor at or prior to the Closing
pursuant to the terms of this Agreement.
(b) Deliveries by the
G-Modelo Signato-
----------------------------------
ries, the
Banamex Trust and the Option Trust. At the
--------------------------------------------
Closing, the
Controlling Shareholders, the Banamex Trust
and the Option
Trust shall deliver or cause to be deliv-
ered the
following:
(i) stock certificates
repre-
senting the Series P-C Shares registered in the
name of the Investor and the Initial Diblo
Shares, duly endorsed in the name of the Inves-
tor;
(ii) a certificate of
the appro-
priate officer of Diblo certifying (A) the
completion of the transfer to USA Export of the
exclusive rights of Diblo for the export of
G-Modelo beers to the United States upon the
terms set forth in the agreement between USA
Export and the applicable G-Modelo Corporations
(the "USA Export Agreement"),(B) the Certif-
icate of Incorporation and By-laws of USA Ex-
port and (C) the USA Export Agreement as in
effect on the Closing Date duly executed by the
parties thereto;
(iii) a certificate of
an appro-
priate officer of G-Modelo certifying (x) the
exact amount of the dividend declared out of
the consolidated after-tax net earnings of G-
Modelo calculated in accordance with Mexican
GAAP, which dividend will be 484,440,235.90
Mexican Pesos which is the Mexican Peso equiva-
lent of 155.4 million United States dollars
based upon an agreed Free Exchange Rate of
3.1170 Mexican Pesos per United States dollar
9
for this purpose, (y) the date of declaration
of such dividend and (z) the date of payment of
such dividend (which shall be payable to G-Mod-
elo's shareholders of record on the date of
such declaration);
(iv) a certificate of
an appro-
priate officer of Diblo certifying (x) the
exact amount of the dividend declared out of
the consolidated after-tax net earnings of
Diblo calculated in accordance with Mexican
GAAP, which dividend will be 645,920,325 Mexi-
can Pesos based upon an agreed Free Exchange
Rate of 3.1170 Mexican Pesos per United States
dollar for this purpose, (y) the date of dec-
laration of such dividend, and (z) the date of
payment of such dividend (which shall be pay-
able to Diblo's shareholders of record on the
date of such declaration);
(v) a copy of the
Amended G-Mo-
delo By-laws as in effect on the Closing Date
certified by the Secretary of G-Modelo and the
Amended Diblo By-laws as in effect on the Clos-
ing Date certified by the Secretary of Diblo;
(vi) Powers of
Attorney granting
one or more of the Controlling Shareholders the
power and authority to act on behalf of those
Controlling Shareholders who have executed this
Agreement by power of attorney, which Control-
ling Shareholders together with the Controlling
Shareholders who have directly executed this
Agreement own or control at least 99 percent of
the capital stock of G-Modelo;
(vii) the opinion
referred to in
Section 8.6;
(viii) copies of the
duly executed
Control Trust Agreement, the Banamex Trust
Agreement, the Option Trust Agreement and the
Real Estate Trust Agreement, in each case as in
effect on the Closing Date;
(ix) Designation as
Trustee
Delegate authorizing the representative of
10
Banco Nacional de Mexico, S.A. on behalf of each of
the Banamex Trust and the Option Trust to execute
the Banamex Trust Agreement and the Option Trust
Agreement, respectively, and this Agreement and of
the
Control Trust to execute the Control Trust
Agreement; and
(x) any other
documents, in-
struments and writings required to be delivered
by the G-Modelo Signatories, the Banamex Trust
or the
Option Trust at or prior to the Closing
pursuant to the terms of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE G-MODELO SIGNATORIES
------------------------------
Each of the G-Modelo Signatories, jointly and
severally,
represents and warrants to A-B, A-BI and the
Investor as
follows:
3.1. Capital Stock of
G-Modelo.
-------------------------
(a) Other than as set
forth on Exhibit A,
there are no
authorized, issued or outstanding securities
of G-Modelo.
The Series A Shares
and the Series C Shares
are owned of
record as set forth on Exhibit A, free and
clear of all
Encumbrances, except as set forth in this
Agreement.
All of the Series A
Shares and the Series C
Shares have been
duly and validly authorized and issued,
and all of such
shares, other than those Series C Shares
held in
G-Modelo's treasury for issuance to the public in
accordance with
Section 5.8 or to executive employees of
the G-Modelo
Corporations in accordance with Section
5.13, are fully
paid and nonassessable, and, upon payment
for the treasury
shares in connection with such issuanc-
es, such
treasury shares will be outstanding, fully paid
and
nonassessable. The
Series B Shares have been duly
and validly
authorized for issuance upon conversion of
shares of
G-Modelo capital stock pursuant to the Amended
G-Modelo
By-laws, are free of pre-emptive rights and none
of such shares
have been issued. The
Series P-C Shares
have been duly
and validly authorized and, upon payment
therefor as
provided in this Agreement, will be validly
issued and
outstanding, fully paid and nonassessable.
11
Except as
provided in this Agreement, the Control Trust
Agreement and
the Option Trust Agreement, there is no
subscription,
option, warrant, call, right, contract,
agreement,
commitment, understanding or arrangement with
respect to the
issuance, sale, delivery or transfer of
the capital
stock of G-Modelo, including any right of
conversion or exchange
under any security or other in-
strument.
Each of the persons
listed on Exhibit A has
good and
marketable title to the shares listed next to
such person's
name on Exhibit A, and the Investor will
receive good and
marketable title to the Series P-C
Shares, free and
clear of all Encumbrances, except as set
forth in this
Agreement.
(b) Upon the
conversion, if any, by the
Investor of the
Series P-C Shares into Series B Shares
pursuant to the terms
of the Series P-C Shares, the
Investor will
receive good and marketable title to the
Series B Shares
free and clear of all Encumbrances,
except as set
forth in this Agreement.
(c) Upon the purchase
of the Option
Shares at the
Option Closing (as such term is defined in
Section 6.3)
pursuant to Section 6.3, the Investor or its
authorized
designee, if any, will receive good and mar-
ketable title to
the Option Shares free and clear of all
Encumbrances,
except as set forth in this Agreement.
(d) Upon the purchase
of Series A Shares
at a Purchase
Right Closing (as such term is defined in
Section 6.2)
pursuant to Section 6.2, the Investor or its
authorized designee,
if any, will receive good and mar-
ketable title to
such Series A Shares free and clear of
all
Encumbrances, except as set forth in this Agreement.
(e) Except as provided
in this Agreement,
the Control
Trust Agreement and the Amended G-Modelo By-
laws, the
Control Trust is not a party to any subscrip-
tion, option,
warrant, call, right, contract, agreement,
commitment,
understanding or arrangement with respect to
the sale,
delivery or transfer of the Series A Shares
held by the
Control Trust, including any right of conver-
sion or exchange
under any security or other instrument.
Except as
provided in this Agreement, the Option Trust
Agreement and
the Amended G-Modelo By-laws, the Option
Trust is not a
party to any subscription, option, war-
rant, call,
right, contract, agreement, commitment,
12
understanding or
arrangement with respect to the sale,
delivery or
transfer of the Series A Shares held by the
Option Trust,
including any right of conversion or ex-
change under any
security or other instrument. Each of
the Control
Trust and the Option Trust has good and mar-
ketable title to
the Series A Shares held in trust by it,
free and clear
of all Encumbrances, except as set forth
in this
Agreement.
3.2. Capital Stock of
Diblo and the G-Modelo
---------------------------------------
Corporations.
------------
(a) The authorized
capital stock of Diblo
is variable with
a minimum fixed capital of 1,428,804,61-
4.20 Mexican
Pesos and a variable capital, which as of
the Closing
Date, equals 1,122,188,515.70 Mexican Pesos.
The total
capital is divided into (i) 226,268,273 shares
of Diblo common
stock, all of which shares are issued and
outstanding,
169,701,206 of which shares are designated
as Class I Diblo
Series A Shares which represent the
minimum fixed
capital and 56,567,067 of which shares are
designated as
Class II Diblo Series B Shares and (ii)
17,030,940 Diblo
P-C Shares, all of which shares are
issued and
outstanding and are designated as Class II
shares and which
together with the Class II Diblo Series
B Shares
represent the variable capital. The Diblo Series
A Shares and the
Diblo Series B Shares (collectively, the
"Diblo Common
Shares") and the Diblo P-C shares are owned
of record as set
forth on Schedule 3.2(a). All Diblo
Common Shares
have been duly and validly authorized and
issued, are
fully paid and nonassessable, and are owned
of record as set
forth on Schedule 3.2(a) free and clear
of all
Encumbrances, except as set forth in this Agree-
ment.
All Diblo P-C Shares
have been duly and validly
authorized and
issued, and upon payment therefor immedi-
ately after the
Closing will be fully paid and nonassess-
able, and are
owned by G-Modelo free and clear of Encum-
brances.
Other than the Diblo
Common Shares and the
Diblo P-C
Shares, there are no authorized, issued or out-
standing
securities of Diblo.
Except as provided in this
Agreement and
the Banamex Trust Agreement, there is no
subscription,
option, warrant, call, right, contract,
agreement,
commitment, understanding or arrangement with
respect to the
issuance, sale, delivery or transfer of
the capital
stock of Diblo, including any right of con-
version or
exchange under any security or other instru-
ment.
Each of G-Modelo and
the Banamex Trust has good
13
and marketable
title to the Diblo Common Shares and, in
the case of
G-Modelo, the Diblo P-C Shares owned by it,
and at the
Closing the Investor will receive good and
marketable title
to the Initial Diblo Shares, free and
clear of all
Encumbrances, except as set forth in this
Agreement.
(b) Upon the purchase
of the Diblo Option
Shares at the
Diblo Option Closing (as such terms are
defined in
Section 6.4) pursuant to Section 6.4, the
Investor or its
authorized designee, if any, will receive
good and
marketable title to the Diblo Option Shares free
and clear of all
Encumbrances, except as set forth in
this
Agreement.
(c) For each of the
G-Modelo Corpora-
tions, Schedule
3.2(c) identifies (i) the names of the
directors or
sole administrator, as the case may be, (ii)
the authorized
capital for such corporation, divided
between minimum
fixed capital and variable capital, (iii)
the number of
such shares which are issued and outstand-
ing, together
with the number of treasury shares, if any,
and (iv) the
names of all record holders of such issued
and outstanding
shares (indicating the number of shares
owned).
Each of the G-Modelo
Corporations has good and
marketable title
to the shares of capital stock of the G-
Modelo
Corporations owned by it, free and clear of all
Encumbrances.
All of the shares of
capital stock of the
G-Modelo
Corporations are duly and validly authorized and
issued, fully
paid and nonassessable. Except as provided
in this
Agreement, there is no subscription, option, war-
rant, call,
right, contract, agreement, commitment,
understanding or
arrangement with respect to the issu-
ance, sale,
delivery or transfer of any of the shares of
the capital
stock of the G-Modelo Corporations, including
any right of
conversion or exchange under any security or
other
instrument. As
promptly as practicable, the Con-
trolling
Shareholders agree to identify the relationship,
if any, of the
shareholders, the directors or the sole
administrator of
the G-Modelo Corporations identified on
Schedule 3.2(c)
to Srs. Antonino Fernandez R., Pablo
Aramburuzabala,
Nemesio Diez R., Juan Sanchez-Navarro y
P. or Valentin
Diez M. and to provide such information to
A-B.
(d) Except as provided
in this Agreement
and the Banamex
Trust Agreement, the Banamex Trust is not
14
a party to any
subscription, option, warrant, call,
right, contract,
agreement, commitment, understanding or
arrangement with
respect to the sale, delivery or trans-
fer of the Diblo
Series B Shares held by the Banamex
Trust, including
any right of conversion or exchange
under any
security or other instrument. The Banamex
Trust has good
and marketable title to the Diblo Series B
Shares held in
trust by it, free and clear of all Encum-
brances, except
as set forth in this Agreement.
3.3. USA Export.
All of the shares of
capital
----------
stock of USA
Export are duly and validly authorized and
issued, fully
paid and nonassessable and owned of record
and beneficially
by certain of the Controlling Sharehold-
ers.
Except as provided in
this Agreement, there is no
subscription,
option, warrant, call, right, contract,
agreement,
commitment, understanding or arrangement with
respect to the
issuance, sale, delivery or transfer of
the capital
stock of USA Export, including any right of
conversion or
exchange under any security or other in-
strument.
All of the exclusive
rights of Diblo for the
export of
G-Modelo beers to the United States have been
transferred to
USA Export. USA Export
had all requisite
power and
authority (corporate or otherwise) to execute,
deliver and
perform the USA Export Agreement and to
consummate the
transactions contemplated thereby. The
execution,
delivery and performance of the USA Export
Agreement by USA
Export and the consummation by USA
Export of its
obligations thereunder have been duly
authorized by
all necessary corporate action and no other
corporate
proceedings on the part of the Board of Direc-
tors or
shareholders of USA Export is necessary to autho-
rize the USA
Export Agreement or to consummate the trans-
action
contemplated thereby.
The USA Export Agreement
has been duly
and validly executed and delivered by the
G-Modelo
Corporations which are parties thereto and USA
Export and
constitutes the valid and binding obligation
of each of them,
enforceable against each of them in
accordance with
its terms. None of
A-B, A-BI, the Inves-
tor or any of
their respective affiliates has any owner-
ship interest in
USA Export or ability to influence or
control any of
the policies or decisions of the Board of
Directors or
management of USA Export.
15
3.4. Power and
Authority; Effect of Agreement.
----------------------------------------
(a) Each of the
G-Modelo Signatories has
all requisite
power and authority (corporate or other-
wise) to
execute, deliver and perform this Agreement and
to consummate
the transactions contemplated hereby. The
execution,
delivery and performance by the corporate
G-Modelo
Signatories of their obligations under this
Agreement and
the consummation by them of the transac-
tions
contemplated hereby have been duly authorized by
the Board of
Directors and shareholders, as applicable,
of each
corporate G-Modelo Signatory, and no other corpo-
rate action or
proceeding on the part of such corporation
or its
shareholders is necessary to authorize this Agree-
ment or the
consummation of any of the transactions
contemplated
hereby. This Agreement
has been duly and
validly executed
and delivered by the G-Modelo Signato-
ries and
constitutes the valid and binding obligation of
each of the
G-Modelo Signatories, enforceable against
each of them in
accordance with its terms.
(b) One or more of the
Controlling Share-
holders has full
legal power and authority to act on
behalf of those
Controlling Shareholders who have exe-
cuted this
Agreement by power of attorney, which Control-
ling
Shareholders together with the Controlling Share-
holders who have
directly executed this Agreement own or
control at least
99 percent of the capital stock of G-
Modelo.
(c) As of the date
hereof, a majority of
the members of
the technical committees of the Control
Trust, the
Banamex Trust and the Option Trust are Con-
trolling
Shareholders or will otherwise be bound by the
terms of this
Agreement.
(d) The execution,
delivery and perfor-
mance by the
G-Modelo Signatories of this Agreement and
the consummation
by the G-Modelo Signatories of the
transactions
contemplated hereby does not and will not,
with or without
the giving of notice or the lapse of
time, or both,
(i) violate any law, rule or regulation to
which any
G-Modelo Signatory or any of its respective
assets is
subject, (ii) violate any order, writ, injunc-
tion, judgment
or decree applicable to any G-Modelo
Signatory or any
of its respective assets or properties,
or (iii)
conflict with, or result in a breach of or
16
default under,
or give rise to any right of termination,
cancellation or
acceleration under (A) any term or condi-
tion of the
Certificate of Incorporation, the By-Laws, or
other similar
charter documents, of any corporate G-Mode-
lo Signatory, or
(B) any of the terms, conditions or
provisions of
any note, bond, mortgage, indenture or
material lease,
license, agreement or other material
instrument to
which any G-Modelo Signatory is a party or
by which any of
them or any of their respective assets
may be bound;
except with respect to clauses (i), (ii)
and (iii)(B)
above, for violations, conflicts, breaches
or defaults
which in the aggregate would not materially
hinder or impair
any G-Modelo Signatory's ability to
consummate the
transactions contemplated hereby.
3.5. Investments.
The corporations,
partner-
-----------
ships, joint
ventures or other entities in which G-Modelo
or any of the
G-Modelo Corporations has, or pursuant to
any agreement
will have, individually or in the aggre-
gate, directly
or indirectly, the right to acquire by any
means, an equity
interest or investment exceeding ten
percent of the equity
capital thereof (other than the
G-Modelo
Corporations) (the "G-Modelo Investments"), in
the aggregate,
are not material to the business, assets,
operations,
prospects or financial condition of G-Modelo
and the G-Modelo
Corporations, taken as a whole.
3.6. Organization;
Assets.
--------------------
(a) Each of G-Modelo,
the G-Modelo Corpo-
rations and USA
Export is a corporation duly organized,
validly existing
and in good standing under the laws of
the jurisdiction
of its incorporation, and each has all
requisite
corporate power and authority to own, lease and
operate its
properties and to carry on its business as
now being
conducted. G-Modelo,
the G-Modelo Corporations
and USA Export
are each duly qualified or licensed and in
good standing to
do business in each jurisdiction in
which the
property owned, leased or operated by such
corporation or
the nature of the business conducted by
such corporation
makes such qualification necessary,
except where the
failure to be so qualified or licensed
and in good
standing would not have a material adverse
effect on the
business, assets, operations, prospects or
financial
condition of G-Modelo, such G-Modelo Corpora-
tion or USA
Export, as the case may be. The Controlling
Shareholders
have heretofore delivered to the Investor
17
complete and
correct copies of the Certificate of Incor-
poration and
Amended By-laws (or other similar charter
documents), as
currently in effect, of G-Modelo and
Diblo.
The Controlling
Shareholders have heretofore made
available to the
Investor complete and correct copies of
(i) the stock
registry book and (ii) the Certificate of
Incorporation
and By-laws (or other similar charter
documents), as
currently in effect, of each G-Modelo
Corporation
(other than Seeger Industrial, Eurocermex,
Iberocermex,
Procermex, Inc., a Texas corporation ("Proc-
ermex"),
Desarrollo Inmobiliario Siglo XXI, S.A. de C.V.
and Arena Silica
de Mexico, S.A. de C.V.). Each of the
Amended G-Modelo
By-laws and the Amended Diblo By-laws
has been duly and
validly authorized, is in full force
and effect and
is enforceable in accordance with its
terms.
(b) The assets
currently owned by or
leased to
G-Modelo and the G-Modelo Corporations, direct-
ly or
indirectly, include all of the assets and proper-
ties, whether
tangible or intangible, real, personal or
mixed, used in
connection with, or that relate to or are
necessary for
G-Modelo and the G-Modelo Corporations to
conduct their
business and operations in all material re-
spects as
presently conducted.
The assets reflected on
the G-Modelo
Balance Sheet or acquired by G-Modelo or a
G-Modelo
Corporation after the date of the G-Modelo
Balance Sheet
are in all material respects in good work-
ing condition
for the conduct of the business and opera-
tions of
G-Modelo and the G-Modelo Corporations, ordinary
wear and tear
excepted.
(c) As of the Closing
Date, (i) the only
assets of
G-Modelo are 169,701,202 Diblo Series A Shares,
17,030,940 Diblo
PC Shares, cash and marketable securi-
ties; (ii)
G-Modelo has no liabilities other than liabil-
ities incurred
in connection with the transactions con-
templated by
this Agreement; and (iii) G-Modelo conducts
no business or
operations except in connection with the
transactions
contemplated by this Agreement and except
for investing
activities with respect to the cash and
marketable
securities owned by it.
3.7. Financial
Information. The
Controlling
---------------------
Shareholders
have previously furnished to the Investor:
(a) audited
consolidated balance sheets and the related
audited
consolidated statements of income, changes in
18
stockholders
equity and changes in the financial position
(including the
related notes) of G-Modelo and subsidiar-
ies for the
fiscal years ended December 31, 1992 and
December 31,
1991 and of the G-Modelo Corporations for
each of the four
fiscal years ended December 31, 1991,
December 31,
1990, December 31, 1989 and December 31,
1988 accompanied
by the auditor reports thereon (collec-
tively, the
"Audited Consolidated Financial Statements"),
and (b) the
unaudited consolidated balance sheet and the
related
unaudited consolidated statements of income of
G-Modelo and
subsidiaries for the two months ended Febru-
ary 28, 1993
(collectively, the "Unaudited Consolidated
Financial
Statements" and together with the Audited
Consolidated
Financial Statements, the "Consolidated
Financial
Statements"). The
audited consolidated balance
sheet of
G-Modelo and subsidiaries for the fiscal year
ended December
31, 1992 is hereinafter referred to as the
"G-Modelo
Balance Sheet." The
Consolidated Financial
Statements (i)
were prepared from the (A) books and
records of
G-Modelo and the G-Modelo Corporations in the
case of the
Audited Consolidated Financial Statements for
the fiscal year
ended December 31, 1992 and the Unaudited
Consolidated
Financial Statements and (B) from the books
and records of
the G-Modelo Corporations in the case of
the Audited
Consolidated Financial Statements for other
four fiscal
years, which books and records accurately
reflect in all
material respects the accounts and trans-
actions recorded
therein, (ii) present fairly the finan-
cial position,
results of operations, changes in stock-
holders equity
and changes in financial position of
G-Modelo and its
subsidiaries as of and for the periods
in which they
relate, and (iii) have been prepared in
accordance with
Mexican GAAP consistently applied through-
out the periods
covered, except as otherwise noted
therein and
except that the Unaudited Consolidated Finan-
cial Statements
are subject to any normal and recurring
adjustments
which may arise from the audit of the fiscal
year ended
December 31, 1993. The
consolidated books and
records of
G-Modelo and its subsidiaries reflect that as
of December 31,
1992, G-Modelo and the G-Modelo Corpora-
tions had cufine
(Cuenta De Utilidad Fiscal Neta) in an
aggregate amount
equal to 2,216,147,495 Mexican Pesos.
3.8. Undisclosed
Liabilities; Absence of
-----------------------------------
Certain Changes.
Neither G-Modelo nor
any G-Modelo
---------------
Corporation has
any liabilities or obligations of any
nature, secured
or unsecured (absolute, accrued, contin-
19
gent or
otherwise and whether due or to become due),
except
liabilities and obligations which are fully re-
flected,
reserved against or disclosed in the G-Modelo
Balance Sheet or
the notes to the Audited Consolidated
G-Modelo
Financial Statements and except for liabilities
and obligations
incurred in the ordinary course of busi-
ness and
consistent with past practice since December 31,
1992.
Except as contemplated
by this Agreement, since
December 31,
1992 there has not been any material adverse
change in the
business, assets, operations, prospects or
financial
condition of G-Modelo and the G-Modelo Corpora-
tions, taken as
a whole.
3.9. Title and Related
Matters. Except
with
-------------------------
respect to the
Patent and Trademark Rights (as defined in
Section 3.10 and
as to which the representations in
Section 3.10
shall apply) and Real Property (as defined
in Section 3.20
and as to which the representations in
Section 3.20
apply): the G-Modelo
Corporations have good
and marketable
title, free and clear of all Encumbrances,
to (a) all
properties and assets (personal, tangible,
intangible and
mixed) reflected in the G-Modelo Balance
Sheet or
acquired after the date thereof by such corpora-
tions, and (b) all
other material properties and assets
owned by
G-Modelo and the G-Modelo Corporations, except
in each case for
(i) any of such properties or assets
sold or
otherwise disposed of in the ordinary course of
business, (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 in writing to the Investor, and
(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 opera-
tion of such
properties and assets.
3.10. Patents,
Trademarks, Etc.
Schedule 3.10
-------------------------
sets forth a
list of all patents, common law and regis-
tered trademarks
and service marks, applications for
trademark and
service mark registrations, and copyright
registrations
owned by G-Modelo or any of the G-Modelo
Corporations
(the "Patent and Trademark Rights"). Except
as set forth on
Schedule 3.10, (a) no other company is
licensed or
authorized by G-Modelo or any of the G-Modelo
Corporations to
use any of the Patent and Trademark
Rights; (b)
neither G-Modelo nor any G-Modelo Corporation
uses any of the
Patent and Trademark Rights by consent of
20
or license from
any other rightful owner thereof, and the
same are free and clear of
Encumbrances, and G-Modelo or
a G-Modelo
Corporation has the right to exclude others
from making,
using, or selling the invention of such
patents and has
the exclusive right to use such common
law and
registered marks and copyrighted works on the
goods or
services for which they are currently used, or
on the goods and
services specified in the respective
trademark
registrations subject to any conditions or
limitations
therein; (c) the conduct of the business of
the G-Modelo
Corporations as now being conducted in
Mexico, Canada
and the United States does not conflict
with any
patents, trademarks, service marks, names, trade
names or
copyrights of others in any way which has an
adverse effect
on the business, assets, operations,
prospects or
financial condition of G-Modelo and the G-
Modelo
Corporations, taken as a whole; (d) G-Modelo and
the G-Modelo
Corporations have no knowledge that the
conduct of the
business of the G-Modelo Corporations as
now being
conducted in any country other than Mexico,
Canada or the
United States conflicts with any patents,
trademarks,
service marks, names, trade names or copy-
rights of others
in any way which has a material adverse
effect on the
business, assets, operations, prospects or
financial
condition of G-Modelo and G-Modelo Corpora-
tions, taken as
a whole; (e) the G-Modelo Corporations
solely own good
and valid title to the Patent and Trade-
mark Rights in
Mexico, Canada and the United States, and
to the
Controlling Shareholders' best knowledge after due
inquiry, there
is no fact which raises any issue as to
the validity of
the Patent and Trademark Rights in Mexi-
co, Canada and
the United States; (f) the G-Modelo Corpo-
rations solely
own good and valid title to the Patent and
Trademark Rights
used in the conduct of the business of
the G-Modelo
Corporations as now being conducted in any
country other
than Mexico, Canada or the United States,
and except as
set forth on Schedule 3.10, to the Control-
ling
Shareholders' best knowledge after due inquiry,
there is no fact
which raises any issue as to the validi-
ty of the Patent
and Trademark Rights; (g) except as set
forth on
Schedule 3.10, there is no pending litigation in
a court or
proceedings in any administrative agency, nor
has G-Modelo or
any G-Modelo Corporation received any
notice or other
communication, in which any of the Patent
and Trademark
Rights are being challenged or contested;
(h) except as
set forth on Schedule 3.10, neither G-
Modelo nor any
G-Modelo Corporation received any pro-
21
tests, claims,
notices, or other communications relating
to infringement
of the rights of others arising from the
present use of
the Patent and Trademark Rights, and to
the Controlling
Shareholders' best knowledge after due
inquiry, the
subject matter of the Patent and Trademark
Rights do not
thereby infringe; and (i) none of the Con-
trolling
Shareholders, G-Modelo or any G-Modelo Corpo-
ration has
contracted to provide indemnification for
infringement of
the intellectual property rights of
others, or to
grant any license of the Patent and Trade-
mark Rights to
any other party or receive a license to
use any patent,
trademark or copyright from a third
party, except as
set forth in Schedule 3.10, or to under-
take or covenant
not to sue any other party with respect
to the Patent
and Trademark Rights.
3.11. Litigation.
Except as set forth
in
----------
Schedule 3.11,
there are no (a) actions, suits, proceed-
ings or
investigations, pending or, to the Controlling
Shareholders'
best knowledge after due inquiry, threat-
ened, against
G-Modelo or any G-Modelo Corporation or (b)
orders,
injunctions or decrees of any court or governmen-
tal agency
against or affecting G-Modelo or any G-Modelo
Corporation,
which in either (a) or (b) above would have
a material
adverse effect on the business, assets, opera-
tions, prospects
or financial condition of G-Modelo and
the G-Modelo
Corporations, taken as a whole. There are
no actions,
suits, proceedings or investigations, pending
or, to the
Controlling Shareholders' best knowledge after
due inquiry,
threatened, which would give any third party
the right to
enjoin or rescind or cause a material alter-
ation in the
transactions contemplated hereby.
3.12. Compliance with
Laws. G-Modelo and
each
--------------------
G-Modelo
Corporation is in compliance in all material
respects with
all laws, rules, regulations and orders
applicable to
their respective businesses, and G-Modelo
and each
G-Modelo Corporation has lawfully obtained all
necessary
permits, licenses and governmental authoriza-
tions required
for the ownership, use or occupancy of
their properties
and assets and the carrying on of their
business as
currently conducted, except for all such
failures to have
any such permit, license or governmental
authorizations which would
not, in the aggregate, have a
material adverse
effect on the business, assets, opera-
tions, prospects
or financial condition of G-Modelo and
the G-Modelo
Corporations, taken as a whole.
22
3.13. Tax Matters.
-----------
(a) All Tax Returns
(as hereinafter
defined)
required to be filed by G-Modelo or the G-Modelo
Corporations
(collectively, the "Taxpayers") have been
filed on a
timely basis and are in all material respects
true, complete
and correct;
(b) All Taxes (as
hereinafter defined)
that are due and
payable or claimed or asserted to be due
and payable by
the Taxpayers by any tax authority for all
periods up to
and including the Closing Date have been
paid or provided
for, except for Taxes which are the
subject of
customary challenges by the Ministry of Treas-
ury and the
aggregate amount of which claimed by the
Ministry to be
due does not exceed 3,500,000 Mexican
Pesos in any
year;
(c) There are no liens
for Taxes upon the
assets of any of
the Taxpayers;
(d) The Taxpayers have
complied in all
material
respects with all applicable laws, rules and
regulations
relating to the payment and withholding of
Taxes pursuant
to all applicable tax provisions concern-
ing tax
withholding or similar provisions and have,
within the time
and in the manner prescribed by law, paid
over to the
proper governmental authorities all amounts
required to be
so withheld and paid over under all appli-
cable laws;
(e) (i) Except for the
tax years 1988
through 1992,
the statute of limitations for the assess-
ment of all
Taxes under the Mexican income tax and the
United States
federal income tax laws have expired for
all applicable
returns of the Taxpayers or an audit of
those returns
has been completed by the appropriate
taxing
authorities for all periods ending on or before
the Closing
Date, (ii) no deficiency for any Taxes has
been proposed,
asserted or assessed which has not been
finally
resolved, (iii) neither the Controlling Share-
holders nor the
Taxpayers know of any facts that are
likely to result
in any assertion or assessment of a Tax
with respect to
any past taxable period, and (iv) no
taxing authority
has successfully asserted any issue
concerning the
liability of the Taxpayers for Taxes that
by application
of similar principles could result in any
23
assertion or
assessment of a Tax for another taxable
period;
(f) No Tax audits or other
administrative
proceedings or
court proceedings are now pending with
regard to any
Taxes or Tax Returns of the Taxpayers;
(g) None of the
transactions contemplated
by or completed
with respect to this Agreement has or
will cause the
Taxpayers to incur any additional Tax
liability as a
result thereof;
(h) The Taxpayers have
not incurred any
Tax liabilities
for the period beginning January 1, 1993
and ending on
the Closing Date other than Tax liabilities
incurred in the
ordinary course of their business; and
(i) For purposes of
this Agreement, (i)
"Taxes" shall
mean all taxes, charges, fees, levies or
other
assessments, including, without limitation, income
tax, property
tax, value added tax, all other net income,
sales, use, ad
valorem, beer excise, transfer, license,
withholding,
payroll, employment, social security, INFON-
AVIT, SAR,
estimated, property or other taxes, customs
duties, fees,
assessments or charges of any kind whatso-
ever, together
with any interest and any penalties,
additions to tax
or additional amounts imposed by any
taxing authority
of any jurisdiction upon any of the
Taxpayers, and
(ii) "Tax Returns" shall mean all returns,
declarations,
reports, information
returns and state-
ments required
to be filed by any of the Taxpayers in
connection with
Taxes.
3.14. Shareholder
Agreements. Except for the
----------------------
Control Trust
Agreement, the Option Trust Agreement and
the Banamex
Trust Agreement, there are no contracts,
agreements or
understandings, whether written or oral
(including any
and all amendments thereto), among or
between the
shareholders of G-Modelo or any G-Modelo
Corporation or
any Related Person thereof or between a
shareholder of
G-Modelo or any G-Modelo Corporation or
any Related
Person thereof and G-Modelo or any G-Modelo
Corporation with
respect to the shares of the capital
stock of
G-Modelo or any G-Modelo Corporation or the
business or
operations of G-Modelo or any G-Modelo Corpo-
ration.
24
3.15. Consents.
No consent, approval
or
--------
authorization
of, or exemption by, or filing with, any
governmental or
regulatory authority (other than as may
be required
under the HSR Act or the Law on Economic
Competition
("LEC")) is required in connection with the
execution,
delivery and performance by the G-Modelo
Signatories of
the transactions contemplated by this
Agreement.
3.16. Environmental
Matters. (a) The
opera-
---------------------
tions of
G-Modelo and the G-Modelo Corporations comply in
all material
respects with all Federal, state and local
environmental
and health and safety statutes and regula-
tions; (b)
neither G-Modelo nor any G-Modelo Corporation
nor, to the
Controlling Shareholders' best knowledge
after due
inquiry, any prior owner or tenant of the Real
Property has
made, caused or contributed to any release
of any hazardous
or toxic waste, substance or constitu-
ent, into the
environment; (c) none of the operations of
G-Modelo or any
G-Modelo Corporation is subject to any
judicial or
administrative proceeding alleging the viola-
tion of any
Federal, state or local environmental or
health or safety
statute or regulation; (d) none of the
operations of
G-Modelo or any G-Modelo Corporation is
subject to any
compliance agreement or settlement agree-
ment resulting
from an alleged violation of any Federal,
state or local
environmental or health or safety statute
regulation; (e)
none of the operations of G-Modelo or any
G-Modelo
Corporation is the subject of any Federal, state
or local
investigation or threatened investigation re-
garding a
violation or alleged violation of any Federal,
state or local
environmental or health or safety statute
or regulation;
(f) none of the operations of G-Modelo or
any G-Modelo
Corporation is required to file a notice or
report pursuant
to any Federal, state or local environ-
mental or health
or safety statute or regulation of any
past or present
spill or release of hazardous or toxic
substance or
constituent into the environment; (g) none
of the
businesses of G-Modelo or any G-Modelo Corporation
involves the
generation, transportation, treatment, stor-
age or disposal
of hazardous or toxic waste; (h) G-Modelo
and the G-Modelo
Corporations have no knowledge of any
hazardous wastes
or toxic substances in, on, over or
under the Real
Property; and (i) G-Modelo and the G-
Modelo
Corporations possess all material environmental
permits and
authorizations required by any Federal, state
25
or local
environmental or health and safety statute or
regulation to
conduct their operations.
3.17. Absence of
Certain Changes or Events.
------------------------------------
Except as set
forth in Schedule 3.17, since December 31,
1992 there has
not been (i) any material adverse change
in the business,
assets, operations, prospects or finan-
cial condition
of G-Modelo and the G-Modelo Corporations,
taken as a
whole; (ii) any significant damage, destruc-
tion or loss
affecting G-Modelo or any of the G-Modelo
Corporations,
which is not substantially covered by
insurance; (iii)
any material increase in the compensa-
tion payable or
to become payable by G-Modelo or any
G-Modelo
Corporation to its officers or key employees;
(iv) any
material increase in any bonus, insurance,
pension or other
employee benefit plan, payment or ar-
rangement made
to, for or with any such officers or key
employees; or
(v) any entry into any agreement, commit-
ment or
transaction (including, without limitation, any
borrowing,
capital expenditure or capital financing) by
G-Modelo or any
G-Modelo Corporation, except agreements,
commitments or
transactions in the ordinary course of
business and
consistent with past practice; or (vi) any
change by
G-Modelo or any G-Modelo Corporation in ac-
counting
methods, principles or practices except as
required by
Mexican GAAP.
3.18. Material
Contracts. Except for
the
------------------
information
which will be provided on the Schedule to be
delivered to the
Investor pursuant to Section 7.2(a)(v),
Schedule 3.18
contains a list of each material contract,
license, lease,
agreement or understanding (including,
without
limitation, with governments or governmental
agencies),
whether written or oral (including any and all
amendments
thereto), to which G-Modelo or any G-Modelo
Corporation is a
party or by which any of their respec-
tive properties
or assets may be bound (a "Material
Contract"); and
where such Material Contract is with a
party which is
not a G-Modelo Corporation and is oral or
is evidenced
only by form purchase orders, Schedule 3.18
identifies the
commodity purchased or sold, the supplier
or purchaser
thereof, the annual quantity purchased or
sold and a
recent representative price therefor; pro-
----
vided, however,
in the case of Material Contracts which
-----
-------
are subject to
confidentiality agreements between the
parties,
Schedule 3.18 sets forth only the parties there-
to and the
subject matter thereof; and provided, further,
-------- -------
26
such contracts
are on an arm's-length basis and the price
terms thereof
are at or below market. For purposes of
this Section
3.18, a Material Contract shall include,
without
limitation, (a) any agreement, contract, commit-
ment,
understanding or arrangement (a "Material Agree-
ment") requiring
total payments of more than 1 million
Mexican Pesos (except with respect
to oral agreements
which shall be
deemed to be Material Agreements only if
they require
total payments of 3 million or more Mexican
Pesos) and
having a term exceeding six months and which
may not be
cancelled upon 90 or fewer days' notice with-
out any
liability, penalty or premium (other than a
nominal
cancellation fee or charge); (b) one or more
purchase orders
for a single product or service which
require
aggregate payments in any twelve month period of
3 million or
more Mexican Pesos; (c) any Material Agree-
ment which might
reasonably be expected to have a materi-
al adverse
effect on the business, assets, operations,
prospects or
financial condition of G-Modelo and the
G-Modelo
Corporations, taken as a whole; (d) any covenant
not to compete;
(e) any Material Agreement (other than
the Material
Agreements listed on Schedule 3.14) (1)
requiring total
payments of more than 100,000 United
States dollars
in any twelve month period and (2) which
is between or
among G-Modelo or a G-Modelo Corporation
and any
Controlling Shareholder who owns 1 percent or
more of the
capital stock of G-Modelo or any entity in
which such
Controlling Shareholder owns 1 percent or more
of the capital
stock and (3) which involves the business
or operations of
G-Modelo or any G-Modelo Corporation or
requires the
payment of money or the provision of servic-
es to or by
G-Modelo or any G-Modelo Corporation; or (f)
any other
Material Agreement which is material to the
business,
assets, operations, prospects or financial
condition of
G-Modelo or any G-Modelo Corporation.
Except as
disclosed in Schedule 3.18, none of the Con-
trolling
Shareholders, G-Modelo or any G-Modelo Corpora-
tion or any
other party to a Material Contract is in
default in any
material respect thereunder. The infor-
mation required
by the first sentence of this Section
3.18 with respect to oral
contracts and purchase orders
to be set forth
on Schedule 3.18, may be delivered to the
Investor within
a reasonable time (not to exceed ninety
days) following
the Closing.
3.19. Employee
Benefits; Employment Contracts.
---------------------------------------
Schedule 3.19
contains a list of all material plans, pro-
27
grams, policies,
contracts, agreements or understandings,
whether written
or oral (including any and all amendments
thereto), to
which G-Modelo or any G-Modelo Corporation
is a party which
relate to all employment, bonus, profit-
-sharing,
deferred compensation, pension, employee bene-
fit, welfare and
retirement plans, stock purchase and
stock option
plans, consulting arrangements in excess of
1 million
Mexican Pesos per year and all labor union and
collective
bargaining agreements.
3.20. Real Property.
As used herein, the
term
-------------
"Real Property"
shall mean all of the following:
(1) all material land
and easements
owned, used or
occupied by G-Modelo or any of the G-Mode-
lo Corporations
and all material buildings, structures
and other
improvements thereof or thereon; and
(2) all rights and
appurtenances in and
to the Real
Property described in subparagraph (1) above;
and
(3) all material real
estate leasehold
interests owned
by G-Modelo or any G-Modelo Corporation
as a tenant,
excluding leases from G-Modelo or any G-
Modelo
Corporation, and all other real property interests
owned by any of
the G-Modelo Corporations.
(a) G-Modelo or a
G-Modelo Corporation
has good and
marketable title to the Real Property di-
rectly or
indirectly through trusts, free and clear of
all easements,
restrictions, covenants, conditions or
Encumbrances of
any character whatsoever except (i)
conditions or
restrictions which do not with respect to
the parcel of
Real Property so encumbered have a material
adverse effect
on the actual or intended use of such
property, (ii)
public or private roadway rights-of-way or
utility
easements which do not underlie any buildings,
(iii) real
property leases to a G-Modelo Corporation, and
(iv) taxes and
assessments which are a lien but which are
not yet due and
payable or which are being contested in
good faith by
appropriate proceedings and for which
appropriate
reserves have been established and disclosed
in writing to
the Investor.
28
(b) The Real Property
conforms in all
material
respects to any and all applicable state and
local laws,
zoning and building ordinances and health and
safety
ordinances, and no zoning, building or similar law
or ordinance or
regulation is being violated by the
operation or use of
the Real Property in any manner
having a
material adverse effect on the marketability or
the actual or
intended use or operation of the Real
Property.
Neither G-Modelo nor
any G-Modelo Corporation
has received any
notice of any material violation of any
law, ordinance
or regulation in connection with the
operation or use
of such Real Property.
(c) None of the Real
Property is subject
to the Federal
Law of the Agrarian Reform.
(d) With respect to
any Real Property
located (i)
within one hundred kilometers of the border
of Mexico and
any of the United States, Belize or Guate-
mala or (ii)
within fifty kilometers of any of Mexico's
coastlines (the
"Restricted Zone"), either (A) all of the
outstanding
shares of capital stock of the G-Modelo
Corporations
which own Real Property located within the
Restricted Zone
have been duly transferred into the Real
Estate Trust or
as promptly as practicable following the
Closing will be
duly transferred into a trust to be
established
under a trust agreement for the benefit of
such G-Modelo
Corporations pursuant to Section 5.14, or
(B) the by-laws
of the G-Modelo Corporations which own
Real Property in
the Restricted Zone permit the indirect
ownership by
foreigners of capital stock of such G-Modelo
Corporations.
3.21. Tied House
Prohibitions. There is
no
-----------------------
Mexican statute,
rule or regulation applicable to G-
Modelo or any
G-Modelo Corporation which prohibits G-
Modelo or any
G-Modelo Corporation or its shareholders
from selling
alcoholic beverages, on either a retail or
wholesale basis.
3.22. Insurance.
G-Modelo and each
G-Modelo
---------
Corporation have
policies of liability, fire, automobile,
property and
other forms of insurance, all of which are
valid and
enforceable and in full force and effect, are
underwritten by
unaffiliated financially sound and repu-
table insurers,
are sufficient for all applicable re-
quirements of
law and provide insurance, including,
29
without
limitation, liability and products liability
insurance, in
such amounts and against such risks as is
customary for
companies engaged in similar businesses to
G-Modelo and the
G-Modelo Corporations in Mexico to pro-
tect the
properties, assets, businesses and operations of
G-Modelo and
each of the G-Modelo Corporations. All such
policies will
remain in full force and effect through
their respective
dates and will not in any way be affect-
ed by or
terminate or lapse by reason of, any of the
transactions
contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF A-B, A-BI
AND THE INVESTOR
-------------------------------------------
A-B, A-BI and the Investor, jointly and sever-
ally, represent
and warrant to each of the G-Modelo
Signatories, the
Option Trust and the Banamex Trust as
follows:
4.1. Corporate Power
and Authority; Effect of
----------------------------------------
Agreement.
Each of A-B, A-BI and
the Investor is a
---------
corporation duly
organized, validly existing and in good
standing under
the laws of the State of Delaware. Each
of A-B, A-BI and
the Investor has all requisite corporate
power and
authority to execute, deliver and perform this
Agreement and to
consummate the transactions contemplated
hereby.
The execution,
delivery and performance by each
of A-B, A-BI and
the Investor of its obligations under
this Agreement
and the consummation by each of A-B, A-BI
and the Investor
of the transactions contemplated hereby
have been duly
authorized by the Board of Directors of
each of A-B,
A-BI and the Investor, and no other corpo-
rate action or
proceeding on the part of each of A-B,
A-BI and the
Investor or their stockholders is necessary
to authorize
this Agreement or the consummation of any of
the transactions
contemplated hereby.
This Agreement has
been duly and
validly executed and delivered by each of
A-B, A-BI and
the Investor and constitutes the valid and
binding
obligation of each of A-B, A-BI and the Investor,
enforceable
against each of them in accordance with its
terms.
The execution,
delivery and performance by the
each of A-B,
A-BI and Investor of this Agreement and the
consummation by
each of A-B, A-BI and the Investor of the
transactions
contemplated hereby does not and will not,
30
with or without
the giving of notice or the lapse of
time, or both,
(a) violate any law, rule or regulation to
which any of
them or any of their respective assets is
subject, (b) violate
any order, writ, injunction, judg-
ment or decree
applicable to any of them or any of their
respective
assets or properties, or (c) conflict with, or
result in a
breach of or default under, or give rise to
any right of
termination, cancellation or acceleration
under (i) any
term or condition of the Certificate of
Incorporation or
By-Laws of any of them, or (ii) any of
the terms,
conditions or provisions of any note, bond,
mortgage,
indenture or material lease, license, agreement
or other
material instrument to which any of them or any
of their
respective subsidiaries is a party or by which
any of their
respective assets may be bound; except, with
respect to
clauses (a), (b) and (c)(ii) above, for viola-
tions,
conflicts, breaches or defaults which in the
aggregate would
not materially hinder or impair their
ability to
consummate the transactions contemplated
hereby.
4.2. Consents.
No consent, approval
or autho-
--------
rization of, or
exemption by, or filing with, any govern-
mental or
regulatory authority (other than as may be
required under
the HSR Act or the LEC) is required in
connection with
the execution, delivery and performance
by A-B, A-BI or
the Investor of the transactions contem-
plated by this
Agreement.
4.3. Availability of
Funds. The Investor
has
---------------------
available or
will have available on the Closing Date
sufficient funds
to enable it to consummate the transac-
tions
contemplated by Article II of this Agreement.
4.4. Management of
G-Modelo and the G-Modelo
---------------------------------------
Corporations.
Each of A-B, A-BI and
the Investor ac-
------------
knowledge that
it is its intention and desire, as well as
the intention
and desire of the Controlling Shareholders,
that G-Modelo
and the G-Modelo Corporations shall contin-
ue to be managed
by the Controlling Shareholders, with
the
participation of A-B, A-BI and the Investor as minor-
ity
shareholders, as provided for in this Agreement and
in the Amended
G-Modelo By-laws and the Amended Diblo By-
laws; and that
this has been an essential and basic
condition for
the Controlling Shareholders to enter into
this Agreement
and to create and enter into the asso-
ciation or joint
venture herein set forth.
31
ARTICLE V
COVENANTS OF THE PARTIES
------------------------
5.1. Access to
Information.
---------------------
(a) A-B and its
authorized representa-
tives shall be
permitted to review the business activi-
ties of G-Modelo
and the G-Modelo Corporations as they
deem reasonably
necessary sufficiently in advance of
future
investments in G-Modelo and Diblo contemplated by
this Agreement.
For such purposes and
subject to prior
consultation
with a representative of the Controlling
Shareholders,
(a) A-B and its authorized representatives
shall have
access during normal business hours to books,
records and
properties of G-Modelo and the G-Modelo
Corporations and
to those employees and financial, legal
and other
representatives of G-Modelo and the G-Modelo
Corporations
having knowledge of financial, operating and
legal data and
other information with respect to the
business and
properties of G-Modelo and the G-Modelo
Corporations as
A-B may reasonably request to enable A-B
and its
authorized representatives to conduct a finan-
cial,
environmental and legal review of G-Modelo and the
G-Modelo
Corporations for purposes of determining whether
to make further
investments in G-Modelo and Diblo; pro-
----
vided, however,
that such review shall be subject to
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prior
consultation with and scheduli
