================================================================================
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 8-K
_______________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report
(Date of earliest event reported)
APRIL 30, 1999
GENERAL CIGAR HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
_______________
Commission file number: (1-12757)
_______________
Delaware 13-3922128
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
_______________
387 Park Avenue South 10016-8899
New York, New York (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 448-3800
________________________________________________________________________________
================================================================================
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
- --------------------------------------------
As used herein, references to the "Registrant" mean General Cigar Holdings,
Inc., and references to "General Cigar" mean General Cigar Co., Inc., a
wholly-owned subsidiary of the Registrant.
On March 26, 1999, General Cigar and Swedish Match North America Inc., a
Delaware corporation (the "Purchaser"), entered into an Asset Purchase Agreement
(the "Asset Purchase Agreement"), pursuant to which the Purchaser agreed to
purchase General Cigar's mass-market cigar business.
On April 30, 1999 (the "Closing Date"), the sale of General Cigar's mass-market
cigar business was completed. Purchaser acquired on the Closing Date
substantially all of the mass-market assets and assumed substantially all of the
mass-market liabilities, as defined in the Asset Purchase Agreement, a copy of
which is attached hereto as Exhibit 2.3 and incorporated herein by reference.
In accordance with the Asset Purchase Agreement, Purchaser paid to Registrant on
the Closing Date $200,000,000 (the "Purchase Price") in cash in consideration of
the sale of General Cigar's mass-market cigar business. On the Closing Date,
Registrant entered into various agreements with Purchaser pursuant to the Asset
Purchase Agreement, including (a) a noncompetition agreement prohibiting
Registrant from competing with the mass-market business for a period of five
years; (b) an agreement whereby Registrant will provide certain transitional
services to Purchaser; (c) an agreement related to the distribution, purchase
and sale of certain General Cigar's products through the Purchaser's mass-market
sales force; and (d) an agreement whereby Registrant will provide certain of
Purchaser's tobacco requirements for mass-market cigars.
On the Closing Date, Registrant utilized the proceeds from the sale to prepay
$54.8 million of bank debt and a $3.4 million equipment loan, as previously
announced.
2
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
- -----------------------------------------
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED -- Not applicable
(b) PRO FORMA FINANCIAL INFORMATION
The information required in this section appeared in the Registrant's Form
8-K, dated April 19, 1999, in pages 3, F-1, F-2, F-3 and is incorporated by
reference in this Report.
(c) EXHIBITS
The exhibits listed in the following table have been filed as part of this
Current Report on Form 8-K.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
-------------------------------------------------------------------------
2.3 Asset Purchase Agreement, dated as of March 26, 1999, by and
between General Cigar Co., Inc. and Swedish Match North America
Inc.
10.17(b) Second Amended and Restated Credit Agreement, dated as of April
30, 1999 (Amending and Restating the Amended and Restated
Credit Agreement, dated as of April 29, 1998), among General
Cigar Co., Inc., as Borrower; General Cigar Holdings, Inc., 387
PAS Corp., Club Macanudo, Inc., Club Macanudo (Chicago), Inc.,
Villazon & Company, Inc., and GCMM Co., Inc. as Guarantors, and
The Lenders From Time to Time Parties Hereto, and The Chase
Manhattan Bank as Administrative Agent. (Exhibits and schedules
are omitted; the Registrant hereby undertakes to furnish a copy
of such exhibits and schedules to the Commission upon request).
99 Press Release, dated April 30, 1999
3
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
SIGNATURE
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENERAL CIGAR HOLDINGS, INC.
Date: May 10, 1999 By: /s/ Joseph Aird
---------------
Joseph Aird
Senior Vice President,
Chief Financial Officer,
Treasurer and Acting Controller
4
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- --------------------------------------------------------------------------------
2.3 ...... Asset Purchase Agreement, dated as of March 26, 1999, by and between
General Cigar Co., Inc. and Swedish Match North America Inc.
10.17(b).. Second Amended and Restated Credit Agreement, dated as of April 30,
1999 (Amending and Restating the Amended and Restated Credit
Agreement, dated as of April 29, 1998), among General Cigar Co.,
Inc., as Borrower; General Cigar Holdings, Inc., 387 PAS Corp., Club
Macanudo, Inc., Club Macanudo (Chicago), Inc., Villazon & Company,
Inc., and GCMM Co., Inc. as Guarantors, and The Lenders From Time to
Time Parties Hereto, and The Chase Manhattan Bank as Administrative
Agent. (Exhibits and schedules are omitted; the Registrant hereby
undertakes to furnish a copy of such exhibits and schedules to the
Commission upon request).
99 ....... Press Release, dated April 30, 1999
Exhibit 2.3
________________________________________________________________________________
________________________________________________________________________________
ASSET PURCHASE AGREEMENT
by and between
GENERAL CIGAR CO., INC.
("Seller")
and
SWEDISH MATCH NORTH AMERICA INC.
("Purchaser")
Dated as of March 26, 1999
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE I. DEFINITIONS......................................................1
1.1. Defined Terms.....................................................1
1.2. Other Defined Terms..............................................10
ARTICLE II. PURCHASE OF ASSETS; ASSUMPTION OF LIABILITIES..................11
2.1. Transfer of Assets...............................................11
2.2. Assumption and Satisfaction of Liabilities.......................12
2.3. Purchase Price...................................................12
2.4. Closing..........................................................12
2.5. Conveyances at Closing...........................................13
ARTICLE III. POST-CLOSING ADJUSTMENTS......................................14
3.1. Closing Date Combined Statement of Net Assets; Working
Capital Adjustment.............................................14
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLER.......................15
4.1. Organization of Seller...........................................15
4.2. Reserved.........................................................15
4.3. Reserved.........................................................15
4.4. Reserved.........................................................15
4.5. Authorization....................................................15
4.6. Mass-Market Intellectual Property................................16
4.7. Absence of Certain Changes or Events.............................17
4.8. Contracts and Commitments........................................18
4.9. No Conflict or Violation.........................................20
4.10. Consents and Approvals..........................................20
4.11. Financial Statements............................................20
4.12. Litigation......................................................20
4.13. Liabilities.....................................................21
4.14. Compliance with Law.............................................21
4.15. No Brokers......................................................21
4.16. No Other Agreements to Sell the Mass-Market Cigar Business......21
4.17. Employee Benefit Plans..........................................21
4.18. Tax Matters.....................................................22
4.19. Real Property...................................................22
4.20. Personal Property...............................................23
4.21. Certain Environmental Matters...................................24
4.22. Inventory.......................................................25
4.23. Permits.........................................................25
4.24. Labor Relations.................................................25
i
<PAGE>
4.25. Year 2000.......................................................26
4.26. Books and Records...............................................26
4.27. Insurance.......................................................26
4.28. Performance Bonds and Letters of Credit.........................27
4.29. Sufficiency of Assets...........................................27
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PURCHASER.....................27
5.1. Organization of Purchaser........................................27
5.2. Authorization....................................................27
5.3. Consents and Approvals...........................................27
5.4. No Brokers.......................................................27
5.5. No Conflict or Violation.........................................28
5.6. Financing Arrangements...........................................28
ARTICLE VI. ACTIONS BY SELLER AND PURCHASER PRIOR TO THE CLOSING...........28
6.1. Maintenance of Business..........................................28
6.2. Certain Prohibited Transactions..................................28
6.3. Access...........................................................29
6.4. Consents and Best Efforts........................................30
6.5. No Mergers, Consolidations, Sale of Stock, Etc.; No Other
Negotiations..................................................31
6.6. Supplement to Schedules..........................................31
ARTICLE VII. CONDITIONS TO THE OBLIGATIONS OF SELLER.......................31
7.1. Representations, Warranties and Covenants........................32
7.2. Consents.........................................................32
7.3. No Governmental or Other Proceeding or Litigation................32
7.4. Opinion of Counsel...............................................32
7.5. Certificates.....................................................32
7.6. Reserved.........................................................32
7.7. HSR Act..........................................................32
7.8. Assumption Document..............................................32
7.9. Execution of Ancillary Agreements................................32
ARTICLE VIII. CONDITIONS TO THE OBLIGATIONS OF PURCHASER...................33
8.1. Representations, Warranties and Covenants........................33
8.2. Consents.........................................................33
8.3. No Governmental or Other Proceeding or Litigation................33
8.4. Opinion of Counsel...............................................33
8.5. Certificates.....................................................33
ii
<PAGE>
8.6. HSR Act..........................................................33
8.7. No Material Adverse Change.......................................34
8.8. Execution of Ancillary Agreements................................34
8.9. Conveyancing Documents...........................................34
8.10. Affidavit.......................................................34
8.11. Environmental Due Diligence.....................................34
ARTICLE IX. ACTIONS BY SELLER AND BUYER AFTER THE CLOSING..................34
9.1. Books and Records................................................34
9.2. Further Assurances...............................................34
9.3. Nonsolicitation..................................................34
9.4. WARN Act.........................................................35
9.5. Employees and Employee Benefits..................................35
9.6. Collection of Receivables........................................38
ARTICLE X. RISK OF LOSS....................................................39
ARTICLE XI. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS, ETC..............39
11.1. Survival of Representations, Etc................................39
11.2. Indemnification.................................................40
11.3. Threshold; Limitations on Liability.............................41
11.4. Insurance Proceeds..............................................42
11.5. Indemnification as Exclusive Remedy.............................42
ARTICLE XII. MISCELLANEOUS.................................................42
12.1. Budget and Projections..........................................42
12.2. Termination.....................................................42
12.3. Assignment......................................................43
12.4. Bulk Transfer Laws..............................................43
12.5. Costs and Expenses..............................................43
12.6. Transfer Taxes..................................................43
12.7. Real Estate and Other Taxes.....................................43
12.8. Utilities and Other Charges.....................................44
12.9. Notices.........................................................44
12.10. Choice of Law..................................................45
12.11. Entire Agreement; Amendments and Waivers.......................45
12.12. Counterparts...................................................45
12.13. Invalidity.....................................................45
12.14. Headings.......................................................45
12.15. Publicity......................................................45
iii
<PAGE>
DISCLOSURE SCHEDULE
EXHIBITS
Exhibit A -- Financial Statements
Exhibit B -- Form of Interim Services Agreement
Exhibit C -- Persons Having Knowledge
Exhibit D -- Form of Master Distribution Agreement
Exhibit E -- Form of Non-Compete Agreements
Exhibit F -- Right of First Refusal
Exhibit G -- Form of Supply Agreement
Exhibit H -- Allocation of Purchase Price
Exhibit I -- Form of Assignment and Assumption Agreement
Exhibit J -- Form of Bill of Sale
Exhibit K -- Form of Assignment of Mass-Market Trademarks
Exhibit L -- Form of Assumption Document
Exhibit M -- Form of Opinion from Counsel to Purchaser
Exhibit N -- Form of Opinion from Counsel to Seller
iv
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
This Asset Purchase Agreement, dated as of March 26, 1999, is by and
between General Cigar Co., Inc., a Delaware corporation ("Seller"), and Swedish
Match North America Inc., a Delaware corporation ("Purchaser").
RECITALS
--------
WHEREAS, Seller owns, directly or indirectly, certain assets that it
uses in the operation of the Mass-Market Cigar Business (as defined below); and
WHEREAS, Purchaser desires to purchase from Seller, and Seller
desires to sell or cause to be sold to Purchaser, such assets subject to the
terms and subject to the conditions of this Agreement.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Seller and Purchaser hereby agree as follows:
ARTICLE I.
DEFINITIONS
-----------
1.1. DEFINED TERMS. As used herein, the terms below shall have the
following meanings:
"ACCOUNTING PRINCIPLES" shall mean GAAP, except that: (i) no charge
for income tax expenses is recorded; (ii) no current or deferred income tax
liabilities or assets are reflected; (iii) the inter-company account for the
Mass-Market Cigar Business, which reflects the balances resulting from
inter-company transactions, including (A) allocations of costs and expenses, and
funding of operating activities and capital expenditures, and (B) liabilities
for benefit plan expenses, insurance and workman's compensation, and other
partially self-insured liabilities, have been included in the net assets line in
the Statement of Net Assets; (iv) no interest was imputed on intercompany
balances or investments; (v) certain notes are omitted and (vi) the basis of the
allocations of costs and expenses between the Retained Business and the
Mass-Market Cigar Business is set forth in the notes to the Financial
Statements; provided that such allocation is not necessarily in accordance with
GAAP.
"ACTION" shall mean any action, order, writ, injunction, judgment or
decree, suit, litigation, proceeding, labor dispute, arbitral action or
investigation.
1
<PAGE>
"AFFILIATE" shall mean a Person that directly or indirectly through
one or more intermediaries controls, is controlled by or is under common control
with the Person specified.
"AGREEMENT" shall mean this Asset Purchase Agreement, together with
the Disclosure Schedule and all exhibits referenced herein.
"ANCILLARY AGREEMENTS" shall mean the Supply Agreement, the
Non-Compete Agreements, the Master Distribution Agreement, the Interim Services
Agreement and the Right of First Offer Agreement.
"APPLICABLE LAW" or "APPLICABLE LAWS" shall mean, with respect to
any Person, any domestic, foreign, federal, state or local statute, law,
ordinance, rule, regulation, order, writ, injunction, directive, judgment,
decree, permit, authorization or opinion or any other requirement of law
(including common law and including any Environmental Law), all as in effect as
of the Closing, of any Governmental Authority applicable to such Person or any
of its Affiliates or any of their respective properties, assets, officers,
directors, employees, consultants or agents (in connection with such officer's,
director's, employee's, consultant's or agent's activities on behalf of such
Person or any of its Affiliates).
"BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or
a day on which banking institutions in New York, New York or Stockholm, Sweden
are authorized or obligated by law or executive order to be closed.
"CLOSING DATE" shall mean the fifth Business Day following the date
on which all conditions set forth in Articles VII and VIII hereof shall have
been satisfied or waived.
"CODE" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time.
"CONFIDENTIALITY AGREEMENTS" shall mean those certain
confidentiality agreements dated February 1, 1999 and February 3, 1999, between
Seller and Purchaser.
"CONTRACT" shall mean any written agreement, understanding,
arrangement, contract, lease, note, loan, evidence of indebtedness, purchase
order, letter of credit, indenture, security or pledge agreement, franchise
agreement, undertaking, practice, covenant not to compete, employment agreement,
license, instrument, obligation or commitment to which Seller is a party or is
bound.
"CONVEYANCING INSTRUMENTS" shall mean collectively, the various
agreements, instruments and other documents listed in Section 2.5(a) to be
entered into to effect the transfer of the Mass-Market Assets in the manner
contemplated by this Agreement.
"DISCLOSURE SCHEDULE" shall mean a schedule attached hereto and
delivered by Seller to Purchaser which sets forth exceptions to the
representations and warranties contained in Article IV hereof and certain other
information called for by Article IV hereof and other provisions of this
Agreement.
2
<PAGE>
"DOMINICAN REPUBLIC FACILITIES" shall mean Seller's mass-market
cigar manufacturing facilities at the Industrial Free Zone of Santiago,
Dominican Republic representing the real property and improvements leased
pursuant to the Dominican Republic Leases.
"DOMINICAN REPUBLIC LEASES" shall mean: (i) that certain Lease
Agreement, dated as of January 7, 1999, by and between General Cigar Dominica,
S.A. and La Corporacion Zona Franca Industrial de Santiago, Inc., (ii) that
certain Lease Agreement, dated as of March 11, 1999, by and between Seller and
La Corporacion Zona Franca Industrial de Santiago, Inc., (iii) that certain
Lease Agreement, dated as of October 3, 1997, by and between Seller and La
Corporacion Zona Franca Industrial de Santiago, Inc., and (iv) that certain
Lease Agreement, dated as of March 11, 1998, by and between Seller and La
Corporacion Zona Franca Industrial de Santiago, Inc.
"DOTHAN FACILITIES" shall mean the Dothan Owned Facility and the
real property and improvements located at 700 East Main Street leased pursuant
to the Dothan IRB Lease.
"DOTHAN OWNED FACILITY" shall mean the real property and the
improvements representing Seller's storage facility located at Sixth Avenue,
Dothan, Alabama.
"DOTHAN IRB LEASE" shall mean that certain Lease Agreement, dated as
of November 14, 1986, by and between Seller and the Industrial Revenue Board of
the City of Dothan, Alabama, together with related agreements.
"ENCUMBRANCE" shall mean, with respect to any Mass-Market Asset, any
mortgage, pledge, lien, title defect, security interest, hypothecation, adverse
claim, easement, right of way, including without limitation any lease, chattel
mortgage, conditional sales contract, collateral security arrangement and other
title or interest retention arrangement.
"ENVIRONMENTAL CLAIMS" shall mean all Actions, claims, demands,
suits, notices or causes of action for any damage, including without limitation,
personal injury, property damage, lost use of property, or consequential
damages, arising directly or indirectly out of Environmental Conditions or
Environmental Laws.
"ENVIRONMENTAL CONDITIONS" shall mean the state of the environment,
including natural resources (e.g., flora and fauna), soil, surface water, ground
water, any present or potential drinking water supply, subsurface strata, or
ambient air, relating to or arising out of the use, handling, storage,
treatment, recycling, generation, transportation, release, spilling, leaking,
pumping, pouring, emptying, discharging, injecting, escaping, leaching,
disposal, dumping, or threatened release of Hazardous Substances by Seller, or
by its agents, representatives, employees, or independent contractors when
acting in such capacity on behalf of Seller. Environmental Conditions also
include the exposure of persons to Hazardous Substances at the work place or the
exposure of persons or property to Hazardous Substances migrating from or
otherwise emanating from or located on property owned or occupied by Seller.
3
<PAGE>
"ENVIRONMENTAL LAWS" shall mean all Applicable Laws that relate to
or impose liability or standards of conduct concerning the protection,
investigation or restoration of the environment or natural resources including,
without limitation: (i) all requirements pertaining to reporting, licensing,
permitting, controlling, investigating or remediating emissions, discharges,
releases or threatened releases of Hazardous Substances, chemical substances,
pollutants, contaminants or toxic substances, materials or wastes, whether
solid, liquid or gaseous in nature, into the air, surface water, groundwater or
land; (ii) all requirements relating to the manufacture, processing, generation,
distribution, use, treatment, storage, disposal, transports or handling of
Hazardous Substances, chemical substances, pollutants, contaminants or toxic
substances, materials or wastes, whether solid, liquid or gaseous in nature;
(iii) the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the Clean Air Act, the
Water Pollution Control Act, the Safe Drinking Water Act, the Toxic Substances
Control Act (each as amended as of the date hereof) and all requirements
promulgated pursuant to any of these or analogous state or local statutes.
"ENVIRONMENTAL PERMIT" shall mean any of the Permits required by or
pursuant to any applicable Environmental Law.
"FINANCIAL STATEMENTS" shall mean the Statement of Net Assets and
the Income Statement, each as attached hereto as Exhibit A.
"FORM 10-K" shall mean the Report on Form 10-K of General Cigar
Holdings, Inc. for the fiscal year ended November 28, 1998.
"GAAP" shall mean United States generally accepted accounting
principles.
"GOVERNMENTAL AUTHORITY" shall mean any foreign, domestic, federal,
state or local governmental authority, quasi-governmental authority,
instrumentality, court, government or self-regulatory organization, commission,
tribunal or organization or any regulatory, administrative or other agency, or
any political or other subdivision, department or branch of any of the
foregoing.
"HAZARDOUS SUBSTANCES" shall mean all pollutants, contaminants,
chemicals, wastes, and any other carcinogenic, ignitable, corrosive, reactive,
toxic or otherwise hazardous substances or materials (whether solids, liquids or
gases) subject to regulation, control or remediation under Environmental Laws,
including without limitation all flammable, explosive and radioactive materials,
PCBs, pesticides, herbicides, asbestos, sludge, slag, acids, metals, solvents,
waste waters, petroleum products or by-products and urea-formaldehyde
insulation.
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and all applicable regulations promulgated thereunder.
"INCOME STATEMENT" shall mean the unaudited historical and budgeted
statement of operations relating to the Mass-Market Cigar Business for the years
ended November 28, 1998, November 29, 1997 and November 30, 1996 (actual) and
November 27, 1999 (budgeted) attached as part of Exhibit A hereto.
4
<PAGE>
"INDEBTEDNESS FOR BORROWED MONEY" of any Person shall mean, at any
date, without duplication, (i) all obligations of such Person for borrowed
money, (ii) all obligations of such Person, properly recordable under generally
accepted accounting principles as a liability on the financial statements of
such Person, evidenced by bonds, debentures, notes, or other similar
instruments, (iii) all Indebtedness for Borrowed Money (as defined in clauses
(i) and (ii) above) of others secured by a lien on any asset of such Person,
whether or not such Indebtedness for Borrowed Money is assumed by such Person,
and (iv) all Indebtedness for Borrowed Money (as defined in clauses (i) and (ii)
above) of others guaranteed by such Person.
"INTELLECTUAL PROPERTY" shall mean all patents and applications,
including all reissues, continuations, divisions, continuations-in-part,
renewals or extensions thereof; trademarks, service marks, trade names, trade
dress, domain names, logos, business and product names, slogans, and
registrations and applications for registration or renewal thereof; copyrights
and registrations or renewals thereof; inventions, processes, designs, formulae,
trade secrets, know-how, confidential and technical information; all other
intellectual property and proprietary rights; copies and tangible embodiments
thereof (in whatever form or medium, including electronic media); and licenses
of any of the foregoing.
"INTERIM SERVICES AGREEMENT" shall mean that certain Interim
Services Agreement between Seller and Purchaser, to be dated as of the Closing
Date, the material terms of which are attached hereto as Exhibit B.
"IRB LIABILITY" shall mean all of Seller's obligations pursuant to
the Dothan IRB Lease.
"KNOWLEDGE" shall mean, with respect to any Person, actual knowledge
of any officer or any member of the Board of Directors of such Person who is
specified on Exhibit C hereto.
"LIABILITIES" shall mean any and all debts, liabilities and
obligations, absolute or contingent, matured or unmatured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising,
including all costs and expenses relating thereto, and including, without
limitation, those debts, liabilities and obligations arising under any law,
rule, regulation, Action, threatened Action, order or consent decree of any
governmental entity or any award of any arbitrator of any kind, and those
arising under any contract, commitment or undertaking.
"LONG-TERM DEBT" shall mean, with respect to the Statement of Net
Assets and the Closing Date Statement of Net Assets, "Long-Term Debt" as
reflected thereon, determined in accordance with the Accounting Principles
applied to determine "Long-Term Debt" as set forth in the Statement of Net
Assets, it being understood that "Long-Term Debt" shall not include long-term
debt due within one year which is reflected as a current liability.
"LOSSES" shall mean, in respect of any obligation to indemnify any
Person pursuant to Section 11.2(a) of this Agreement or the determination of the
limitations on liability set forth in Section 11.3 of this Agreement, any and
all actual losses, damages, liabilities, obligations, judgments, settlements,
awards, and offsets which the Indemnified Party may suffer or incur (together,
5
<PAGE>
"Damages"), and reasonable out-of-pocket costs, expenses and attorneys' fees
relating to Damages (including any such reasonable costs, expenses and
attorneys' fees incurred in enforcing such right of indemnification against any
Indemnifying Party or with respect to any appeal) and penalties, if any, but
shall not include (a) any such amounts for which a reserve or allowance was
recorded in the Financial Statements or (b) incidental, indirect or
consequential damages or damages for lost profits, other than any such
incidental, indirect or consequential damages or damages for lost profits
claimed by any third party against any indemnified party pursuant to Article XI.
"MASS-MARKET BOOKS AND RECORDS" shall mean the books and records
(including computerized records, ledgers, files and software) owned by Seller
and its Subsidiaries that relate primarily to the Mass-Market Cigar Business or
are necessary to operate the Mass-Market Cigar Business including, without
limitation, all files relating to any Action being assumed by Purchaser as part
of the Mass-Market Liabilities and all licenses, leases, agreements and filings
relating to the Mass-Market Cigar Business (but not including the Seller's Books
and Records).
"MASS-MARKET CIGAR BUSINESS" shall mean the business, as conducted
by Seller immediately prior to the Closing Date, of manufacturing and selling
cigars that (i) are manufactured with either a wrapper or binder of
reconstituted or HTL (homogenized tobacco leaf) tobacco rather than natural leaf
tobacco, or (ii) exhibit all of the following four characteristics: (1) made
wholly by machine rather than hand rolled or hand bunched, (2) sold to consumers
predominately through mass-market classes of trade, such as convenience stores,
shoppers clubs, chain and independent food stores, mass merchandisers, chain and
independent drug stores, and discount tobacco shops, (3) containing "short
filler" tobacco, rather than "long filler," and (4) generally sold to consumers
at a retail price equivalent to $1.00 or less per cigar. For purposes of clarity
in this Agreement, the "Mass-Market Cigar Business" of Seller shall not include:
(i) the growing, procurement or processing of tobacco; (ii) manufacturing and
selling "miniature" or other small cigars made now or in the future by or for
Seller under the Macanudo, Partagas, Canary D'Oro or any other such brands
associated with a Premium Cigar (as defined in the Buyer Non-Competition
Agreement), even if such cigars might otherwise fit the definition above; (iii)
manufacturing and selling hand made cigars designed, priced and marketed to
mass-market classes of trade, such as the "Don Sebastian" brand family; or (iv)
manufacturing and selling the cigars as described in the Right Of First Refusal
Agreement.
"MASS-MARKET CONTRACTS" shall mean the Contracts to which Seller or
its Affiliates is a party that relate primarily to the Mass-Market Cigar
Business, but excluding any retention or "stay bonus" arrangements with
employees of Seller in existence on or prior to the date hereof or on the
Closing Date and contracts for the supply of tobacco to Seller.
"MASS-MARKET EMPLOYEES" shall mean all employees of the Seller, (i)
who immediately prior to the Closing Date, were employed in connection with the
Mass-Market Cigar Business as full-time or part-time employees or contract
merchandisers, in each case, as set forth on Schedule 1.1 hereof, and (ii) who
are able to work as of the Closing Date or, if not then able to work, when first
able to work thereafter provided that such Mass-Market Employee is first able to
work within 60 days after the Closing Date (or within 90 days after the Closing
Date in the case of any such Employee who, as of the Closing Date, is on leave
under the Family Medical Leave Act of 1993).
6
<PAGE>
"MASS-MARKET FACILITIES" shall mean the Dothan Facilities and the
Dominican Republic Facilities.
"MASS-MARKET INVENTORY" shall mean the inventory owned by Seller and
used in connection with the Mass-Market Cigar Business, consisting of supplies,
work in progress, finished goods, packaging materials and machine parts, but
excluding raw materials (tobacco).
"MASS-MARKET LIABILITIES" shall mean all of the following
Liabilities: (i) Liabilities in connection with any Action commenced on or after
the Closing Date with respect to tobacco products liability resulting from the
use, on, prior to or after the Closing Date, of products manufactured by the
Mass-Market Cigar Business; (ii) Environmental Claims other than Off-Site
Environmental Liabilities; (iii) the Liabilities existing, arising or accruing
on or after the Closing Date pursuant to the Mass-Market Contracts, the IRB
Liability and Seller's Liabilities pursuant to the Dothan IRB Lease, the
Dominican Republic Leases (but excluding any obligation or Liability resulting
from any default or nonperformance by Seller on or prior to the Closing Date);
and (iv) the other Liabilities reflected on the Closing Date Statement of Net
Assets or set forth on Section 4.13 of the Disclosure Schedule; provided, that
Mass-Market Liabilities shall not include the Retained Liabilities.
"MASS-MARKET PERSONAL PROPERTY" shall mean the personal property set
forth on Schedule 4.20.
"MASS-MARKET TRADEMARKS" shall mean the trademarks set forth in
Section 4.6 of the Disclosure Schedule.
"MASTER DISTRIBUTION AGREEMENT" shall mean that certain Master
Distribution Agreement between Seller and Purchaser, to be dated as of the
Closing Date, substantially in the form attached hereto as Exhibit D.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
the Mass-Market Assets or the Mass-Market Liabilities, or on the financial
condition or results of operations of the Mass-Market Cigar Business, other than
any such effect resulting from (a) an adverse trend or trends in the cigar
industry as a whole or (b) customer reaction to the transactions contemplated
hereby.
"NET PROPERTY AND EQUIPMENT" shall mean, with respect to the
Statement of Net Assets and the Closing Date Statement of Net Assets, "Net
Property and Equipment" as set forth thereon, determined in accordance with the
Accounting Principles applied to determine "Net Property and Equipment" as set
forth on the Statement of Net Assets.
"NON-COMPETE AGREEMENTS" shall mean those certain Non-Compete
Agreements between Seller and Purchaser, to be entered into as of the Closing
Date, substantially in the form attached hereto as Exhibits E-1 and E-2,
respectively.
7
<PAGE>
"OFF-SITE ENVIRONMENTAL LIABILITIES" shall mean all Liabilities
(whether such Liabilities are owed to Governmental Authorities, third parties or
otherwise), whether currently in existence or arising at any time hereafter
which relate to any activity conducted or condition in existence on or prior to
the Closing Date in any location other than the Mass-Market Facilities and which
arise under or relate to any Environmental Law.
"PERMITS" shall mean all material licenses, permits, orders,
consents, approvals, registrations, authorizations, qualifications and filings
with and under all federal, state, local or foreign laws and governmental or
regulatory bodies and all industry or other nongovernmental self-regulatory
organizations, in each case, primarily related to, or necessary to operate, the
Mass-Market Cigar Business as currently conducted by Seller.
"PERMITTED ENCUMBRANCES" shall mean (i) the Dothan IRB Liability;
(ii) zoning or planning restrictions, easements, permits and other restrictions,
limitations and irregularities in the title thereto which, do not and, if any
rights thereunder were exercised, would not, in the aggregate, materially
adversely affect the full use and enjoyment of the property in the manner in
which it is currently used; (iii) those for current taxes not yet due and
payable; and (iv) liens imposed by law, such as materialmen's, mechanics',
workers', repairmen's, employees', carriers', vendors', warehousemen's and other
like liens arising in the ordinary course of business in respect of obligations
that are not yet due and payable or will be paid by Seller in the ordinary
course following the Closing Date.
"PERSON" shall mean an individual, a partnership, a corporation, a
trust, an unincorporated organization, a government or any department or agency
thereof or any other entity.
"PREPAID EXPENSES" shall mean those prepaid expenses relating to the
Mass-Market Cigar Business of the type and category identified on the Statement
of Net Assets which will be included in the Closing Date Statement of Net
Assets.
"RETAINED ASSETS" shall mean the assets of Seller other than the
Mass-Market Assets, including without limitation (i) cash, (ii) receivables,
(iii) assets relating to the Company's Villazon subsidiary in Tampa, Florida
which are not used in connection with the business of manufacturing and
distributing cigars under the Mass-Market Trademarks, (iv) the capital stock of
the Seller's Subsidiaries, (v) all other assets expressly allocated to Seller or
any of the Seller's Subsidiaries under this Agreement and (vi) any other assets
of Seller and its Affiliates relating to the Retained Business.
"RETAINED BUSINESS" shall mean the businesses conducted by Seller
and its Affiliates other than the Mass-Market Cigar Business.
"RETAINED LIABILITIES" shall mean (a) any workers' compensation
claims related to the operation of the Mass-Market Cigar Business prior to the
Closing, or any other claims or liabilities relating to the employment or
termination of employment by Seller of any persons; (b) any business or business
activities of Seller which are not part of the Mass-Market Cigar Business; (c)
any Tax Liabilities of Seller or any of its Affiliates, or any Tax Liabilities
8
<PAGE>
with respect to the Mass-Market Cigar Business or the Mass-Market Assets in
connection with Pre-Closing activities by Seller or its Affiliates, except as
otherwise expressly provided herein; (d) any liabilities under the Plans and
Programs, accrued vacation, or sick pay; (e) any intercompany or intracompany
liabilities or corporate charges that are not reflected as "liabilities" of the
Mass-Market Cigar Business on the Statement of Net Assets or the Closing Date
Statement of Net Assets; (f) any Liability in any pending or threatened
litigation or governmental proceeding, in either case, in which Seller or any of
its Affiliates is a party; (g) mortgage loans or any other indebtedness not
listed as a Mass-Market Liability; (h) any Liability arising out of or secured
by a Retained Asset; (i) any Liabilities or obligations of Seller or its
Affiliates under any collective bargaining agreements; (j) any Off-Site
Environmental Liability; (k) trade payables, whether or not related to the
Mass-Market Cigar Business; (l) all Liabilities of Seller under, or to be
retained or assumed by Seller or any of the Seller's Subsidiaries pursuant to,
this Agreement, (m) any liability of Seller under retention or "stay bonus"
arrangements with employees in existence on or prior to the date hereof or the
Closing Date; and (n) all other Liabilities of Seller or its Affiliates not
constituting Mass-Market Liabilities.
"RIGHT OF FIRST REFUSAL AGREEMENT" shall mean that certain Right of
First Refusal Agreement between Seller and Purchaser, to be dated the Closing
Date, substantially in the form attached hereto as Exhibit F.
"SELLER'S BOOKS AND RECORDS" shall mean the books and records
(including computerized records, ledgers, files and software) owned by Seller
and its Subsidiaries which relate to the Retained Business, and are necessary to
operate the Retained Business, or are required by law to be retained by Seller,
including, without limitation, all files relating to any Action being retained
by Seller as a Retained Liability, original corporate minute books, stock
ledgers and certificates and corporate seals, and all licenses, leases,
agreements and filings, relating to Seller, the Seller's Subsidiaries or the
Retained Business.
"STATEMENT OF NET ASSETS" shall mean the unaudited statement of net
assets relating to the Mass-Market Cigar Business at November 28, 1998 attached
as part of Exhibit A hereto.
"SUBSIDIARY" shall mean with respect to any Person, (a) any
corporation of which at least a majority in interest of the outstanding voting
stock (having by the terms thereof voting power under ordinary circumstances to
elect a majority of the directors of such corporation, irrespective of whether
or not at the time stock of any other class or classes of such corporation shall
have or might have voting power by reason of the happening of any contingency)
is at the time, directly or indirectly, owned or controlled by such Person, by
one or more Subsidiaries of such Person, or by such Person and one or more of
its Subsidiaries, or (b) any non-corporate entity in which such Person, one or
more Subsidiaries of such Person, or such Person and one or more Subsidiaries of
such Person, directly or indirectly, at the date of determination thereof, has
at least majority ownership interest.
"SUPPLY AGREEMENT" shall mean that certain Supply Agreement, to be
entered into between Seller and Purchaser, substantially in the form attached
hereto as Exhibit G.
9
<PAGE>
"TARGET LONG-TERM DEBT" shall equal $1,195,000, the amount of
long-term debt reflected on the Statement of Net Assets.
"TARGET NET PROPERTY AND EQUIPMENT" shall equal $11,960,000, the
amount of Net Property and Equipment reflected on the Statement of Net Assets.
"TARGET WORKING CAPITAL" shall equal $8,703,000, the amount of
Working Capital reflected on the Statement of Net Assets.
"WORKING CAPITAL" shall mean, with respect to the Statement of Net
Assets and the Closing Date Statement of Net Assets, (a) Mass-Market Inventory
and Prepaid Expenses less (b) current liabilities as set forth thereon,
determined in each case in accordance with the Accounting Principles applied to
calculate the Target Working Capital as reflected on the Statement of Net
Assets.
1.2. OTHER DEFINED TERMS. The following terms shall have the
meanings defined for such terms in the Sections set forth below:
TERM SECTION
---- -------
Claim 11.2(b)
Claim Notice 11.2(b)
Closing 2.4
Closing Date 2.4
Closing Date Statement of Net Assets 3.1(a)
Code Recitals
Indemnification Limit 11.3(c)
Indemnified Party 11.2(b)
Indemnifying Party 11.2(b)
Leased Personal Property 4.21
Loss Threshold 11.3(a)
Mass-Market Assets 2.1
Mass-Market Intellectual Property 4.6(b)
Material Contracts 4.8
Owned Personal Property 4.21
Personal Property Leases 4.20
Plans and Programs 4.17(b)
Projections 12.1
Proposed Acquisition Transaction 6.5
Purchase Price 2.3(a)
Purchaser Preamble
Purchaser Indemnified Parties 11.2(a)
Required Consents 4.8(c)
Returns 4.18(b)
Seller Preamble
Seller Indemnified Parties 11.2(a)
State Tobacco Litigation 4.12
Tax 4.18(a)
Taxing Authority 4.18(a)
Third-Party Claim 11.2(b)
10
<PAGE>
ARTICLE II.
PURCHASE OF ASSETS; ASSUMPTION OF LIABILITIES
---------------------------------------------
2.1. TRANSFER OF ASSETS. On the terms and subject to the conditions
set forth herein, on the Closing Date, Seller shall take or cause to be taken
all actions necessary to cause the transfer, assignment, delivery and conveyance
to Purchaser of all of Seller's and its Affiliates' right, title, interest and
claims in and to the Mass-Market Assets. The "Mass-Market Assets" shall consist
of the following:
(i) the Mass-Market Intellectual Property;
(ii) Permits to the extent such licenses and Permits are
transferable;
(iii) the Mass-Market Inventory;
(iv) the Mass-Market Contracts;
(v) the Mass-Market Personal Property;
(vi) the Dothan Owned Facility;
(vii) the Dothan IRB Lease;
(viii) the Dominican Republic Leases;
(ix) the Prepaid Expenses;
(x) the Personal Property Leases;
(xi) the Mass-Market Books and Records; and
(xii) all other assets reflected on the Closing Date Statement
of Net Assets.
Notwithstanding the foregoing, the Mass-Market Assets shall not
include any of the Retained Assets or any personal property belonging to any
individual Affiliate of Seller that is located at any Facility.
11
<PAGE>
2.2. ASSUMPTION AND SATISFACTION OF LIABILITIES. (a) Purchaser shall
take or cause to be taken all actions necessary to cause the assumption on the
Closing Date by Purchaser of the Mass-Market Liabilities, subject to the
provisions of Article XI hereof. Effective as of and after the Closing Date
Purchaser shall assume, pay, perform, and discharge in due course all of the
Mass-Market Liabilities.
(b) Purchaser shall not assume any obligation, payment or liability
of Seller of any kind, whether fixed, contingent, known, or unknown and whether
existing as of the Closing or arising thereafter, with respect to the Retained
Liabilities. Effective prior to, as of and after the Closing Date Seller shall
pay, perform and discharge in due course all of the Retained Liabilities
2.3. PURCHASE PRICE.
(a) PAYMENT OF PURCHASE PRICE. At the Closing, upon the terms and
subject to the conditions set forth herein, Purchaser shall, by wire transfer of
immediately available funds, pay to Seller or at Seller's direction for the
sale, transfer, assignment, conveyance and delivery of the Mass-Market Assets
the aggregate amount of Two Hundred Million Dollars ($200,000,000), SUBJECT,
HOWEVER, to the adjustment as set forth in Article III. The aggregate amount of
Two Hundred Million Dollars ($200,000,000) is hereinafter referred to as the
"Purchase Price".
(b) ALLOCATION OF PURCHASE PRICE. Seller and Purchaser shall
allocate the Purchase Price among the Mass-Market Assets and the Mass-Market
Liabilities in accordance with an allocation schedule substantially in the form
set forth on Exhibit H. As soon as may be practicable after the Closing, Seller
and Purchaser shall amend Exhibit H to reflect any adjustments to the Purchase
Price made pursuant to Article III. As soon as may be practicable after the
Closing and prior to filing any tax return which includes information related to
the transactions contemplated in this Agreement, Seller and Purchaser employing
the allocation of the Purchase Price made pursuant to this Section 2.3(b) shall
prepare mutually acceptable IRS Forms 8594 which they shall use to report the
transactions contemplated in this Agreement to the Internal Revenue Service and
to all other taxing authorities. Neither Seller nor Purchaser shall take a
position in any Return, Tax proceeding, tax audit or otherwise inconsistent with
such allocation; provided, however, that nothing contained herein shall require
Seller or Purchaser to contest any proposed deficiency or adjustment by any
taxing authority or agency which challenges such allocation of the Purchase
Price, or exhaust administrative remedies before any taxing authority or agency
in connection therewith, and Seller and Purchaser shall not be required to
litigate before any court (including without limitation the United States Tax
Court), any proposed deficiency or adjustment by any taxing authority or agency
which challenges such allocation of the Purchase Price. Seller and Purchaser
shall give prompt notice to the other of the commencement of any tax audit or
the written assertion of any proposed deficiency or adjustment by any taxing
authority or agency which challenges such allocation of the Purchase Price.
2.4. CLOSING. The Closing of the transactions contemplated herein
(the "Closing") shall be held at 10:00 a.m., New York City time, on the fifth
Business Day following the date in which all of the conditions to Closing set
12
<PAGE>
forth in Articles VII and VIII hereof have been satisfied, or such other date as
to which the parties may agree (the "Closing Date") at the offices of Latham &
Watkins, 885 Third Avenue, Suite 1000, New York, New York. The parties have
selected April 30, 1999 as the proposed Closing Date, and each party will use
good faith efforts to cause the satisfaction of the conditions to Closing set
forth in Articles VII and VIII to be satisfied on or prior to April 23, 1999.
2.5. CONVEYANCES AT CLOSING.
(a) INSTRUMENTS AND POSSESSION. To effect the sale and transfer
referred to in Section 2.1 hereof, at the Closing, Seller will execute and
deliver or cause to be delivered to Purchaser:
(i) an Assignment Agreement, in the form attached hereto as
Exhibit I, conveying Seller's right, title and interest in and to the
Dothan IRB Lease and the Dominican Republic Leases to Purchaser;
(ii) one or more bills of sale, in the form attached hereto as
Exhibit J, conveying in the aggregate good and sufficient title to the
Owned Personal Property and the Mass-Market Inventory;
(iii) a general warranty deed in recordable form for the State
of Alabama conveying good and marketable title to the Dothan Owned
Facility free and clear of Encumbrances other than Permitted Encumbrances.
(iv) Assignments of Contract Rights, each in the form attached
hereto as Exhibit L, with respect to the Mass-Market Contracts other than
the Dothan IRB Lease and the Dominican Republic Leases;
(v) Assignments of Mass-Market Trademarks, each in the form
attached hereto as Exhibit K, in recordable form to the extent necessary
to assign such Mass-Market Trademarks; and
(vi) such other instruments as shall be reasonably requested
by Purchaser to vest in Purchaser Seller's title in and to the Mass-Market
Intellectual Property (other than Mass-Market Trademarks), assignable
Permits, Prepaid Expenses, Mass-Market Books and Records and other
Mass-Market Assets in accordance with the provisions hereof.
(b) ASSUMPTION DOCUMENT. Upon the terms and subject to the
conditions contained herein, at the Closing, Purchaser shall execute and deliver
to Seller an instrument of assumption substantially in the form attached hereto
as Exhibit L evidencing Purchaser's assumption, pursuant to Section 2.2, of the
Mass-Market Liabilities (the "ASSUMPTION DOCUMENT").
13
<PAGE>
(c) FORM OF INSTRUMENTS. To the extent that a form of any document
to be delivered hereunder is not attached as an Exhibit hereto, such documents
shall be in form and substance, and shall be executed and delivered in a manner,
reasonably satisfactory to Purchaser and Seller.
(d) CERTIFICATES; OPINIONS. Purchaser and Seller shall deliver the
certificates, opinions of counsel and other matters described in Articles VII
and VIII.
ARTICLE III.
POST-CLOSING ADJUSTMENTS
------------------------
3.1. CLOSING DATE COMBINED STATEMENT OF NET ASSETS; WORKING CAPITAL
ADJUSTMENT.
(a) Not later than 45 days following the Closing Date, Seller shall
prepare a statement of net assets of the Mass-Market Cigar Business as of the
close of business on the Closing Date, which shall include a calculation of
Working Capital, Net Property and Equipment and Long-Term Debt as of the Closing
Date (the "Closing Date Statement of Net Assets"). The Closing Date Statement of
Net Assets shall be prepared in accordance with the Accounting Principles
applied to the Statement of Net Assets.
(b) The Closing Date Statement of Net Assets and the calculation of
the Working Capital, Net Property and Equipment and Long-Term Debt shall be
submitted to Purchaser and its independent accountants on or before the 45th day
after the Closing Date. If the accountants for Seller and the accountants for
Purchaser do not reach agreement with respect to the Closing Date Statement of
Net Assets and the calculation of Working Capital, Net Property and Equipment
and Long-Term Debt on or before 30 days after the submission to Purchaser of
Seller's proposed Closing Date Statement of Net Assets, another independent
accounting firm of national reputation shall be selected and retained by the
accountants for Seller and Purchaser and such firm will make a determination of
those matters with respect to which the accountants for Seller and the
accountants for Purchaser do not agree, which determination shall be binding on
the parties. Such determination shall be made by such other accounting firm on
or before the 45th day after such other accounting firm has been so notified.
The fees of such other accounting firm will be borne 1/2 by Purchaser 1/2 by
Seller. Each of Purchaser and Seller shall bear the fees and expenses of its
respective accountants.
(c) Working Capital, Net Property and Equipment and Long-Term Debt
as calculated in accordance with the procedures set forth in (a) and (b) based
upon the Closing Date Statement of Net Assets shall be final and binding on the
parties hereto. If (i)(A) Working Capital, plus (B) Net Property and Equipment,
less (C) Long-Term Debt (each as so calculated) shall be greater than (ii)(A)
Target Working Capital plus (B) Target Net Property and Equipment, less (C)
Target Long-Term Debt (each as reflected on the Statement of Net Assets) plus
(D) $532,000, Purchaser shall, within five Business Days of the determination
14
<PAGE>
thereof, pay to Seller, by wire transfer of immediately available funds, the
amount of such difference. If (i)(A) Working Capital plus (B) Net Property and
Equipment, less (C) Long-Term Debt (each as so calculated) is less than (ii)(A)
Target Working Capital plus (B) Target Net Property and Equipment, less (C)
Target Long-Term Debt (each as reflected on the Statement of Net Assets) plus
(D) $532,000, Seller shall, within five Business Days of the determination
thereof pay to Purchaser, by wire transfer of immediately available funds, the
amount of such difference.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
To induce Purchaser to enter into this Agreement, Seller hereby
makes the following representations and warranties to Purchaser, except as
otherwise set forth in the Disclosure Schedule. The sections of the Disclosure
Schedule are numbered to correspond to the various representations and
warranties set forth in this Article IV to which they relate. Such section
references in the Disclosure Schedule are for the parties' convenience only, and
any item disclosed in any section of the Disclosure Schedule shall be deemed to
be an exception to each representation and warranty set forth in any section of
this Article IV with respect to which it may fairly be deemed to contain
information that would constitute an exception to such representation and
warranty.
4.1. ORGANIZATION OF SELLER. Seller is duly incorporated and validly
existing as a corporation in good standing under the laws of the State of
Delaware and has full corporate power to conduct the Mass-Market Cigar Business
as it is presently being conducted and to own and lease its properties and
assets.
4.2. RESERVED.
4.3. RESERVED.
4.4. RESERVED.
4.5. AUTHORIZATION. Seller has the corporate power to execute and
deliver this Agreement and each of the Ancillary Agreements to which it is a
party and to consummate the transactions contemplated hereby and thereby, and
all requisite corporate action has been taken by Seller to authorize the
execution, delivery and performance of this Agreement and each of the Ancillary
Agreements to which it is a party by Seller. This Agreement has been duly
executed and delivered by Seller and, assuming the due authorization, execution
and delivery of this Agreement by Purchaser, is a valid and binding obligation
of Seller, enforceable against Seller in accordance with its terms, except as
the foregoing may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to or
affecting the rights or remedies of creditors, general principles of equity
(whether considered in an action at law or in equity) and the discretion of the
court before which any proceeding therefor may be brought.
15
<PAGE>
4.6. MASS-MARKET INTELLECTUAL PROPERTY.
(a) MASS-MARKET TRADEMARKS. Section 4.6(a) of the Disclosure
Schedule contains a complete list of the Mass-Market Trademarks. The Mass-Market
Trademarks constitute all of the trademarks (i) used by Seller in the
manufacture and distribution of Mass-Market Cigars (as defined in the
Non-Compete Agreement) and (ii) pursuant to which Seller generated the revenues
reflected on the Income Statement. Seller owns the Mass-Market Trademarks which
have been registered or applied for in the United States Patent and Trademark
Office (hereinafter "U.S. Mass-Market Trademarks"), free and clear of all
Encumbrances. Seller owns the foreign Mass-Market Trademarks, free and clear of
all Encumbrances, except where said Encumbrances would not have a Material
Adverse Effect. All appropriate actions have been taken by Seller to maintain
the validity and enforceability of the U.S. Mass-Market Trademarks, including
payment of all required fees. All appropriate actions have been taken by Seller
to maintain the validity and enforceability of the foreign Mass-Market
Trademarks, including payment of all required fees, except where non-action
would not have a Material Adverse Effect . No judicial or administrative
proceeding of any kind is pending or, to the Knowledge of Seller, has been
threatened against Seller in the United States involving (a) the ownership,
validity, enforceability, infringement, misuse or misappropriation of any
Mass-Market Trademarks, or (b) the ownership, validity, enforceability,
infringement, misuse or misappropriation by Seller of Intellectual Property
rights of any third party which could result in a Material Adverse Effect.
Seller has no Knowledge of the infringement or misappropriation of the
Mass-Market Trademarks by a third party which could have a Material Adverse
Effect. Seller has not received written notice of any infringement or liability
of any kind for the use of intellectual property rights of others with respect
to the Mass-Market Intellectual Property within the last three (3) years which
could have a Material Adverse Effect. Neither Seller nor any of its Affiliates
has granted any license or right to use, option, release or covenant not to sue
or non-assertion assurance to any third person with respect to, or granted any
outstanding lien or security interest in, any of the U.S. Mass-Market
Trademarks. Neither Seller nor any of its Affiliates has granted any license or
right to use, option, release or covenant not to sue or non-assertion assurance
to any third person with respect to, or granted any outstanding lien or security
interest in, any of the foreign Mass-Market Trademarks, except where such grant
would not have a Material Adverse Effect. There is no existing or contemplated
agreement, understanding, or grant of permission between Seller or any of its
Affiliates and any third person that encumbers or otherwise affects Seller's
exclusive right to use the U.S. Mass-Market Trademarks. There is no existing or
contemplated agreement, understanding, or grant of permission between Seller or
any of its Affiliates and any third person that encumbers or otherwise affects
the Seller's right to use the foreign Mass-Market Trademarks, except where such
agreement, understanding, or grant of permission would not have a Material
Adverse Effect.
(b) Schedule 4.6(b) to the Disclosure Schedule sets forth all
Intellectual Property which is used in connection with and relates primarily to,
and which Seller reasonably believes is necessary for the operation of, the
Mass-Market Cigar Business, including all Mass-Market Trademarks, all packaging
designs, and, to the extent it exists, any manufacturing specifications such as
formulas or flavorings (the "Mass-Market Intellectual Property").
16
<PAGE>
(c) Seller and its Affiliates shall convey all right, title and
interest in or right to use which Seller and its Affiliates have in the
Mass-Market Intellectual Property. Immediately after the Closing, the Purchaser
shall have the same rights as Seller to all of the Mass-Market Intellectual
Property and on the same terms and conditions as in effect prior to the Closing.
(d) The conduct of the Mass-Market Cigar Business does not infringe
upon, conflict in any way with or misappropriate any Intellectual Property of
any third party, except for infringements, conflicts or misappropriations that,
individually and in the aggregate, would not have a Material Adverse Effect.
None of the Mass-Market Intellectual Property used in the Mass-Market Cigar
Business is being infringed or used by any third party, except for such
infringements or uses as, individually and in the aggregate, would not have a
Material Adverse Effect.
(e) To the best of Seller's Knowledge, none of the Mass-Market
Intellectual Property which is used in the United States and owned by Seller is
subject to any outstanding order, ruling, decree, judgment or stipulation by or
with any Governmental Entity.
(f) Seller shall diligently and immediately use its reasonable best
efforts to rectify any defects affecting or concerning the Mass-Market
Intellectual Property, such as errors in title or ownership, defects in chain of
title, or undisclosed encumbrances, where known or unknown at the time of the
Closing, except where said defects would not have a Material Adverse Effect. Any
expenses, including attorneys fees, required to rectify any such defect in the
Mass-Market Intellectual Property shall be borne by Seller. Any defect rectified
prior to the Closing shall not be deemed to have a Material Adverse Effect. This
obligation survives the Closing.
(g) Seller shall ensure that all necessary documents are filed with
the appropriate government offices to ensure that all the Mass-Market Trademarks
are in the name of Seller or GCMM Co., Inc., and Seller shall bear all
associated costs including, without limitation, payment of all attorneys fees
and filing fees. Buyer shall use good faith efforts to notify Seller which
Mass-Market Intellectual Property, if any, it is not interested in maintaining.
Buyer shall be responsible for all fees to effect the transfer of
the Mass-Market Intellectual Property from Seller to Buyer. Buyer and Seller
shall use good faith efforts to undertake all necessary assignments at the same
time if such transfer is deemed reasonable.
4.7. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
the Disclosure Schedule, since November 28, 1998, the Mass-Market Cigar Business
has been conducted in the ordinary course of business and there has not been
any:
(a) change in the Mass-Market Assets, the Mass-Market Liabilities,
or in the financial condition or results of operations of the Mass-Market Cigar
Business, except for (i) changes in the ordinary course of business and
consistent with past practice, (ii) changes contemplated hereby or relating to
the transactions contemplated hereby or (iii) changes which have not had and
could not reasonably be expected to have a Material Adverse Effect;
17
<PAGE>
(b) sale, assignment or transfer of any Mass-Market Asset which is
material to the Mass-Market Cigar Business, other than in the ordinary course of
business;
(c) cancellation of any Indebtedness for Borrowed Money owed to
Seller, whether or not in the ordinary course of business, which cancellation
would have or could reasonably be expected to have a Material Adverse Effect;
(d) capital expenditures or the incurrence of liability therefor by
Seller involving payments in excess of $50,000 on behalf of the Mass-Market
Cigar Business;
(e) execution of any lease as tenant of real property or as lessee
of personal property or the incurrence of liability therefor by Seller related
to the Mass-Market Cigar Business, involving payments in excess of $50,000 per
year;
(f) failure to repay any Indebtedness for Borrowed Money of Seller,
which failure had or could reasonably be expected to have a Material Adverse
Effect;
(g) physical damage, destruction or loss (whether or not covered by
insurance) affecting any Mass-Market Assets, which physical damage, destruction
or loss had or could reasonably be expected to have a Material Adverse Effect;
(h) mortgage or pledge of, or any Encumbrance placed on, any
Mass-Market Assets; or
(i) any other fact, event or condition of any character that will
have, or could reasonably be expected to have, a Material Adverse Effect or
could reasonably be expected to materially disrupt, interrupt, prevent or impair
the conduct of the Mass-Market Cigar Business.
4.8. CONTRACTS AND COMMITMENTS.
(a) Section 4.8(a) of the Disclosure Schedule sets forth a complete
list of each of the following written or oral Contracts (collectively, the
"MATERIAL CONTRACTS"):
(i) Mass-Market Contract creating any partnership, or any
Indebtedness for Borrowed Money;
(ii) Mass-Market Contract (including purchase orders,
franchise agreements and undertakings or commitments to any governmental
or regulatory authority) not made in the ordinary course of business;
(iii) Contracts of employment with Mass-Market Employees
(including without limitation employment, change in control, golden
parachute, severance or similar agreements or arrangements and other
Mass-Market Contracts with Mass-Market Employees);
(iv) Mass-Market Contracts consisting of sales commitments for
tobacco products;
18
<PAGE>
(v) any other Mass-Market Contract involving payments by
Seller in excess of $50,000 annually that are not cancelable on 30-days'
notice by Seller, without payment of penalty or premium;
(vi) Mass-Market Contract relating to, or evidences of, or
guarantees of, or providing security for, Indebtedness for Borrowed Money
or the deferred purchase price of property (whether incurred, assumed,
guaranteed or secured by any Mass-Market Asset);
(vii) license, sale, distribution, commission, marketing,
agent, franchise, technical assistance or similar contract relating to or
providing for the marketing and/or sale of the products of the Mass-Market
Cigar Business to which Seller is a party or by which Seller is bound;
(viii) Mass-Market Contract that requires the payment or
incurrence of a Mass-Market Liability, or the rendering of services or the
sale of goods by Seller subsequent to the date of this Agreement of more
than $50,000;
(ix) Mass-Market Contract containing a covenant limiting the
freedom of the Seller or any Affiliate of the Seller to engage in the
Mass-Market Cigar Business or the transactions contemplated by the
Ancillary Agreements or to compete with any Person (other than the
Non-Compete Agreement); or
(x) Any other Mass-Market Contract required by applicable law
to be filed by Seller with the U.S. Securities and Exchange Commission.
(b) Seller has furnished to Purchaser a copy of each of the Material
Contracts, and each such copy is correct and complete and includes all
modifications thereof.
(c) All of the Material Contracts indicated with an asterisk ("*")
on Section 4.8(a) of the Disclosure Schedule are in full force and effect and
constitute the legal, valid and binding obligations of Seller and, to the
Knowledge of Seller, of the other parties thereto (except, in each case, as may
be limited by bankruptcy, reorganization, insolvency and similar laws of general
application relating to or affecting the enforcement of rights of creditors or
the relief of debtors), and to the Knowledge of Seller, no condition exists or
event, act or omission has occurred which, with or without notice, or lapse of
time or both, would constitute a default or a basis of force majeure or other
claim of excusable delay or nonperformance thereunder. Except for the consents
of parties listed on Schedule 4.8(c) (the "REQUIRED CONSENTS"), no consent of
any party to the Material Contracts is required to assign the Material
Contracts, and Seller's rights and obligations thereunder, to Purchaser. No
other party to any Material Contract has notified Seller of the assertion of its
right to renegotiate the terms or conditions of any Material Contract, and, to
the Knowledge of Seller, no such basis exists.
(d) For informational purposes, Seller has set forth in Section
4.8(d) of the Disclosure Schedule a list of Mass-Market Contracts in existence
on the date hereof (i) which are not required to be set forth on Schedule 4.8(a)
and (ii) with respect to which Seller makes no representation or warranty to
Purchaser.
19
<PAGE>
4.9. NO CONFLICT OR VIOLATION. Except as set forth in the Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated by this Agreement will (i)
violate, conflict with or result in any breach or default under any term or
provision or result in the acceleration of any Liability or cancellation or
termination of the Dothan IRB, the Dothan IRB Lease, the Dominican Republic
Leases, any Personal Property Leases or any other Material Contract, (ii) result
in the creation or imposition of any material Encumbrance on any Mass-Market
Asset, (iii) result in any violation of the provisions of the charter or other
organizational document or by-laws of Seller or (iv) result in any violation by
Seller of any Applicable Law, which violation would have a Material Adverse
Effect, or prohibit consummation by Seller of the transactions contemplated by
this Agreement.
4.10. CONSENTS AND APPROVALS. Except (a) for the filing of premerger
notification reports under the HSR Act and by the Bureau of Alcohol, Tobacco and
Firearms and (b) as set forth in the Disclosure Schedule, no consent, approval
or authorization of any governmental or regulatory authority, or any other
Person, is required to be made or obtained by Seller in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby, except where failure to obtain such
consent, approval or authorization would not have a Material Adverse Effect.
4.11. FINANCIAL STATEMENTS. The Financial Statements have been
delivered to Purchaser by Seller. Except as otherwise set forth therein
(including the notes thereto), the Financial Statements have been prepared based
on the books and records of Seller in accordance with the Accounting Principles
and, with respect to the Statement of Net Assets and the Income Statement (other
than the column entitled ("1999 Budget"), present fairly in accordance with the
Accounting Principles, the financial condition and results of operations of the
Mass-Market Cigar Business as of the dates indicated or the periods indicated;
provided, that no representation or warranty is made hereby with respect to the
accuracy or the likelihood of achievement of the results of operations or other
information set forth in the column entitled "1999 Budget" set forth on the
Income Statement.
4.12. LITIGATION. Except as set forth in the Disclosure Schedule and
the Form 10-K, there is no Action pending or, to Seller's Knowledge, threatened
against, relating to or affecting (i) the Mass-Market Cigar Business, (ii) the
Mass-Market Assets or (iii) the transactions contemplated by this Agreement,
except as would not reasonably be likely to have a Material Adverse Effect. If
any Action arising out of the manufacture, sale, distribution, advertising,
promotion, marketing, packaging, labeling, or use of tobacco or any tobacco
product is threatened or commenced by or on behalf of any State or the federal
government or any of their respective officers acting in their official
capacities (including but not limited to any Attorney General), departments,
subdivisions, or agencies (collectively "State Tobacco Litigation"), then for
purposes of this Agreement such State Tobacco Litigation shall be deemed not to
be reasonably likely to have a Material Adverse Effect. Except as disclosed in
the Disclosure Schedule and the Form 10-K, there is no State Tobacco Litigation
pending or, to Seller's knowledge, threatened against Seller relating to the
Mass-Market Cigar Business. Seller is not in default with respect to any
judgment, order, writ, injunction or decree of any court or governmental agency,
and there are no unsatisfied judgments against Seller relating to the
Mass-Market Cigar Business which, if paid, would have a Material Adverse Effect.
20
<PAGE>
4.13. LIABILITIES. Seller has not incurred or become liable for,
directly or indirectly, any Mass-Market Liabilities and the Mass-Market Assets
are not subject, directly or indirectly, to any Liability required by generally
accepted accounting principles to be set forth on the Statement of Net Assets or
in a financial statement except (i) Mass-Market Liabilities set forth on the
Statement of Net Assets or in the Disclosure Schedule or (ii) Mass-Market
Liabilities incurred in the ordinary course of business consistent with past
practice since the date of the Statement of Net Assets.
4.14. COMPLIANCE WITH LAW. Seller is, and for the period of the
applicable statute of limitations has been, in compliance with all Applicable
Laws (other than Environmental Laws, which are addressed in Section 4.21
hereof), except where the failure to comply would not have a Material Adverse
Effect.
4.15. NO BROKERS. Except for the services of Peter J. Solomon
Company Limited, which have been retained by Seller, neither Seller nor any of
its Affiliates has entered into or will enter into any contract, agreement,
arrangement or understanding with any Person which will result in the obligation
of Purchaser to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby. Seller is solely
responsible for any payment, fee or commission that may be due to Peter J.
Solomon Company Limited in connection with the transactions contemplated hereby.
4.16. NO OTHER AGREEMENTS TO SELL THE MASS-MARKET CIGAR Business.
Seller has no legal obligation, absolute or contingent, to any other Person to
effect any sale, transfer or other disposition (including, without limitation,
by way of any merger, consolidation or other reorganization of Seller or any of
its Subsidiaries) of any Mass-Market Assets (other than a sale of inventory in
the ordinary course of business) or to enter into any agreement with respect
thereto.
4.17. EMPLOYEE BENEFIT PLANS.
(a) Except as set forth on Schedule 4.17(a), there are no employment
contracts or change in control, golden parachute, severance or similar
agreements or arrangements with any of the Mass-Market Employees. Seller has
furnished to Purchaser a list of the Mass-Market Employees and will provide such
additional information concerning the Mass-Market Employees as Purchaser may
reasonably request, subject to Seller's policies in effect at the time of the
request with respect to providing information about its employees to other
potential employers.
(b) Schedule 4.17(b) sets forth a complete list of all employee
benefit plans and programs to which Seller is a party and in which the
Mass-Market Employees participate immediately prior to the Closing Date (the
"PLANS AND PROGRAMS"). None of the Plans and Programs are multiemployer plans
(as defined in ERISA Section 3(37)).
21
<PAGE>
4.18. TAX MATTERS.
(a) "Tax" (including, with correlative meaning, the terms "Taxes"
and "Taxable") means, any net income, gross income, gross receipts, tobacco
products, sales, use, transfer, payroll, premium, property, windfall profits,
alternative or add-on minimum tax, or other tax, fee or assessment, together
with any interest and any penalty, addition to tax or additional amount imposed
by any Governmental Authority (domestic or foreign) responsible for the
imposition of any such tax (a "Taxing Authority").
(b) With respect to the Mass-Market Assets and the Mass-Market Cigar
Business, (i) all returns, statements, reports and forms ("Returns") required to
be filed with any Taxing Authority on or before the Closing Date involving
material Taxes have been timely filed, and (ii) all Taxes shown as due and
payable on such Returns have been timely paid.
(c) Except as set forth on Section 4.18 (c) of the Disclosure
Schedule, there are no (i) pending audits or deficiencies assessed against
Seller or any of its Affiliates with respect to the Mass-Market Assets, which
have not been fully settled, (ii) outstanding agreements or waivers extending
the time to assess any Taxes with respect to the Mass-Market Assets or the
Mass-Market Cigar Business, (iii) Tax liens pending or, to the Knowledge of
Seller, threatened, against any of the Mass-Market Assets or the Mass-Market
Cigar Business, or (iv) notices of any Tax deficiency outstanding, proposed or
assessed with respect to the Mass-Market Assets or the Mass-Market Cigar
Business.
(d) Except as set forth on Section 4.18 (d) of the Disclosure
Schedule, none of the Mass-Market Assets is (i) property that is subject to the
so-called safe harbor lease provisions of former Section 168(f)(8) of the Code,
(ii) "tax-exempt use property" within the meaning of Section 168(h) of the code
or (iii) property securing any debt the interest on which is tax-exempt under
Section 103(a) of the Code.
(e) Seller and its Affiliates have timely and duly withheld all
Taxes required to have been withheld with respect to the Mass-Market Cigar
Business and the Mass-Market Assets in connection with amounts paid or owing to
any employee, independent contractor, creditor, stockholder, or other third
party, and such withheld Taxes have either been timely and duly paid to the
proper Governmental Authority or set aside in accounts for such purpose and will
be timely and duly paid to the proper Governmental Authority.
4.19. REAL PROPERTY.
(a) OWNED REAL PROPERTY.
(i) The Dothan Owned Facility is the only real property owned
in whole or in part by Seller primarily used in the Mass-Market Cigar
Business. Seller has good and marketable title in fee simple to the Dothan
Owned Facility, free and clear of all Encumbrances except for Permitted
Encumbrances and except for Encumbrances set forth in Section 4.19(a) of
the Disclosure Schedule.
22
<PAGE>
(ii) To Seller's Knowledge, except as set forth in Section
4.19(a) of the Disclosure Schedule and except as would not adversely
affect the full use and enjoyment of the property in the manner in which
it is currently used, all easements, rights of way, licenses, and other
non-ownership interests, if any, granted to Seller with respect to the
Dothan Owned Facility are valid and effective in accordance with their
terms.
(b) LEASED REAL PROPERTY. Except as disclosed in the Disclosure
Schedule, each of the Dothan IRB Lease and the Dominican Republic Leases are in
full force and effect, are valid and enforceable in accordance with their terms
and constitute the legal, valid and binding obligations of Seller and, to the
Knowledge of the Seller, of the other parties thereto (except, in each case, as
may be limited by bankruptcy, reorganization, insolvency and similar laws of
general application relating to or affecting the enforcement of rights of
creditors or the relief of debtors), and, to the Knowledge of Seller, no
condition exists or event, act or omission has occurred which, with or without
notice, lapse of time or both, would constitute a default or a basis of force
majeure or other claim of excusable delay or nonperformance thereunder. Seller
has delivered to the Purchaser a copy of each of the Dothan IRB Lease and the
Dominican Republic Leases, and each such copy is correct and complete and
includes any and all modifications thereto. The interest of Seller in and under
any of the Dothan IRB Lease and the Dominican Republic Leases is subject to no
Encumbrance, other than any Encumbrance related to the Dothan IRB and other than
Permitted Encumbrances. Seller has the right of ingress and egress with respect
to the Dominican Republic Facilities.
(c) Except as described in the Disclosure Schedule, (i) no
improvement or structure on any of the Mass-Market Facilities encroaches on any
adjacent property or conflicts with the rights of any owner thereof except as
would not materially interfere with the operation thereof or impose a material
Liability on Purchaser or its Affiliates, and (ii) no improvement or structure
on any real property owned or leased by any other Person encroaches on any of
the Mass-Market Facilities except as would not materially interfere with the
operation thereof.
(d) The structures and improvements located on each of the
Mass-Market Facilities are in substantial compliance with all applicable
material building, fire, and other regulatory laws, ordinances, and regulations.
Seller has not received any written notice of any violation thereof.
(e) All requisite certificates of occupancy and other material
Permits or approvals legally required with respect to the structures and
improvements located on each of the Mass-Market Facilities the occupancy and use
thereof, have been obtained and are currently in full force and effect.
4.20. PERSONAL PROPERTY. (a) Section 4.20(a) of the Disclosure
Schedule sets forth a list of machinery, equipment, furniture, fixtures,
vehicles and other items of tangible personal property that are owned or used by
the Seller primarily in the Mass-Market Cigar Business (the "OWNED PERSONAL
PROPERTY"). The list of Owned Personal Property, is accurate in all material
respects.
23
<PAGE>
(b) All of the Owned Personal Property is owned by the Seller free
and clear of any Encumbrances, except for Permitted Encumbrances.
(c) Section 4.20(c) of the Disclosure Schedule sets forth a list of
machinery, equipment, furniture, fixtures, vehicles and other items of tangible
personal property that are leased by the Seller and used primarily in the
Mass-Market Cigar Business (the "LEASED PERSONAL PROPERTY"), the leases for
which (the "PERSONAL PROPERTY LEASES") are being assumed by the Purchaser in
connection with the purchase of the Mass-Market Cigar Business.
(d) All of the Owned Personal Property and Leased Personal Property
is owned or leased by Seller (or its wholly-owned Subsidiaries, excluding
qualifying shares in de minimis amounts for purposes of determining whether such
Subsidiary is "wholly-owned"). The Owned Personal Property and the Leased
Personal Property is, considered in the aggregate, in good operating condition
and has been appropriately maintained in the ordinary course of business,
conforms to all material requirements of law and is substantially fit for use in
accordance with the Mass-Market Cigar Business, subject only to ordinary wear
and tear.
4.21. CERTAIN ENVIRONMENTAL MATTERS. Except as set forth in Section
4.21 of the Disclosure Schedule (as to all of which matters any liability
therefrom shall be a Retained Liability):
(a) Seller is, with respect to the Mass-Market Cigar Business and
the Mass-Market Assets, as of the date of this Agreement, and has been, at all
times within the last five years, in substantial compliance with all
Environmental Laws applicable to the Mass-Market Cigar Business or the
Mass-Market Assets.
(b) Seller is not, with respect to any of the Mass-Market
Facilities, the Mass-Market Assets or the Mass-Market Cigar Business, the
subject of any Action, order, writ, injunction, judgment or decree, suit,
litigation, proceeding, or arbitral action or proceeding or, to Seller's
Knowledge, investigation pertaining to Environmental Conditions, nor is Seller,
with respect to any of the Mass-Market Facilities, Mass-Market Assets or
Mass-Market Cigar Business, subject to any pending Environmental Claim, nor to
Seller's Knowledge is there any threatened Environmental Claim relating to the
Mass-Market Facilities, the Mass-Market Assets or the Mass-Market Cigar
Business;
(c) Set forth in Section 4.21 of the Disclosure Schedule is a list
of Environmental Permits currently held by the Seller, and the Seller has
conducted and is conducting the Mass-Market Cigar Business in compliance with
the Environmental Permits, which constitute all of the Environmental Permits
required to be obtained from any public, governmental, regulatory or judicial
authority to conduct the Mass-Market Cigar Business in substantially the same
manner and extent it is presently conducted;
(d) To Seller's Knowledge, there is no action, activity,
circumstance, condition, event, or incident, including without limitation, the
release, emission, discharge, presence, or disposal of any Hazardous Substance,
that could reasonably be expected to form the basis of any material
Environmental Claim or result in any material Liability, Action or penalties
under Environmental Laws against Seller or the Mass-Market Cigar Business, any
of the Mass-Market Facilities or any other Mass-Market Assets;
24
<PAGE>
(e) With respect to any of the Mass-Market Assets or Mass-Market
Cigar Business, (i) Seller is not subject to any outstanding order from, or
contractual obligation with, any Governmental Authority or Person in respect of
which it would be likely to incur costs arising from the release or threatened
release of a Hazardous Substance, and (ii) Seller has not entered into any
contractual obligation (including indemnification obligation) with any
Governmental Authority or Person pursuant to which it assumed responsibility
for, either directly or indirectly, the remediation of any condition arising
from or relating to the release or threatened release of Hazardous Substances;
and
(f) Seller has disclosed and made available to Purchaser all
studies, analyses and test results, site assessments and compliance audits
prepared by Seller, its Affiliates or third-party consultants, in the
possession, custody or control of Seller pertaining to the Mass-Market
Facilities relating to (i) the environmental conditions on, under or about the
Mass-Market Facilities, and (ii) any Hazardous Substances used, managed,
handled, transported, treated, generated, stored, discharged, emitted, or
otherwise released on, under, about or from any of the Mass-Market Facilities,
or otherwise in connection with the Mass-Market Cigar Business.
4.22. INVENTORY. The Mass-Market Inventory reflected on the
Statement of Net Assets, is and the Mass-Market Inventory as of the Closing
shall be, merchantable and fit for the purpose for which it was procured or
manufactured and legally qualified for export and sale. Except as reserved for
on the Statement of Net Assets, all such inventory is, and shall be as of the
Closing, in good and marketable condition and salable in the normal course of
the Mass-Market Cigar Business, as currently conducted. The Mass-Market
Inventory reflected on the Statement of Net Assets is, and the Mass-Market
Inventory as of the Closing shall be, sufficient for and not materially or
substantially in excess of the requirements of the Mass-Market Cigar Business.
4.23. PERMITS. Section 4.23 of the Disclosure Schedule sets forth a
list of all Permits issued to the Seller and the Seller has furnished to the
Purchaser a copy of each of such Permits, and each such copy is correct and
complete and includes any and all modifications thereof. The Permits are in full
force and effect; the Seller is not in material violation of any of the Permits;
no proceedings for the suspension or cancellation of any of the Permits is
pending or, to the Knowledge of the Seller, threatened; no condition exists
which (with or without notice, the passage of time or both) would constitute a
material violation of any of the Permits; and the Permits constitute all
material governmental licenses, permits, consents, approvals or certificates
required to be obtained or held by the Seller in connection with the operation
of the Mass-Market Cigar Business as presently conducted, the failure to obtain
which would have a Material Adverse Effect; provided, however, that no
representation is made in this sentence with respect to "Environmental Permits",
as to which all representations and warranties are set forth in Section 4.21
hereof.
4.24. LABOR RELATIONS.
25
<PAGE>
(a) Seller is not a party to any collective bargaining agreement
related to the Mass-Market Cigar Business, and none of the Mass-Market Employees
is a party to any collective bargaining agreement.
(b) Seller, with respect to the Mass-Market Employees, is in
compliance in all material respects with all Applicable Laws regarding
employment practices, terms and conditions of employment, and wages and hours;
there is no unfair labor practice complaint against Seller pending before the
National Labor Relations Board or any similar labor agency with respect to the
Mass-Market Cigar Business; there is no labor strike, dispute, slowdown,
representation question or stoppage pending or threatened against or involving
the Mass-Market Cigar Business; there exists no grievance which may have a
Material Adverse Effect; no arbitration proceeding arising out of or under any
collective bargaining agreement is pending or threatened with respect to the
Mass-Market Cigar Business; and since December 31, 1994, Seller has not, with
respect to any Mass-Market Employees, experienced any strike, material
interruption, or material work slowdown by its labor force due to employment
problems of any nature.
4.25. YEAR 2000. Seller has reviewed its operations and those of any
third party with which the Seller has a material relationship to evaluate the
extent to which the Mass-Market Cigar Business will be affected by the Year 2000
Problem. Seller does not anticipate incurring operating expenses or costs
material to the financial position or results of operations of the Mass-Market
Cigar Business in connection with the actions that the Seller currently believes
are necessary to address the Year 2000 Problem with respect to the Mass-Market
Cigar Business. As a result of the aforementioned review, Seller has no reason
to believe, and does not believe, that the Year 2000 Problem will have a
Material Adverse Effect. The "Year 2000 Problem" as used herein means any risk
that computer hardware or software used in the receipt, transmission,
processing, manipulation, storage, retrieval, retransmission or other
utilization of data or in the operation of mechanical or electrical systems of
any kind will not, in the case of dates or time periods occurring on and after
December 31, 1999, function at least as effectively as in the case of dates or
time periods occurring prior to January 1, 2000.
4.26. BOOKS AND RECORDS. All of the Mass-Market Books and Records,
for all periods beginning on November 27, 1995 and ending on the Closing Date,
have been prepared and maintained in all respects in accordance with sound
business practices, when taken in conjunction with Seller's business as a whole.
4.27. INSURANCE. Seller maintains policies of insurance which insure
the Mass-Market Assets and the Mass-Market Cigar Business in commercially
reasonable amounts for occurrences normally insured against. Seller carries no
health hazard policy, which, to Seller's Knowledge, is consistent with industry
practice. There are no claims by Seller pending or, to the Knowledge of Seller,
threatened with respect to the Mass-Market Assets or the Mass-Market Cigar
Business under said policies or disputes with underwriters, and all premiums due
and payable have been paid and all such policies are in full force and effect in
accordance with their respective terms.
26
<PAGE>
4.28. PERFORMANCE BONDS AND LETTERS OF CREDIT. Section 4.28 of the
Disclosure Schedule sets forth all letters of credit and performance bonds to
which Seller is a party or under which Seller is obligated relating to either
the Mass Market Cigar Business or the Mass-Market Assets.
4.29. SUFFICIENCY OF ASSETS. The Mass-Market Assets, together with
the services and other matters the subject of the Interim Services Agreement,
the Distribution Agreement and the Supply Agreement, constitute all assets which
are necessary to conduct the Mass-Market Cigar Business on and immediately after
the Closing Date in the same manner and to the extent conducted by the Seller on
the date hereof.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
To induce Seller to enter into this Agreement, Purchaser hereby
makes the following representations and warranties to Seller.
5.1. ORGANIZATION OF PURCHASER. Purchaser is duly incorporated and
validly existing as a corporation in good standing under the laws of the State
of Delaware and has full corporate power to conduct its business as it is
presently being conducted and to own and lease its properties.
5.2. AUTHORIZATION. Purchaser has the corporate power to execute and
deliver this Agreement and each of the Ancillary Agreements to which it is a
party and to consummate the transactions contemplated hereby and thereby, and
all requisite corporate action has been taken by Purchaser to authorize the
execution, delivery and performance of this Agreement and each of the Ancillary
Agreements to which it is a party. This Agreement has been duly executed and
delivered by Purchaser and, assuming the due execution of this Agreement by
Seller, is a valid and binding obligation of Purchaser, enforceable against
Purchaser in accordance with its terms, except as the foregoing may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to or affecting the rights and remedies of
creditors, general principles of equity (whether considered in an action at law
or in equity) and the discretion of the court before which any proceeding
therefor may be brought.
5.3. CONSENTS AND APPROVALS. No consent, approval or authorization
of any governmental or regulatory authority or any other Person is required to
be made or obtained by Purchaser or any of its Affiliates in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby other than the filings required under the
HSR Act and by the Bureau of Alcohol, Tobacco and Firearms.
5.4. NO BROKERS. Neither Purchaser nor any of its Affiliates has
entered into or will enter into any agreement, arrangement or understanding with
any Person which will result in the obligation of Purchaser or Seller to pay any
finder's fee, brokerage commission or similar payment in connection with the
transactions contemplated hereby.
27
<PAGE>
5.5. NO CONFLICT OR VIOLATION. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby will
result in (a) a violation of or a conflict with any provision of the charter or
bylaws of Purchaser, (b) a breach of, or a default under, any term or provision
of any contract or agreement to which Purchaser is a party, which breach or
default would prevent Purchaser from consummating the transactions contemplated
hereby or (c) a violation by Purchaser of any statute, rule, regulation,
ordinance, code, order, judgment, writ, injunction, decree or award, which
violation would prevent Purchaser from consummating the transactions
contemplated hereby.
5.6. FINANCING ARRANGEMENTS. Purchaser has and will have as of
immediately prior to the Closing Date on hand or committed cash and cash
equivalent assets of not less than the sum of $200,000,000.
ARTICLE VI.
ACTIONS BY SELLER AND PURCHASER
-------------------------------
PRIOR TO THE CLOSING
--------------------
6.1. MAINTENANCE OF BUSINESS. Seller covenants that, prior to the
Closing, except as may be agreed to in writing by Seller and Purchaser, it shall
conduct the Mass-Market Cigar Business, in all material respects, according to
its ordinary and usual course of business and consistent with Seller's prior
practices. Without limiting the generality of the foregoing, Seller shall: (a)
maintain in effect and fully perform all of its obligations under the Contracts
and the Dothan IRB Lease and the Dominican Republic Leases in accordance with
the terms thereof; (b) give prompt written notice to Purchaser of any notice
given or received by Seller of any default or breach or alleged default or
breach under any of the Material Contracts, the Dothan IRB Lease or the
Dominican Republic Leases or the Personal Property Leases and of any claim or
threat of which Seller may have Knowledge to commence any action, suit,
proceeding, or investigation against Seller with respect to the Mass-Market
Cigar Business; (c) maintain the Mass-Market Facilities in the same condition
and repair as on the date of this Agreement, ordinary wear and tear excepted;
(d) protect and maintain in effect the Mass-Market Intellectual Property; (e)
comply, in all material respects, with all Applicable Laws in the conduct of the
Mass-Market Cigar Business; (f) preserve the business of the Mass-Market Cigar
Business; (g) maintain in full force and effect all insurance policies currently
in effect with respect to the Mass-Market Assets, or policies that provide
coverage that is comparable to such insurance policies; and (h) promptly advise
Purchaser of any breach of any representation or warranty, covenant, condition
or obligation of Seller hereunder.
6.2. CERTAIN PROHIBITED TRANSACTIONS. Seller covenants that except
as may be required by contract or law, and except as contemplated by Section 6.2
of the Disclosure Schedule, it shall use its reasonable best efforts not to,
without the prior written approval of Purchaser:
28
<PAGE>
(a) mortgage, pledge or allow any Encumbrance on any Mass-Market
Assets;
(b) create, incur, assume or guarantee any Indebtedness for Borrowed
Money that would be a Mass-Market Liability;
(c) make any change in its accounting methods or in the manner of
keeping the Mass-Market Books and Records (except as may be required by GAAP or
as requested by Purchaser);
(d) settle pending or threatened litigation relating to the
Mass-Market Cigar Business;
(e) cancel any Indebtedness for Borrowed Money relating to the
Mass-Market Cigar Business owed to it;
(f) except in the ordinary course of business, sell, assign or
transfer any of the Mass-Market Assets;
(g) make any capital expenditure or incur any commitment or
liability therefor, individually or in the aggregate, involving payments in
excess of $50,000 on behalf of the Mass-Market Cigar Business;
(h) enter into or terminate any Contract, lease, commitment,
transaction or understanding of any kind with respect to the Mass-Market Cigar
Business outside the ordinary course of business or amend, modify or agree to
amend or modify any Material Contract (including, without limitation, the
Personal Property Leases, the Dothan IRB Lease and the Dominican Republic
Leases) outside the ordinary course of business;
(i) except as set forth on the Disclosure Schedule, (i) pay or agree
to any employee welfare, pension, retirement, profit-sharing or similar payment
or arrangement with any Mass-Market Employee; (ii) enter into any new
employment, management or consulting agreement with any Mass-Market Employee;
(j) voluntarily take any action which would render any
representation and warranty of Seller contained in Section 4.7 hereof inaccurate
at any time between the date hereof and the Closing Date, including as of the
Closing Date; or
(k) enter into any agreement or commitment to do any of the actions
set forth in (a) - (j) above.
6.3. ACCESS. Prior to the Closing, Seller shall provide Purchaser
with reasonable access during normal business hours to the Mass-Market Assets
and to Seller's employees, officers, agents and consultants, books and records
(including property or sales Tax Returns), compensation and employee benefit
29
<PAGE>
plan documents, and such other information relating to the Mass-Market Cigar
Business and the Mass-Market Employees subject to its existing policies with
respect to providing information about its employees to other potential
employers, as Purchaser may reasonably request. Seller shall provide Purchaser
with, or allow Purchaser to make, copies, at Purchaser's expense, of any
requested materials that are relevant to the Mass-Market Cigar Business and do
not contain any confidential or proprietary information about the Retained
Business or otherwise violate any internal procedures of the Retained Business.
Seller shall authorize the independent accountants of Seller to allow the
independent accountants of Purchaser to review the work papers and other
accounting records of Seller's accountants prepared in connection with the
preparation of the Closing Date Statement of Net Assets. Purchaser shall use its
reasonable efforts to minimize any disruption to Seller's business in connection
with the conduct of the process contemplated herein, and Seller shall receive
reasonable advance notice of and shall have the right to participate in, any
discussions Purchaser might have with any federal or state regulatory
authorities about Seller or the Mass-Market Cigar Business. In the event that,
as a result of any such investigation, Purchaser discovers any fact that makes
untrue any representation or warranty of Seller hereunder, (a) Purchaser shall
immediately provide Seller with written notice of such fact and (b) Seller's
representations and warranties made hereunder or in any certificate delivered
pursuant to this Agreement shall, for purposes of each provision of this
Agreement (other than (y) the conditions set forth in Article VIII hereof to the
obligations of Purchaser to consummate the transactions contemplated hereby and
(z) the right of Purchaser to terminate this Agreement under Section 12.2
hereof) be deemed modified by such fact or facts as if the same had been fully
disclosed on the Disclosure Schedule on the date hereof, whether or not Seller
is advised of such fact or facts.
6.4. CONSENTS AND BEST EFFORTS. As soon as practicable, and in any
event not later than five Business Days after execution and delivery of this
Agreement, Purchaser and Seller shall make all filings required under the HSR
Act. In addition, Purchaser and Seller will each furnish all information as may
be required by any state regulatory agency properly asserting jurisdiction or by
the Federal Trade Commission and the United States Department of Justice under
the HSR Act in order that the requisite approvals for the transactions
contemplated hereby be obtained or to cause any applicable waiting periods to
expire. Seller shall use its commercially reasonable efforts to obtain prior to
the Closing Date the Required Consents, and any other consents, approvals,
authorizations and agreements of and to give all notices and make all other
filings with, any third parties, including Governmental Authorities, necessary
to authorize, permit or approve the consummation of the transactions
contemplated hereby or to continue in effect and to assure that the Mass-Market
Cigar Business and Purchaser shall be entitled to all of the benefits of the
Material Contracts, including without limitation: (i) as required, the consent
of the landlords or lessors of the Leased Real Property and the lessors of the
Leased Personal Property to the assignment to, and assumption by, Purchaser of
the Dothan IRB Lease, the Dominican Republic Leases and the Personal Property
Leases; (ii) as required, the consent of third parties to the assignment to, and
assumption by, Purchaser of the Material Contracts; (iii) the consent of any
governmental, public or regulatory authority to the assignment to Purchaser of
the Permits. Purchaser and Seller shall cooperate with each other with respect
thereto. In addition, subject to the terms and conditions herein provided, each
of the parties hereto covenants and agrees to use its reasonable best efforts to
30
<PAGE>
take, or cause to be taken, all action or do, or cause to be done, all things
necessary, proper or appropriate to consummate and make effective the
transactions contemplated hereby and to cause the fulfillment of the parties'
obligations hereunder.
6.5. NO MERGERS, CONSOLIDATIONS, SALE OF STOCK, ETC.; NO OTHER
NEGOTIATIONS. In consideration of the time and expense that will be incurred by
Purchaser in connection with the transaction contemplated by this Agreement,
Seller agrees that following the execution of this Agreement or until
termination of this Agreement pursuant to Section 12.2 hereof, it shall not, nor
shall it permit any of its Subsidiaries or Affiliates to, nor shall it authorize
or permit any officer, director or employee of, or any investment banker,
attorney, accountant or other advisor or representative of, Seller or any of its
Subsidiaries or Affiliates to, directly or indirectly, (i) solicit, initiate or
encourage the submission of any offer or proposal involving a Proposed
Acquisition Transaction (as hereinafter defined) or (ii) participate in any
discussions or negotiations regarding, or furnish to any person any information
with respect to, or agree to or endorse, or take any action to facilitate, any
offer or proposal involving a Proposed Acquisition Transaction or any inquiries
or the making of any proposal that constitutes, or may be reasonably expected to
lead to, any Proposed Acquisition Transaction. Seller shall as promptly as
practicable advise Purchaser of the receipt by it (or any of the other entities
of persons referred to above) after the date hereof of any offer or proposal
involving a Proposed Acquisition Transaction, or any inquiry which could lead to
any offer or proposal involving a Proposed Acquisition Transaction, the material
terms and conditions of such offer, proposal or inquiry and, in the case of an
offer or proposal, the identity of the person making any such offer or proposal.
The term "Proposed Acquisition Transaction" as used herein means any proposed
(i) purchase of all or any portion of all the assets of the Mass-Market Cigar
Business; (ii) sale or exchange of Seller's capital stock, (iii) merger of
Seller with any Person or (iv) licensing of the Mass-Market Trademarks to any
Person.
6.6. SUPPLEMENT TO SCHEDULES. After the date hereof, Seller shall,
from time to time prior to or at the Closing, by notice to Purchaser, supplement
or amend any Section of the Disclosure Schedule, including without limitation,
one or more supplements or amendments thereto, to correct any matter which would
constitute a breach of any representation or warranty set forth herein. Such
supplemental or amended Schedule shall not be deemed to cure any breach of such
representation or warranty for the purposes of Article VIII hereof. If, however,
the Closing occurs, such supplemental or amended Schedule shall be effective to
cure and correct for all purposes any breach of any representation or warranty
that would have existed by reason of Seller not having made such supplement or
amendment.
ARTICLE VII.
CONDITIONS TO THE OBLIGATIONS OF SELLER
---------------------------------------
31
<PAGE>
The obligations of Seller to consummate the transactions
contemplated hereby on the Closing Date are subject, in the discretion of
Seller, to the satisfaction or waiver, on or prior to the Closing Date, of each
of the following conditions:
7.1. REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations
and warranties of Purchaser contained in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of the
Closing Date as if such representations and warranties were made at and as of
the Closing Date, and Purchaser shall have performed in all material respects
all agreements and covenants required hereby to be performed by them prior to or
at the Closing Date. There shall be delivered to Seller a certificate (signed by
the President or a Vice President on behalf of Purchaser) to the foregoing
effect.
7.2. CONSENTS. All (a) Required Consents and (b) other consents,
approvals and waivers from governmental authorities and other Persons necessary
to permit Seller to consummate the transactions contemplated hereby or necessary
to avoid a breach of, default under or termination of any Mass-Market Liability,
Mass-Market Contract or Permit shall have been obtained, unless the failure to
obtain any such consent, approval or waiver would not have a Material Adverse
Effect.
7.3. NO GOVERNMENTAL OR OTHER PROCEEDING OR LITIGATION. No suit,
action, investigation, inquiry or other proceeding by any governmental authority
or other Person shall be pending or threatened which (i) questions the validity
or legality of the transactions contemplated hereby, (ii) could reasonably be
expected to have a material adverse effect on the financial condition or results
of operation of Seller if the transactions contemplated hereunder are
consummated or (iii) could reasonably be expected to cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation.
7.4. OPINION OF COUNSEL. Purchaser shall have delivered to Seller an
opinion or opinions of counsel to Purchaser, reasonably acceptable to Seller,
substantially in the form of Exhibit M hereto.
7.5. CERTIFICATES. Purchaser shall have delivered to Seller such
certificates of Purchaser signed by its officers to evidence compliance with the
conditions set forth in this Article VII as may be reasonably requested by
Seller.
7.6. RESERVED.
7.7. HSR ACT. The applicable waiting period, including any extension
thereof, under the HSR Act shall have expired or otherwise been terminated.
7.8. ASSUMPTION DOCUMENT. Purchaser shall have delivered the
Assumption Document required by Section 2.5(b) to be delivered by Purchaser.
7.9. EXECUTION OF ANCILLARY AGREEMENTS. Each of the Ancillary
Agreements shall have been duly executed and delivered by each party thereto
other than Seller.
32
<PAGE>
ARTICLE VIII.
CONDITIONS TO THE OBLIGATIONS
-----------------------------
OF PURCHASER
------------
The obligations of Purchaser to consummate the transactions
contemplated hereby are subject, in the discretion of Purchaser, to the
satisfaction or waiver, on or prior to the Closing Date, of each of the
following conditions:
8.1. REPRESENTATIONS, WARRANTIES AND COVENANTS. Except as they may
have been modified by actions or other changes permitted under Article VI hereof
(other than Section 6.3 hereof), (a) all representations and warranties of
Seller contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date as if such
representations and warranties were made at and as of the Closing Date and (b)
Seller shall have performed in all material respects all agreements and
covenants required hereby to be performed by them prior to or at the Closing
Date. There shall be delivered to Purchaser certificates (signed by the
Chairman, Vice Chairman, President or a Vice President on behalf of Seller) to
the foregoing effect.
8.2. CONSENTS. All (a) Required Consents and (b) other consents,
approvals and waivers from governmental authorities and other Persons necessary
to permit Purchaser to consummate the transactions contemplated hereby or
necessary to avoid a breach of, default under or termination of any Mass-Market
Liability, Mass-Market Contract or Permit shall have been obtained, unless the
failure to obtain any such consent, approval or waiver would not have a Material
Adverse Effect.
8.3. NO GOVERNMENTAL OR OTHER PROCEEDING OR LITIGATION. No suit,
action, investigation, inquiry or other proceeding by any governmental authority
or other Person shall be pending or threatened which (i) questions the validity
or legality of the transactions contemplated hereby, (ii) could reasonably be
expected to have a Material Adverse Effect or a material adverse effect on
Purchaser if the transactions contemplated by this Agreement are consummated, or
(iii) could reasonably be expected to cause any of the transactions contemplated
by this Agreement to be rescinded following consummation.
8.4. OPINION OF COUNSEL. Seller shall have delivered to Purchaser an
opinion or opinions of counsel for Seller, reasonably acceptable to Purchaser,
substantially in the form of Exhibit N attached hereto.
8.5. CERTIFICATES. Seller shall have delivered to Purchaser such
certificates of Seller signed by its officers to evidence compliance with the
conditions set forth in this Article VIII as may be reasonably requested by
Purchaser.
8.6. HSR ACT. The applicable waiting period, including any extension
thereof, under the HSR Act shall have expired or otherwise been terminated.
33
<PAGE>
8.7. NO MATERIAL ADVERSE CHANGE. There shall have been no change in
the condition of the Mass-Market Assets or the Mass-Market Liabilities or the
financial condition or results of operations of the Mass-Market Cigar Business,
except for (i) changes in the ordinary course of business and consistent with
past practice, (ii) changes contemplated hereby or relating to the transactions
contemplated hereby or (iii) changes which have not had and could not reasonably
be expected to have a Material Adverse Effect.
8.8. EXECUTION OF ANCILLARY AGREEMENTS. Each of the Ancillary
Agreements shall have been duly executed and delivered by each party thereto
other than Purchaser.
8.9. CONVEYANCING DOCUMENTS. Seller shall have delivered the
Conveyancing Instruments required by Section 2.5(a) to be delivered by Seller.
8.10. AFFIDAVIT. Seller shall have delivered to Purchaser an
affidavit stating that Seller is not a foreign person pursuant to Section
1445(b)(2) of the Code.
8.11. ENVIRONMENTAL DUE DILIGENCE. Purchaser shall have received a
final "Phase I" environmental report (or reports) with respect to all of the
Dothan Facilities (the "DOTHAN ENVIRONMENTAL REPORT"). The Dothan Environmental
Report shall not contain any information with respect to Environmental
Conditions at the Dothan Facilities that could reasonably be expected to result
in a material Mass-Market Liability, after giving effect to remedial action that
either (a) is taken by Seller prior to the Closing Date or (b) Seller, with the
consent of Purchaser (which consent shall not be unreasonably withheld), agrees
to commence and complete within 12 months after the Closing Date at Seller's
sole cost and expense.
ARTICLE IX.
ACTIONS BY SELLER AND BUYER AFTER THE CLOSING
---------------------------------------------
9.1. BOOKS AND RECORDS. Seller and Purchaser agree that so long as
any Mass-Market Books and Records or Seller Books and Records, to the extent
that they pertain to the operations of the Mass-Market Cigar Business prior to
the Closing Date, remain in existence and available, each party (at its expense)
shall have the right to inspect and to make copies of the same upon reasonable
written notice at any time during business hours for any proper purpose.
9.2. FURTHER ASSURANCES. On and after the Closing Date, Seller and
Purchaser will take all appropriate action and execute all documents,
instruments or conveyances of any kind which may be reasonably necessary or
advisable to carry out any of the provisions hereof, including without
limitation, putting Purchaser in possession and operating control of the
Mass-Market Cigar Business.
9.3. NONSOLICITATION.
34
<PAGE>
(a) NONSOLICITATION OF EMPLOYEES OF PURCHASER. If the transactions
contemplated hereby are consummated, neither Seller, any of its Subsidiaries or
any of their respective Affiliates shall directly or indirectly, for themselves
or on behalf of any other individual or entity, induce or attempt to induce any
of the Mass-Market Employees or any other employee of Purchaser, any of its
Subsidiaries or any of their respective Affiliates to leave his or her
employment with the Purchaser, any of its Subsidiaries, or any of their
respective Affiliates at any time within five (5) years from the Closing Date.
If the transactions contemplated hereby are not consummated, neither Seller, any
of its Subsidiaries or any of their respective Affiliates shall, directly or
indirectly, for itself or himself or on behalf of any other individual or
entity, induce or attempt to induce any employee of Purchaser, any of their
respective Subsidiaries or any of their respective Affiliates to leave his or
her employment with Purchaser, such Subsidiary or such Affiliate, at any time
within three (3) years from the date of written notice of termination of this
Agreement.
(b) NONSOLICITATION OF EMPLOYEES OF SELLER. If the transactions
contemplated hereby are consummated, neither Purchaser, any of its Subsidiaries
or any of their respective Affiliates shall directly or indirectly, for
themselves or on behalf of any other individual or entity, induce or attempt to
induce any employee of Seller, any of its Subsidiaries or any of their
respective Affiliates to leave his or her employment with Seller, any of its
Subsidiaries or any of their respective Affiliates, at any time within five (5)
years from the Closing Date; provided that the foregoing restriction shall not
apply with respect to the Mass-Market Employees. If the transactions
contemplated hereby are not consummated, neither Purchaser, any of its
Subsidiaries or any of their respective Affiliates shall, directly or
indirectly, for itself or himself or on behalf of any other individual or
entity, induce or attempt to induce any employee of Seller, any of their
respective Subsidiaries or any of their respective Affiliates to leave his or
her employment with Seller, such Subsidiary or such Affiliate, at any time
within three (3) years from the date of written notice of termination of this
Agreement.
9.4. WARN ACT. If a plant closing or a mass layoff occurs or is
deemed to occur with respect to the Mass-Market Cigar Business in connection
with the transactions contemplated in this Agreement or at any time after the
Closing, Purchaser shall be solely responsible for providing all notices
required under the Work Adjustment and Retraining Notification Act, 29 U.S.C.
ss.2109 eT Seq. or the regulations promulgated thereunder (the "WARN Act") and
for taking all remedial measures, including without limitation, the payment of
all amounts, penalties, liabilities, costs and expenses if such notices are not
provided.
9.5. EMPLOYEES AND EMPLOYEE BENEFITS.
(a) Effective as of the Closing Date, Purchaser will, in connection
with its acquisition of the Mass-Market Cigar Business, offer employment to each
Mass-Market Employee in the same or substantially comparable position and at the
same or substantially comparable total compensation (including base salary and
bonus but excluding stock-based compensation) as in effect immediately prior to
the Closing. All such individuals who accept the Purchaser's offer of employment
and who become employees of the Purchaser are referred to herein as the
"Transferred Employees." Such Transferred Employees shall become employees of
35
<PAGE>
Purchaser effective at 12:01 a.m. Eastern Standard Time on the Closing Date (or
the date as of which the Transferred Employee is first able to work, if later)
or such later date as may be mutually agreed upon by any Transferred Employee
and Purchaser (such date of hire by Purchaser referred to herein as the "Hire
Date").
(b) Seller (or its applicable Plan or Program) shall be and remain
liable and responsible for any and all liabilities or payments arising prior to
or in connection with the Closing in respect to the employment by Seller of the
Mass-Market Employees or the termination of that employment, including but not
limited to (i) all claims relating to workers' compensation whether incurred or
made by the Mass-Market Employees arising out of events or circumstances which
occurred prior to or in connection with the Closing; (ii) all health expenses
incurred by the Mass-Market Employees prior to the Hire Date, whether or not
claims for such expenses have been filed prior to the Hire Date, so long as such
claims are covered by and filed in accordance with the claims period of the
applicable Plan or Program of Seller; (iii) any bonus or incentive plans
maintained by Seller; (iv) any severance payable to any Mass-Market Employee by
reason of the termination of his or her employment with Seller prior to or in
connection with the Closing payable under any contract, policy, Plan or Program
of Seller; (v) any severance payable to any Transferred Employee who is not
employed by the Purchaser as of the 90th day following the Closing Date payable
under any contract, policy, Plan or Program of Seller which covered such
Transferred Employee immediately prior to the Closing Date; (vi) any vacation
accrual which is or becomes payable upon the termination of employment with
Seller (provided that Purchaser shall permit each Transferred Employee to use
any vacation time after the Closing Date that has accrued through the Closing
Date); (vii) any benefits payable to the Mass-Market Employees under any of
Seller's Plans and Programs; (viii) any salary, wages or other compensation
payable to the Mass-Market Employees for any period of employment with Seller
prior to the Hire Date; and (ix) any health care continuation obligation under
applicable law or contract where the qualifying event occurs prior to or in
connection with the Closing.
(c) Purchaser shall not assume, and Seller shall retain all
obligations to fund or otherwise shall provide all benefits in respect of or
payable under, Seller's Plans and Programs. Except as provided in subsection
(g), no assets or liabilities of any of Seller's Plans and Programs shall be
transferred from such Plans and Programs to any plan maintained or established
by Purchaser.
(d) Purchaser shall take all action necessary and appropriate to
provide that Transferred Employees shall, effective as of the Hire Date (but
subject to subsections (e) and (f)), at the option of Purchaser which may be
applied on a plan or program by plan or program basis and/or separately to
different groups of employees and subject to changes required by applicable law,
be entitled to either:
(i) participate in plans or programs established or amended by
Purchaser that provide coverages and benefits which are not less favorable
than the coverages and benefits provided by the Plans and Programs of
Seller in which such Transferred Employees participated immediately prior
to the Closing Date, or
36
<PAGE>
(ii) participate in Purchaser's then existing plans and
programs on substantially the same basis as similarly situated employees
of Purchaser (taking into account all applicable factors, including but
not limited to position, location of employment, employment
classification, age, length of service, pay, part time or full time
status, and the like, as well as changes made in such plans and programs
in the future);
provided, however, that in no event shall the coverages and benefits offered by
the Purchaser to the Transferred Employees who are full time employees be, in
the aggregate, less favorable than coverages and benefits of the Seller's Plans
and Programs in which they participated immediately prior to the Closing Date,
and provided, further, that Purchaser shall not be obligated to provide
severance benefits for any Transferred Employee who ceases to be employed by
Purchaser before the 90th day following the Closing Date. Subject to the
preceding sentence, if a Transferred Employee did not participate in a plan or
program of the Seller immediately prior to the Closing Date of the same or
substantially similar type as a particular plan or program maintained by the
Purchaser, then such Purchaser plan or program shall not be required to cover
the Transferred Employee. The requirements of this subsection (d) shall expire
on December 31, 2000.
(e) Subject to restrictions and limitations imposed by applicable
law or by insurance companies providing plan benefits or stop loss insurance
with respect to a plan, Purchaser shall (i) make participation in employee
welfare benefit plans available to Transferred Employees on, or as soon as
practicable following, the Hire Date; provided, however, that Purchaser agrees
to use its best efforts to make such participation in its employee welfare
benefit plans available to Transferred Employees effective on the Hire Date,
(ii) cause its employee welfare benefit plans and programs to provide coverage
to the Transferred Employees without regard to any waiting period, evidence and
requirement of insurability, preexisting condition, actively at work requirement
or exclusion or limitation (except to the extent and in the manner any such
waiting period, evidence and requirement of insurability, preexisting condition,
actively at work requirement or exclusion or limitation applies immediately
prior to the Closing, provided, however, that Purchaser agrees to use its best
efforts to make coverage in its employee welfare benefit plans available on such
basis to Transferred Employees, and (iii) make participation in employee pension
benefit plans available to Transferred Employees no later than 90 days following
the Closing Date.
(f) Subject to restrictions and limitations imposed by applicable
law, Purchaser agrees (i) for purposes of determining eligibility to become a
participant in its employee pension benefit plans and programs, to treat a
Transferred Employee's service with Seller or any of its predecessors or
affiliates since last date of hire through the Hire Date as service with
Purchaser for any Transferred Employee who is employed by Purchaser on the 90th
day following the Closing Date, (ii) for purposes of determining vesting in its
employee pension benefit plans and programs, to treat a Transferred Employee's
service with Seller or any of its predecessors or affiliates since last date of
hire through the Hire Date as service with Purchaser for any Transferred
Employee who is employed by Purchaser on the first anniversary of the Closing
Date, (iii) for purposes of determining eligibility to become a participant in
its employee welfare benefit plans and programs, to treat a Transferred
37
<PAGE>
Employee's service with Seller or any of its predecessors or affiliates since
last date of hire through the Hire Date as service with Purchaser, and (iv) for
purposes of vacations, seniority and the like, to treat a Transferred Employee's
service with Seller or any of its predecessors or affiliates since last date of
hire through the Hire Date as service with Purchaser; provided, however, that no
past service credit shall be required for any post-retirement health, life or
other welfare benefits.
(g) If Seller and Purchaser mutually agree, existing balances of
Transferred Employees in Seller's health care spending account may be
transferred to a health care spending account maintained by Purchaser at or
after the Closing Date.
(h) Seller agrees to provide Purchaser with such records as
Purchaser may reasonably request regarding service of and participation by
employees prior to the Hire Date in employee benefit plans and programs
maintained or participated in by Seller. Seller agrees to provide Purchaser with
access to (i) Mass-Market Employees at least 20 days prior to the Closing Date
for purposes of Purchaser's explaining to, and receiving elections from,
Transferred Employees regarding its welfare benefits and (ii) to the insurance
companies and other service providers for Seller's Plans and Programs providing
welfare benefits at least 30 days prior to the Closing Date. If such access is
not provided, Seller agrees that such inaccessibility will affect Purchaser's
best efforts to provide welfare benefits effective as of the Closing Date.
(i) [intentionally omitted]
(j) Notwithstanding any other provision of this Section 9.5, the
parties understand and agree that (i) in the event that any Transferred
Employees become represented by a collective bargaining agent prior to the
Closing Date, provision of benefits to such Transferred Employees shall be
determined pursuant to collective bargaining and (ii) in the event that any
Transferred Employees become covered by a collective bargaining agreement on or
following the Closing Date, provision of benefits to such Transferred Employees
shall be determined pursuant to the terms of the collective bargaining
agreement.
(k) No provision in this Agreement shall create any third party
beneficiary rights in any Mass-Market Employee or Transferred Employee (or any
beneficiaries, dependents, or collective bargaining representatives thereof),
with respect to the terms and conditions of employment of any such Mass-Market
Employee or Transferred Employee, including, but not limited to, the type or
level of compensation or benefits provided by Purchaser or Seller.
9.6. COLLECTION OF RECEIVABLES. Purchaser is not purchasing accounts
receivable of Seller as such exist prior to the Closing Date. Such accounts
receivable and all risks of collection thereof shall remain the responsibility
of Seller.
38
<PAGE>
ARTICLE X.
RISK OF LOSS
------------
From the date hereof through the Closing Date, all risk of loss or
damage to the Mass-Market Assets shall be borne by Seller, and thereafter shall
be borne by Purchaser. If any portion of the Mass-Market Assets is destroyed or
damaged by fire or other cause on or prior to the Closing Date, other than use,
wear or loss in the ordinary course of business, Seller shall give written
notice to Purchaser as soon as practicable after, but in any event within five
(5) calendar days of, discovery of such damage or destruction, the amount of
insurance, if any, covering such Mass-Market Assets, and the amount, if any,
which the Seller is otherwise entitled to receive as a consequence. Prior to the
Closing, Purchaser shall have the option, which shall be exercised by written
notice to Seller within ten (10) calendar days after receipt of Seller's notice
or if there are not ten (10) calendar days prior to the Closing Date, as soon as
practicable prior to the Closing Date, of (a) accepting such Mass-Market Assets
in their destroyed or damaged condition in which event Purchaser shall be
entitled to the proceeds of any insurance or other proceeds payable with respect
to such loss and the full Purchase Price shall be paid, (b) excluding such
Mass-Market Assets from this Agreement, in which event the Purchase Price shall
be reduced by the reasonable value allocated to such Mass-Market Assets, as
mutually agreed between the parties or (c) if such loss has resulted in a
Material Adverse Effect, terminating this Agreement in accordance with Section
12.2. If Purchaser accepts such Mass-Market Assets, then after the Closing, any
insurance or other proceeds shall belong, and shall be assigned to, Purchaser;
otherwise, such insurance proceeds shall belong to Seller.
ARTICLE XI.
INDEMNIFICATION; SURVIVAL OF
----------------------------
REPRESENTATIONS, ETC.
---------------------
11.1. SURVIVAL OF REPRESENTATIONS, ETC. The covenants,
representations and warranties contained herein shall survive the Closing Date
(unless the party for whose benefit any such representation or warranty was made
had Knowledge of the inaccuracy of such representation or the breach of such
warranty on the Closing Date, whether in the case of Purchaser, as a result of
the exercise of Purchaser's rights under Section 6.3 or otherwise) until, and
claims based upon or arising out of such representations and warranties, as well
as any claims based upon or arising out of any covenants and agreements herein
or made hereunder, may be asserted at any time before, 5:00 p.m. Eastern
Standard Time on the first anniversary of the Closing Date, at which time, such
covenants, agreements, representations and warranties shall expire and
terminate, provided, however, that (i) the representations and warranties of
Seller respecting Taxes set forth in Section 4.18 shall survive the Closing for
the applicable statute of limitations; (ii) the representations and warranties
of Seller respecting environmental matters set forth in Section 4.21 shall
survive the Closing until 5:00 p.m. Eastern Standard Time on the fifth
anniversary of the Closing Date, at which time such representations and
warranties shall expire and terminate; (iii) the representations and warranties
39
<PAGE>
of Seller to the extent they apply solely to title to the Mass-Market Assets set
forth in Sections 4.6, 4.19, 4.20 and 4.22, and the obligation of Seller to
indemnify Purchaser for any loss arising out of any Retained Liabilities
pursuant to Section 11.2(a)(i), shall survive the Closing without limitation as
to time; (iv) the obligation of Purchaser to indemnify Seller for any loss
arising out of the Mass-Market Liabilities pursuant to Section 11.2(a)(ii),
shall survive the Closing without limitation as to time and (v) the covenants
and agreements of Seller or Purchaser under this Agreement to be performed after
Closing Date shall survive the Closing, to the extent specifically provided
herein (the "SURVIVAL PERIOD"). The termination of the representations and
warranties provided herein shall not affect the rights of a party in respect of
any claim made by such party in a writing received by the other party prior to
the expiration of the applicable survival period provided herein, nor shall it
affect the rights of a party in respect of any claim made by such party at any
time hereafter in respect of any Mass-Market Liabilities or Retained
Liabilities.
11.2. INDEMNIFICATION.
(a) GENERAL.
(i) Subsequent to the Closing Date, Seller shall indemnify
Purchaser, its Affiliates, and each of their respective, partners,
officers, directors, employees, stockholders and agents (the "Purchaser
Indemnified Parties") against, and hold each of the Purchaser Indemnified
Parties harmless from any Losses incurred by any such Purchaser
Indemnified Party, that are incident to, arise out of, in connection with,
or related to, whether directly or indirectly, (A) the breach of any
warranty, representation, covenant or agreement of Seller contained in
this Agreement, (B) the Retained Liabilities, and (C) the waiver by Seller
and Purchaser of compliance with the Bulk Transfer Laws (except for those
Liabilities with respect to which any Seller Indemnified Party is entitled
to indemnification from Purchaser pursuant to Section 11.2 (a)(ii)(A)).
(ii) Subsequent to the Closing Date, Purchaser shall indemnify
Seller, its Affiliates, and each of their respective partners, officers,
directors, employees, stockholders and agents, as the case may be (the
"Seller Indemnified Parties"), against, and hold each of the Seller
Indemnified Parties harmless from, any Losses incurred by such Seller
Indemnified Party, that are incident to, arise out of, in connection with,
or related to, whether directly or indirectly, (A) the breach of any
warranty, representation, covenant or agreement of Purchaser contained in
this Agreement, and (B) the Mass-Market Liabilities (except for those
Liabilities with respect to which any Purchaser Indemnified Party is
entitled to indemnification from Seller pursuant to Section 11.2
(a)(i)(A).
(b) PROCEDURE FOR CLAIMS. If a claim for Losses (a "Claim") is to be
made by a person entitled to indemnification hereunder, the person claiming such
indemnification (the "Indemnified Party") shall give written notice (a "Claim
Notice") to the indemnifying person (the "Indemnifying Party") as soon as
practicable after the Indemnified Party becomes aware of any fact, condition or
40
<PAGE>
event which may give rise to Losses for which indemnification may be sought
under this Section 11.2. In the case of a Claim involving the assertion of a
claim by a third party (whether pursuant to a lawsuit or other legal action or
otherwise, a "Third-Party Claim"), (A) the Indemnifying Party shall be entitled,
if it so elects, at its own cost, risk and expense, (1) to take control of the
defense and investigation of such Third-Party Claim and (2) to pursue the
defense thereof by appropriate actions or proceedings, including, without
limitation, to employ and engage attorneys of its own choice reasonably
acceptable to the Indemnified Party to handle and defend the same, and (B) the
Indemnifying Party shall be entitled (but not obligated), if it so elects, to
compromise or settle such claim, which compromise or settlement shall be made
only with the written consent of the Indemnified Party, such consent not to be
unreasonably withheld. In the event the Indemnifying Party elects to assume
control of the defense and investigation of such lawsuit or other legal action
in accordance with this Section 11.2(b), the Indemnified Party may, at its own
cost and expense, participate in the investigation, trial and defense of such
Third-Party Claim. If the Indemnifying Party fails to assume the defense of such
Third-Party Claim in accordance with this Section 11.2 within 30 calendar days
after receipt of the Claim Notice, the Indemnified Party against which such
Third-Party Claim has been asserted shall (upon delivering notice to such effect
to the Indemnifying Party) have the right to undertake, at the Indemnifying
Party's cost, risk and expense, the defense, compromise and settlement of such
Third-Party Claim on behalf of and for the account of the Indemnifying Party;
provided that such Third-Party Claim shall not be compromised or settled without
the written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld. In the event the Indemnifying Party assumes the defense
of the claim, the Indemnifying Party shall keep the Indemnified Party reasonably
informed of the progress of any such defense, compromise or settlement, and in
the event the Indemnified Party assumes the defense of the claim, the
Indemnified Party shall keep the Indemnifying Party reasonably informed of the
progress of any such defense, compromise or settlement. The Indemnifying Party
shall be liable for any settlement of any Third-Party Claim effected pursuant to
and in accordance with this Section 11.2 and for any final judgment (subject to
any right of appeal), and the Indemnifying Party agrees to indemnify and hold
harmless each Indemnified Party from and against any and all Damages by reason
of such settlement or judgment.
11.3. THRESHOLD; LIMITATIONS ON LIABILITY.
(a) Except as provided in Section 11.3(e), the Purchaser Indemnified
Parties shall not be entitled to recover for any Losses until such time as the
Losses claimed by the Purchaser Indemnified Parties in the aggregate exceed
$100,000 (the "Loss Threshold"), and then only to the extent of such excess.
(b) Except as provided in Section 11.3(e), the Seller Indemnified
Parties shall not be entitled to recover for any Losses until such time as the
Losses claimed by the Seller Indemnified Parties in the aggregate exceed the
Loss Threshold, and then only to the extent of such excess.
(c) Except as provided in Section 11.3(e), the maximum aggregate
amount of Losses for which the Purchaser Indemnifying Parties shall be liable
pursuant to this Article XI shall be $10,000,000 (the "Indemnification Limit").
41
<PAGE>
(d) Except as provided in Section 11.3(e), the maximum aggregate
amount of Losses for which the Seller Indemnifying Parties shall be liable
pursuant to this Article XI shall be the Indemnification Limit.
(e) The thresholds and limitations set forth in this Section 11.3
shall not apply with respect to any Claim by an Indemnified Party with respect
to: (i) the Retained Liabilities (in the case of a Claim by a Purchaser
Indemnified Party), including Off-Site Environmental Liabilities; (ii) the
Mass-Market Liabilities (in the case of a Claim by a Seller Indemnified Party);
(iii) the breach of any covenant or agreement by any party to be performed after
the Closing; (iv) any criminally fraudulent breach of a representation or
warranty discovered by the non-breaching party after the Closing; (v) the breach
of any representations and warranties of Seller to the extent they apply solely
to title to Mass-market Assets set forth in Sections 4.6, 4.19, 4.20 and 4.22
(in the case of a Claim by a Purchaser Indemnified Party); or (vi) the failure
of a party to comply with the provisions of Section 11.2(b).
11.4. INSURANCE PROCEEDS. To the extent that any Claim is covered by
insurance held by the Indemnified Party, such Indemnified Party shall be
entitled to indemnification pursuant to this Article XI only with respect to the
amount of Losses that are in excess of the cash proceeds received by such
Indemnified Party pursuant to such insurance. If such Indemnified Party receives
such cash insurance proceeds prior to the time such Claim is paid, then the
amount payable by the Indemnifying Party pursuant to such Claim shall be reduced
by the amount of such insurance proceeds. If such Indemnified Party receives
such cash insurance proceeds after such Claim is paid, then upon receipt by the
Indemnified Party of any cash proceeds pursuant to such insurance up to the
amount of the Losses incurred by such Indemnified Party with respect to such
Claim, such Indemnified Party shall repay any portion of such amount which was
previously paid by the Indemnifying Party to the Indemnified Party in
satisfaction of such Claim.
11.5. INDEMNIFICATION AS EXCLUSIVE REMEDY. With respect to any
matter as to which indemnification is provided pursuant to this Article XI, such
indemnification shall be the sole remedy available to the indemnified party.
ARTICLE XII.
MISCELLANEOUS
-------------
12.1. BUDGET AND PROJECTIONS. Purchaser acknowledges that no
representations or warranties have been made by Seller, and Purchaser has not
relied upon any statements made by Seller, with respect to projections or the
likelihood of projected results being achieved.
12.2. TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby abandoned (a) by mutual agreement of Seller and
Purchaser, (b) by either Seller or Purchaser if the conditions to such parties'
obligations set forth in Articles VII and VIII, as the case may be, have not
been satisfied (unless waived by the party entitled to the benefit thereof) and
42
<PAGE>
the Closing has not occurred on or before June 30, 1999, without liability of
either party hereto or (c) by Purchaser at any time following the occurrence of
an event described in Article X(c); provided, however, that no party shall be
released from liability hereunder if this Agreement is terminated and the
transactions abandoned by reason of the failure of such party to have performed
its obligations hereunder. In the event that a condition precedent to a party's
obligations is not satisfied, nothing contained herein shall be deemed to
require any party to terminate this Agreement, rather than to waive such
condition precedent and proceed with the transactions contemplated hereby. The
Confidentiality Agreements shall survive any termination of this Agreement.
12.3. ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by Seller without the prior written
consent of Purchaser, or by Purchaser without the prior written consent of
Seller except that Purchaser may assign its rights and obligations to any direct
or indirect wholly-owned Subsidiary of Swedish Match AB; provided that such
assignee shall agree in writing to be bound by the terms and conditions
applicable to Purchaser as set forth in this Agreement; and provided further,
that following any such assignment Purchaser shall remain liable, and no such
assignment shall relieve Purchaser from its obligations, under this Agreement.
Subject to the foregoing, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns, and
no other Person shall have any right, benefit or obligation hereunder.
12.4. BULK TRANSFER LAWS. Seller and Purchaser hereby waive
compliance with the provisions of any applicable bulk transfer laws, or any
other similar laws ("Bulk Transfer Laws"), and Seller hereby agrees to defend,
indemnify, and hold harmless Purchaser from and against any costs, expenses,
liability or claims by any person arising out of or due to the failure to comply
with such Bulk Transfer Laws, including, without limitation, any claims by any
person against all or any part of the Mass-Market Assets, but excluding any
Mass-Market Liabilities.
12.5. COSTS AND EXPENSES. Except as otherwise specifically provided
herein, all costs and expenses incurred by or on behalf of Seller and Purchaser,
including, without limitation, all fees and expenses of agents, representatives,
counsel, and accountants employed in connection with the authorization,
preparation, execution, and performance of this Agreement or other matters
relating thereto shall be borne solely by the party that incurred the same and
the other party shall have no liability with respect thereof.
12.6. TRANSFER TAXES. All sales, use, and transfer taxes and
recording, filing, title, and registration fees or other charges imposed upon or
incurred in connection with or as a direct result of the transfer of the
Mass-Market Assets to Purchaser and the consummation of the transactions
contemplated herein shall be borne and paid in accordance with local custom.
12.7. REAL ESTATE AND OTHER TAXES. All real estate and ad valorem
taxes imposed upon or assessed against the Leased Real Property or other
Mass-Market Assets shall be prorated as of the Closing Date.
43
<PAGE>
12.8. UTILITIES AND OTHER CHARGES. To the extent such amounts are
not included in the Prepaid Expenses or payables to be retained by Seller as
part of the Retained Liabilities (a) charges for electricity, water, gas, and
other utilities and for telephone services related to the Mass-Market Assets as
of or for the calendar month in which the Closing occurs shall be prorated as of
the Closing Date; (b) payments under the Contracts and the Dothan IRB Lease and
the Dominican Republic Leases and the Personal Property Leases as of or for the
calendar month in which the Closing occurs shall be prorated as of the Closing
Date; and (c) other similar prepaid expenses and other charges of Seller related
to the Mass-Market Cigar Business shall be prorated as of the Closing Date as
mutually agreed by Seller and Purchaser.
12.9. NOTICES. Unless otherwise provided herein, any notice,
request, instruction or other document to be given hereunder by any party to the
others shall be in writing and effective when delivered in person or by courier
(with a receipt obtained therefor), telegraphed, telexed or by facsimile
transmission (with an executed copy mailed as described below), or effective on
the date receipt is acknowledged when mailed by certified mail, postage prepaid,
return receipt requested, as follows:
If to Seller:
c/o General Cigar Holdings, Inc.
387 Park Avenue South
New York, New York 10016
Attention: A. Ross Wollen, Esq.
Senior Vice President and General Counsel
Facsimile No.: (212) 561-8791
With a copy to: Latham & Watkins
885 Third Avenue
New York, New York 10022
Attention: R. Ronald Hopkinson, Esq.
Facsimile No.: (212) 751-4864
If to Purchaser: Swedish Match North America Inc.
6630 West Broad Street
Richmond, Virginia
Attention: Gerard J. Roerty, Jr., Esq.
Facsimile No.:(804) 287-3282
With a copy to: Mays & Valentine, L.L.P.
Nations Bank Center, 23rd Floor
1111 East Main Street,
Richmond, Virginia 23219
Attention: Elizabeth G. Hester, Esq.
Facsimile No.: (804) 697-1339
44
<PAGE>
and to: Swedish Match AB
Rosenlundsgaten 36
SE-118 85 Stockholm
Sweden
Attention: Bo Aulin
Facsimile No.: 011-46-8-658-7656
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
12.10. CHOICE OF LAW. This Agreement shall be construed, interpreted
and the rights of the parties determined in accordance with the internal laws of
the State of New York, without regard to the conflict of law principles thereof
except with respect to matters of law concerning the internal corporate affairs
of any corporate entity which is a party to or the subject of this Agreement,
and as to those matters the law of the jurisdiction under which the respective
entity derives its powers shall govern.
12.11. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement,
together with the Disclosure Schedule and all exhibits hereto and the
Confidentiality Agreement, constitutes the entire agreement among the parties
pertaining to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties. No supplement, modification or waiver of this Agreement shall be
binding unless executed in writing by all parties. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
12.12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.13. INVALIDITY. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement or any other such instrument.
12.14. HEADINGS. The headings of the Articles and Sections herein
are inserted for convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
12.15. PUBLICITY. The initial press release with respect to the
execution of this Agreement shall be a joint press release reasonably acceptable
to Purchaser and Seller. Thereafter, so long as this Agreement is in effect,
neither Purchaser, Seller nor any of their respective Affiliates shall issue or
cause the publication of any press release or other announcement with respect to
45
<PAGE>
this Agreement or the other transactions contemplated hereby without the prior
consultation of the other party, except as may be required by law or by any
listing agreement with a national securities exchange.
46
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
or have caused this Agreement to be duly executed on their respective behalf by
their respective officers thereunto duly authorized, as of the day and year
first above written.
GENERAL CIGAR CO., INC.
By: /s/ Edgar M. Cullman
------------------------
Name: Edgar M. Cullman
Title: Chairman
SWEDISH MATCH NORTH AMERICA, INC.
By: /s/ William G. McClure, III
-------------------------------
Name: William G. McClure, III
Title: Authorized Agent
47
Exhibit 10.17(b)
________________________________________________________________________________
________________________________________________________________________________
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of April 30, 1999
(Amending and Restating the Amended and Restated Credit Agreement,
dated as of April 29, 1998)
Among
GENERAL CIGAR CO., INC.,
as Borrower
GENERAL CIGAR HOLDINGS, INC.,
387 PAS CORP.,
CLUB MACANUDO, INC.,
CLUB MACANUDO (CHICAGO), INC.,
VILLAZON & COMPANY, INC., and
GCMM CO., INC.as Guarantors
and
THE LENDERS FROM TIME TO TIME PARTIES HERETO
------------------------------
THE CHASE MANHATTAN BANK,
as Administrative Agent
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of April 30,
1999 (amending and restating the Amended and Restated Credit Agreement, dated as
of April 29, 1998 (the "FIRST AMENDED AND RESTATED AGREEMENT")) by and among
General Cigar Co., Inc., a Delaware corporation (the "BORROWER"), General Cigar
Holdings, Inc., a Delaware corporation ("HOLDINGS"), 387 PAS Corp., a New York
corporation ("387"), Club Macanudo, Inc., a New York corporation ("CLUB"), Club
Macanudo (Chicago), Inc., an Illinois corporation ("CLUB CHICAGO"), Villazon &
Company, Inc., a Delaware corporation ("NEW VILLAZON"), GCMM Co., Inc., a
Delaware corporation ("GCMM"), the several banks and other financial
institutions from time to time parties hereto (collectively, the "LENDERS"), and
The Chase Manhattan Bank, a New York banking corporation, as agent for the
Lenders hereunder (in such capacity, the "ADMINISTRATIVE AGENT").
W I T N E S S E T H :
---------------------
WHEREAS, the Borrower has entered into a definitive Asset Purchase
Agreement dated as of March 26, 1999, by and between the Borrower and Swedish
Match North America, Inc. for the sale by the Borrower of its Mass-Market Cigar
Business (as such term is defined in the Sale Agreement);
WHEREAS, the Borrower has requested that the Lenders and the
Administrative Agent amend and restate the First Amended and Restated Agreement
and consent to the sale of the Mass-Market Cigar Business, and the Lenders and
the Administrative Agent are agreeable to such requests upon the terms and
subject to the conditions set forth herein;
NOW, THEREFORE, the parties hereto hereby agree that on the Second
Amendment and Restatement Effective Date (as herein defined), the First Amended
and Restated Agreement will be amended and restated in its entirety as follows:
SUBSECTIONS 1.1 THROUGH 10.7
----------------------------
Subsections 1.1 through 10.7 of the First Amended and Restated
Agreement, in each case with their respective existing subsection and Section
designations, are hereby incorporated herein by reference as if set forth in
full herein, except that for purposes of such incorporation by reference:
1. Section 1 of the First Amended and Restated Agreement shall be
deemed amended by deleting therefrom the definitions of "Consolidated Interest
Expense", "Holdings Loan Party Group", "Indebtedness" and "Restricted Payment"
and substituting in lieu thereof the following definitions:
1
<PAGE>
"CONSOLIDATED INTEREST EXPENSE": as to any Person for any
period, interest expense of such Person and its Restricted
Subsidiaries for such period, including without limitation, interest
payable with respect to Loans, the interest portion of all
obligations under Financing Leases and dividends payable on
preferred Capital Stock, all as determined on a consolidated basis
in accordance with GAAP; PROVIDED that for purposes of determining
compliance with subsection 6.1(c) for any period, Consolidated
Interest Expense for such period shall be reduced by the amount of
consolidated interest income of such Person and its Restricted
Subsidiaries for such period, but in no event shall the Consolidated
Interest Expense be deemed to be less than zero.
"HOLDINGS LOAN PARTY GROUP": the collective reference to
Holdings, the Borrower, 387, Club, Club Chicago, Villazon, GCMM and
each other Person that shall hereafter become a party to this
Agreement as a guarantor pursuant to the provisions of subsection
5.8.
"INDEBTEDNESS": of any Person at any date, (a) all
indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services (other than current
liabilities incurred in the ordinary course of business and payable
in accordance with customary trade practices) or which is evidenced
by a note, bond, debenture or similar instrument, (b) all
obligations (contingent or otherwise) of such Person under Financing
Leases, (c) all obligations (contingent or otherwise) of such Person
in respect of letters of credit, acceptances or similar obligations
issued or created for the account of such Person, (d) the
liquidation value of all redeemable preferred Capital Stock of such
Person, (e) all liabilities secured by any Lien on any property
owned by such Person even though such Person has not assumed or
otherwise become liable for the payment thereof and (f) any
withdrawal liability of such Person or a Commonly Controlled Entity
to a Multiemployer Plan. The Indebtedness of any Person shall
include any Indebtedness of any partnership in which such Person is
a general partner.
"RESTRICTED PAYMENT": any declaration or payment of a dividend
(other than dividends payable solely in common stock of Holdings)
on, making of any payment on account of, or setting apart of assets
for a sinking or other analogous fund for the purchase, redemption,
defeasance, retirement or other acquisition of, any shares of any
class of Capital Stock of Holdings or any warrants or options to
purchase any such stock (other than (a) payments on account of
Holdings' Capital Stock made by Holdings to its management employees
3
<PAGE>
pursuant to any of its Plans to the extent that the aggregate amount
of such payments subsequent to the Closing Date does not exceed
$750,000 and (b) acquisitions of Capital Stock of Holdings from the
holders of stock options granted pursuant to said Plans in
consideration for the cancellation of such options to the extent
that the aggregate amount paid in respect of such acquisitions does
not exceed $1,000,000), whether now or hereafter outstanding, and
any making of any other distribution in respect thereof, either
directly or indirectly, whether in cash or property or in
obligations of Holdings or any Subsidiary of Holdings; PROVIDED that
for purposes of determining compliance with subsection 6.1(c) for
any period of four consecutive fiscal quarters, any amounts up to an
aggregate of $5,000,000 expended by Holdings during such period on
purchases of outstanding shares of Holdings' common stock shall not
be deemed Restricted Payments.
2. Section 1 of the First Amended and Restated Agreement shall be
deemed amended by inserting the following new definitions in correct
alphabetical order:
"FIRST AMENDED AND RESTATED AGREEMENT": as defined
in the recitals to this Second Amended and Restated
Agreement.
"GCMM PREFERRED STOCK": preferred stock issued by
GCMM as consideration for any investment made by GCMM
pursuant to subsection 6.9(e).
"MASS-MARKET CIGAR BUSINESS": as defined in the MMCB
Sale Agreement.
"MMCB CLOSING": the closing of the sale which is the
subject of the Sale Agreement.
"MMCB PURCHASE PRICE": as defined in subsection 6.5.
"MMCB SALE AGREEMENT": the Asset Purchase Agreement
dated as of March 26, 1999, by and between the Borrower and
Swedish Match North America, Inc.
"SECOND AMENDED AND RESTATED AGREEMENT": this Second
Amended and Restated Credit Agreement, as amended,
supplemented or modified from time to time.
3
<PAGE>
"SECOND AMENDMENT AND RESTATEMENT EFFECTIVE DATE":
the date on which each of the conditions precedent
specified in subsection 4.4 shall have been satisfied.
3. Subsection 2.9(b)(i) of the First Amended and Restated Agreement
is amended by inserting the following sentence at the end thereof:
"Notwithstanding anything contained in this subsection 2.9(b)(i),
the reduction in the Revolving Credit Commitments resulting from the
receipt of the Net Cash Proceeds from the sale of the Mass-Market
Cigar Business shall equal $42,500,000 and shall be allocated among
the Lenders so that, after giving effect thereto, their respective
Revolving Credit Commitments shall be as set forth on Schedule I
hereto."
4. Subsection 2.20 of the First Amended and Restated Agreement
entitied "Expansion Facility" is hereby deemed deleted in its entirety.
5. Subsections 3.1(a) and 3.2 of the First Amended and Restated
Agreement shall be deemed amended to read in their entirety as follows:
"3.1 FINANCIAL CONDITION. (a) Each of (i) the audited combined
balance sheets of Holdings as at November 28, 1998 and November 29,
1997 and the related audited combined statements of operations and
of cash flows for the fiscal years ended on November 28, 1998 and
November 29, 1997 (said financial statements having been audited by
PricewaterhouseCoopers LLP), copies of which have heretofore been
furnished to each Lender, are complete and correct and present
fairly the combined financial condition of Holdings as at such
dates, and the combined results of its operations and its combined
cash flows for the fiscal periods then ended. All such financial
statements, including the related schedules and notes thereto, have
been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by such
accountants, and as disclosed therein). Neither Holdings nor any of
its Subsidiaries had, at the date of the balance sheets referred to
above, any material Guarantee Obligation, contingent liability or
liability for taxes, or any long-term lease or unusual forward or
long-term commitment, including, without limitation, any interest
rate or foreign currency swap or exchange transaction, which is not
reflected in the foregoing statements or in the notes thereto.
Except for the sale of the Mass-Market Cigar Business contemplated
to be completed in April 1999, during the period from November 28,
1998 to and including the date hereof there has been no sale,
4
<PAGE>
transfer or other disposition by Holdings or any of its Subsidiaries
of any material part of its business or property, and no purchase or
other acquisition of any business or property (including any Capital
Stock of any other Person) material in relation to the combined
financial condition of Holdings and its Subsidiaries, taken as a
whole, at November 28, 1998."
"3.2 NO CHANGE. Except for the sale of the Mass-Market Cigar
Business contemplated to be completed in April 1999, since November
28, 1998 there has been no change, and no development or event
involving a prospective change, which has had or could reasonably be
expected to have a Material Adverse Effect, and Holdings and its
Subsidiaries have made no Restricted Payments."
6. Section 3 of the First Amended and Restated Agreement shall be
deemed amended by adding thereto the following new subsection 3.25:
"3.25 REPRESENTATIONS AND WARRANTIES ON SECOND AMENDMENT AND
RESTATEMENT EFFECTIVE DATE. The representations and warranties made
by the Borrower in subsections 3.1 through 3.24 are true and correct
in all material respects on and as of the Second Amendment and
Restatement Effective Date, as if made on and as of the Second
Amendment and Restatement Effective Date, except to the extent such
representations and warranties expressly relate to an earlier date."
7. Section 4 of the First Amended and Restated Agreement shall be
deemed amended by adding thereto the following new subsection 4.4:
"4.4 CONDITIONS TO SECOND AMENDMENT AND RESTATEMENT
EFFECTIVE DATE. The Second Amendment and Restatement
Effective Date shall be the date on which the following
conditions precedent are satisfied:
(a) the Administrative Agent shall have received a copy of
this Second Amended and Restated Agreement, duly executed and
delivered by the Borrower, Holdings, 387, Club, Club Chicago, New
Villazon, GCMM and the Lenders; and
(b) the Borrower shall have paid to each Lender the fees
separately agreed to by the Borrower with such Lender."
8. Subsection 6.1(b) and (c) of the First Amended and Restated
Agreement shall be deemed amended to read in their entirety as follows:
5
<PAGE>
"(b) MAINTENANCE OF NET WORTH. Permit Consolidated Net Worth
of Holdings at any time to be less than the sum of (i) $280,000,000
plus (ii) 50% of cumulative Consolidated Net Income of Holdings
(without deduction for any losses during any quarterly period) for
the period commencing on November 29, 1998 and ending on the last
day of the then most recently ended fiscal period for which
financial statements shall have been delivered to the Lenders
pursuant to subsection 5.1(a) or (b); PROVIDED that for purposes of
this subsection 6.1(b), Consolidated Net Income of Holdings shall
not be deemed to include any net income gained or recognized by
Holdings from the sale of the Mass-Market Cigar Business as
calculated in accordance with GAAP and reported by Holdings in its
financial statements for the fiscal quarter ended May 28, 1999."
(c) FIXED CHARGE COVERAGE. Permit the ratio of (i)
Consolidated Operating Cash Flow of Holdings for any period of four
consecutive fiscal quarters less the sum of (x) Capital Expenditures
of Holdings during such period and (y) Restricted Payments during
such period to (ii) Consolidated Interest Expense of Holdings for
such period to be less than 2.5 to 1.0."
9. Subsection 6.2 of the First Amended and Restated Agreement is
amended by adding the following new clause (k) after the existing clause (j):
"(k) the GCMM Preferred Stock issued pursuant to
subsection 6.6(f)."
10. Subsection 6.5 of the First Amended and Restated Agreement is
amended by adding the following new clause (d) after the existing clause (c):
(d) the Borrower may consummate the sale of the Mass- Market
Cigar Business, provided that:
(i) at the MMCB Closing, the Borrower and GCMM will
receive at least $190,000,000 in cash on a pre-tax basis (such
amount to be prior to the application of such proceeds in accordance
with (ii) and (iv) below) (the "MMCB PURCHASE PRICE");
(ii) promptly upon receipt of the MMCB Purchase Price,
the Borrower shall apply the Net Cash Proceeds resulting therefrom
to prepay all then outstanding Revolving Credit Loans, including all
interest accrued thereon and fees payable to the date of such
prepayment;
6
<PAGE>
(iii) the MMCB Closing shall have occurred within sixty
days of the Second Amendment and Restatement Effective Date; and
(iv) in connection with the MMCB Closing, each of the
following shall have been terminated: (a) the indebtedness and the
guaranty of the Borrower and Holdings with respect to the IRB
Indebtedness (as defined in the Sale Agreement) respecting the
Mass-Market Cigar Business facility in Dothan, Alabama and (b) the
indebtedness with respect to the Borrower's mortgage to GECC of its
transportation equipment.
11. Subsection 6.6 of the First Amended and Restated Agreement is
amended by adding the following new clause (f) after the existing clause (e):
"(f) the issuance of GCMM Preferred Stock in consideration for
debt securities purchased pursuant to subsection 6.9(e), PROVIDED
that the aggregate liquidation value of the GCMM Preferred Stock
does not exceed $6,000,000."
12. Subsection 6.9 of the First Amended and Restated Agreement shall
be deemed amended to read in its entirety as follows:
"6.9 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any
advance, loan, or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets
constituting a business unit of, or make any other investment in,
any Person, except:
(a) extensions of trade credit in the ordinary
course of business;
(b) investments in Cash Equivalents;
(c) investments or advances by Holdings (other than
investments or advances made directly or indirectly for the purposes
of the development of real estate) in or to its Restricted
Subsidiaries and investments or advances by such Restricted
Subsidiaries in or to Holdings and in or to other Restricted
Subsidiaries of Holdings; and
(d) investments or advances by Holdings or any of its
Restricted Subsidiaries subsequent to April 30, 1999 in an amount
not to exceed $35,000,000 in the aggregate for the purpose of
acquiring assets (other than assets covered by subsection 6.11) or
7
<PAGE>
businesses, PROVIDED, that, in the case of the acquisition of the
Capital Stock of any Material Subsidiary the provisions of
subsection 5.8 shall be complied with in connection therewith.
(e) in addition to investments otherwise expressly permitted
by this subsection 6.9, investments by GCMM subsequent to April 30,
1999 in debt securities in an aggregate amount (valued at cost) not
to exceed $25,000,000."
13. Schedules I through VI to the First Amended and Restated
Agreement shall each be deemed amended to read in their entirety as set forth in
Schedules I through VI attached hereto, respectively.
14. Exhibits G and H of the First Amended and Restated Agreement are
hereby deemed deleted in their entirety.
SUBSECTIONS 10.8 THROUGH 10.14
------------------------------
10.8 COUNTERPARTS. This Second Amended and Restated Agreement may be
executed by one or more of the parties to this Second Amended and Restated
Agreement on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument. A set
of the copies of this Second Amended and Restated Agreement signed by all the
parties shall be lodged with the Borrower and the Administrative Agent.
10.9 SEVERABILITY. Any provision of this Second Amended and Restated
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
10.10 INTEGRATION. This Second Amended and Restated Agreement, the
Notes and the other Loan Documents to which the Borrower is a party represent
the entire agreement of the Borrower, the Guarantors which are parties hereto,
the Administrative Agent and the Lenders with respect to the subject matter
hereof and thereof, and there are no promises or representations by the
Borrower, any such Guarantor, the Administrative Agent or any Lender relative to
subject matter hereof or thereof not stated or referred to herein or in the
other Loan Documents.
10.11 GOVERNING LAW. THIS SECOND AMENDED AND RESTATED AGREEMENT AND
THE NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS SECOND
AMENDED AND RESTATED AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
8
<PAGE>
10.12 SUBMISSION TO JURISDICTION. Each of the Borrower and each
Guarantor which is a party hereto hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Second Amended and Restated Agreement, the
Notes and the other Loan Documents to which it is a party, or for
recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the courts of the State of New York
for New York County, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not
to plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Borrower at its address set forth in subsection 10.2 or at such other
address of which the Administrative Agent shall have been notified
pursuant thereto; and
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction.
10.13 WAIVER OF JURY TRIAL. THE BORROWER, THE GUARANTORS WHICH ARE
PARTIES HERETO, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS SECOND AMENDED AND RESTATED AGREEMENT OR THE NOTES OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
10.14 SCHEDULES AND EXHIBITS. Schedules VII through IX and Exhibits
A-1 through F of the First Amended and Restated Agreement are hereby
incorporated by reference as Schedules VII through IX and Exhibits A-1 through F
hereto, respectively.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amended and Restated Agreement to be duly executed and delivered in New York,
New York by their proper and duly authorized officers as of the day and year
first above written.
GENERAL CIGAR CO., INC., as
Borrower
By /s/ A. Ross Wollen
---------------------
Title: Secretary
GENERAL CIGAR HOLDINGS, INC., as a
Guarantor
By /s/ A. Ross Wollen
---------------------
Title: Secretary
387 PAS CORP., as a Guarantor
By /s/ A. Ross Wollen
---------------------
Title: Secretary
CLUB MACANUDO, INC., as a Guarantor
By /s/ A. Ross Wollen
---------------------
Title: Secretary
10
<PAGE>
CLUB MACANUDO (CHICAGO), INC., as a
Guarantor
By /s/ A. Ross Wollen
---------------------
Title: Secretary
VILLAZON & COMPANY, INC., as a
Guarantor
By /s/ A. Ross Wollen
---------------------
Title: Secretary
GCMM CO., INC., as a Guarantor
By /s/ A. Ross Wollen
---------------------
Title: Secretary
11
<PAGE>
THE CHASE MANHATTAN BANK, as
Administrative Agent and as a Lender
By /s/ [ILLEGIBLE]
---------------------
Title: Vice-President
THE BANK OF NOVA SCOTIA, as a
Lender
By /s/ [ILLEGIBLE]
---------------------
Title: Unit Head
FLEET NATIONAL BANK, as a Lender
By /s/ [ILLEGIBLE]
---------------------
Title: Senior Vice-President
12
<PAGE>
Schedule I
ADDRESSES AND COMMITMENTS OF LENDERS
------------------------------------
REVOLVING
CREDIT
ADDRESS COMMITMENT
- ------- ----------
The Chase Manhattan Bank .......................... $ 16,666,668
270 Park Avenue
New York, NY 10017
Attention: Karen Sharf
The Bank of Nova Scotia, New York Agency .......... $ 16,666,666
One Liberty Plaza
New York, NY 10006
Attention: Michael Kuss
Fleet National Bank ............................... $ 16,666,666
777 Main Street
Hartford, CT 06115
Attention: Jeffrey J. White
<PAGE>
Schedule II
MATERIAL SUBSIDIARIES OF GENERAL CIGAR HOLDINGS, INC.
-----------------------------------------------------
# OF SHARES
NAME PARENT OUTSTANDING
- --------------------------------------------------------------------------
Club Macanudo, Inc. Holdings 100
Club Macanudo (Chicago), Inc. Holdings 100
General Cigar Co., Inc. Holdings 100
GCMM Co., Inc. General Cigar 100
387 PAS Corp. Holdings 100
387 PAS Enterprises 387 PAS Corp. N/A
Villazon & Co., Inc. General Cigar 1,000
NON-MATERIAL OR FOREIGN
SUBSIDIARIES OF GENERAL CIGAR HOLDINGS, INC.
--------------------------------------------
NAME PARENT
- ----------------------------------------------------------
Cifuentes Free Zone, Ltd. General Cigar
Cifuentes Y Cia, Ltd. General Cigar
C.T.P. Dominicana S.A. General Cigar
Club Macanudo (Services), Inc. Holdings
Culbro Dominicana S.A. General Cigar
Culbro International, S.A. General Cigar
Culbro Tobacco Sales Corporation General Cigar
Culbro Tobacco, Inc. Holdings
Culbro V.L. Tobacco, S.A. General Cigar
General Cigar Dominicana S.A. General Cigar
Gradiaz Annis & Co., Inc. General Cigar
Honduras American Tabaco, S.A. de C.V. General Cigar
Industrial Buildings & Properties, Inc. General Cigar
Jose Escalante & Co. General Cigar
Macanudo Cigar Company, Inc. General Cigar
Moll Tool & Plastics Corp. General Cigar
Partagas Cigar Company, Inc. General Cigar
Twenty Seventh & Park, Inc. 387 PAS Corp.
General Cigar International General Cigar
<PAGE>
Schedule III
GENERAL CIGAR HOLDINGS, INC.
SCHEDULE OF INDEBTEDNESS
AS OF APRIL 30, 1999
$(000'S)
Vehicle Leases ............................... $ 1,808.
Villazon Installment Notes ................... $10,000.
<PAGE>
Schedule IV
GENERAL CIGAR HOLDINGS, INC.
SCHEDULE OF LIENS
AS OF APRIL 30, 1999
$(000'S)
None.
<PAGE>
Schedule V
GENERAL CIGAR HOLDINGS, INC.
SCHEDULE OF SALE-LEASEBACK TRANSACTIONS
AS OF APRIL 30, 1999
None.
<PAGE>
Schedule VI
GENERAL CIGAR HOLDINGS, INC.
SCHEDULE OF GUARANTEES
AS OF APRIL 30, 1999
Club Macanudo (Chicago) 5 Year Lease Ending 9/30/2001
Average Annual rental $200,000
Club Macanudo (New York) 10 Year Lease Ending 8/31/2005
Average annual Rental $250,000
General Cigar Co., Inc. Guarantee Villazon & Co., Inc.
$10,000,000 Seller Notes
Upper Saddle River (New Jersey) 4 Year Lease Ending 12/31/2000
Average Annual Rental $207,000
General Cigar International (Woking, 25 Year Sublease Ending 12/08/2018
England) but can be canceled with three month
notice by either party.
Average Annual Rental $42,000
EXHIBIT 99
NEWS FROM:
GENERAL CIGAR HOLDINGS, INC.
387 Park avenue South CONTACT:
New York, NY 10016-8899 A. ROSS WOLLEN
212/448-3800 (212) 448-3820
GENERAL CIGAR HOLDINGS and SWEDISH MATCH
ANNOUNCE CLOSING OF SALE
------------------------
NEW YORK--(BUSINESS WIRE)--April 30, 1999--General Cigar Holdings, Inc. (NYSE:
MPP - news) and Swedish Match AB (NASDAQ: SWMAY - news) announced today that
they had completed the previously announced sale by General Cigar of its
Mass-Market cigar business to Swedish Match. The Closing took place in New York
where Edgar M. Cullman, Jr., General Cigar's Chief Executive Officer, and
Lennart Sunden, Swedish Match's Chief Executive Officer said: "We worked
constructively together to the Closing and we anticipate a continuing,
cooperative effort as we will be partners in many endeavors."
The Mass-Market cigar business includes two manufacturing facilities, Dothan,
Alabama, USA and Santiago, Dominican Republic; machinery and equipment;
inventories, trademarks; and other commercial assets and liabilities. In
addition, as part of the sale, General Cigar and Swedish Match have entered into
an ongoing strategic relationship through a Tobacco Supply Agreement and a
Master Distribution Agreement. Among the Mass-Market brands that were sold are
Garcia y Vega (the number one selling Mass-Market cigar using a natural leaf
wrapper), White Owl, Tiparillo and Tijuana Smalls.
Swedish Match is an international group with headquarters in Stockholm, Sweden.
The company manufactures a broad range of tobacco products, matches and
disposable lighters which are sold in approximately 140 countries. Swedish Match
is one of the world's largest cigar manufacturers with a turnover in the cigar
operations of 900 MSEK. Annual sales in 1998 amounted to approximately 8,200
MSEK. Swedish Match is listed on the Stockholm Stock Exchange and on NASDAQ.
General Cigar Holdings, which traces its roots to 1906, is a leading
manufacturer and marketer of premium cigar brands including Macanudo, Partagas,
Punch (MPP) and Hoyo de Monterrey. In addition to being a major grower of
high-quality Connecticut shade wrapper tobacco, General Cigar operates the Club
Macanudo cigar bars in New York City and Chicago.
