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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
AMENDMENT NO. 2
TO
FORM 8-K
FILED SEPTEMBER 20, 1996
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
September 25, 1996 (July 19, 1996)
SUIZA FOODS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 340-28130 75-2559681
(STATE OR OTHER (COMMISSION FILE (IRS EMPLOYER
JURISDICTION OF NUMBER) IDENTIFICATION NO.)
INCORPORATION)
3811 TURTLE CREEK BLVD., SUITE 1300
DALLAS, TEXAS 75219
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code:
(214) 528-0939
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(C) EXHIBITS
2.1 Stock Purchase Agreement, dated as of July 19, 1996, among G
Acquisition Corp., a Puerto Rico corporation, Jose M. Rodriguez
Garrido, Jorge Rodriguez Garrido, Maria Angles Martinez Famada
and Sandra Mediavilla Garcia.
23.1 Consent of independent auditors (filed with Amendment No. 1
on Form 8-K/A dated September 24, 1996).
2
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SIGNATURES
Pursuant to the requirements 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.
Dated: September 25, 1996 SUIZA FOODS CORPORATION
By: /s/ Tracy L. Noll
----------------------------
Tracy L. Noll
CHIEF FINANCIAL OFFICER
3
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INDEX TO EXHIBITS
Exhibit
Number Description
------- -----------
2.1 Stock Purchase Agreement, dated as of July 19, 1996, among G
Acquisition Corp., a Puerto Rico corporation, Jose M. Rodriguez
Garrido, Jorge Rodriguez Garrido, Maria Angles Martinez Famada and
Sandra Mediavilla Garcia.
23.1 Consent of Independent Auditors (filed with Amendment No. 1 on Form
8-K/A dated September 24, 1996).
4
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "AGREEMENT") made and entered into this 19th
day of July, 1996, by and among G Acquisition Corp., a Puerto Rico corporation
("PURCHASER"), and Jose M. Rodriguez Garrido and Jorge Rodriguez Garrido (the
"SELLERS"), and Maria Angeles Martinez Famada and Sandra Mediavilla Garcia (the
"SELLERS' WIVES").
BACKGROUND
WHEREAS, the Sellers own all of the outstanding capital stock (the
"SHARES") of Garrido y Compania, Inc., a Puerto Rico corporation ("GARRIDO"),
consisting of an aggregate of 586 shares of common stock, $100 par value per
share;
WHEREAS, Garrido owns all of the outstanding capital stock of (i) Garrido
Alto Grande Corp., a Puerto Rico corporation ("ALTO GRANDE"), consisting of an
aggregate of 1 share of common stock, $1,000 par value per share, and (ii) Guest
Choice, Inc., a Puerto Rico corporation ("GUEST CHOICE"), consisting of an
aggregate of 12 shares of common stock, no par value, and whereas Alto Grande
owns all of the outstanding capital stock of Alto Grande Export Corp., a Puerto
Rico corporation ("EXPORT"), consisting of an aggregate of 10 shares of common
stock, $100 par value per share, (Garrido, together with Alto Grande, Export,
and Guest Choice, is referred to as the "COMPANY");
WHEREAS, the Company is engaged principally in the agricultural business,
more specifically, the production, processing, packaging, marketing, and
distribution of coffee and related products;
WHEREAS, the Company has endeavored to expand its operations and is in a
position to enter, and has entered, new markets in and outside Puerto Rico and,
consequently, needs to further increase the Company's resources in order to
continue its expansion and modernization process and to more fully develop its
potential in those markets;
WHEREAS, Purchaser and its Affiliates (as defined herein) have the capital,
financial, and other resources necessary to expand upon and continue the
expansion and modernization of the Company as well as the development of new
markets and to carry out its objectives;
WHEREAS, in order to insure the fulfillment of their personal obligations
with respect thereto, the Sellers have assumed the liabilities of the Company
described in Exhibit L hereof as required by Purchaser in furtherance of its
business plans for the Company subsequent to the date of this Agreement; and
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WHEREAS, Purchaser wishes to acquire the Shares from the Sellers, and the
Sellers desire to sell the Shares to Purchaser, on the terms and subject to the
conditions set forth in this Agreement.
THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements contained in this Agreement, the parties to this
Agreement agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE SHARES
1.1 PURCHASE AND SALE. Subject to the terms and conditions of this
Agreement, the Sellers hereby sell and deliver to Purchaser, and Purchaser
hereby purchases and takes from the Sellers, the Shares, in consideration for
the payment by Purchaser to the Sellers of the "PURCHASE PRICE", payable as
follows:
(a) Subject to Section 5.3 hereof, Purchaser hereby pays to Jose M.
Rodriguez Garrido $31,435,144.87 and to Jorge Rodriguez Garrido $3,920,996.02,
which amounts constitute each respective Seller's PRO RATA SHARE (as defined
herein) of the aggregate amount of $35,356,140.89. Each of the Sellers
acknowledges his receipt of his respective payment to his satisfaction. For the
purposes of this Agreement, "PRO RATA SHARE" means a fraction equal to the
number of Shares held of record as of the date of this Agreement by a Seller
divided by the number of outstanding Shares as of the date of this Agreement.
(b) In addition, Purchaser will pay to each Seller his PRO RATA SHARE
of the Earnout Amount (as defined herein), when and as determined pursuant to
this Section 1.1(b). The "EARNOUT AMOUNT" means the following and will be
payable as follows:
(i) The amount of the Earnout Amount will be equal to the lower
of (A) $5,500,000 and (B) 5.5 times EBITDA (as defined herein) of the Company,
in excess of $5,000,000 for the consecutive twelve calendar month period ending
December 31, 1997, provided that if the Company has EBITDA of more than
$6,000,000 for any consecutive twelve calendar month period commencing after
June 30, 1996 and ending on or before November 30, 1997, the Earnout Amount will
be equal to $5,500,000. "EBITDA" means the net income of the Company (inclusive
of accruals for taxes, employee bonuses (excluding all bonuses to Jose M.
Rodriguez Garrido, and excluding bonuses to other Company employees other than
those contemplated by Purchaser's employee bonus plan for all employees), sick
pay, vacation pay, deferred compensation, compensation earned but not yet paid,
allowance for doubtful accounts, reserve for inventory obsolescence, and net of
intercompany profits), plus interest expense (net of interest income), plus
income tax expense, plus depreciation and amortization expense, and plus or
minus any extraordinary loss or gain for the relevant period,
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each of the above computed in accordance with generally accepted accounting
principles, consistently applied ("GAAP"). The parties acknowledge and agree
that in the computation of EBITDA (C) the Company will be treated as a
consolidated entity, (D) any and all cost savings after June 30, 1996 will be
taken into consideration (regardless of whether the cost savings are the
result of dealings with any Affiliate or unrelated entity), (E) any and all
management fees or allocations from any Affiliate of the Company will be
disregarded, except for that portion of any such management fee or allocation
that represents the actual cost of the legal, accounting, and other expenses
of the Company that are paid or incurred by such Affiliate, provided that
such actual cost considered in the computation of EBITDA will not be higher
than the cost of comparable services from unaffiliated Persons (as defined
herein), and (F) the EBITDA contribution from capital expenditure projects in
excess of $500,000 (in the aggregate for the period) and from acquisitions
will be excluded, provided that Purchaser and the Agent (as defined herein)
shall agree in good faith on the amount of any such exclusion.
(ii) Purchaser will calculate in good faith the EBITDA of the
Company and the Earnout Amount and provide written notice of such determination
to the Sellers (A) for the year ending December 31, 1997, no later than March
31, 1998 and (B) within 30 days after the financial statements are prepared and
made available by the Company to Suiza Foods Corporation for the consecutive
twelve month period ending on June 30, 1997 and for each such period ending at
the end of each calendar month thereafter until November 30, 1997. Jose M.
Rodriguez Garrido, hereby appointed as agent for the Sellers (the "Agent"), may
object to the determination of EBITDA and/or the Earnout Amount by delivering
written notice of such objection, setting forth the basis for such objection, to
Purchaser within 45 days of receipt of the determination from Purchaser. The
determination of Purchaser will be final and binding on all parties as to any
item not so objected to by the Agent. Upon receipt by Purchaser of any
objection by the Agent, the Agent and Purchaser will negotiate in good faith for
a period of 30 days to reconcile their differences. If such differences are not
so reconciled, the Sellers and Purchaser agree to submit their disagreement to
an arbitrator pursuant to the provisions of Section 1.1(e) hereof.
(iii) Purchaser will pay each Seller his PRO RATA SHARE of the
Earnout Amount, if any, in immediately available funds by wire transfer to the
account designated in writing by each Seller, within 30 days of the earlier to
occur of (A) a determination pursuant to Section 1.1(b)(ii)(A) hereof of the
Earnout Amount and (B) the date as of which it is determined pursuant to Section
1.1(b)(ii)(B) hereof that the Company had EBITDA of more than $6,000,000 for any
consecutive twelve calendar month period commencing after June 30, 1996 and
ending on or before November 30, 1997. In the event that a dispute arises in
connection with EBITDA and/or the Earnout Amount, Purchaser shall pay each
Seller his PRO RATA SHARE of the portion of the Earnout Amount not in dispute on
the date set forth above. Each Seller shall be entitled to interest at a rate
equal to 10% per annum on his PRO RATA
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SHARE of: (C) the portion of any disputed amount of the Earnout Amount that
is subsequently determined to be owing to the Sellers, and (D) the
outstanding balance of any undisputed amount of the Earnout Amount, such
interest to be computed from the date set forth above on which the Earnout
Amount was due to be paid, until full payment thereof. Purchaser agrees to
cause the Company to conduct its operations in a commercially reasonable
manner and not to take any actions outside the ordinary course of business
for the purpose of diminishing or otherwise adversely affecting the Company's
EBITDA.
(c) As further consideration, each Seller, or his designees, will
receive his PRO RATA SHARE of one-half of the tax credits for Purchaser's
investment in an agricultural business to which Purchaser is or may hereafter
become entitled under the Puerto Rico Agricultural Incentives Act of 1995, Act
No. 225 of December 1, 1995, as amended, and the rules and regulations issued
thereunder (the "AGRICULTURAL INCENTIVES ACT"), that may arise as a result of
the payment by Purchaser to the Sellers of the consideration specified in
Sections 1.1(a), (b) and (d) hereof (the "AGRICULTURAL TAX CREDITS"). The
parties agree that Purchaser's obligation under this Section 1.1(c) is to
transfer one-half of the Agricultural Tax Credits; that the existence of the
Agricultural Tax Credits is dependent on the qualification of the acquisition by
Purchaser of the Shares as an eligible investment within the meaning of such
term under the Agricultural Incentives Act; that Purchaser makes no
representation, express or implied, that Agricultural Tax Credits will be
generated as a result of the acquisition of the Shares; and that the
Agricultural Tax Credits do not include the credits that may become available
under the Agricultural Incentives Act as a result of a loss upon any subsequent
sale, exchange, or other disposition of the Shares, or as a result of subsequent
capital contributions to the Company. The foregoing notwithstanding, Purchaser
agrees to do all acts and execute all documents reasonably necessary and
convenient for Purchaser to obtain such Agricultural Tax Credits and to transfer
to each Seller, or his designees, each of the Sellers' PRO RATA SHARE of such
credits; provided, however, that (i) with respect to Purchaser acts required
hereunder, Purchaser shall in no event be required to expend in excess of
$200,000, and (ii) in the event that expenses in excess of such amount are
required, any party may continue to pursue such credits at its own expense.
Purchaser shall retain each Seller's PRO RATA SHARE of the Agricultural Tax
Credit until such Seller provides Purchaser with written instructions indicating
the Persons to whom the same shall be transferred. If Sellers have not provided
such instructions prior to June 30, 1998 with respect to the full amount of the
Agricultural Tax Credits, Purchaser shall, on such date, transfer to each Seller
the outstanding balance, if any, of his PRO RATA SHARE of such credits. To the
extent action by a Suiza Foods Corporation subsidiary is necessary, Suiza Foods
Corporation shall cause such subsidiary to take such action as may be necessary
to effect the transfer of the Agricultural Tax Credits in accordance with the
terms of this Agreement.
(d) ADJUSTMENT TO PURCHASE PRICE. The cash portion of the Purchase
Price specified in Section 1.1(a) will be subject to adjustment as follows:
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(i) Within 30 days after the audited financial statements for
June 30, 1996 are prepared and made available by the Company to Suiza Foods
Corporation, Purchaser will calculate in good faith the actual amount of net
working capital of the Company as of June 30, 1996 (computed following the
example in Exhibit M hereof, including cash, plus the market value of marketable
securities and cash equivalents as of June 30, 1996, plus accounts receivable
(net of allowance for doubtful accounts), plus inventory (net of the elimination
of intercompany profits and inventory reserves for obsolescence), plus prepaid
expenses, and less accounts payable and accrued expenses that are not related to
indebtedness for borrowed money or purchase money financing, but including
accruals for taxes, employee bonuses, sick pay, vacation pay, deferred
compensation, compensation earned but not yet paid, and interest, each item
computed in accordance with GAAP) ("ACTUAL NET WORKING CAPITAL") and, also
within such 30-day period, provide written notice of such determination to the
Sellers specifying the amount by which Actual Net Working Capital varies from
$13,617,658. The Agent may object to the determination of Actual Net Working
Capital by delivering written notice of such objection, setting forth the basis
for such objection, to Purchaser within 45 days of receipt of the determination
from Purchaser. The determination of Purchaser will be final and binding on all
parties as to any item not so objected to by the Agent. Upon receipt by
Purchaser of any objection by the Agent, the Agent and Purchaser will negotiate
in good faith for a period of 30 days to attempt to reconcile their differences.
If such differences are not so reconciled, the Sellers and Purchaser agree to
submit their disagreement to an arbitrator pursuant to the provisions of
Section 1.1(e) hereof.
(ii) Within 5 business days of the date on which Actual Net
Working Capital is determined, Purchaser will pay each Seller, in immediately
available funds by wire transfer to the account designated by him, such Seller's
PRO RATA SHARE of the amount by which Actual Net Working Capital exceeds
$13,617,658, or each Seller will pay to Purchaser, in immediately available
funds by wire transfer to an account designated in writing by Purchaser, such
Seller's PRO RATA SHARE of the amount by which Actual Net Working Capital is
less than $13,617,658.
(e) RESOLUTION OF DIFFERENCES IN COMPUTING EBITDA, THE EARNOUT
AMOUNT, AND ACTUAL NET WORKING CAPITAL. Should the Agent object to the
determination by Purchaser of the Company's EBITDA, the Earnout Amount, or
Actual Net Working Capital as contemplated in Sections 1.1(b) or 1.1(d) above,
and such differences are not reconciled as contemplated in Sections 1.1(b)
or 1.1(d) above, then Purchaser and the Sellers shall submit their disagreement
to an arbitrator who shall be the Puerto Rico office of a nationally recognized
public accounting firm, a Puerto Rico public accounting firm of recognized
standing, a licensed certified public accountant of recognized standing in the
community of Puerto Rico and a resident thereof, or any other Person agreeable
to Purchaser and the Agent.
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The arbitration proceeding under this Section will commence by a
formal written notice by the Agent or Purchaser to the Arbitration Division of
the American Arbitration Association (the "AAA"), with copy to the other parties
by certified mail with return receipt. The Agent and Purchaser will immediately
thereupon undertake to (i) select a mutually agreeable arbitrator as provided in
the preceding paragraph and (ii) notify the AAA of such a selection. The Agent
and Purchaser must both select and notify the AAA with respect to the identity
of the agreed upon arbitrator within a period of 20 business days from
respondent's receipt by certified mail of the claimant's notice of arbitration.
Such joint notification shall constitute the formal appointment of the
arbitrator. If the joint written notification to the AAA described above is not
sent by the parties to the AAA within the 20-day period described above or
within an agreed-upon extension in writing, the AAA will be empowered to and
shall appoint the arbitrator in the parties' stead from the roster of
AAA-approved candidates. In such case, the AAA shall select and appoint as
arbitrator any one of the Persons described in the preceding paragraph within 15
days from the parties' failure to jointly notify the appointment as set forth
above. The arbitration proceeding shall be held in Puerto Rico. The
arbitration hearing, should one be required, shall be held no later than two
months from the appointment of the arbitrator as set forth above, and the
arbitrator shall issue a ruling within 20 days from termination of the
arbitration hearing and such ruling shall be based upon GAAP. The arbitrator's
determination of the disputed items will be final and binding on all parties and
may not be challenged in court.
The AAA's Commercial Rules for Arbitration shall apply to the
arbitration except insofar as they may be incompatible with the procedure set
forth above. The determinations by the AAA's Director of Arbitration with
respect to any procedural matters, as well as with respect to the selection of
the arbitrator as set forth above and the location of the arbitration, shall be
binding on the parties and shall not be challengeable in court. The parties
hereby waive their right to challenge the final ruling of the arbitrator in
court. The fees of the arbitrator and the costs of the arbitration shall be
borne in equal parts by the parties during the course of the arbitration.
However, the arbitrator shall incorporate in the final ruling provisions for the
reimbursement of any such fees and costs by one party to the other on the basis
of the percentage that any monetary award made by the arbitrator bears to the
original amount of the claim giving rise to the arbitration proceeding.
1.2 DELIVERIES BY THE PARTIES. (a) The Sellers hereby deliver to
Purchaser at the offices of McConnell Valdes, 270 Munoz Rivera Avenue, Hato Rey,
Puerto Rico 00918:
(i) Certificates of stock representing all of the Shares to be
sold by each of the Sellers, duly endorsed and otherwise in good form for
transfer;
(ii) The management agreement duly executed by Jose M. Rodriguez
Garrido (the "MANAGEMENT AGREEMENT"), in the form of Exhibit A hereof;
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(iii) The letter agreement between Purchaser and Jorge Rodriguez
Garrido (the "JORGE RODRIGUEZ GARRIDO LETTER AGREEMENT") duly executed by Jorge
Rodriguez Garrido, in the form of Exhibit B hereof;
(iv) The letter agreement between Purchaser and William Simpson
regarding Guest Choice (the "SIMPSON LETTER AGREEMENT") duly executed by William
Simpson, in the form of Exhibit C hereof;
(v) A certificate of the Secretary of Garrido, in the form of
Exhibit D hereof;
(vi) The written resignation of each director of the Company, in
the form of Exhibit E hereof;
(vii) A legal opinion of Gabriel J. Montilla, Esq., in the form
of Exhibit F hereof;
(viii) The escrow agreement (the "ESCROW AGREEMENT") duly
executed by the Sellers, in the form of Exhibit G hereof;
(ix) The duly executed (A) amendment to the lease agreement with
Matilde Alonso Viuda de Garrido dated August 22, 1985 with respect to the Caguas
production facility, (B) the lease agreements with Pedro Rodriguez Mendez with
respect to the Caguas truck maintenance facility, warehouse and parking lot, and
(C) the lease agreement with the Sellers with respect to the charcoal operation
facility in Adjuntas (collectively, the "LEASE AGREEMENTS"), in the forms of
Exhibit H hereof;
(x) The use and habitation agreement regarding the Company's
Lares residential property (the "USE AND HABITATION AGREEMENT") duly executed by
the Agent, in the form of Exhibit I hereof;
(xi) Evidence reasonably satisfactory to Purchaser of full
payment of all liabilities listed in Exhibit L hereof, or an irrevocable and
unconditional release of the Company from any such liabilities; and
(xii) The documentation necessary for the cancellation of the
liens described in Schedule 2.18(b) hereof.
(b) Purchaser hereby delivers to the Sellers at the offices of
McConnell Valdes, 270 Munoz Rivera Avenue, Hato Rey, Puerto Rico 00918:
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(i) The Purchase Price as set forth in this Agreement;
(ii) The guarantee by Suiza Foods Corporation of the payment of
the Earnout Amount, if any, in the form of Exhibit J hereof;
(iii) The Management Agreement duly executed by Purchaser;
(iv) The Jorge Rodriguez Garrido Letter Agreement duly executed
by Purchaser;
(v) The Simpson Letter Agreement duly executed by Purchaser;
(vi) A legal opinion of Axtmayer Adsuar Muniz & Goyco, in the
form of Exhibit K hereof;
(vii) The Escrow Agreement duly executed by Purchaser;
(viii) The Lease Agreements duly executed by Purchaser; and
(ix) The Use and Habitation Agreement duly executed by
Purchaser.
1.3 FURTHER ASSURANCES. At or after the date of this Agreement, and
without further consideration, but at Purchaser's cost and expense (subject to
Section 4.7), the Sellers will execute and deliver to Purchaser such further
instruments of conveyance and transfer and such other documents as Purchaser may
reasonably request in order to more effectively convey and transfer to Purchaser
all of the Shares and to put Purchaser in operational control of the Company and
its assets.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers hereby represent and warrant to Purchaser as follows:
2.1 ORGANIZATION. Each of Garrido, Alto Grande, Export, and Guest Choice
is a corporation duly organized, validly existing, and in good standing under
the laws of Puerto Rico and has full corporate power to own its properties and
to conduct its business as presently conducted. Each of Garrido, Alto Grande,
Export, and Guest Choice is duly authorized, qualified, or licensed to do
business and is in good standing as a foreign corporation in each state or other
jurisdiction in which its business or operations as presently conducted or the
location of its assets make such qualification necessary.
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2.2 AUTHORITY. The Sellers, individually, have all requisite power and
authority to execute, deliver, and perform this Agreement and all other
documents and instruments listed in Schedule 2.2 of this Agreement (the "SELLER
DOCUMENTS"). The execution, delivery, and performance of this Agreement and the
Seller Documents by each Seller have been duly authorized by all necessary
action on the part of such Seller. This Agreement and the Seller Documents have
been duly executed and delivered by the Sellers and are legal, valid, and
binding obligations of each Seller, enforceable against such Seller in
accordance with their respective terms.
2.3 MINUTE BOOKS. The Sellers have delivered to Purchaser true, correct,
and complete copies of the certificates of incorporation, by-laws, minute books,
stock certificate books, and stock record books of each of Garrido, Alto Grande,
Export, and Guest Choice. The minute books of each of Garrido, Export, Alto
Grande, and Guest Choice contain complete and accurate minutes or consents
reflecting all material actions taken by the directors (including any
committees) and stockholders of such companies.
2.4 CAPITALIZATION; SUBSIDIARIES. (a) The authorized capital stock of
Garrido consists solely of 10,000 shares of common stock, $100 par value per
share, of which 586 shares are issued and outstanding. The Shares are validly
issued, fully paid, and nonassessable and are held by the Sellers free and clear
of any lien, pledge, security interest, or other encumbrance or claim (a "LIEN")
of any Person, or any preemptive or similar rights. There are no outstanding
options, warrants, convertible securities, or other rights, agreements,
arrangements, or commitments obligating Garrido or the Sellers to issue or sell
any securities or ownership interests in Garrido. There are no stockholders'
agreements, voting agreements, voting trusts, or similar agreements binding on
any of the Sellers or applicable to any of the Shares. All of the outstanding
capital stock of the Company has been offered and sold in compliance with all
applicable securities laws, rules, and regulations.
(b) Alto Grande and Guest Choice are the only subsidiaries of
Garrido, and Export is the only subsidiary of Alto Grande, and none of them have
any other subsidiaries. Garrido and Alto Grande own of record and beneficially
all the outstanding capital stock of each of its subsidiaries, free and clear of
any Lien. Except as set forth in Schedule 2.4(b) hereof, there are no
outstanding options, warrants, convertible securities, or other rights,
agreements, arrangements, or commitments obligating any subsidiary of Garrido or
Alto Grande to issue or sell any securities or ownership interests in any such
subsidiary. There are no stockholders' agreements, voting agreements, voting
trusts, or similar agreements applicable to any of the shares of capital stock
of Alto Grande, Export or Guest Choice.
2.5 TITLE TO THE SHARES. The Shares constitute all of Garrido's issued
and outstanding capital stock. The Sellers own the Shares of record and
beneficially as set forth in Schedule 2.5 hereof, free and clear of any Lien.
Purchaser hereby acquires the entire legal
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and beneficial interest in all of the Shares and, as a result of such
acquisition, all of the equity ownership interests in each subsidiary of
Garrido and Alto Grande, free and clear of any Lien.
2.6 NO VIOLATION. Except as described in Schedule 2.6 hereof, neither the
execution or delivery of this Agreement and the Seller Documents nor the
consummation of the transactions contemplated by this Agreement or the Seller
Documents, by the Sellers, including, without limitation, the sale of the Shares
to Purchaser, will materially conflict with or result in the material breach of
any term or provision of, materially violate, constitute a default under, result
in the creation of any Lien on the Company's assets pursuant to, or relieve any
third party of any material obligation to the Company, give any third party the
right to terminate or accelerate any obligation under, or materially increase
the rights of any other Person under, or materially increase the liabilities or
obligations of the Company under, any charter provision, by-law, Material
Agreement (as defined herein), Permit (as defined herein), order, law, or
regulation to which the Company or any of the Sellers is a party or by which the
Company, any of its assets, or any of the Sellers is in any way bound or
obligated.
2.7 GOVERNMENTAL CONSENTS. Except as described in Schedule 2.7, no
consent, approval, order, or authorization of, or registration, qualification,
designation, declaration, or filing with, any governmental or quasi-governmental
agency, authority, commission, board, or other body (collectively, a
"GOVERNMENTAL BODY") is required on the part of the Company or any of the
Sellers in connection with the transactions contemplated by this Agreement or
the Seller Documents, except where the failure to obtain or comply with the same
would not have a material adverse effect on the Company.
2.8 FINANCIAL STATEMENTS. Attached as Schedule 2.8 hereof are true and
complete copies of (a) the unaudited consolidated balance sheet of the Company
(the "LATEST BALANCE SHEET") as of March 31, 1996 (the "LATEST BALANCE SHEET
DATE") and the related unaudited consolidated statements of operations and cash
flow for the 9 months then ended, and (b) the audited consolidated balance
sheets of the Company as of June 30, 1995 and June 30, 1994 and the related
audited consolidated statements of operations and cash flow for the 12 months
then ended (collectively, the "FINANCIAL STATEMENTS"). The Financial Statements
present fairly the financial condition of the Company at the dates specified and
the results of its operations for the periods specified and, except as described
in Schedule 2.8 hereof, have been prepared in accordance with GAAP, subject in
the case of the unaudited statements, and except as disclosed in Schedule 2.8
hereof, to changes resulting from normal period-end adjustments for recurring
accruals (which will not be material individually or in the aggregate) and to
the absence of footnote disclosure and other presentation items. The Financial
Statements have been prepared from the books and records of the Company, which
accurately and fairly reflect all the transactions of, acquisitions and
dispositions of assets by, and incurrence of liabilities by the Company. All
accounts receivable reflected on the Latest Balance Sheet represent valid and
enforceable obligations arising from sales actually made or services actually
performed in
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the ordinary course of the Company's business. There are no contests,
claims, or rights of set-off, other than returns or adjustments in the
ordinary course of business, relating to the amount or validity of any such
accounts receivable.
2.9 ABSENCE OF MATERIAL LIABILITIES. The Company has no direct or
indirect material debts, obligations, or liabilities of any nature, whether
absolute or contingent, accrued or unaccrued, asserted or unasserted, known or
unknown, or otherwise, and whether due or to become due (collectively,
"LIABILITIES"), except for (a) as disclosed in Schedule 2.9(a) hereof,
(b) Liabilities specifically identified in the Latest Balance Sheet as "CURRENT
LIABILITIES" in accordance with GAAP and that are not related to indebtedness
for borrowed money or purchase money financing, and (c) obligations to be
performed in the ordinary course of business under the Material Agreements and
all other agreements of the Company entered into in the ordinary course of its
business. Notwithstanding the definition of the term "MATERIAL AGREEMENTS" set
forth in Section 2.20 hereof, for purposes of this Section 2.9 the obligations
to be performed in the ordinary course of business under the Material Agreements
or the other agreements referred to in clause (c) of this Section 2.9 do not
include any Liabilities of the Company with or to any former shareholders of the
Company under any agreements or other arrangements pursuant to which, or in
connection with which, the Company acquired such shareholder's shares of stock
in the Company, including without limitation, the repayment of any promissory
notes issued by the Company to any such former shareholders.
2.10 ABSENCE OF MATERIAL ADVERSE CHANGE. Except as set forth in
Schedule 2.10 hereof and except as specifically contemplated in this Agreement,
since the Latest Balance Sheet Date, there has not been: (a) any material
adverse change in the condition (financial or otherwise), results of operations,
business, prospects, assets, or Liabilities of the Company or with respect to
the manner in which the Company conducts its business or operations; (b) any
payment or transfer of assets (including without limitation any dividend, stock
repurchase, or other distribution or any repayment of indebtedness) to any of
the Sellers or their Affiliates, (c) any material breach or default (or, to the
knowledge of the Agent, any event that with notice or lapse of time would
constitute a breach or default), termination, or, to the knowledge of the Agent,
threatened termination under any Material Agreement; (d) any material theft,
damage, destruction, casualty loss, condemnation, or eminent domain proceeding
affecting any of the Company's assets, whether or not covered by insurance; (e)
any sale, assignment, or transfer of any of the assets of the Company, except in
the ordinary course of business and consistent with past practices; (f) any
waiver by the Company of any material rights related to the Company's business,
operations, or assets; (g) any other transaction, agreement, or commitment
entered into by the Company or the Sellers materially adversely affecting the
Company's business, operations, or assets; or (h) any agreement or understanding
of the Company or the Sellers to do or resulting in any of the foregoing.
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2.11 TAXES. (a) All required federal, Commonwealth of Puerto Rico, state,
local, and other tax returns, notices, and reports (including without limitation
income, property, sales, use, franchise, excise, municipal license, withholding,
social security, and unemployment tax returns) relating to or involving
transactions with the Company have been accurately prepared and duly and timely
filed in all material respects, and all taxes required to be paid with respect
to the periods covered by any such returns have been timely paid. There is
currently no tax deficiency proposed or assessed against the Company, and the
Company does not have in effect any waiver of any statute of limitations on the
assessment or collection of any tax. Except as described in Schedule 2.11(a)
hereof, no tax audit, action, suit, proceeding or claim is now pending or, to
the knowledge of the Agent, threatened against the Company, and, to the
knowledge of the Agent, no issue or question has been raised (and is currently
pending) and no investigation is pending by any taxing authority in connection
with any of the Company's tax returns or reports. The Company has withheld or
collected from each payment made to each of its employees the full amount of all
taxes required to be withheld or collected therefrom and has paid such taxes to
the proper tax receiving officers or authorized depositories. Neither of the
Sellers nor the Company has given or been requested to give waivers or
extensions (or, to the knowledge of the Agent, is or would be subject to a
waiver or extension given by any other Person) of any statute of limitations
relating to the payment of taxes of the Company or for which the Company may be
liable.
(b) The Company's taxable year ends on June 30th of each year.
Schedule 2.11(b) hereof contains a complete, accurate, and correct list of all
audits of all tax returns for taxable years commencing after June 30, 1991,
including a reasonably detailed description of the nature and outcome of each
audit. Schedule 2.11(b) hereof describes all adjustments to the Puerto Rico
income tax, property tax, excise tax, and municipal license tax returns filed by
the Company or any group of corporations including the Company for all taxable
years commencing after June 30, 1991, and the resulting deficiencies proposed by
the relevant tax authorities.
(c) Alto Grande is the holder of a grant of industrial tax exemption
issued by the Governor of Puerto Rico in Case No. 88-8-I-80 (the "GRANT") under
the terms of the Puerto Rico Tax Incentives Act, Act No. 8 of January 24, 1987,
as amended. To the knowledge of the Agent, the Grant is in full force and
effect and is valid and enforceable. Except for the amendments described in
Schedule 2.11(c) hereof, neither the Grant nor the Order Fixing the Date of
Commencement of Operations of the Grant has been amended or modified. To the
knowledge of the Agent, Alto Grande has complied at all times with all the
provisions of the Grant and the provisions of all applicable laws, statutes,
rules, regulations, ordinances, orders, procedures, or proclamations, the breach
of which would result in the revocation of the Grant. To the knowledge of the
Agent, there are no facts or circumstances existing or pending, or threatened
actions or proceedings, that would result in the revocation of the Grant. To
the knowledge of the Agent, except as stated in Schedule 2.11(c) hereof, all
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of the products manufactured by Alto Grande and all of the real and personal
property, tangible and intangible, owned and used by Alto Grande in such
operations enjoy exemption under the Grant.
(d) Each of Garrido and Alto Grande has a valid certificate in effect
as an Agricultural Business, within the meaning of the Agricultural Incentives
Act, issued by the Secretary of Agriculture of the Commonwealth of Puerto Rico.
The representations made by Garrido and Alto Grande to the Secretary of
Agriculture in connection with the issuance of each such certificate are true,
accurate, and complete in all material respects.
2.12 LITIGATION. Except as disclosed in Schedule 2.12 hereof, there are no
pending or, to the knowledge of the Agent, threatened lawsuits, administrative
proceedings, or reviews, or formal or informal complaints or investigations by
any individual, corporation, partnership, Governmental Body, or other entity (a
"PERSON") against or relating to the Company or any of its directors, employees,
or agents (in their capacities as such) or to which any assets of the Company
are subject or that seek to restrain or prohibit or obtain damages or other
relief with respect to this Agreement or the Seller Documents or the
consummation of the transactions contemplated by this Agreement or the Seller
Documents. Except as disclosed in Schedule 2.12 hereof, and except for orders,
writs and decrees generally applicable to the industry in which the Company is
engaged, the Company is not subject to or bound by any currently existing order,
writ, injunction, or decree which has a material adverse effect on the condition
(financial or otherwise) or operations of the Company.
2.13 COMPLIANCE WITH LAWS. Except where the non-compliance, violation or
contravention would not have a material adverse effect on the business, assets,
condition (financial or otherwise) or the results of operations of the Company,
and except as otherwise disclosed in this Agreement or disclosed in Schedule
2.13 hereof, the Company is currently complying with, and has at all times
complied with, and the use, operation, and maintenance of its assets comply with
and have at all times complied with, and neither the Company or its assets nor
the use, operation, or maintenance of its assets is in violation or
contravention of, any applicable statute, law, ordinance, decree, order, rule,
or regulation of any Governmental Body, including, without limitation, all
federal, Commonwealth of Puerto Rico, state, and local laws relating to
occupational health and safety, employment, environmental, labor and tax
matters.
2.14 PERMITS. Except as disclosed in Schedule 2.15 hereof concerning
environmental permits, and except as disclosed in Schedule 2.14 hereof, the
Company owns or possesses from each appropriate Governmental Body all right,
title, and interest in and to all permits, licenses, authorizations, approvals,
quality certifications, franchises, or rights (collectively, "PERMITS") issued
by any Governmental Body necessary or required to conduct its business as
currently conducted, except where the failure to obtain such Permits would not
have a material
<PAGE>
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adverse effect on the business, assets, condition (financial or otherwise) or
the results of operations of the Company. To the knowledge of the Agent, no
loss or expiration of any such Permit is pending or threatened, other than
expiration in accordance with their terms of Permits that may be renewed in
the ordinary course of business without lapsing.
2.15 ENVIRONMENTAL MATTERS. (a) Without limiting the generality of the
other representations and warranties set forth in this Article II, except as
disclosed in Schedule 2.15 hereof: (i) the Company has conducted its business in
material compliance with all applicable Environmental Laws (as defined herein)
including, without limitation, by having all Permits required under any
applicable Environmental Law for the operation of its business; (ii) none of the
properties owned or leased by the Company contains any Hazardous Substance (as
defined herein) in amounts exceeding natural background levels or the levels
permitted by applicable Environmental Laws; (iii) the Company has not received
any notices, demand letters, or requests for information from any Governmental
Body or other Person indicating that the Company may be in violation of, or
liable under, any Environmental Law or relating to any of the properties
identified in Schedule 2.18 hereof; (iv) no reports have been filed, or are
required to be filed, by the Company concerning the release of any Hazardous
Substance or the threatened or actual violation of any applicable Environmental
Law; (v) no Hazardous Substance has been disposed of, released, or transported
in violation of any applicable Environmental Law from any properties owned or
leased by the Company or as a result of any activity of the Company; (vi) there
have been no environmental investigations, studies, audits, tests, reviews, or
other analyses regarding compliance or noncompliance with any applicable
Environmental Law conducted by or that are in the possession of the Company
relating to the activities of the Company or any of the properties identified in
Schedule 2.18 hereof that have not been delivered to Purchaser; (vii) there are
no underground storage tanks on, in, or under any properties owned or leased by
the Company, and no underground storage tanks have been closed or removed from
any of such properties; (viii) there is no exposure from asbestos or asbestos
containing material present in any of the properties owned or leased by the
Company, and no asbestos has been removed from any of such properties; and (ix)
neither the Company nor any of its properties are subject to any Liabilities
relating to any suit, settlement, court order, administrative order, regulatory
requirement, judgment, or claim asserted or arising under any applicable
Environmental Law.
(b) There are no trust funds or similar arrangements pursuant to
which the Company has to set aside funds to fulfill closure and post-closure
obligations relating to any landfills. The Company has not received notice that
it must contribute to any such fund. To the knowledge of the Agent, the
Company has no Liabilities relating to landfills that are not fully reflected on
the Financial Statements.
(c) "ENVIRONMENTAL LAW" means any applicable federal, Commonwealth of
Puerto Rico, state, or local law, statute, ordinance, rule, regulation, code,
Permit, license,
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authorization, approval, consent, order, judgment, decree, injunction,
requirement, or agreement with any Governmental Body with jurisdiction over
environmental matters relating to (i) the protection, preservation, or
restoration of the environment (including without limitation air, water
vapor, surface water, groundwater, drinking water, surface land, subsurface
land, plant and animal life, or any other natural resource) or to human
health or safety or (ii) the exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release, or disposal of Hazardous Substances, in each case as
amended. "HAZARDOUS SUBSTANCE" means any substance listed, defined,
designated, classified or regulated as hazardous, toxic, or radioactive under
any applicable Environmental Law. Hazardous Substance includes any toxic
waste, hazardous substance, toxic substance, hazardous waste, or petroleum or
any petroleum derivative or by-product, radon, radioactive material, asbestos
or asbestos containing material, urea formaldehyde, lead, or polychlorinated
biphenyls.
2.16 EMPLOYEE MATTERS. Set forth in Schedule 2.16 hereof is a complete
list of all current non-union employees of the Company, including their
compensation. The consummation of the transactions contemplated by this
Agreement and the Seller Documents will not accelerate the time of payment or
vesting or increase the amount of compensation due to any director, officer, or
employee (present or former) of the Company. Except as reflected in the
Financial Statements, the Company has no existing liabilities for severance or
workers compensation payments to any Person and, except as set forth in Schedule
2.16 hereof, has no agreement, arrangement, or understanding with any present or
former employee with respect to any severance or similar payments, other than as
provided by law. To the knowledge of the Agent, no employees that, individually
or in the aggregate, would be material to the condition (financial or
otherwise), results of operations, business, prospects, assets, or Liabilities
of the Company or the manner in which the Company conducts its business or
operations, intend to terminate their employment with the Company. Except as
set forth in Schedule 2.16 hereof, the Company neither has in effect nor has had
in effect during the ten (10) year period ending on the date of this Agreement,
any collective bargaining, union or labor agreements, contracts or other
arrangements with any group of employees, labor union, or employee
representative. To the knowledge of the Agent, no organization effort is
currently being made or threatened by or on behalf of any labor union with
respect to employees of the Company. The Company is in material compliance with
all provisions of each applicable collective bargaining agreement, and no
complaint alleging any violation of such provisions has been filed or, to the
knowledge of the Agent, threatened to be filed with or by any Governmental Body.
During the ten (10) year period ending on the date of this Agreement, the
Company did not experience any strike, labor trouble, work stoppage, or slow
down by its employees. The Agent does not know of any basis for any such
strike, labor trouble, work stoppage, or slow down by Company employees.
<PAGE>
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2.17 EMPLOYEE BENEFIT PLANS. The Company neither has in effect nor has had
in effect during the ten (10) year period ending on the date of this Agreement
any "EMPLOYEE BENEFIT PLANS" (as defined in Employee Retirement Income Security
Act of 1974, as amended ("ERISA")), or, except as described in Schedule 2.17
hereof, any other bonus, incentive, compensation, deferred compensation, profit
sharing, stock option, stock appreciation right, stock bonus, stock purchase,
savings, severance, supplemental unemployment, layoff, salary continuation,
pension, health, life insurance, disability, group insurance, vacation pay,
holiday, sick leave, fringe benefit, and welfare plans, or any other similar
plan, agreement, contract, policy, or understanding (whether written or oral,
qualified or non-qualified, currently effective or terminated), and any trust,
escrow, or other agreement or contract related thereto, together with any
amendment, modification or supplement thereto that: (a) are maintained or
contributed to by the Company; and (b) provide benefits or describe policies or
procedures applicable to any current or former officer, director, employee,
agent, or representative of the Company, or the beneficiaries or dependents of
any thereof, regardless of whether funded (collectively, the "EMPLOYEE PLANS",
and individually, an "EMPLOYEE PLAN"). No written or oral representations that
are binding on the Company have been made by any officer of the Company with the
authority to make such representations to any current or former officer,
director, employee, agent, or representative of the Company, or any beneficiary
or dependent of any thereof, promising or guaranteeing any employer payment or
funding for the continuation of medical, dental, life, or disability coverage
for any period of time beyond the end of the current plan year, except to the
extent of coverage required under Section 4980B of the U.S. Internal Revenue
Code of 1986, as amended. Except as required pursuant to any of the plans
described in Schedule 2.17 hereof, neither Purchaser nor the Company (as
applicable) will have any liability to any of the Sellers, the Company, any
Puerto Rico governmental agency, any current or former officer, director,
employee, agent, or representative of the Company, or any beneficiary or
dependent of any thereof, or any other person or entity, relating to any
Employee Plan.
2.18 TITLE TO ASSETS. (a) Set forth in Schedule 2.18(a) hereof is a
complete list (including the street address, where applicable) of (i) all real
property currently owned by the Company; (ii) all real property currently leased
or otherwise used by the Company; (iii) all real property formerly owned,
leased, or otherwise used by the Company during the five (5) year period ending
on the date of this Agreement, indicating the nature of any facilities or
operations of the Company on such property and the date and manner of
disposition; (iv) each vehicle currently owned or leased by the Company; and (v)
each tangible asset currently owned by the Company.
(b) The Company has good and marketable title to all of its assets,
including, without limitation, the assets listed in Schedule 2.18(a) hereof
(other than those described in clause (iii) above), the assets reflected on the
Latest Balance Sheet, and all assets used by the Company in the conduct of its
business (except as described in Schedule 2.18(b) hereof for
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assets disposed of since the Latest Balance Sheet Date other than assets
disposed in the ordinary course of business for fair value to Persons that
are not Affiliates of the Company or the Sellers and consistent with past
practices and except for assets held under leases or licenses disclosed
pursuant to Section 2.20 hereof); and all such assets are owned free and
clear of any Liens, except for (i) inchoate Liens for current taxes not yet
due; (ii) minor imperfections of title and encumbrances that do not materially
detract from or interfere with the use or value of such properties; and
(iii) Liens disclosed in Schedule 2.18(b) hereof.
2.19 CONDITION OF PROPERTIES; INVENTORIES. (a) Except as set forth in
Schedule 2.19(a) hereof, all material facilities, machinery, equipment,
fixtures, vehicles, and other tangible property owned, leased, or used by the
Company are in good operating condition and repair, normal wear and tear
excepted, are reasonably fit and usable for the purposes for which they are
currently being used, are adequate and sufficient for the Company's business as
currently conducted, and conform with all applicable laws, rules and regulations
in all material respects. The Company maintains policies of insurance issued by
insurers of recognized responsibility insuring the Company and its material
assets and business against such losses and risks, and in such amounts, as are
customary in the case of corporations of established reputation engaged in the
same or similar businesses in Puerto Rico.
(b) To the knowledge of the Agent, except as described in
Schedule 2.19(b) hereof, all inventory of the Company, whether or not reflected
in the Latest Balance Sheet, consists of a quality and quantity usable and
salable in the ordinary course of business, except for obsolete items and items
of below-standard quality, all of which have been written off or written down to
net realizable value in the Latest Balance Sheet or on the accounting records of
the Company as of the date of this Agreement, as the case may be. All
inventories not written off have been priced at cost on a first in, first out
basis. In the opinion of the Agent, the quantities of each item of inventory
(whether raw materials, work-in-process, or finished goods) are reasonable for
the purpose of conducting the business of the Company in its present
circumstances.
2.20 MATERIAL AGREEMENTS. (a) Schedule 2.20(a) hereof lists each
agreement, understanding, and arrangement (whether written or oral and including
all amendments) involving the payment or receipt by, or an obligation of or to,
the Company of an annual amount in excess of $20,000 to which the Company is a
party or a beneficiary or by which the Company or any of its assets is bound
(collectively, the "MATERIAL AGREEMENTS"), including without limitation (i) any
real estate leases; (ii) any agreement that is material to the business,
operations, or prospects of the Company; (iii) any agreement evidencing,
securing or otherwise relating to any indebtedness for which the Company is
liable; (iv) any capital or operating leases or conditional sales agreements
relating to vehicles, equipment, or other assets of the Company; (v) any supply
or manufacturing agreements or arrangements pursuant to
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which the Company is entitled or obligated to acquire any assets from a third
party; (vi) any insurance policies; (vii) any employment, consulting,
noncompetition, separation, collective bargaining, union, or labor agreements
or arrangements; (viii) any agreement, arrangement, understanding, or
business relationship, whether as a supplier, vendor, customer, or otherwise
with or for the benefit of any Seller, or, to the knowledge of the Agent, any
director, officer, or employee of the Company, or any Affiliate of such
person; and (ix) any other agreement or arrangement pursuant to which the
Company could be required to make payments or entitled to receive payments.
(b) The Company has delivered to Purchaser a copy of each Material
Agreement. Except as described in Schedule 2.20(b) hereof, (i) each Material
Agreement is valid, binding, and in full force and effect and enforceable in
accordance with its terms; (ii) the Company has performed all of its material
obligations under each Material Agreement, and there exists no material breach
or default (or event that with notice or lapse of time would constitute a
material breach or default) under any Material Agreement; (iii) there has been
no termination or notice of default or, to the knowledge of the Agent, any
threatened termination under any Material Agreement; (iv) no consent of any
Person is required in connection with the transactions contemplated by this
Agreement in order to preserve the rights of the Company under any Material
Agreement.
2.21 CUSTOMERS AND SUPPLIERS. Set forth in Schedule 2.21 hereof is a
complete list of the top 20 customers of the Company measured in terms of sales
(the "MATERIAL CUSTOMERS"). The Agent believes that the relationships of the
Company with each of its suppliers and customers is good and, to the knowledge
of the Agent, none of the Company's relationships with any material customer or
any material supplier will be terminated or materially diminished as a result of
this Agreement, the consummation of any of the transactions contemplated by this
Agreement, or otherwise.
2.22 INTELLECTUAL PROPERTY RIGHTS. Set forth in Schedule 2.22 hereof is a
complete list of all registered patents, trademarks, service marks, trade names
and copyrights of the Company (collectively, "REGISTERED INTELLECTUAL
PROPERTY"), owned by the Company or with respect to which the Company has any
rights. Except as disclosed in Schedule 2.22 hereof, the Company has the sole
and exclusive right to use all Registered Intellectual Property as and to the
extent registered. Except as disclosed in Schedule 2.22 hereof, the Company has
the right to use all other proprietary software, intellectual property,
proprietary information, trade secrets, trademarks, trade names, copyrights,
material and manufacturing specifications, licenses, and drawings and designs
used by the Company (collectively, "INTELLECTUAL PROPERTY"), without (except as
disclosed in Schedule 2.22 hereof) infringing on or otherwise acting adversely
to the rights or claimed rights of any other Person, and (except as disclosed in
Schedule 2.22 hereof) neither the Company nor the Sellers are obligated to pay
any royalty or other consideration to any Person in connection with the use of
any such Intellectual Property.
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To the knowledge of the Agent, except as disclosed in Schedule 2.22 hereof,
no other Person is infringing the rights of the Company in any of its
Intellectual Property. The Intellectual Property constitutes all of the
assets and properties of that nature which are used for the operation of the
business of the Company as it is currently conducted and, to the knowledge of
the Agent, no employee, agent or representative of the Company has entered
into any agreement that restricts or limits in any way the scope or type of
work in which such employee, agent, or representative may be engaged or
requires that such employee, agent, or representative transfer, assign, or
disclose information to any other Person concerning his work for the Company
other than to the Company.
2.23 SUBSIDIARIES AND INVESTMENTS. Except as set forth in Schedule 2.23
hereof, the Company does not own any direct or indirect equity or debt interest
in any other Person, including, without limitation, any interest in a
partnership or joint venture, and is not obligated or committed to acquire any
such interest.
2.24 COMPETING INTERESTS. Except as set forth in Schedule 2.24 hereof,
neither the Sellers, the Company, nor, to the knowledge of the Agent, any
director, officer, or Affiliate of any of such persons is, or owns, directly or
indirectly, an interest in any Person that is a competitor, customer, or
supplier of the Company or that otherwise has business dealings with the
Company.
2.25 ILLEGAL OR UNAUTHORIZED PAYMENTS; POLITICAL CONTRIBUTIONS. Neither
the Sellers, the Company nor, to the knowledge of the Agent, any of its
officers, directors, employees, agents, other representatives or any other
Person with which the Company is or has been affiliated or associated, has,
directly or indirectly, made, authorized, or received any payment, contribution,
or gift of money, property, or services, whether or not in contravention of
applicable law, (a) as a kickback or bribe to any Person or (b) except as
described in Schedule 2.25 for contributions during the past year, to any
political organization, or the holder of or any aspirant to any elective or
appointive public office, except for personal political contributions not
involving the direct or indirect use of funds of the Company. The Company has
not violated any applicable federal or state antitrust statutes, rules or
regulations, including without limitation those relating to unfair competition,
price fixing, bid rigging, or collusion, the violation of which could have a
material adverse effect on the Company.
2.26 INSURANCE. Schedule 2.26 hereof lists all insurance policies
currently in effect under which the Company is a beneficiary or an insured. The
Company has not received any notice that any of the policies listed in such
Schedule 2.26 has been or will be cancelled prior to its scheduled termination
date, or would not be renewed substantially on the same terms now in effect if
the insured party requested renewal, or has received notice from any of its
insurance carriers that any insurance premiums will be subject to increase in an
amount materially disproportionate to the amount of the increases with respect
thereto (or with respect
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to similar insurance) in prior years. The Company is not in material default
under any such policy and all premiums due and payable with respect to such
coverage have been paid or accrued.
2.27 NO MISREPRESENTATIONS. The Sellers have disclosed to Purchaser all
facts and information known to them that would be material to a purchase of the
Company. Neither the Company nor the Agent has received any appraisal report
relating to the value or condition of the Company or any of its assets, other
than the offers or advice received in connection with the sale of the Company
and/or its assets. The representations, warranties and statements made by the
Sellers in this Agreement (including the Schedules to this Agreement) and the
Seller Documents are true, complete, and correct, and do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make any such representation, warranty, or statement, under the circumstances in
which it is made, not misleading. To the knowledge of the Agent, the
representations, warranties and statements in the Summary Information Memorandum
compiled by The Chase Manhattan Bank, N.A. with respect to the Company dated
January, 1996 (except for any projections contained therein) were true,
complete, and correct in all material respects when made and did not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make any such representation, warranty, or statement under the circumstances
in which it was made, not misleading.
2.28 OBLIGATIONS BETWEEN THE SELLERS AND THE COMPANY. Except as expressly
set forth in Schedule 2.28 hereof, neither of the Sellers nor any of their
respective Affiliates has any Liabilities owing to the Company, and the Company
has no Liabilities owing to either of the Sellers or their respective
Affiliates.
2.29 PILON'S VOLUME. During its 1996 fiscal year, the Company sold
approximately 1,685 hundredweights of products using the Pilon name.
2.30 LIABILITIES LISTED IN EXHIBIT L. The principal balance and accrued
interest of the liabilities listed in Exhibit L hereof are true and correct.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Sellers as follows:
3.1 ORGANIZATION. Purchaser is a corporation duly organized, validly
existing, and in good standing under the laws of Puerto Rico.
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3.2 AUTHORITY. Purchaser has all requisite power and authority to
execute, deliver, and perform under this Agreement and all other documents and
instruments contemplated by this Agreement. The execution, delivery, and
performance of this Agreement and all such other documents and instruments by
Purchaser have been duly authorized by all necessary action, corporate or
otherwise, on the part of Purchaser. This Agreement and all such other
documents and instruments have been duly executed and delivered by Purchaser and
are legal, valid, and binding obligations of Purchaser, enforceable against
Purchaser in accordance with their respective terms.
3.3 NO VIOLATION. The execution, delivery, and performance of this
Agreement and all other documents and instruments contemplated by this Agreement
by Purchaser will not conflict with or result in the breach of any term or
provision of, or violate or constitute a default under, any charter provision or
by-law or under any material agreement, instrument, order, law, or regulation to
which Purchaser is a party or by which Purchaser is in any way bound or
obligated.
3.4 GOVERNMENTAL CONSENTS. Except as described in Schedule 3.4 hereof, no
consent, approval, order or authorization of, or registration, qualification,
designation, declaration, or filing with, any Governmental Body is required on
the part of Purchaser in connection with the transactions contemplated by this
Agreement.
3.5 SECURITIES ACT OF 1933. The Shares are being acquired for investment
purposes only and not with a view to any public distribution thereof, and
Purchaser will not offer to sell or otherwise dispose of such shares so acquired
by it in violation of any registration requirements of applicable law.
ARTICLE IV
COVENANTS AND AGREEMENTS
4.1 RELEASE OF THE SELLERS. Each Seller and each of the Sellers' Wives,
for themselves and their heirs, executors, administrators, successors, and
assigns, to the fullest extent permitted under applicable law, hereby fully and
unconditionally releases and forever discharges and holds harmless the other
Seller, the Company, Purchaser and their respective employees, officers,
directors, successors, Affiliates, and assigns, from any and all Claims (as
defined herein) of every kind and nature whatsoever, whether or not now existing
or known, relating in any way, directly or indirectly, to the Company, that such
Seller or either of Sellers' Wives may now have or may hereafter claim to have
against the other Seller, the Company, Purchaser, or any of such employees,
officers, directors, successors, or assigns as a result of acts or omissions
occurring, or failing to occur, on or before the date of this Agreement;
provided that the foregoing release will not affect any Liabilities or
obligations of Purchaser to any Seller under this Agreement or the Seller
Documents.
<PAGE>
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4.2 TRANSACTION COSTS. The Sellers will pay all attorneys', accountants',
finders', brokers', investment banking and other fees, costs, and expenses
incurred by the Company or the Sellers prior to the date of this Agreement
(except for the time devoted by the Company's officers or employees, and except
for fees that would have been incurred anyway in the ordinary course of the
Company's trade or business, such as the acquisition or renewal of permits or
licenses) or by the Sellers after the date of this Agreement, in connection with
the preparation, negotiation, execution, and performance of this Agreement and
the Seller Documents or any of the transactions contemplated by this Agreement
and the Seller Documents. Purchaser will pay all attorneys', accountants',
finders', brokers', investment banking and other fees, costs and expenses that
it incurs in connection with the preparation, negotiation, execution and
performance of this Agreement and the Seller Documents or any of the
transactions contemplated by this Agreement and the Seller Documents.
4.3 NONDISCLOSURE. Each Seller acknowledges and agrees that all customer,
prospect, and marketing lists, sales data and Intellectual Property of the
Company (collectively, "CONFIDENTIAL INFORMATION") are valuable, special, and
unique assets and each Seller agrees to (a) treat the Confidential Information
as confidential and not make use of any Confidential Information for such
Seller's own purposes or for the benefit of any Person (other than Purchaser or
the Company), and (b) except as required by applicable law, not to disclose any
Confidential Information to any other Person.
4.4 PUBLICITY. Purchaser and the Sellers will cooperate with each other
in the development and distribution of all news releases and other public
disclosures relating to the transactions contemplated by this Agreement.
Neither Purchaser, the Company or the Sellers will issue or make, or allow to
have issued or made, any press release or public announcement concerning this
Agreement or the transactions contemplated hereby without the advance approval
of the form and substance thereof by the other parties, unless otherwise
required by applicable legal or stock exchange requirements (in which event
Purchaser will allow the Sellers reasonable time to comment as to the content of
such press release or public statement in advance of its issuance).
4.5 GARRIDO'S TAX CREDIT FOR INVESTMENT IN GUEST CHOICE. Purchaser
acknowledges and agrees to the transfer to the Sellers of all tax credits to
which Garrido is or may hereafter become entitled under the Agricultural
Incentives Act, as a result of Garrido's investment in Guest Choice prior to the
date of this Agreement, and that, without the payment of any further
consideration to Purchaser, the Sellers are entitled to all such credits to the
extent that any such credits exist under the Agricultural Incentives Act.
4.6 MITIGATION OF DAMAGES. Purchaser acknowledges its obligation to make
reasonable efforts to mitigate damages incurred by Purchaser arising out of any
Claim, as
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provided by law, including claims with respect to which indemnification will
be sought against the Sellers.
4.7 ASSUMPTION OF LIABILITIES AND CANCELLATION OF LIENS. Sellers agree to
pay and discharge in full all of the liabilities described in Exhibit L hereof,
and to take any and all actions and execute any and all documents, at their sole
cost and expense, necessary for the cancellation of the Liens described in
Schedule 2.18(b) hereof.
4.8 DEFERRED TAXES. Purchaser acknowledges and agrees that the deferred
taxes reflected in the Financial Statements will not be taken into account for
purposes of the computation of EBITDA, the Earnout Amount and Actual Net Working
Capital required to be made pursuant to this Agreement.
4.9 PAYMENT OF SPECIAL BONUSES BY THE SELLERS. Purchaser agrees that any
of the Sellers, at his sole discretion, may offer and pay, from such Seller's
funds, bonuses to any Company employees subsequent to the date of this Agreement
as a result of the sale of the Shares and/or the payment to the Sellers of the
Earnout Amount.
ARTICLE V
INDEMNIFICATION
5.1 (a) INDEMNIFICATION OF PURCHASER. Subject to the provisions of
Section 5.2 hereof, each Seller severally ("mancomunadamente"), but not jointly,
will indemnify and hold Purchaser, its subsidiaries (including the Company), and
their respective Affiliates, directors, officers, employees, and agents (the
"PURCHASER PARTIES") harmless from any and all liabilities, obligations, claims,
contingencies, damages, costs, and expenses, including all court costs and
reasonable attorneys' fees (the "CLAIMS"), that any Purchaser Party may suffer
or incur as a result of or relating to:
(i) the breach or inaccuracy of any of the representations,
warranties, covenants, or agreements made by the Sellers in this Agreement or
any Seller Document (including the Schedules thereto);
(ii) any Claim, lawsuit or proceeding made or initiated by a
third party at or prior to the date of this Agreement, or arising out of any act
or transaction of the Sellers or the Company occurring prior to the date of this
Agreement, or arising out of acts or omissions of the Company or the Sellers at
or prior to the date of this Agreement, that is related to the Company, its
assets, or the operation of its business; or,
(iii) described in Sections 5.2(a)(ii)(other than in clause (F)
thereof) and 5.2(a)(iii) hereof.
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The Purchaser Parties acknowledge and agree that their sole and
exclusive remedy with respect to any Claim shall be pursuant to the
indemnification provisions set forth in this Article V. In furtherance of the
foregoing, and except as otherwise set forth in this Article V, the Purchaser
Parties hereby fully and unconditionally waive, release and forever discharge
each Seller and each of the Sellers' Wives, for themselves and their heirs,
executors, administrators, successors, and assigns, to the fullest extent
permitted under applicable law, from any and all Claims that the Purchaser
Parties may have against such Seller or any of the Sellers' Wives relating to
the subject matter of this Agreement.
(b) PROCEDURES RELATING TO INDEMNIFICATION OF A CLAIM. In order for
any Purchaser Party to be entitled to any indemnification provided for under
this Agreement in respect of, arising out of or involving a Claim, such
indemnified party must notify the indemnifying party in writing, and in
reasonable detail, of the Claim as to which it asserts a right to
indemnification within 10 days after receipt by such indemnified party of notice
(notice to such indemnified party being the filing of any action, receipt of any
Claim in writing, any extrajudicial claim for damages or compensation, the
threat of any of the foregoing, or similar form of actual notice) of the Claim,
if any. Thereafter, the indemnified party shall deliver to the indemnifying
party, within 10 days after the indemnified party's receipt thereof, copies of
any notices and documents (including court papers) received by the indemnified
party relating to the Claim. Failure to timely give such notification or
deliver such notices or documents shall not affect the obligation to provide
indemnification hereunder except to the extent that the indemnifying party shall
have been actually materially prejudiced as a result of such failure (except
that the indemnifying party shall not be liable for any expenses incurred during
the period in which the indemnified party failed to give such notice in
accordance with the terms of this Agreement).
If a Claim is made against an indemnified party, the indemnifying
party will be entitled to participate in the defense thereof and, if it so
chooses, to assume the defense thereof with counsel selected by the indemnifying
party and reasonably satisfactory to the indemnified party. Should the
indemnifying party so elect to assume the defense of a Claim, the indemnifying
party will not be liable to the indemnified party for legal expenses
subsequently incurred by the indemnified party in connection with the defense
thereof. If the indemnifying party assumes such defense, the indemnified party
shall have the right to participate in the defense thereof and to employ
counsel, at its own expense, separate from the counsel employed by the
indemnifying party, it being understood that the indemnifying party shall
control such defense. The indemnifying party shall be liable for the reasonable
fees and expenses of counsel employed by the indemnified party for any period
during which the indemnifying party has not assumed the defense thereof (other
than during any period in which the indemnified party shall have failed to give
notice of the Claim as provided above). If the indemnifying party chooses to
defend or prosecute any Claim, all of the parties hereto shall cooperate in the
defense or prosecution thereof. Such cooperation shall include the retention
<PAGE>
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by the Company of all records and information required by law other than
those not transferred to Purchaser as a result of this transaction, and (upon
the indemnifying party's request) reasonable access to the records and
information which are reasonably relevant to such Claim, and making employees
available on a mutually convenient basis to provide additional information
and explanation of any material provided hereunder. Whether or not the
indemnifying party shall have assumed the defense of a Claim, no party shall
admit any liability with respect to, or settle, compromise, or discharge,
such Claim without the other party's prior written consent (which consent
shall not be unreasonably withheld).
The parties agree that the indemnifying party that assumes the defense
of a Claim shall have the right to surrender such defense to the indemnified
party. Unless the indemnifying party surrenders control of the defense of a
proceeding prior to the termination of the period for discovery by the defendant
within such proceeding, it will be conclusively established for purposes of this
Agreement that the Claims subject of such proceeding are within the scope of and
subject to indemnification hereunder.
(c) EXCEPTION FOR TAX CLAIMS. Anything herein to the contrary
notwithstanding, in connection with tax related Claims for the taxable years of
the Company ended on or before June 30, 1996, the Agent shall have full, sole
and absolute discretion, authority and control to defend, settle, compromise or
discharge such Claim without the unrequested intervention or consent by or from
the Purchaser Parties; provided, however, that Sellers shall notify Purchaser of
the facts and circumstances related to any proposed settlement at least 5 days
prior to any settlement, and that (i) the Sellers' right to settle or compromise
without Purchaser's consent is limited to settlements or compromises that do not
impose any conditions upon Purchaser other than the acceptance of the Claim and
that are discharged by the payment of money by the Sellers as sole consideration
therefor, and (ii) concurrently with any such settlement or compromise, the
Sellers must either (A) pay in full the Claim, or (B) obtain an irrevocable and
unconditional release of the Company, its officers, directors and Affiliates.
Furthermore, the Purchaser Parties covenant and agree that under no circumstance
will they disclose information regarding the Company's or the Sellers' tax
matters for periods prior to the date of this Agreement except as may be
requested by the Agent in writing or as may be expressly required pursuant to
applicable law (in which case Purchaser shall notify the Agent in advance of its
intended compliance with such request, including in such notice the legal basis
upon which Purchaser is obligated to disclose such information together with a
detailed description of the information to be disclosed).
(d) LIMITATION ON INDEMNITY.
(i) AGGREGATE BASE AMOUNT. Notwithstanding anything to the
contrary provided in this Agreement, the Sellers will have no obligation to
indemnify the Purchaser Parties pursuant to the provisions of this Agreement for
Claims that any Purchaser Party
<PAGE>
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suffers or incurs as a result of or relating to the events or circumstances
described in Section 5.1(a)(i), 5.1(a)(ii), or 5.1(a)(iii) hereof that in the
aggregate do not exceed $250,000 (the "AGGREGATE BASE AMOUNT") and then only
for the amount by which the total amount of such Claims exceeds $250,000 and
subject to Section 5.2 hereof; provided, however, that the Aggregate Base
Amount will not apply to Claims that result from or relate to (A) the
litigation described in Schedule 2.12 hereof, (B) the tax audit described in
Schedule 2.11(a) hereof, (C) the agreements or other arrangements pursuant to
which, or in connection with which, the Company acquired the stock of any
former shareholders of the Company, or any other Claim of any type or nature
brought by or relating to any former shareholders of the Company, (D) the
environmental matters disclosed in Schedule 2.15 hereof, or (E) the
liabilities disclosed in Exhibit L hereof.
(ii) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as
otherwise expressly set forth in this Section 5.1(d)(ii), all representations
and warranties made in or pursuant to this Agreement will survive the execution
and delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement until March 31, 1998. The representations and
warranties contained in Section 2.11 hereof shall lapse and be of no further
force and effect on the following dates: (A) the representations and warranties
related to self-imposed taxes for which a return has to be filed, 4 years from
the due date of the applicable tax return, or 6 years from such date if 25% or
more of the Company's gross income, volume of business or value of the property
(as applicable) has been excluded from the return, (B) the representations and
warranties related to taxes for which no return has to be filed, the day
following the date on which the statute of limitation for the assessment of the
tax expires, and (C) in the event that the Agent agrees to the extension of any
of the time periods described in the preceding paragraphs (A) or (B), then the
representations and warranties related to the taxes to which such extension is
applicable will lapse and be of no further force and effect on the day following
the date when the extension expires. The representations and warranties
contained in Section 2.15 shall lapse and be of no further force and effect 5
years from the date of this Agreement. The representations and warranties
contained in Section 2.18(b) hereof and those with respect to Registered
Intellectual Property only in Section 2.22 hereof shall lapse and be of no
further force and effect 10 years from the date of this Agreement. The
representations and warranties contained in Sections 2.4 and 2.5 hereof shall
survive after the date of this Agreement and remain in full force and effect
thereafter. Notwithstanding the foregoing, any representation, warranty,
covenant, or agreement in respect of which indemnification may be sought under
any provision of this Agreement shall survive the time at which it would
otherwise terminate pursuant to this Section 5.1(d)(ii) if specific and
reasonably detailed written notice of the breach or inaccuracy of such
representation, warranty, covenant, or agreement giving rise to such right to
indemnification has been given to the party against which such indemnification
may be sought prior to such time. The Sellers and Purchaser hereby acknowledge
and agree that, except as otherwise specifically referenced in this Agreement,
the representations, warranties, covenants and agreements set forth herein
<PAGE>
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relate to events, conditions, facts and circumstances existing as of the date of
this Agreement and do not relate to any period of time thereafter.
5.2 MAXIMUM AMOUNT OF INDEMNIFICATION. (a) Subject to Section 5.1
hereof, the Sellers' obligation to indemnify and hold harmless the Purchaser
Parties for all Claims shall be limited in the aggregate to each Seller's PRO
RATA SHARE of $2,500,000, except for (i) Claims that relate to the environmental
representations and warranties of Section 2.15 hereof, as to which the limit
shall be increased by such Seller's PRO RATA SHARE of an additional $1,500,000
over his PRO RATA SHARE of the $2,500,000 described above, but only to the
extent that his PRO RATA SHARE of $2,500,000 is exhausted, (ii) Claims that
relate to (A) the litigation described in Schedule 2.12 hereof, (B) the tax
audit described in Schedule 2.11(a) hereof, (C) the agreements or other
arrangements pursuant to which, or in connection with which, the Company
acquired the stock of any former shareholders of the Company, (D) the release of
petroleum compounds identified by Law Environmental Caribe from the underground
storage tanks located at the Caguas roasting facility described in Schedule 2.15
hereof, (E) the liabilities described in Exhibit L hereof, (F) any breach or
inaccuracy of any of the Sellers' representations and warranties contained in
Sections 2.4, 2.5, 2.11 and 2.18(b) hereof, or in Section 2.22 hereof with
respect to the following trademarks or brand names: Cafe Crema and Alto Grande,
or (G) any breach of this Agreement by the Sellers that constitutes fraud upon
Purchaser, and (iii) the penalties or fines related to the expired or
non-existent environmental permits described in Schedule 2.15 hereof, as to
which the limit shall be each Seller's PRO RATA SHARE of $26,000,000 plus his
PRO RATA SHARE of the amount of the Earnout Amount actually paid, if any.
(b) Anything herein to the contrary notwithstanding, in no event
shall any action, suit, claim or proceeding be commenced against a Seller in
connection with a representation, warranty or matter the survival of which has
lapsed, unless, prior to such lapse, Purchaser has provided the Seller against
whom indemnification will be sought a specific and reasonably detailed written
notice of its interest to seek indemnification.
5.3 ESCROWED AMOUNT. As security for the Sellers' obligations under this
Article V, and to provide a non-exclusive source of reimbursement and
indemnification to the Purchaser Parties, an amount equal to $2,500,000 (the
"ESCROWED AMOUNT") has been retained of the Purchase Price and has been
deposited by the parties with an escrow agent pursuant to the Escrow Agreement.
From time to time, upon written notice by Purchaser to the Sellers of a Claim
the amount of which is determinable and upon the Agent's acknowledgment and
acceptance of such Claim, the Escrowed Amount will be applied (on the basis of
each Seller's PRO RATA SHARE) to indemnify and hold harmless Purchaser against
such Claim. On the business day following the final determination of the
Earnout Amount, any portion of the Escrowed Amount that has not been so applied
will be released to the Sellers; provided, however, that if Purchaser has
notified the Sellers of a Claim on or before the date
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of the final determination of the Earnout Amount, the amount of which is
uncertain or contingent, or that the Agent has not acknowledged and accepted,
a portion of the Escrowed Amount, based on Purchaser's good faith estimate of
the potential amount of such Claim, that would be adequate to indemnify and
hold harmless the Purchaser Parties for such Claim will remain deposited with
the escrow agent; and provided, further, that when the amount of such
uncertain, contingent, or challenged Claim is reduced, fixed, or resolved,
any portion of the Escrowed Amount remaining after the application of the
Escrowed Amount for such indemnification will be released promptly to the
Sellers.
5.4 INSURANCE. The amount of any Claim for which indemnification
is provided under this Article V shall be net of any amounts recovered by the
indemnified party under insurance policies in respect of such Claim. The
aggregate limitation on each of Sellers' and Purchaser's indemnification
obligations described in Sections 5.2 and 5.5 of this Agreement, respectively,
will not be reduced by any Claims, or portion thereof, recovered by the
indemnified party under an insurance policy. No Person, including any insurance
company providing insurance to an indemnified party in respect of any such
Claim, shall have any rights of subrogation in respect of the rights of such
indemnified party under this Article V.
5.5 INDEMNIFICATION BY PURCHASER. Purchaser will indemnify and hold the
Sellers, Sellers' Wives, and their respective heirs, executors, administrators,
successors, agents, and assigns harmless from and against any Claim that any
Seller, any of Sellers' Wives, or their heirs, executors, administrators,
successors, agents, and assigns may suffer or incur as a result of, or relating
to, the breach or inaccuracy of any representations, warranties, covenants or
agreements made by Purchaser in this Agreement or pursuant to this Agreement;
provided, however, that Purchaser's obligations hereunder for breaches or
inaccuracies of the representations and warranties set forth in Article III of
this Agreement shall be limited in the aggregate to $2,500,000.
ARTICLE VI
NON-COMPETITION AGREEMENT
6.1 NONCOMPETITION. Each of the Sellers hereby agrees for a period ending
on the later of three (3) years after such Seller leaves employment with the
Company (or any successor thereof) or any of its Affiliates, or five (5) years
from the date of this Agreement (each such period being a "NON-COMPETE PERIOD"),
that such Seller will not, directly or indirectly, as an employee, consultant,
advisor, referring source, agent of, or investor in, any Person:
(a) engage in the business of (i) roasting, distributing, or selling
ground coffee; (ii) distributing or selling charcoal; (iii) distributing or
selling office coffee, and office
<PAGE>
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coffee supplies, office supplies, or medical supplies; or (iv) processing raw
coffee beans or exporting, selling, or promoting coffee products (the
"BUSINESS") within any country in the world in which the Company, its
subsidiaries, or their respective successors and assigns engage at such time
(the "TERRITORY");
(b) directly or indirectly influence or attempt to influence any
customer or potential customer of the Company, its subsidiaries, or their
respective successors and assigns that is located in the Territory to purchase
goods or services related to the Business from any Person other than Company,
its subsidiaries, or their respective successors and assigns; or
(c) employ or attempt to employ or solicit for any employment
competitive with the Company, its subsidiaries, or their respective successors
and assigns, any individuals who are employees of the Company, its subsidiaries,
or their respective successors and assigns, or (except when acting as an
authorized agent of Purchaser) influence or seek to influence any such employees
to leave the Company's, its subsidiaries', or their respective successors' or
assigns' employment;
Provided that the foregoing will not apply to any investment in
publicly traded securities constituting less than 3% of the outstanding
securities in such class. The Sellers acknowledge that the Sellers' obligations
under this Article VI are a material inducement and condition to Purchaser's
entering into this Agreement and performing the transactions contemplated by
this Agreement. Each Seller acknowledges that this Section 6.1 is necessary to
protect the investment made hereunder by Purchaser in the acquisition of the
Shares, and that the restrictions and remedies contained in this Agreement are
reasonable in light of the consideration and other value such Seller has
accepted pursuant to this Agreement. If any provision of this Section 6.1 should
be found by any court of competent jurisdiction to be unreasonable by reason of
its being too broad as to the period of time, territory, and/or scope, then, and
in that event, such provision will nevertheless remain valid and fully
effective, but will be considered to be amended so that the period of time,
territory, and/or scope set forth will be changed to be the maximum period of
time, the largest territory, and/or the broadest scope, as the case may be, that
would be found reasonable and enforceable by such court. Should any Seller
violate this Section 6.1, the period of time of the Non-Compete Period will
automatically be extended for a period of time equal to the period of time such
Seller began such violation until such violation permanently ceases.
6.2 SPECIFIC PERFORMANCE. In the event of a violation of this Article VI,
Purchaser will be entitled to injunctive relief against the Seller who is in
violation of this Article VI in addition to any other legal or equitable
remedies that may be available.
<PAGE>
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ARTICLE VII
MISCELLANEOUS
7.1 NOTICES. All notices that are required or may be given pursuant to
this Agreement must be in writing and delivered personally, by a recognized
courier service, by a recognized overnight delivery service, by telecopy, or by
registered or certified mail, postage prepaid, to the parties at the following
addresses (or to the attention of such other Person or such other address as any
party may provide to the other parties by notice in accordance with this
Section 7.1):
If to Purchaser:
Suiza Foods Corporation
3811 Turtle Creek Blvd.
Suite 1300
Dallas, TX 75219
Attention: Mr. Gregg Engles
Telecopy: (214) 528-9929
With copy to:
Axtmayer Adsuar Muniz & Goyco
PO Box 70294
San Juan, PR 00936-8294
Attention: Fernando Goyco, Esq.
Telecopy: (787) 756-9010
Hughes & Luce
1717 Main St., Suite 2800
Dallas, TX 75201
Attention: Mr. William MacCormack
Telecopy: (214) 939-6100
If to Sellers:
Mr. Jose M. Rodriguez Garrido
Condominio Villas del Mar Este, PH-B-D
Isla Verde, Carolina
Puerto Rico 00979
Mr. Jorge Rodriguez Garrido
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Urbanizacion Paseo Real
Calle A-B-14
Rio Piedras, Puerto Rico 00926
With copy to:
Gabriel J. Montilla, Esq.
El Caribe Building, Suite 1201
San Juan, Puerto Rico 00901
Any such notice or other communication will be deemed to have been given and
received (whether actually received or not) on the day it is personally
delivered, delivered by courier or overnight delivery service, or, if sent by
telecopy or if mailed, when actually received.
7.2 ATTORNEYS' FEES AND COSTS. If attorneys' fees or other costs are
incurred to secure performance of any obligations under this Agreement, or to
establish damages for the breach of this Agreement or to obtain any other
appropriate relief, whether by way of prosecution or defense, the prevailing
party will be entitled to recover reasonable attorneys' fees and costs incurred
in connection therewith.
7.3 NO BROKERS. Each party to this Agreement represents to the other
parties that it has not incurred and will not incur any liability for brokerage
fees or agents' commissions in connection with this Agreement or the
transactions contemplated by this Agreement (other than the fees payable by the
Sellers or the Company to The Chase Manhattan Bank, N.A. which will be paid by
the Sellers), and agrees that it will indemnify and hold harmless the other
parties against any claim for brokerage and finders' fees or agents' commissions
in connection with the negotiation or consummation of the transactions
contemplated by this Agreement.
7.4 COUNTERPARTS. This Agreement may be executed in counterparts for the
convenience of the parties to this Agreement, all of which together will
constitute one and the same instrument.
7.5 ASSIGNMENT. Neither this Agreement nor any of the rights, interests,
or obligations under this Agreement will be assigned or delegated by any Seller
or Purchaser without the prior written consent of the other parties; except that
Purchaser may assign its rights and obligations under this Agreement to any
direct or indirect subsidiary of Purchaser or to a Person that is a subsidiary
of a common parent Person. This Agreement is not intended to confer any rights
or benefits to any Person (including, without limitation, any employees of the
Company) other than the parties to this Agreement and the Persons named in
Article VI.
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7.6 ENTIRE AGREEMENT. This Agreement and the related documents contained
as Exhibits and Schedules to this Agreement or expressly contemplated by this
Agreement contain the entire understanding of the parties relating to the
subject matter of this Agreement and supersede all prior written or oral and all
contemporaneous oral agreements and understandings relating to the subject
matter of this Agreement. This Agreement cannot be modified or amended except
in writing signed by the party against whom enforcement is sought. The Exhibits
and Schedules to this Agreement are by this Agreement incorporated by reference
into and made a part of this Agreement.
7.7 GOVERNING LAW; VENUE. This Agreement will be governed by and
construed and interpreted in accordance with the substantive laws of the
Commonwealth of Puerto Rico, without giving effect to any conflicts-of-law rule
or any other principle that might require the application of the laws of another
jurisdiction. Each party agrees that it shall bring any action or proceeding
in respect of or related to this Agreement and the transactions contained herein
or contemplated hereby, whether in tort or contract or at law or in equity,
exclusively in the Commonwealth or Federal Courts located in San Juan, Puerto
Rico (the "CHOSEN COURTS"). The parties irrevocably submit to the exclusive
jurisdiction of the Chosen Courts, waive any objection that the Chosen Courts
are an inconvenient forum or do not have jurisdiction over any party hereto and
agree that service of process upon such party in any such action or proceeding
shall be effective if notice is given in accordance with Section 7.1 of this
Agreement.
7.8 DISPUTE RESOLUTION. Except as otherwise expressly provided in this
Agreement, if any dispute arises out of this Agreement, the parties agree not to
commence any lawsuit with respect to such dispute until the following procedures
have been completed:
(a) The party believing a dispute to exist will give the other
parties written notice thereof, setting forth in reasonable detail the facts
alleged to give rise to such dispute, the relevant contractual provisions, the
nature of any claimed default or breach and a statement of the manner in which
such party believes the dispute should be resolved.
(b) Within 30 days after receipt of such notice, each party against
whom relief is sought in connection with such dispute will deliver a written
response, setting forth in reasonable detail its view of the facts alleged to
give rise to such dispute, the relevant contractual provisions, the nature of
the claimed default or breach and a statement of the manner in which such party
believes the dispute should be resolved.
(c) If the parties do not agree on the manner in which the dispute
should be resolved, they will arrange to hold a meeting within ten (10) business
days after delivery of the response. Each party will have in attendance at such
meeting a representative with authority to bind the represented party to any
agreement resolving the dispute. At the meeting (and any
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adjournments thereof), the parties will negotiate in good faith in an attempt
to agree as to whether a dispute exists, the exact nature of the dispute and
the manner in which the dispute should be resolved. If deemed appropriate by
the parties, a professional mediator may be engaged to assist in resolving
the dispute. Any resolution of the dispute will be evidenced by a written
agreement setting forth in reasonable detail the actions to be taken by each
party. If no such written agreement is reached within 30 days after the
first meeting, the parties may pursue any legal remedies available to them
with respect to such dispute.
7.9 SHARES AS PRIVATE PROPERTY OF THE SELLERS. The Sellers and the
Sellers' Wives acknowledge and agree that (i) the Shares are the private
property ("bienes privativos") of the Sellers, and (ii) the Sellers' Wives have
no right, title, or interest in or to the Shares, individually or as members of
the conjugal partnership between each of them and her respective husband.
7.10 DEFINITION OF AFFILIATE. An "Affiliate" of any Person shall mean any
other Person directly or indirectly controlling, controlled by or under common
control with such Person and in addition, shall include, in all instances, the
relatives of any Person within the second degree of consanguinity.
7.11 SCHEDULES. The disclosure of any matter in the Schedules hereto shall
not, in and of itself, be construed as an indication or determination by the
Sellers of the standard of materiality for purposes of this Agreement.
IN WITNESS WHEREOF, the parties to this Agreement have executed this
Agreement as of the date first above written.
G ACQUISITION CORP.
By: /s/ Gregg L. Engles
---------------------------------------
Name: Gregg L. Engles
------------------------------------
Title: President
------------------------------------
SELLERS
/s/ Jose M. Rodriguez Garrido
- ------------------------------------------
JOSE M. RODRIGUEZ GARRIDO
/s/ Jorge Rodriguez Garrido
- ------------------------------------------
JORGE RODRIGUEZ GARRIDO
<PAGE>
-34-
SELLERS' WIVES
/s/ Maria Angeles Martinez Famada
- ------------------------------------------
MARIA ANGELES MARTINEZ FAMADA
/s/ Sandra Mediavilla Garcia
- ------------------------------------------
SANDRA MEDIAVILLA GARCIA
