-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CWIJe15gQ+jViazVCVRwLz2sjt86/PPw36cgpMKkcJr9hQy9qJCjL3Bi4bYzprJ0 2y/IYkaFyTBHDnhunR9s7Q== 0000950152-01-000031.txt : 20010122 0000950152-01-000031.hdr.sgml : 20010122 ACCESSION NUMBER: 0000950152-01-000031 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 20001215 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010102 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENESEE CORP CENTRAL INDEX KEY: 0000040934 STANDARD INDUSTRIAL CLASSIFICATION: MALT BEVERAGES [2082] IRS NUMBER: 160445920 STATE OF INCORPORATION: NY FISCAL YEAR END: 0503 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-01653 FILM NUMBER: 1500738 BUSINESS ADDRESS: STREET 1: 445 ST PAUL ST CITY: ROCHESTER STATE: NY ZIP: 14605 BUSINESS PHONE: 7162639440 MAIL ADDRESS: STREET 1: 445 ST PAUL STREET CITY: ROCHESTER STATE: NY ZIP: 14605 FORMER COMPANY: FORMER CONFORMED NAME: GENESEE BREWING CO INC DATE OF NAME CHANGE: 19880322 8-K 1 l85770ae8-k.txt GENESEE CORPORATION 8-K Exhibit Index at Page 7 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): December 15, 2000 ------------------ GENESEE CORPORATION - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) NEW YORK 0-1653 16-0445920 - -------------------------------------------------------------------------------- (State or other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 445 St. Paul Street, Rochester, New York 14605 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (716) 263-9440 ----------------------------- Page 2 of 272 GENESEE CORPORATION Item 2. Acquisition or Disposition of Assets Sale of Assets By The Genesee Brewing Company, Inc. - --------------------------------------------------- On December 15, 2000, The Genesee Brewing Company, Inc. ("Genesee Brewing Company"), a wholly owned subsidiary of Genesee Corporation (the "Corporation"), completed the sale of substantially all of the assets of its brewing business to High Falls Brewing Company, LLC ("High Falls") for $25.8 million. The sale was completed in accordance with the terms of an Asset Purchase Agreement dated August 29, 2000, as amended by Amendment No.1 to Asset Purchase Agreement, both of which are filed with this report as Exhibit 10-1and Exhibit 10-2, respectively (collectively, the "Asset Purchase Agreement"). The transferred assets consisted principally of all machinery, equipment, and other tangible property used in the brewing business, accounts receivable, inventory, customers contracts, intellectual property and other intangible property used in the brewing business, and certain real property and improvements located thereon. The purchase price paid for the purchased assets consisted of $14.8 million in cash at closing and $11 million in High Falls promissory notes. All of the promissory notes and certain of the related collateral instruments are subject to an Intercreditor Agreement dated as of December 15, 2000 among High Falls, Genesee Brewing Company and certain of High Fall's other lenders, a copy of which is filed with this report as Exhibit 10-9. The purchase price is subject to post closing adjustment based on an audit of the closing date balance sheet in accordance with the provisions of the Asset Purchase Agreement. The principals of High Falls include a director and several former officers and directors of the Corporation, including Samuel T. Hubbard, Jr., a director and the former President and Chief Executive Officer of the Corporation, John B. Henderson, the former Senior Vice President and Chief Financial Officer of the Corporation, Gary C. Geminn, a former director of the Corporation and the former Senior Vice President of The Genesee Brewing Company, and Michael C. Atseff, the former Vice President and Controller of the Corporation. Because of these individual's interest in the transaction, the Corporation formed a Special Committee of independent directors to negotiate and approve the transaction. The terms of the transaction were determined through negotiations between the parties. The Special Committee retained the firm of Houlihan Lokey Howard & Zukin Financial Advisors, Inc. ("Houlihan Lokey") to evaluate the fairness of the transaction. Houlihan Lokey opined that the transaction was fair to Genesee Brewing Company, the Corporation and the Corporation's shareholders from a financial point of view. Page 3 of 272 GENESEE CORPORATION Item 2. Acquisition or Disposition of Assets (continued) The above description of the Asset Purchase Agreement and related agreements and instrument is incomplete and is qualified in its entirety by reference to such agreements and instruments filed as exhibits to this report. In addition, a news release announcing the consummation of the sale was previously filed as Exhibit 99 to the Corporation's Current Report on Form 8-K filed with the Securities and Exchange Commission on December 18, 2000 and is hereby incorporated by reference. Sale of Assets By Cheyenne Leasing Company On December 27, 2000, the Corporation's equipment leasing subsidiary, Cheyenne Leasing Company ("Cheyenne"), completed the sale of substantially all of its lease portfolio to ICON Cheyenne, LLC ("ICON"). The sale was completed in accordance with the terms of the Portfolio Purchase Agreement dated as of September 1, 2000, which is filed with this report as Exhibit 10-2. The purchase price was paid in cash at the closing. The Corporation's share of the proceeds paid at the closing was $12.3 million. The purchase price for three of the leases sold to ICON was paid into escrow pending satisfaction by Cheyenne of certain post closing conditions. The Corporation's share of the amount escrowed is approximately $700,000, which the Corporation expects to receive within 60 days The proceeds from the sale of assets by Genesee Brewing Company and Cheyenne were invested in money market funds pending authorization by the Corporation's Board of Directors to pay out a portion of the proceeds in a liquidating distribution to shareholders. Forward-Looking Statements -------------------------- This report contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements and certain risks and uncertainties related thereto are set forth in the news releases filed with this report as Exhibit 99-1 and Exhibit 99-2, which are incorporated herein by reference. Item 5. Other Events. Genesee Corporation issued a news release on December 28, 2000, which is filed with this report as Exhibit 99-2. Page 4 of 272 GENESEE CORPORATION Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (a) Financial Statements of Business Acquired. - Not applicable (b) Pro Forma Financial Information. The Pro Forma (unaudited) Condensed Consolidated Statements of Operations for the fiscal years ended April 29, 2000, May 1, 1999, and May 2, 1998, and the thirteen and twenty six weeks ended October 28, 2000 and October 30, 1999, set forth on pages 10-16 of this report, present the Corporation's results of continuing operations for such periods as if the Corporation had disposed of its brewing and equipment leasing businesses as of the beginning of such periods. The Pro Forma (unaudited) Condensed Consolidated Balance Sheet as of October 28, 2000, set forth on page 9 of this report, presents the financial position of the Corporation as if it had disposed of the brewing and equipment leasing businesses as of that date. Such balance sheet combines the Company's unaudited Condensed Consolidated Balance Sheet as of October 28, 2000, with appropriate adjustments to reflect the sale transactions identified above and the investment of the net proceeds in money market funds. The unaudited pro forma consolidated condensed financial statements do not purport to represent what the Corporation's results of operations or financial position would have been had the disposition of the Corporation's brewing and equipment leasing businesses occurred on the dates specified, or to project the Corporation's results of operations or financial position for any future period or date. The pro forma adjustments are based upon available information and certain assumptions that management believes are reasonable under the circumstances. In the opinion of management, all adjustments have been made that are necessary to present fairly the pro forma data. Actual amounts could differ from those set forth below. These statements should be read in conjunction with the accompanying notes herein and the historical consolidated financial statements and related notes of the Corporation included in its Annual Report on Form 10-K for the fiscal year ended April 29, 2000, and Quarterly Report on Form 10-Q for the six months ended October 28, 2000. Page 5 of 272 GENESEE CORPORATION Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (continued) Notes To Pro Forma Financial Statements (see pages 9-16): (1) Represents the Corporation's Condensed Consolidated Statement of Operations for the fiscal years ended April 29, 2000, May 1, 1999, and May 2, 1998, based on the consolidated financial statements which were previously presented in its Annual Reports on Form 10-K for the fiscal years then ended. (2) Represents the Corporation's Condensed Consolidated Statement of Operations for the thirteen and twenty six week periods ended October 28, 2000 and October 30, 1999, based on the consolidated financial statements which were previously presented in its quarterly report on Form 10-Q. (3) Represents the Corporation's Condensed Consolidated Balance Sheet as of October 28, 2000, based on the consolidated financial statements that were previously presented in its quarterly report on Form 10-Q. (4) Represents the elimination of the net assets of the brewing and equipment leasing businesses and the application of the net proceeds to invest in money market funds. In accordance with Generally Accepted Accounting Principles rules regarding transactions with highly leveraged entities, the estimated gain on the sale of the brewing business has been deferred until a later date when the earnings process has been completed. (5) There are no pro forma adjustments since the brewing and equipment leasing businesses have previously been reported as discontinued operations. (6) Weighted average and common equivalent share amounts reflect dilutive equivalent shares that were previously excluded due to a net loss for the period. Item 7 (c) Exhibits The Exhibit Index attached hereto is incorporated in this Item 7(c) as if fully set forth herein. Page 6 of 272 GENESEE CORPORATION 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 hereunto duly authorized. Genesee Corporation Date: January 2, 2001 By /s/Mark W. Leunig ----------------------- ----------------------------------------- Mark W. Leunig, Senior Vice President and Chief Administrative Officer Page 7 of 272 GENESEE CORPORATION EXHIBIT INDEX -------------
Page ---- Exhibit 10-1 Asset Purchase Agreement, dated as of August 29, 2000 between The Genesee Brewing Company, Inc. and High Falls Brewing Company, LLC (Exhibits and schedules pursuant to the Asset Purchase Agreement have not been filed by the registrant, who hereby undertakes to file such exhibits and schedules upon request of the Commission.) 17 Exhibit 10-2 Amendment No.1 to Asset Purchase Agreement dated as of December 15, 2000, between The Genesee Brewing Company, Inc. and High Falls Brewing Company, LLC. 74 Exhibit 10-3 $3,500,000 First Senior Bridge Note dated December 15, 2000 executed by High Falls Brewing Company, LLC in favor of The Genesee Brewing Company, Inc. 83 Exhibit 10-4 $3,000,000 First Senior Bridge Note dated December 15, 2000 executed by High Falls Brewing Company, LLC in favor of The Genesee Brewing Company, Inc. 104 Exhibit 10-5 Mortgage dated as of December 15, 2000 executed by High Falls Brewing Company, LLC in favor of The Genesee Brewing Company, Inc. 125 Exhibit 10-6 $4,500,000 Subordinated Promissory Note dated December 15, 2000 executed by High Falls Brewing Company, LLC in favor of The Genesee Brewing Company, Inc. 140 Exhibit 10-7 Security Agreement dated as of December 15, 2000 executed by High Falls Brewing Company, LLC in favor of The Genesee Brewing Company, Inc. 150
Page 8 of 272 GENESEE CORPORATION EXHIBIT INDEX (CONTINUED) -------------------------
PAGE ---- Exhibit 10-8 Intercreditor Agreement dated as of December 15, 2000 among High Falls Brewing Company, LLC, The Genesee Brewing Company, Inc. Manufacturers and Traders Trust Company and Cephas Capital Partners, L.P. 164 Exhibit 10-9 Guaranty dated as of December 15, 2000 executed by The Genesee Brewing Company, Inc. in favor of Boston Brewing Company, Inc. d/b/a The Boston Beer Company for itself and as the sole general partner of Boston Beer Company Limited Partnership. 189 Exhibit 10-10 Indemnification Agreement dated as of December 15, 2000 between The Genesee Brewing, Inc. and High Falls Brewing Company, LLC. 194 Exhibit 10-11 Management Separation Agreement dated as of December 15, 2000 among Genesee Corporation, The Genesee Brewing Company, Inc., and Samuel T. Hubbard, Jr. 210 Exhibit 10-12 Management Separation Agreement dated as of December 15, 2000 between Genesee Corporation and John B. Henderson. 218 Exhibit 10-13 Management Separation Agreement dated as of December 15, 2000 between Genesee Corporation and Gary C. Geminn. 226 Exhibit 10-14 Portfolio Purchase Agreement dated as of September 1, 2000 among Cheyenne Leasing Company, Genesee Ventures, Inc., Taylor-Bolane Associates, Inc., Genesee Corporation and ICON Cheyenne, LLC.(Exhibits and schedules pursuant to the Agreement have not been filed by the registrant, who hereby undertakes to file such exhibits and schedules upon request of the Commission.) 234 Exhibit 99-1 The news release filed as Exhibit 99 to the Current Report on Form 8-K filed by the Corporation on December 18, 2000 is incorporated herein by reference. Exhibit 99-2 News release dated December 28, 2000. 271
Page 9 of 272 GENESEE CORPORATION AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET OCTOBER 28, 2000
PRO FORMA (DOLLARS IN THOUSANDS) AS REPORTED ADJUSTMENTS PRO FORMA ----------- ----------- --------- (3) (4) --- --- ASSETS - ------ Current assets: Cash and cash equivalents $ 3,903 $ 27,227 $ 31,130 Marketable securities available for sale 8,480 8,480 Trade accounts receivable, less allowance for doubtful receivables $262 3,941 3,941 Notes receivable, current portion 0 7,000 7,000 Inventories, at lower of cost (first-in, first-out) or market 11,200 11,200 Deferred income tax assets, current portion 83 83 Other current assets 117 117 ------- -------- -------- Total current assets 27,724 34,227 61,951 Net property, plant and equipment 12,709 12,709 Goodwill and other intangibles net of accumulated amortization of $3,741 26,028 26,028 Notes receivable, noncurrent portion 0 4,000 4,000 Other assets 1,427 1,427 Net assets held for disposal, noncurrent 24,601 (22,800) 1,801 ------- -------- -------- Total assets 92,489 15,427 107,916 ======= ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Current liabilities: Notes payable, current portion 300 300 Accounts payable 1,688 1,688 Income taxes payable 198 198 Accrued compensation 397 397 Accrued expenses and other 1,173 1,173 Net liabilities held for disposal, current 685 9,778 10,463 ------- -------- -------- Total current liabilities 4,441 9,778 14,219 Notes payable, noncurrent portion 5,823 5,823 Deferred gain on sale of brewing business 0 5,649 5,649 Deferred income tax liabilities, noncurrent portion 418 418 Other liabilities 21 21 ------- -------- -------- Total liabilities 10,703 15,427 26,130 Shareholders' equity: Class A common stock 105 105 Class B common stock 753 753 Additional paid-in capital 5,831 5,831 Retained earnings 78,464 0 78,464 Less: Class B treasury stock, at cost; 95,597 shares (3,367) (3,367) ------- -------- -------- Total shareholders' equity 81,786 0 81,786 ------- -------- -------- Total liabilities and shareholders' equity $92,489 $ 15,427 $107,916 ======= ======== ========
See accompanying notes to pro forma financial statements. Page 10 of 272 GENESEE CORPORATION AND CONSOLIDATED SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) YEAR ENDED APRIL 29, 2000
(Dollars in Thousands, Except Per Share Data) PRO FORMA AS REPORTED ADJUSTMENTS PRO FORMA ----------- ----------- --------- (1) (5) --- --- Revenues $ 45,548 $ -- $ 45,548 Cost of goods sold 39,421 0 39,421 ---------- --- ---------- Gross profit 6,127 0 6,127 Selling, general and administrative expenses 7,801 0 7,801 ---------- --- ---------- Operating loss (1,674) 0 (1,674) Investment income 549 0 549 Other income 185 0 185 Interest expense (351) 0 (351) ---------- --- ---------- Loss from continuing operations before income taxes (1,291) 0 (1,291) Income tax benefit (150) 0 (150) ---------- --- ---------- Net loss from continuing operations (1,141) 0 (1,141) ========== === ========== Basic loss per share from continuing operations (0.70) (0.70) Diluted loss per share from continuing operations (0.70) (0.70) Weighted average common shares outstanding 1,620,013 1,620,013 Weighted average and common equivalent shares 1,620,013 1,620,013
See accompanying notes to pro forma financial statements. Page 11 of 272 GENESEE CORPORATION AND CONSOLIDATED SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) YEAR ENDED MAY 1, 1999
(Dollars in Thousands, Except Per Share Data) PRO FORMA AS REPORTED ADJUSTMENTS PRO FORMA ----------- ----------- --------- (1) (5) --- --- Revenues $ 44,893 $ -- $ 44,893 Cost of goods sold 36,854 0 36,854 ---------- ----- ---------- Gross profit 8,039 0 8,039 Selling, general and administrative expenses 7,287 0 7,287 ---------- ----- ---------- Operating income 752 0 752 Investment income 1,604 0 1,604 Other income 524 0 524 Interest expense (873) 0 (873) ---------- ----- ---------- Earnings from continuing operations before income taxes 2,007 0 2,007 Income tax expense 1,087 0 1,087 ---------- ----- ---------- Net earnings from continuing operations 920 0 920 ========== ===== ========== Basic earnings per share from continuing operations 0.57 0.57 Diluted earnings per share from continuing operations 0.57 0.57 Weighted average common shares outstanding 1,618,793 1,618,793 Weighted average and common equivalent shares 1,618,841 1,618,841
See accompanying notes to pro forma financial statements. Page 12 of 272 GENESEE CORPORATION AND CONSOLIDATED SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) YEAR ENDED MAY 2, 1998
(Dollars in Thousands, Except Per Share Data) PRO FORMA AS REPORTED ADJUSTMENTS PRO FORMA ----------- ----------- --------- (1) (5) --- --- Revenues $ 35,358 $ -- $ 35,358 Cost of goods sold 29,895 0 29,895 ---------- ------ ---------- Gross profit 5,463 0 5,463 Selling, general and administrative expenses 4,018 0 4,018 ---------- ------ ---------- Operating income 1,445 0 1,445 Investment income 2,653 0 2,653 Other income 124 0 124 Interest expense (173) 0 (173) ---------- ------ ---------- Earnings from continuing operations before income taxes 4,049 0 4,049 Income tax expense 1,619 0 1,619 ---------- ------ ---------- Net earnings from continuing operations 2,430 0 2,430 ========== ====== ========== Basic earnings per share from continuing operations 1.50 1.50 Diluted earnings per share from continuing operations 1.49 1.49 Weighted average common shares outstanding 1,617,962 1,617,962 Weighted average and common equivalent shares 1,622,069 1,622,069
See accompanying notes to pro forma financial statements. Page 13 of 272 GENESEE CORPORATION AND CONSOLIDATED SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) THIRTEEN WEEKS ENDED OCTOBER 28, 2000
(Dollars in Thousands, Except Per Share Data) PRO FORMA AS REPORTED ADJUSTMENTS PRO FORMA ----------- ----------- --------- (2) (5) (6) --- --- --- Revenues $ 12,869 $ -- $ 12,869 Cost of goods sold 10,861 0 10,861 ---------- ----- ---------- Gross profit 2,008 0 2,008 Selling, general and administrative expenses 1,473 0 1,473 ---------- ----- ---------- Operating income 535 0 535 Investment income 146 0 146 Other income 81 0 81 Interest expense (108) 0 (108) ---------- ----- ---------- Earnings from continuing operations before income taxes 654 0 654 Income tax expense 499 0 499 ---------- ----- ---------- Net earnings from continuing operations 155 0 155 ========== ===== ========== Basic earnings per share from continuing operations 0.10 0.10 Diluted earnings per share from continuing operations 0.10 0.09 Weighted average common shares outstanding 1,621,164 1,621,164 Weighted average and common equivalent shares 1,621,164 1,652,618
See accompanying notes to pro forma financial statements. Page 14 of 272 GENESEE CORPORATION AND CONSOLIDATED SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) TWENTY SIX WEEKS ENDED OCTOBER 28, 2000
(Dollars in Thousands, Except Per Share Data) PRO FORMA AS REPORTED ADJUSTMENTS PRO FORMA ----------- ----------- --------- (2) (5) --- --- Revenues $ 23,943 $ -- $ 23,943 Cost of goods sold 21,525 0 21,525 ---------- ----- ---------- Gross profit 2,418 0 2,418 Selling, general and administrative expenses 2,878 0 2,878 ---------- ----- ---------- Operating loss (460) 0 (460) Investment income 298 0 298 Other income 326 0 326 Interest expense (216) 0 (216) ---------- ----- ---------- Loss from continuing operations before income taxes (52) 0 (52) Income tax expense 323 0 323 ---------- ----- ---------- Net loss from continuing operations (375) 0 (375) ========== ===== ========== Basic and Diluted loss per share from continuing operations (0.23) (0.23) Weighted average common shares outstanding 1,620,904 1,620,904 Weighted average and common equivalent shares 1,620,904 1,620,904
See accompanying notes to pro forma financial statements. Page 15 of 272 GENESEE CORPORATION AND CONSOLIDATED SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) THIRTEEN WEEKS ENDED OCTOBER 30, 1999
(Dollars in Thousands, Except Per Share Data) PRO FORMA AS REPORTED ADJUSTMENTS PRO FORMA ----------- ----------- --------- (2) (5) (6) --- --- --- Revenues $ 12,517 $ -- $ 12,517 Cost of goods sold 10,757 0 10,757 ---------- ----- ---------- Gross profit 1,760 0 1,760 Selling, general and administrative expenses 1,656 0 1,656 ---------- ----- ---------- Operating income 104 0 104 Investment income 115 0 115 Other income 19 0 19 Interest expense (150) 0 (150) ---------- ----- ---------- Earnings from continuing operations before income taxes 88 0 88 Income tax expense 73 0 73 ---------- ----- ---------- Net earnings from continuing operations 15 0 15 ========== ===== ========== Basic earnings per share from continuing operations 0.01 0.01 Diluted earnings per share from continuing operations 0.01 0.01 Weighted average common shares outstanding 1,620,197 1,620,197 Weighted average and common equivalent shares 1,620,197 1,620,468
See accompanying notes to pro forma financial statements. Page 16 of 272 GENESEE CORPORATION AND CONSOLIDATED SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) TWENTY SIX WEEKS ENDED OCTOBER 30, 1999
(Dollars in Thousands, Except Per Share Data) PRO FORMA AS REPORTED ADJUSTMENTS PRO FORMA ----------- ----------- --------- (2) (5) --- --- Revenues $ 23,002 $ -- $ 23,002 Cost of goods sold 20,400 0 20,400 ---------- ----- ---------- Gross profit 2,602 0 2,602 Selling, general and administrative expenses 3,273 0 3,273 ---------- ----- ---------- Operating loss (671) 0 (671) Investment income 276 0 276 Other income 48 0 48 Interest expense (292) 0 (292) ---------- ----- ---------- Loss from continuing operations before income taxes (639) 0 (639) Income tax benefit (210) 0 (210) ---------- ----- ---------- Net loss from continuing operations (429) 0 (429) ========== ===== ========== Basic and Diluted loss per share from continuing operations (0.26) (0.26) Weighted average common shares outstanding 1,619,829 1,619,829 Weighted average and common equivalent shares 1,619,829 1,619,829
See accompanying notes to pro forma financial statements. EX-10.1 2 l85770aex10-1.txt EXHIBIT 10-1 Page 17 of 272 EXHIBIT 10-1 ------------ ================================================================================ ASSET PURCHASE AGREEMENT BETWEEN MONROE BREWING CO., LLC, AS PURCHASER AND THE GENESEE BREWING COMPANY, INC., AS SELLER Dated as of the 29th day of August, 2000 ================================================================================ Page 18 of 272 TABLE OF CONTENTS
Page ---- I. DEFINITIONS................................................................................1 II. ASSETS TO BE ACQUIRED......................................................................7 2.1 Acquisition and Transfer of Assets............................................7 2.2 Excluded Assets...............................................................8 2.3 Assumed Liabilities...........................................................9 2.4 Excluded Liabilities..........................................................9 2.5 Reorganization...............................................................10 III. PURCHASE PRICE............................................................................11 3.1 Purchase Price and Payment...................................................11 3.2 Additional Purchase Price....................................................11 3.3 Allocation of Purchase Price.................................................12 3.4 General Adjustment of Purchase Price.........................................12 3.5 Management Agreement.........................................................13 IV. THE CLOSING...............................................................................14 4.1 Closing Date.................................................................14 4.2 Proceedings at Closing.......................................................14 4.3 Deliveries by Seller to the Purchaser........................................14 4.4 Deliveries by Purchaser to the Seller........................................15 V. REPRESENTATIONS AND WARRANTIES OF THE SELLER..............................................16 5.1 Organization, Standing, Power and Qualification..............................16 5.2 No Conflict..................................................................16 5.3 Consents.....................................................................17 5.4 Operational Statements.......................................................17 5.5 Absence of Undisclosed Liabilities...........................................17 5.6 Absence of Certain Developments..............................................17 5.7 Taxes........................................................................17 5.8 Real Property................................................................18 5.9 Environmental, Health and Safety Matters.....................................19 5.10 Insurance....................................................................20 5.11 Tangible Property............................................................20 5.12 Machinery....................................................................20 5.13 Intangible Assets............................................................21 5.14 Employees....................................................................21 5.15 Employee Benefit Matters.....................................................22 5.16 Compliance with Laws.........................................................23 5.17 Licenses and Permits.........................................................23 5.18 Legal Proceedings............................................................24
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5.19 Contracts....................................................................24 5.20 Books and Records............................................................24 5.21 No Brokers...................................................................24 5.22 Proxy Statement..............................................................24 5.23 Independence of Representations..............................................24 VI. REPRESENTATIONS AND WARRANTIES OF PURCHASER...............................................25 6.1 Organization, Standing, Power and Qualifications.............................25 6.2 No Conflict..................................................................25 6.3 Consents.....................................................................25 6.4 Legal Proceedings............................................................25 6.5 No Brokers...................................................................26 6.6 No Other Agreements to Sell the Assets or Capital Stock of the Purchaser.............................................................26 6.7 Purchaser's History, Etc.....................................................26 6.8 Purchaser's Solvency.........................................................26 6.9 Projections..................................................................26 6.10 Financing and Availability of Funds..........................................26 6.11 No Knowledge of Inconsistent Information.....................................26 6.12 No Impediment to Governmental Approvals......................................26 6.13 Proxy Statement..............................................................27 VII. COVENANTS.................................................................................27 7.1 Conduct of Business..........................................................27 7.2 Alternative Proposal.........................................................28 7.3 Employment Matters...........................................................28 7.4 Purchaser's Access to Information............................................31 7.5 Consents, Cooperation........................................................31 7.6 Notification of Certain Matters..............................................31 7.7 Financing Commitments........................................................32 7.8 Supplements to Schedules.....................................................32 7.9 Title Insurance..............................................................32 7.10 Environmental Site Assessments...............................................32 7.11 Surveys......................................................................32 7.12 Transfer Tax Forms...........................................................33 7.13 Title Conditions.............................................................33 7.14 Zoning and Land Use Letter...................................................33 7.15 Additional Agreement.........................................................33 7.16 GC Support...................................................................33 7.17 Shareholder Meeting..........................................................34 VIII. CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS.......................................34 8.1 Accuracy of Seller's Representations and Warranties..........................34 8.2 Performance by Seller........................................................34 8.3 Consents.....................................................................34
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8.4 Delivery of Documents........................................................34 8.5 Material Adverse Change......................................................34 8.6 Absence of Litigation and Prohibitions.......................................35 8.7 Liens........................................................................35 8.8 Corporate Documents..........................................................35 8.9 Legal Opinion................................................................35 8.10 Survey; Title Insurance......................................................35 8.11 Licenses and Permits.........................................................35 8.12 WARN.........................................................................35 8.13 Conduct of Business..........................................................35 8.14 Additional Agreement.........................................................36 8.15 Financing Commitments........................................................36 8.16 Net Working Capital..........................................................36 IX. CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS..........................................36 9.1 Accuracy of the Purchaser's Representations and Warranties...................36 9.2 Performance by the Purchaser.................................................36 9.3 Consents.....................................................................36 9.4 Delivery of Documents........................................................36 9.5 Absence of Litigation and Prohibitions.......................................36 9.6 Legal Opinion................................................................37 9.7 Labor Contracts and Employee Benefit Plans...................................37 9.8 Management Employees Releases and Certificates...............................37 9.9 Other Contracts..............................................................37 9.10 Fairness Opinion.............................................................37 9.11 Financing....................................................................37 9.12 GC's Shareholders' Approval..................................................37 9.13 Environmental Matters........................................................37 X. ADDITIONAL POST-CLOSING COVENANTS.........................................................37 10.1 Further Assurances...........................................................37 10.2 Access to Information........................................................38 10.3 Mail.........................................................................38 10.4 Existing Insurance Coverage..................................................38 10.5 Confidentiality..............................................................38 10.6 Consents of Third Parties....................................................39 10.7 Employment Matters...........................................................39 XI. INDEMNIFICATION AND RELATED MATTERS.......................................................39 11.1 Indemnification by the Seller................................................39 11.2 Indemnification by the Purchaser.............................................40 11.3 Limitation on Indemnification Liabilities....................................41 11.4 Survival of Representations, Warranties, Covenants and Indemnities..............................................................41 11.5 Notice of Indemnification....................................................41 11.6 Indemnification Procedure for Third-Party Claims.............................41
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11.7 Exclusive Remedy.............................................................42 XII. TERMINATION...............................................................................42 12.1 Termination..................................................................42 12.2 Effect of Termination........................................................44 12.3 Purchaser's Right to Damages or Expenses.....................................44 XIII. SPECIFIC PERFORMANCE......................................................................44 XIV. GENERAL AND MISCELLANEOUS.................................................................44 14.1 Prorations...................................................................44 14.2 Waiver of Compliance with Bulk Transfer Laws.................................44 14.3 Entire Agreement.............................................................45 14.4 Governing Law................................................................45 14.5 Costs........................................................................45 14.6 Transfer Taxes...............................................................45 14.7 Expenses.....................................................................45 14.8 Headings.....................................................................45 14.9 Notices......................................................................46 14.10 Severability.................................................................46 14.11 Binding Effect; No Assignment................................................46 14.12 Amendments...................................................................47 14.13 Counterparts.................................................................47 14.14 Extension; Waiver............................................................47 14.15 Incorporation of Exhibits and Schedules......................................47 14.16 Press Release and Public Announcement........................................47
Page 22 of 272 ASSET PURCHASE AGREEMENT ------------------------ ASSET PURCHASE AGREEMENT (this "Agreement") dated as of August 29, 2000 by and between THE GENESEE BREWING COMPANY, INC., a New York corporation (the "Seller"), and MONROE BREWING CO., LLC, a New York limited liability company (the "Purchaser"). WITNESSETH: ----------- WHEREAS, the Seller is the wholly-owned subsidiary of The Genesee Corporation ( the "GC"); WHEREAS, the Seller owns a brewery and related warehouses and Real Property (as defined herein) in Rochester, New York, described in EXHIBIT A annexed hereto (collectively the "Genesee Brewery"); WHEREAS, the Genesee Brewery is a brewing facility capable of brewing beer, packaging beer in kegs, cans and bottles and distributing such packaged beer (the "Business"); and WHEREAS, the Purchaser, which has been organized by certain officers and members of Seller's senior management team, desires to purchase certain assets related to the Genesee Brewery, which constitute all of the Real Property, machinery and equipment and certain other personal property and intangible assets owned and/or leased by Seller in Rochester, New York and to assume certain liabilities of the Business, and Seller desires to sell such assets and to have Purchaser assume such liabilities, all on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants and agreements hereinafter set forth, and upon the terms and subject to the conditions hereinafter set forth, the Seller and the Purchaser hereby agree as follows: ARTICLE I DEFINITIONS For purposes of this Agreement, the terms defined in this Article shall have the meanings specified below (such meanings to be equally applicable to both the singular and plural forms of the terms defined): 1.1 "Affiliate" shall mean any director or officer of the parties hereto and any member of the immediate family of any such director or officer and any other Person which directly or indirectly controls, is controlled by or is under common control with the parties hereto. 1.2 "Agreement" shall mean this Asset Purchase Agreement and all of its Exhibits and Schedules, as the same may be amended or modified from time to time as permitted herein. 1.3 "Alternative Proposal" shall have the meaning ascribed to it in Section 7.2 below. Page 23 of 272 1.4 "Assets" shall have the meaning ascribed to it in Section 2.1 1.5 "Assumed Liabilities" shall have the meaning ascribed to it in Section 2.3 below. 1.6 "Brands" shall mean all brands of beer owned by the Seller or any subsidiary or affiliate company of the Seller, including without limitation Genesee Beer, Genesee Cream Ale, Genesee 12 Horse Ale, Genesee Bock, Genny NA, Genny Light, Genny Ice, Genny Red, Koch's Golden Anniversary Beer, Koch's Ice, Koch's Golden Anniversary Light, Michael Shea's Irish Amber, Michael Shea's Black and Tan, JW Dundee's Honey Brown Lager, JW Dundee's Honey Light and JW Dundee's Classic Lager. 1.7 "Books and Records" shall mean all operational statements, books, records, files, and computerized storage media pertaining to the Business located at the Genesee Brewery. 1.8 "Business" shall have the meaning ascribed to it in the preamble to this Agreement. 1.9 "Business Day" shall mean any day of the year on which banks are not required or authorized to be closed in the State of New York. 1.10 "Closing" shall have the meaning ascribed to it in Section 4.1 below. 1.11 "Closing Date" shall have the meaning ascribed to it in Section 4.1. below. 1.12 "Closing Date Balance Sheet" shall have the meaning ascribed to it in Section 3.4 below. 1.13 "COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, as set forth in Section 4980B of the Code and Part 6 of Title I of ERISA. 1.14 "Code" shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder. 1.15 "Consents" shall have the meaning ascribed to it in Section 7.5 below. 1.16 "Contract" shall mean any contract, agreement, plan, understanding, commitment, arrangement, mortgage, deed of trust, bond, indenture, lease, license, note, franchise, certificate, option, warrant, right, instrument or other similar document and any oral obligation, right, contract or agreement. 1.17 "Customer Contracts" shall mean any and all Contracts of Seller and its Affiliates with its distributors or other customers, including, without limitation, that certain Amended and Restated Agreement between Boston Beer Company and Seller dated April 30, 1997. 1.18 "Damages" shall mean all losses, damages, amounts paid in settlement, settlements, costs, expenses, interest, penalties, fines, suits, Judgments, orders, liens, Taxes, obligations and Liabilities (including, without limitation, reasonable attorneys' fees and expenses Page 24 of 272 and reasonable consultants, accountants and expert witnesses fees and reasonable out-of-pocket costs, including costs of investigation or enforcement incident to the foregoing). 1.19 "Debt Financing Commitments" means written legally binding commitment letters or other documentation from one or more commercial banks or other lending institution, which provides for the debt and mezzanine financing disclosed in SCHEDULE 1.19 annexed hereto and have closing conditions satisfactory to Seller in its reasonable discretion. 1.20 "Dollars" or "$" shall mean the legal currency of the United States of America.1.21 "Employee Benefit Plan" shall have the meaning given such term in Section 3(3) of ERISA. 1.22 "Environmental Claim" shall mean any written claim from a Governmental Authority or a third party (other than the Seller or the Purchaser and their respective parents, affiliates, subsidiaries, joint ventures and lenders) received by Seller alleging or asserting liability for investigatory costs, cleanup costs, response costs (including, among others, Governmental Authority response costs), damages to natural resources or other property, personal injuries, fines or penalties or other Liabilities arising out of, based on or resulting from (a) the presence, or release into the environment, of any Hazardous Material exceeding a permissible limit under applicable Environmental, Health and Safety Requirements at any location at, on, or from the Real Property prior to Closing, or (b) circumstances existing prior to Closing which form the basis of any violation, or alleged violation, of any Environmental, Health and Safety Requirements or any Hazardous Environmental Effect at the Genesee Brewery. The term "Environmental Claim" shall include any claim by any Governmental Authority for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental, Health and Safety Requirements, and any claim by any third party, only to the extent such third party claim is expressly provided for in any Environmental, Health and Safety Requirements, seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from the presence at the Genesee Brewery of Hazardous Materials existing prior to Closing which exceed a permissible limit under applicable Environmental, Health and Safety Requirements or arising from alleged injury or threat of injury to health, safety or the environment. 1.23 "Environmental, Health, and Safety Requirements" shall mean all federal, state, local statutes, regulations, ordinances and other provisions having the force or effect of law, all legally enforceable judicial and administrative orders of any Governmental Authority, all common law concerning public health and safety, worker health and safety, and pollution or protection of the environment, each as amended and as in effect or existing as of the Closing, including, without limitation, all those governing the use, production, generation, handling, transportation, treatment, storage, disposal (distribution, labeling, testing, processing), discharge, release, threatened release, control, or cleanup of any Hazardous Materials. 1.24 "Environmental Phase I Report and Phase II Investigation" shall mean those environmental site assessments performed on the Real Property and Improvements that are part of the Genesee Brewery and related information regarding the environmental condition of the Real Property and Improvements, as more fully described on SCHEDULE 7.10 annexed hereto. 1.25 "Equity Financing Commitments" means written legally binding subscription agreements or other documentation from investors which provide for the equity and debt Page 25 of 272 financing disclosed in SCHEDULE 1.19 annexed hereto and have conditions satisfactory to Seller in its reasonable discretion. 1.26 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. 1.27 "ERISA Affiliate" shall mean as to any person, any trade or business, whether or not incorporated, which together with such person would be deemed, at any time through the Closing Date a single employer within the meaning of Section 4001 of ERISA or Section 414(b), (c), (m) or (o) of the Code. 1.28 "Estimated Closing Date Balance Sheet" shall have the meaning ascribed to it in Section 3.4(a) below. 1.29 "Excluded Liabilities" shall have the meaning ascribed to it in Section 2.4 below. 1.30 "Execution Date" shall mean the date hereof. 1.31 "Final Balance Sheet" shall have the meaning ascribed to it in Section 3.4(b) below. 1.32 "Financing Commitment Date" means the date on which Purchaser shall have obtained, and Seller shall have indicated its satisfaction with Purchaser's Debt Financing Commitments and Equity Financing Commitments, which date shall be no later than September 30, 2000. 1.33 "GAAP" shall mean United States generally accepted accounting principles. 1.34 "GC" shall have the meaning ascribed to it in the preamble to this Agreement. 1.35 "Governmental Authority" shall mean the federal government, any state, county, municipal, local or other political subdivision government and any governmental agency, bureau commission, authority or body exercising legislative, judicial or regulatory functions. 1.36 "Hazardous Environmental Effect" shall mean any action or omission to act producing Liabilities under any applicable Environmental, Health and Safety Requirements. 1.37 "Hazardous Material" shall mean any pollutants, hazardous or toxic materials, chemical substances or mixtures, pesticides, contaminants, toxic chemicals, substances or wastes including: petroleum and petroleum products and derivatives; asbestos; radon; polychlorinated bi-phenyls; urea-forinaldehyde foam insulation; explosives; radioactive materials; laboratory wastes and medical wastes (including contaminated clothing, body fluids, contaminated medical instruments and equipment, catheters, used bandages, gauzes, needles or other sharp instruments); and any other chemicals, materials or substances in concentrations designated or regulated as hazardous or as toxic substances, materials, or wastes, or otherwise regulated, under any Environmental, Health and Safety Requirement. Page 26 of 272 1.38 "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder. 1.39 "Improvements" shall have the meaning ascribed to it in Section 2.1(f) below. 1.40 "Indemnitee" shall have the meaning ascribed to it in Section 11.5 below. 1.41 "Indemnitor" shall have the meaning ascribed to it in Section 11.5 below. 1.42 "Initial Payment" shall have the meaning ascribed to it in Section 3.1 below. 1.43 "Insurance" shall have the meaning ascribed to it in Section 5.10 below. 1.44 "Intangible Assets" shall have the meaning ascribed to it in Section 2.1(c) below. 1.45 "IRS" shall have the meaning ascribed to it in Section 5.7(c) below. 1.46 "Judgment" shall mean any judgment, writ, order, injunction determination, award or decree of or by any court, judge, justice or magistrate, including any bankruptcy court or judge, and any order of or by any Governmental Authority, or any arbitration awards. 1.47 "Knowledge" or "known": Of, to or by Seller, shall mean the actual knowledge of Mark Leunig, Steve Morse, Ed Mullen, and Charles Wehle, together with all employees of Seller reporting directly to any of them, and the knowledge that any of the foregoing persons would have obtained upon reasonable examination of the books and records and accounts of Seller generally available to them, without any other imputation of knowledge; and of, to or by Purchaser shall mean the actual knowledge of the Management Employees together with all employees of Seller, other than Mark Leunig, Steve Morse or Ed Mullen, reporting directly to any of them and the knowledge that any of the foregoing persons would have obtained upon reasonable examination of the books and records and accounts of Seller generally available to them, without any other imputation of knowledge. 1.48 "Law" shall mean any statute, ordinance, code, rule, regulation or order enacted, adopted, promulgated, applied or followed by any Governmental Authority. 1.49 "Legal Proceeding" shall mean any judicial, administrative or arbitral action, suit, proceeding (public or private), claim or governmental proceeding. 1.50 "Liability" shall mean any debt, claim, liability, obligation, damage or expense (whether vested or unvested, asserted or unasserted, absolute or contingent, accrued or unaccrued, assessed or unassessed, liquidated or unliquidated, actual or potential, and due or to become due). 1.51 "Licenses and Permits" shall have the meaning ascribed to it in Section 5.17 below. 1.52 "Lien" shall mean any security agreement, financing statement (whether or not filed), security or other interest, conditional sale or other title retention agreement, lease, consignment or bailment given for security purposes, lien, charge, restrictive agreement, Page 27 of 272 mortgage, deed of trust, indenture, pledge, option, encumbrance, limitation, restriction, adverse interest, constructive or other trust, claim charge attachment, exception to or defect in title or other ownership interest (including reservations, rights of entry, possibilities or reverter, encroachments, easements, rights of way, restrictive covenants and licenses) of any kind, whether direct, indirect, accrued or contingent. 1.53 "Machinery" shall have the meaning ascribed to it in Section 2.1(a) below. 1.54 "Management Agreement" shall have the meaning ascribed to it in Section 3.5 below. 1.55 "Management Employees" means Samuel T. Hubbard, Jr., John Henderson, Gary Geminn, Michael Atseff, Paul Rene and Scott Harman, individually, each of whom are current senior management employees of Seller and are now or will be senior officers and managers of Purchaser. 1.56 "Material Adverse Effect" shall mean a material adverse effect on the condition (financial or otherwise) of the Assets, properties, or results of operations of the Business, except for any material adverse effect caused by (i) any change in the value of the Assets resulting from a change generally reflective (but not materially worse than, exclusive of seasonal variations) of year-to-date trends or the operating projections set forth in Fiscal 2001 Budget of Seller set forth in SCHEDULE 1.56 annexed hereto, (ii) any individual change or combination of changes occurring after the date hereof in any federal or state law, rule or regulation or in GAAP, which change(s) affect(s) breweries generally, (iii) any action taken by Seller at the request of Purchaser or (iv) any changes in the economy or in the brewing industry. 1.57 "Multiemployer Plan" shall mean a multiemployer plan, as defined in Sections 3(37) and 4001 (a)(3) of ERISA. 1.58 "Net Working Capital" shall mean the Working Capital Assets less the liabilities set forth on SCHEDULE 2.3(C). An example of the calculation is included in SCHEDULE 1.58 annexed hereto. 1.59 "Operational Statements" shall have the meaning ascribed to it in Section 5.4 below. 1.60 "Outside Closing Date" shall have the meaning ascribed to it in Section 12.1(b) below. 1.61 "Payables" shall mean the balance owed by the Seller to a creditor. 1.62 "Pension Plan" shall mean any employee pension benefit plan, as defined in Section 3(2) of ERISA. 1.63 "Person" shall mean any individual, trustee, corporation, general or limited partnership, joint venture, joint stock company, bank, firm, Governmental Agency, trust, association, organization or unincorporated entity of any kind. Page 28 of 272 1.64 "Phase II Investigation" shall have the meaning ascribed to it in Sections 1.24 and 7.10. 1.65 "Permitted Exceptions" shall have the meaning ascribed to it in Section 5.11 below. 1.66 "Prohibited Transaction" shall mean a transaction that is prohibited under Section 4975 of the Code or Section 406 of ERISA and not exempt under Section 4975 of the Code or Section 408 of ERISA, respectively. 1.67 "Projections" means the projections prepared by Purchaser and contained in Purchaser's business plan dated ____, 2000 a copy of which was provided to Seller. 1.68 "Purchase Price" shall have the meaning ascribed to it in Section 3.1 below. 1.69 "Purchaser" shall have the meaning ascribed to it in the preamble to this Agreement. 1.70 "Real Property" shall have the meaning ascribed to it in Section 2.1(d). 1.71 "Real Property Permitted Exceptions" shall have the meaning ascribed to it in Section 5.8. 1.72 "Returns" shall have the meaning ascribed to it in Section 5.7 below. 1.73 "Seller" shall have the meaning ascribed to it in the preamble to this Agreement. 1.74 "Special Committee" shall mean the special committee of the Board of Directors of GC authorized to investigate, negotiate, recommend and accept transactions for the sale and purchase of the Genesee Brewery. 1.75 "Subsidiary" shall mean with respect to any Person, any corporation, association or other business entity of which more than 50% of the issued and outstanding stock or equivalent thereof having ordinary voting power is owned or controlled by such Person, by one or more Subsidiaries or by such Person and one or more Subsidiaries. 1.76 "Survey" shall have the meaning ascribed to it in Section 7.10 below. 1.77 "Tangible Property" shall have the meaning ascribed to it in Section 2.1(b) below. 1.78 "Taxes" shall have the meaning ascribed to it in Section 5.7 below. 1.79 "Threshold Amount" shall have the meaning ascribed to it in Section 11.3 below. 1.80 "WARN Act" shall mean the Worker Adjustment and Retraining Notification Act of 1988, as amended. 1.81 "Welfare Plan" shall mean any employee welfare benefit plan, as defined in Section 3(l) of ERISA. Page 29 of 272 1.82 "Working Capital Assets" shall have the meaning ascribed to it in Section 2.1(e) below. ARTICLE II ASSETS TO BE ACQUIRED 2.1 Acquisition and Transfer of Assets. Upon the terms and subject to the conditions hereinafter set forth, the Seller shall sell, assign, transfer, convey and deliver to the Purchaser, and the Purchaser shall purchase, acquire and accept all of the right, title and interest of the Seller in, certain assets related to the Genesee Brewery (such assets being collectively referred to herein as, the "Assets"). The Assets shall include the right, title and interest of the Seller in and to the assets, properties, rights and claims described in the following paragraphs (a) through (i) used or held for use in or related to the Business and the Genesee Brewery: (a) Machinery and Equipment. All machinery and equipment (whether leased, to the extent the lease is assignable, or owned, to the extent owned) used in or related to the production and day-to-day Business at the Genesee Brewery, including but not limited to vehicles, manufacturing machinery, and all other machinery and equipment listed on SCHEDULE 2.1(A) attached hereto (collectively, the "Machinery"); (b) Tangible Property. All tangible property used in the day-to-day Business of the Genesee Brewery, including all books and records, furniture, furnishings, telephones and communications equipment, computers and management information systems and all other office equipment (collectively, the "Tangible Property"); (c) Intangible Assets. All intangible assets necessary for day-to-day Business at the Genesee Brewery, including, without limitation, all goodwill, know-how, trademarks, trade names, processes, formulas, trade dress, trade secrets, design patents, copyrights, software, licenses of Intangible Assets, sponsorship arrangements and other intellectual property assets related to the Brands, the Business and the Genesee Brewery and all other intangible assets listed on SCHEDULE 2.1(C) attached hereto (collectively, the "Intangible Assets"); (d) Real Property. All real property interests owned by Seller described in EXHIBIT A annexed hereto (the "Real Property") including all easements, privileges, rights-of-way, riparian and other water rights, and other appurtenances pertaining to or accruing to the benefit of the land or improvements; (e) Working Capital Assets. All accounts receivable, inventories and prepaid expenses as shown on SCHEDULE 2.1(E) annexed hereto; (f) Improvements. All buildings, structures, fixtures and improvements on the Real Property, including but not limited to the brewery and all related warehouses, owned by Seller (collectively, the "Improvements"); (g) Customer Contracts. Any and all rights under any Customer Contracts to the extent assignable; and Page 30 of 272 (h) Reports, Permits and Surveys. To the extent assignable, all reports, surveys, Licenses and Permits and approvals of Governmental Authorities necessary for day to day Business at the Genesee Brewery, including the Environment Phase I Report and Phase II Investigation, Real Property surveys and all other reports, permits and surveys, all as collectively listed on SCHEDULE 2.1(H) attached hereto. (i) Membership Interest. All of Sellers' interest as the sole member in GBC Equipment, LLC, organized pursuant to Section 2.5 below. 2.2 Excluded Assets. Notwithstanding anything to the contrary contained in Section 2.1 hereof, the parties expressly understand and agree that the Seller is not hereunder selling, assigning, transferring, conveying or delivering to the Purchaser any assets other than those assets listed in Section 2.1 hereof. The parties hereto hereby acknowledge that without limiting the excluded assets, Seller is not hereunder selling, assigning, transferring, conveying or delivering to the Purchaser any of the assets listed on SCHEDULE 2.2 annexed hereto (collectively, the "Excluded Assets"). 2.3 Assumed Liabilities. On the terms and subject to the conditions set forth in this Agreement, at the time of Closing, the Purchaser will assume, and become responsible for, those Liabilities and only those Liabilities of the Business set forth in this Section 2.3 (collectively, the "Assumed Liabilities"). The Seller will be responsible for all other Liabilities, including, but not limited to, the Excluded Liabilities. Moreover, the Purchaser's assumption of the Assumed Liabilities will not detract from any of Seller's representations, warranties, covenants or agreements in this Agreement or from any Seller's obligation to indemnify the Purchaser for any Damages resulting from breach thereof. Effective upon the Closing, the Purchaser will assume the Assumed Liabilities, which consist only of: (a) The Liabilities arising after the time of Closing in connection with the operation of the Business and use of the Assets by the Purchaser, including compliance with all Environmental Health and Safety Requirements, including, but not limited to, waste disposal, permit compliance, asbestos management and employee training; excluding, however, Environmental Claims which are caused by any and all actions, omissions to act or conditions existing prior to or at the time of Closing but, for the avoidance of doubt, not such matters for which Purchaser is providing indemnity under Section 11.2; (b) Seller's obligations under any and all leases, month-to-month tenancies, Customer Contracts and related commitments related to the Business, all of which are listed on SCHEDULE 2.3(B) annexed hereto; and (c) Those items listed on SCHEDULE 2.3(C) annexed hereto. 2.4 Excluded Liabilities. The Purchaser shall not assume, or become liable for, any Liabilities of the Seller, any Affiliate thereof, any Person which is, in whole or in part, a predecessor of the Seller, any Affiliate thereof or any other Person, other than the Assumed Liabilities, regardless of whether any such Liability was disclosed or required to be disclosed pursuant to this Agreement (collectively, the "Excluded Liabilities"). Without limiting the generality of the foregoing, the Excluded Liabilities include, but are not limited to, any and all Liabilities: Page 31 of 272 (a) of Seller arising under this Agreement and the transactions contemplated hereby; (b) to the extent caused by: (i) any violation of any Environmental, Health and Safety Requirement, existing prior to or at the time of Closing, (ii) any actions, omissions to act or conditions existing or occurring prior to or at the Closing resulting in an Environmental Claim or Hazardous Environmental Effect, (iii) any conditions after the Closing which arise from or relate to actions or omissions to act occurring prior to or at the time of Closing, resulting in an Environmental Claim or Hazardous Environmental Effect; (c) with respect to (i) Taxes for any period prior to the time of Closing, (ii) Taxes related to the Business for any period prior to the time of Closing, and (iii) Taxes in connection with the consummation of the transactions contemplated hereby [including, without limitation, any income or real property transfer Taxes arising out of or relating to the transfer by the Seller to the Purchaser of the Assets but excluding any sales or use Taxes arising out of or relating to the transfer by Seller to the Purchaser of the Assets (which shall be Purchaser's obligations)]; (d) constituting indebtedness, including, without limitation, Liabilities: (i) in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments, (ii) representing the balance deferred and unpaid of the purchase price of any property (including capital leases) which are not part of the Assets, (iii) to the extent not otherwise included, obligations under interest rate exchange, currency exchange, swaps, futures or similar agreements, and (iv) for guarantees, direct or indirect, in any manner including, without limitation, reimbursement agreements in respect of letters of credit of all or any part of any indebtedness of any third party; (e) of Seller or its Affiliates with respect to employees, including, but not limited to, liabilities for medical benefits, retirement, pension or employee benefit plans, workers compensation or COBRA which are not assumed by Purchaser under Section 7.3(b); (f) with respect to any Liability of Seller with respect to any Employee Benefit Plan or any collective bargaining agreement to which Seller (or any of Seller's Affiliates) is or was a party, and including, without limitation, any employee-related Payables which are not assumed by Purchaser under Section 7.3(b); (g) arising out of Letters of Credit which are pending as well as all underlying surety bonds related thereto; (h) which arise out of or relate to any Legal Proceeding for any events or occurrences related to the Business or the Genesee Brewery which take place prior to the Closing Date; (i) which arise out of or relate to any Legal Proceeding relating to Seller's business, whether related to the Genesee Brewery or not, at any time; (j) relating to product liability actions, causes of action, claims, suits or proceedings in connection with products of the Business based on occurrences or products produced prior to the Closing; Page 32 of 272 (k) for any actions, causes of action, claims, suits or proceedings with respect to the operation of the Business prior to the Closing; and (l) for any Liabilities listed on SCHEDULE 2.4(L). 2.5 Reorganization. Prior to the Closing Date, Seller shall cause to be organized GBC Equipment, LLC, a New York limited liability company, the Articles of Organization and Operating Agreement of which shall be satisfactory to Seller in its sole discretion. Seller shall contribute to such limited liability company for the sole membership interest therein all of the Machinery and Tangible Property. Page 33 of 272 ARTICLE III PURCHASE PRICE 3.1 Purchase Price and Payment. The consideration (the "Purchase Price") to be paid by the Purchaser to the Seller for the sale, assignment, delivery and transfer of the Assets and the Seller's other obligations made under this Agreement shall be the sum of (a) Twenty-Two Million Dollars ($22,000,000) plus or minus the Net Working Capital (the "Initial Payment"), and (b) the Purchaser's assumption of the Assumed Liabilities. The Initial Payment shall be paid at the Closing as follows: Seventeen Million Five Hundred Thousand Dollars ($17,500,000) plus or minus the amount of the Net Working Capital, as determined from the Estimated Closing Date Balance Sheet, by wire transfer of immediately available funds to the account or accounts designated by Seller, with the remaining balance of Four Million Five Hundred Thousand Dollars ($4,500,000) by delivery of Purchaser's Subordinated Promissory Note (the "Subordinated Note"), in the form attached hereto as EXHIBIT B-1, bearing interest at the rate of twelve percent (12%) per annum, payable quarterly, with annual principal payments on each anniversary of the Closing in the amount of five Hundred Thousand Dollars ($500,000) on the first anniversary, One Million Dollars ($1,000,000) on the second anniversary and the balance (Three Million Dollars ($3,000,000)) on the third anniversary, and including a right of offset to the maximum amount specified in Section 11.3, all as provided in EXHIBIT B-1. The Subordinated Note will be secured by a perfected security interest in all of Purchaser's assets. The security interest will be subordinate and subject only to the security interest held by the lenders providing the financing contemplated by the Debt Financing Commitments (and to be held by the New York State Job Development Authority, but only to the extent that it replaces and does not increase any portion of the Debt Financing Commitments) and shall be superior to the debt portion of the equity investments made in Purchaser as evidenced by the form of Investor Subordinated Note attached hereto as EXHIBIT B-3. The security interest shall be granted pursuant to a general security agreement in the form attached hereto as EXHIBIT B-2. 3.2 Additional Purchase Price. (a) In the event that prior to the fourth anniversary of the Closing Date Purchaser receives any tangible benefit of all or a portion of the excess assets (determined on a plan termination basis as of the Closing Date) from the over-funded pension plan which covers certain of Seller's employees, whether by "holiday" in making additional contributions, by reduction of contribution obligations over the level required on a per participant basis as of the Closing Date, by increase in its benefits which, absent the over-funding, would result in an increase in Purchaser's so-called "normal cost" for benefits, by receipt of a loan or equity investment in Purchaser (through any means or device, including but not limited to an ESOP investment by plan trustees) by a reversion of excess assets to the Purchaser, by the use of the excess assets to provide other benefits (e.g., health, disability or death benefits) or otherwise, then Purchaser shall pay Seller an amount equal to 50% of such benefit. If Seller and Purchaser cannot agree that a benefit was received and/or what the amount thereof is, they shall refer the matter to a firm of independent accountants (which may use actuaries) to resolve the matter. The Purchaser and Seller shall share equal responsibility for the fees and expenses of the independent accounting firm. This Section shall be binding on any successor to Purchaser, whether through sale of substantially all of the Assets or the capital stock of Purchaser or by merger or consolidation or otherwise. Page 34 of 272 (b) In the event that Purchaser recovers more than $700,000 net proceeds after expenses from the sale, scrapping or disposal of cooperage included in the Assets in the three years following the Closing Date, Purchaser shall pay Seller 50% of such amounts. In the event that in the three (3) years following the Closing Date Purchaser recovers any amount from the disposal of bottling/keg lines which is not reinvested in the business within six (6) months or the time required to install the replacement/new facility, whichever is later, Purchaser shall pay Seller 50% of such amount. Purchaser agrees to notify Seller of any such recovery and for three years after Closing to provide Seller with copies of its quarterly balance sheet within 45 days after the end of each fiscal quarter except the period shall be 90 days for the final fiscal quarter (year end). (c) Sale of Assets. In the event that within one year after Closing Purchaser sells substantially all of the Assets acquired in this transaction and the proceeds net of shut-down and sale costs are greater than the Purchase Price offered in Section 3.1, the Purchaser and Seller shall share equally in the excess. (d) The claims and rights of Seller under subsections (a), (b) and (c) of this Section 3.2 may not be assigned except to a liquidating trust or similar entity. 3.3 Allocation of Purchase Price. The Purchaser and the Seller hereby agree that the Purchase Price of the Assets is allocable as shown on SCHEDULE 3.3 annexed hereto. In the event that Purchaser and Seller are unable to agree on the allocation, each shall be free to file all returns and reports including without limitation, all federal, state and local income, sales and use, and franchise tax returns, on the basis of its own allocation, and on the basis of the Purchase Price. 3.4 General Adjustment of Purchase Price. (a) The Seller shall prepare and deliver to the Purchaser on or prior to the Closing Date an unaudited balance sheet of Seller as of the month ending nearest the Closing Date for which Seller has a month ending unaudited balance sheet (the "Estimated Closing Date Balance Sheet"). As soon as practicable after the Closing Date hereof, but in no event later than seventy-five (75) calendar days after the Closing Date, the Seller shall prepare an audited balance sheet of the Seller as at the Closing Date (the "Closing Date Balance Sheet"), and shall deliver it to the Purchaser with an audit report thereon. The Closing Date Balance Sheet shall be audited by the accounting firm regularly serving the Seller (the "Auditor") at the expense of Seller, and shall be prepared in accordance with GAAP, except that there shall be no accrual in respect of Environmental Claims or other matters for which the Seller is obligated to indemnify the Purchaser. The audit report delivered by the Auditor shall be addressed to the Seller. (b) The Purchaser and Seller shall have the right to dispute any of the items or amounts set forth on or omitted from the Closing Date Balance Sheet, and the accounting treatment of items for a period of thirty (30) days from the date the Purchaser or Seller, as the case may be, receives the Closing Date Balance Sheet and the Auditor's report thereon by notifying the other party of the specific items or amounts being disputed and its position with respect to such items or amounts. If the Purchaser and the Seller are unable to resolve any such disputes within thirty (30) days, either party may elect to refer the dispute or disputes to a mutually agreeable nationally recognized accounting firm (the "Independent Accountant") for determination, and such determination by the Independent Accountant shall be final and binding on the parties. The Purchaser and the Seller shall cooperate fully with the Independent Page 35 of 272 Accountant and shall provide the Independent Accountant with any and all information and records as shall be requested by the Independent Accountant. The Closing Date Balance Sheet, as revised to reflect the agreement of the parties with respect to all disputed items or amounts, or alternatively to reflect the determination of the Independent Accountant, is referred to herein as the "Final Balance Sheet". (c) In the event either party submits a dispute to the Independent Accountant for resolution as provided above, the Purchaser and the Seller will share responsibility for the fees and expenses of the Independent Accountant as follows: (i) if the Independent Accountant resolves all of the remaining disputes in favor of the Purchaser (the Net Working Capital so determined is referred to herein as the "Low Value"), the Seller will be responsible for all of the fees and expenses of the Independent Accountant; (ii) if the Independent Accountant resolves all of the remaining disputes in favor of the Seller (the Net Working Capital so determined is referred to herein as the "High Value"), the Purchaser will be responsible for all of the fees and expenses of the Independent Accountant; and (iii) if the Independent Accountant resolves some of the remaining disputed items in favor of the Purchaser and the rest of the remaining disputed items in favor of the Seller (the Net Working Capital so determined is referred to herein as the "Actual Value"), the Seller will be responsible for that fraction of the fees and expenses of the Independent Accountant equal to (x) the difference between the High Value and the Actual Value over (y) the difference between the High Value and the Low Value, and the Purchaser will be responsible for the remainder of the fees and expenses. The Seller will make the work papers and back-up materials used in preparing the Closing Date Balance Sheet, and the books and records of the Business available to the Purchaser and its accountants and other representatives at reasonable times and upon reasonable notice at any time during (A) the preparation of the Closing Date Balance Sheet, (B) the review by the Purchaser of the Closing Date Balance Sheet, and (C) the resolution by the parties of any disputes thereto. (d) If the Net Working Capital as shown on the Final Balance Sheet exceeds the Net Working Capital shown on the Estimated Closing Date Balance Sheet, the Purchaser will pay to the Seller an amount equal to such excess plus interest thereon at the prime rate of Chase Manhattan Bank from the Closing Date in cash, certified check or wire transfer within three (3) Business Days after the date of which the Final Balance Sheet is agreed to by Seller and Purchaser or is finally determined by the Independent Accountant. If the Net Working Capital of the Business as shown on the Final Balance Sheet is less than the Net Working Capital shown on the Estimated Closing Date Balance Sheet, the Seller will pay to the Purchaser the amount equal to such deficiency plus interest thereon at the prime rate of interest of Chase Manhattan Bank from the Closing Date in cash, certified check or wire transfer within three (3) Business Days after the date on which the Final Balance Sheet is agreed to by Seller and Purchaser or is finally determined by the Independent Accountant. In either case the parties agree that any adjustment provided for herein shall be treated as an adjustment to the Purchase Price. Page 36 of 272 3.5 Management Agreement. The parties agree to enter into a management agreement, in the form of EXHIBIT C annexed hereto (the "Management Agreement") providing for (a) Purchaser's management of the assets and business of GC after Closing, (b) rental of space and use of equipment in connection with the management services being provided to GC by Purchaser, (c) ancillary costs of continued operation of GC, and (d) payment by GC to Purchaser of a management fee of Thirty Thousand Dollars ($30,000) per month. The initial term will be four (4) months from the Closing Date and GC will have an option to extend the term for two (2) additional four (4) month terms on the same terms and conditions. ARTICLE IV THE CLOSING 4.1 Closing Date. The parties will endeavor to consummate the transactions contemplated hereby (the "Closing") by October27, 2000 and in any event on the date that is two (2) Business Days after the day on which each condition set forth in Articles VIII and IX has been satisfied or is waived by the party entitled to the benefit of such condition, or at such other place and at such other time and date as may be mutually agreed upon by the parties hereto. The date of the Closing is referred to in this Agreement as the "Closing Date." The Closing shall take place at the offices of Underberg & Kessler LLP, 1800 Chase Square, Rochester, New York 14604, or such other location as the parties may mutually agree, on the Closing Date. 4.2 Proceedings at Closing. All corporate proceedings to be taken and all agreements, instruments and documents to be executed and delivered by the Seller in connection with the consummation of the transactions contemplated hereby shall be reasonably satisfactory in form and substance to the Purchaser and its counsel. All corporate proceedings to be taken and all agreements, instruments and documents to be executed and delivered by the Purchaser in connection with the consummation of the transactions contemplated hereby shall be reasonably satisfactory in form and substance to Seller and its counsel. All corporate proceedings to be taken and all documents to be executed and delivered by all parties at the Closing shall be deemed to have been taken, executed and delivered simultaneously as of11:59 P.M., on the Closing Date, and no proceedings shall be deemed taken nor any documents executed or delivered until all have been taken, executed and delivered. 4.3 Deliveries by the Seller to the Purchaser. At the Closing, the Seller shall deliver, or shall cause to be delivered, to the Purchaser the following: (a) duly executed and acknowledged instruments of transfer and assignment of the Assets, including, as appropriate, bargain and sale deeds with covenants against grantor's acts, assignments, transfers of Licenses and Permits (to the extent assignable by Seller), bills of sale, certificates of title and/or New York State (and, if applicable, city or county) transfer tax forms, each dated the Closing Date, sufficient to vest in Purchaser the right, title and interest in the Assets, free and clear of all Liens other than Permitted Exceptions and Real Property Permitted Exceptions (as described in SCHEDULE 5.8 annexed hereto), each being conveyed at the Closing in accordance with the terms of this Agreement; (b) a receipt for the portion of the Purchase Price payable at the Closing; Page 37 of 272 (c) full undisturbed possession of the Assets, and full use and enjoyment of the same subject to Permitted Exceptions and Real Property Permitted Exceptions; (d) secretary's certificates and such certificates from public officials relating to legal existence, corporate good standing, certificate of incorporation and Tax clearance, including certificates issued by the appropriate Governmental Authorities dated as of a date within five days of the Closing as to the good standing of the Seller in the state of New York and the other deliveries required by Article VII, or additionally as the Purchaser may reasonably request; (e) an executed copy of the Management Agreement; (f) executed copies of the Consents referred to in Section 7.5; (g) agreements signed by GC consistent with the terms of EXHIBIT D annexed hereto; (h) duly executed certificates of amendment for the Seller, in form suitable for filing with appropriate Governmental Authority, changing its name to eliminate reference to the name "Genesee", "High Falls" or the names of any of the Brands. (i) such other agreements, instruments and documents as the Purchaser or its counsel may reasonably request; and (j) a certificate of the Secretary or other officer of Seller not affiliated with the Purchaser to the effect that (i) the representations and warranties of Seller set forth in this Agreement are true and correct in all material respects on and as of the Closing Date as if made on and as of such date, except as contemplated or permitted by this Agreement, (ii) Seller has complied in all material respects with all of its covenants and agreements set forth in this Agreement through the Closing Date, and (iii) all of the conditions set forth in Article IX of this Agreement have been satisfied or waived by Seller. 4.4 Deliveries by the Purchaser to the Seller. At the Closing, the Purchaser shall deliver to the Seller the following: (a) immediately available funds by wire transfer for that portion of the Initial Payment as provided in Section 3.1 hereof; (b) a duly executed Subordinated Note in the form of EXHIBIT B-1 annexed hereto and a duly executed Security Agreement in the form of EXHIBIT B-2 annexed hereto and UCC-1 financing statements; (c) duly executed and acknowledged instruments of assumption evidencing the assumption by the Purchaser of the Assumed Liabilities in accordance with the terms of this Agreement, pursuant to which the Purchaser will assume the Assumed Liabilities; (d) secretary's certificates and such certificates from public officials relating to legal existence, corporate good standing, articles of organization and Tax clearance, as well as a certificate issued by the appropriate Governmental Authorities dated as of a date within five (5) Page 38 of 272 days of the Closing as to the good standing of Purchaser in the State of New York, and the other deliveries required by Article IX, or additionally as the Seller or its counsel may reasonably request; (e) an executed copy of the Management Agreement; (f) the other agreements, instruments and documents referred to in Article IX hereof and such other agreements, instruments and documents as the Seller or its counsel may reasonably request; (g) a certificate of the President or other officer of Purchaser to the effect that (i) the representations and warranties of Purchaser set forth in this Agreement are true and correct in all material respects on and as of the Closing Date as if made on and as of such date, except as contemplated or permitted by this Agreement, (ii) Purchaser has complied in all material respects with all of its covenants and agreements set forth in this Agreement through the Closing Date, and (iii) all of the conditions set forth in Article VIII of this Agreement have been satisfied or waived by the Purchaser. ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE SELLER The Seller hereby represents and warrants to the Purchaser as follows: 5.1 Organization, Standing, Power and Qualification. The Seller is a corporation duly organized, validly existing and in good standing under the laws of the state of New York, and has all necessary right, power and authority to (i) own, operate, lease and sell the Assets; (ii) to enter into this Agreement; (iii) to carry out its obligations hereunder; and (iv) to consummate the transactions contemplated hereby. The Seller is duly qualified as a foreign corporation and is in good standing, in each of the jurisdictions listed on SCHEDULE 5.1 annexed hereto, those jurisdictions being all of the jurisdictions where such qualification is required by Law except where the failure to so qualify would not have a Material Adverse Effect. The execution, delivery and performance of this Agreement and the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Seller, and no other approval is necessary for the execution, delivery and performance of this Agreement. This Agreement has been duly executed and delivered by the Seller, and assuming due authorization, execution and delivery by the Purchaser, this Agreement constitutes a legal, valid and binding obligation of the Seller enforceable against it in accordance with its terms, except as may be limited by bankruptcy, moratorium and insolvency laws and by other laws affecting the rights of creditors generally and except as may be limited by the availability of equitable remedies. 5.2 No Conflict. The execution and delivery of this Agreement do not, the consummation of the transactions described herein and contemplated hereby, and the compliance by the Seller with any of the provisions hereof, will not result in or constitute (a) a default, breach or violation of the Certificate of Incorporation or the By-laws of the Seller or any Contract or Lien to which the Seller is a party or by which any of the Assets are bound; (b) subject to the receipt of the Consents required as referred to in Section 5.3, an event which (with notice or lapse of time or both) would permit any Person to terminate, accelerate the performance required by, or accelerate the maturity of any indebtedness or obligation of the Seller under any Contract or Lien Page 39 of 272 to which the Seller is a party or by which any of the Assets are bound; (c) the creation or imposition of any Lien on any property of the Seller associated with the Genesee Brewery, under any Contract to which the Seller is a party or by which any of the Assets are bound; (d) a violation of any Law or Judgment of any court or other Governmental Authority or any other restriction of any kind or character by which the Seller or any of the Assets are bound; or (e) violate or conflict with any other restrictions of any kind or character to which the Seller or an Affiliate thereof or any of the Assets is subject that, individually or in the aggregate, could have a Material Adverse Effect. 5.3 Consents. Except as set forth on SCHEDULE 5.3 annexed hereto, the execution and delivery of this Agreement by the Seller does not, and the performance of this Agreement by the Seller will not, require any Consent, other than (a) routine filings, if any, required by the alcoholic beverage control and corporate laws of jurisdictions in which Seller is qualified to transact businesses as a foreign corporation, and (b) Consents, the failure to obtain which, individually or in the aggregate, would not have a Material Adverse Effect on the Business. 5.4 Operational Statements. SCHEDULE 5.4 annexed hereto contains complete and correct copies of the financial statements of the Genesee Brewery for the 1999 and 2000 fiscal year and the period from May 1, 2000 through July 29, 2000 (the "Operational Statements"). 5.5 Absence of Undisclosed Liabilities. Except as set forth in the Schedules to this Agreement, to the Seller's Knowledge, the Seller has no Liabilities related to or arising from the operation of the Genesee Brewery or other ownership, possession or use of the Assets (other than Liabilities arising in the ordinary course of business). 5.6 Absence of Certain Developments. Since April 30, 2000, the operations of the Genesee Brewery have not experienced any change or event which has had or would, individually or in the aggregate, have a Hazardous Environmental Effect, and, except as set forth on SCHEDULE 5.6 annexed hereto, to Seller's Knowledge, the Seller has not taken any of the actions or permitted to occur any of the events specified in Section 7.1 or committed to do any of the foregoing in connection with the Genesee Brewery. 5.7 Taxes. (a) Except as set forth on SCHEDULE 5.7 annexed hereto, the Seller has filed, been included in or sent, or will file, be included in or send, all returns, declarations and reports and all information returns and statements (collectively, "Returns") required to be filed or sent with respect to all net income, gross income, alternative or add-on minimum, environmental, gross receipts, sales, use, goods and services, ad valorem, transfer, toll-gate, capital stock, franchise, profits, license, withholding, payroll, single business, employment, excise, severance, documentary, stamp, occupation, property, unemployment, real estate taxes and assessments or other taxes, customs, duties, fees, levies, assessments or charges of any kind whatsoever, and any installments with respect thereto, together with any interest penalties, additions to tax or additional amounts imposed or proposed to be assessed thereon by any taxing authority (domestic or foreign) in connection with the Genesee Brewery (collectively, "Taxes"), for any period on or before the time of Closing. Page 40 of 272 (b) All Taxes (plus any interest, penalties and additions to Taxes that were or are proposed to be assessed thereon, if any) due and with respect to the Returns with respect to the Business have been fully paid or, as described in greater detail in SCHEDULE 5.7, are being contested in good faith by appropriate proceedings. All required Tax estimates, deposits, prepayments and similar reports or payments for all periods have been properly made. The Seller is not delinquent in the filing of any Return or the payment of any Tax and has not requested any extension of time within which to file any Return. (c) All Taxes that the Seller was required, or prior to the Closing Date will be required, by Law to withhold or collect have been (in the case of those Taxes that were already required to be withheld or collected) or will be duly withheld or collected and, to the extent required, have been (in the case of those Taxes that were already required to be paid) or will be paid to the appropriate Governmental Authorities. There are no Liens with respect to Taxes upon any of the Assets except for the Permitted Exceptions and Taxes not yet due. (d) Except as set forth on SCHEDULE 5.7(D), the business conducted by the Seller at the Genesee Brewery is not currently under examination by the Internal Revenue Service (the "IRS") or any other Governmental Authority with respect to Taxes. Except as set forth in SCHEDULE 5.7(D), neither the Seller nor the Business has been contacted by or is currently corresponding with any Governmental Authority with respect to failure of Seller to file Returns and/or pay any Taxes. 5.8 Real Property. With respect to all of the Real Property and except for the permitted exceptions (the "Real Property Permitted Exceptions") as set forth on SCHEDULE 5.8 annexed hereto: (a) the Seller has no Knowledge that Seller does not have insurable fee simple title to the Real Property free and clear of any Liens except the Real Property Permitted Exceptions; (b) to the Knowledge of Seller and except as set forth in SCHEDULE 5.8(B) annexed hereto, there are no pending or to the Knowledge of the Seller any threatened condemnation proceedings, lawsuits or administrative actions relating to the Real Property or other matters having a Material Adverse Effect on the current use, occupancy or value thereof (determined with respect to each separate parcel thereof); (c) the legal description for the Real Property contained in EXHIBIT A describes such Real Property, (d) to the Knowledge of Seller,(i) the buildings and improvements are located within the boundary lines of the described parcels of land, (ii) there exists no material violation of applicable setback requirements, zoning laws, and ordinances, (iii) the land does not serve any adjoining property for any purpose inconsistent with the use of the land, and (iv) the Real Property is not located within any flood plain or subject to any similar type restriction for which any Licenses or Permits necessary to the use thereof have not been obtained; (e) to the Knowledge of Seller, all facilities have received all necessary approvals of governmental authorities (including Licenses and Permits) required in connection with the ownership or operation thereof and have been and are being operated and maintained in Page 41 of 272 material accordance with applicable Laws, rules and regulations and the terms and conditions of such Licenses and Permits; (f) to the Knowledge of Seller, there are no leases, subleases, licenses, concessions or other agreements granting to any party or parties the right of use or occupancy of any portion of the Real Property except as may be included in the Real Property Permitted Exceptions; (g) to the Knowledge of Seller, there are no outstanding options or rights of first refusal to purchase the Real Property or any portion thereof or interest therein; (g) to the Knowledge of Seller, there are no parties in possession of the Real Property other than Seller; (h) to the Knowledge of Seller all facilities and Improvements located on the Real Property are supplied with utilities and other services necessary for the operation of such facilities as operated by Seller, including gas, electricity, water, telephone, sanitary sewer, and storm sewer, all of which services are adequate to the knowledge of Seller in accordance with all applicable laws, ordinances, rules, and regulations and are provided via public roads or via permanent, irrevocable, appurtenant easements benefiting the Real Property; (i) to the Knowledge of Seller, the Real Property abuts on and has direct vehicular access to public roads and access to the property is provided by paved public right-of-way with adequate curb cuts available; (j) to the Knowledge of Seller, the Real Property constitutes numerous tax parcels as set forth on EXHIBIT A for purposes of ad valorem taxation; (k) to the Knowledge of Seller, the Real Property does not require any rights over, or restrictions against, other property, in order to comply with any zoning or land use laws or regulations or to operate the Business thereon; and (l) Except for the specific representations and warranties set forth herein, the Purchaser agrees to accept the Real Property and all Improvements in "AS IS" condition as of the Execution Date and agrees that Seller has no obligation to repair, restore or rebuild any portion thereof, including the CSX trestle. In the event that the Real Property or Improvements are damaged prior to Closing, Seller shall either repair the damage or give Purchaser a credit against the cash portion of the Purchase Price for the reasonable cost of repair, subject to the provisions of Section 12.1(l). 5.9 Environmental, Health and Safety Matters. Except as set forth in the Environmental Phase I Report and Phase II Investigation annexed hereto as SCHEDULE 5.9. (a) The Seller has materially complied and is in material compliance with all Environmental, Health, and Safety Requirements in connection with its ownership, occupation and operation of the Real Property, Improvements and the Business. Page 42 of 272 (b) Without limiting the generality of Section 5.9(a), the Seller has obtained and complied with, and is in material compliance with, Licenses and Permits required for the ownership, occupation and operation of the Real Property and Improvements, and any other facilities and the operation of the Business. (c) Within the past five (5) years, the Seller has not received any written notice, claim, report or other information regarding any actual or alleged violation of Environmental, Health and Safety Requirements, or any Liabilities or potential Liabilities (whether accrued, absolute, contingent, unliquidated or otherwise), including any investigatory, remedial or corrective action obligations, or any worker safety or other toxic tort Liabilities relating to the Real Property or Improvements or other facilities or the Business arising under Environmental, Health and Safety Requirements or arising from any third party claim or action. There are no unresolved notices of violation or liability against the Seller. (d) None of the following exists on the Real Property or Improvements: (1) underground storage tanks, (2) materials or equipment containing polychlorinated biphenyls at levels at or above 50 parts per million or (3) landfills, surface impoundments, lagoons or disposal areas. (e) With respect to the Real Property and Improvements, the Seller has never expressly, or by operation of law (except as may arise under applicable statutory or regulatory provisions as may pertain to the acquisition of real property) assumed or undertaken any Liability, including without limitation any obligation for corrective or remedial action, of any other Person relating to Environmental, Health, and Safety Requirements or any third party claim or action. (f) The Real Property and Improvements are free from contamination by Hazardous Materials that exceed any permissible limit and that would require investigation and/or remediation under any Environmental, Safety and Health Requirements, except for such Hazardous Materials for which a no further action determination has been received from an applicable Governmental Authority, as disclosed on SCHEDULE 5.9. 5.10 Insurance. To the Knowledge of Seller, the Seller has casualty, general liability and other insurance policies for the assets and properties of the Business that are sufficient for compliance with all requirements of law and all Contracts relating to machinery, equipment and vehicles at the Genesee Brewery up to the Closing Date (the "Insurance"). 5.11 Tangible Property. The Seller has, and as of the time of the Closing, through sole membership interest in GBC Equipment, LLC, Seller will have and transfer to the Purchaser good, marketable or insurable title to, or a valid leasehold interest in, all Tangible Property constituting part of the Assets, free and clear of any Liens, except for (i) minor imperfections of title, none of which is substantial in amount, detracts from the value or impairs the use of the property or the operation of the Business and which are described on SCHEDULE 5.11 attached hereto, or (ii) Liens for Taxes not yet due or which are being contested in good faith by appropriate proceedings (the items in clauses (i) and (ii) being "Permitted Exceptions"). Except for the specific representations and warranties set forth herein, all Tangible Property is taken "AS IS" and "WHERE IS." In the event that the Tangible Property is damaged prior to Closing, Seller shall either repair the damage or give Purchaser a credit against the cash portion of the Purchase Price for the reasonable cost of repair, subject to the provisions of Section 12.1(l). Page 43 of 272 5.12 Machinery. The Seller has, and as of the time of the Closing, through sole membership interest in GBC Equipment, LLC, Seller will have and transfer to the Purchaser good, marketable or insurable title to, or a valid leasehold interest in, all Machinery constituting part of the Assets, free and clear of any Liens, except for minor imperfections of title, none of which is substantial in amount, detracts from the value or impairs the use of the Machinery or the operation of the Business and which are described on SCHEDULE 5.12 attached hereto. Any and all leases relating to Machinery are set forth on SCHEDULE 5.12 annexed hereto are, and as of the time of the Closing will be, in full force and effect, will expire on the dates set forth on SCHEDULE 5.12 hereto and, except as provided on SCHEDULE 5.12(I) annexed hereto, will be fully assignable. Except for the specific representations and warranties set forth herein, all Machinery is taken "AS IS" and "WHERE IS." In the event that the Machinery is damaged prior to Closing, Seller shall either repair the damage or give Purchaser a credit against the cash portion of the Purchase Price for the reasonable cost of repair, subject to the provisions of Section 12.1(l). 5.13 Intangible Assets. (a) SCHEDULE 2.1(C) attached hereto sets forth an accurate and complete list of all registered and granted Intangible Assets and applications therefor used in the Business. To Seller's Knowledge, the Seller has not during the past three years been known by or done business under any name other than as listed in SCHEDULE 2.1(C). (b) To Seller's Knowledge, no use of the Intangible Assets, the nature of any of the products they sell, the services they provide, or the conduct of the Business infringes upon, is inconsistent with or otherwise violates the rights of any third party in or to such Intangible Assets. In addition, no claim has been asserted or, to Seller's Knowledge, threatened with respect to the foregoing. Except as set forth on SCHEDULE 5.13, the Seller has no Knowledge of any claim which can be asserted successfully by any Person against the Seller with respect to the use of any of the Intangible Assets challenging or questioning the validity or effectiveness of such use of any such item. The Seller has taken reasonably necessary measures to protect the proprietary nature of each of the Intangible Assets, and to maintain the confidentiality of all confidential information, that the Seller owns or uses in connection with the Business. Except as set forth on SCHEDULE 5.13 annexed hereto, to the Knowledge of the Seller, neither the conduct of any other Person's business, nor the nature of any of the products it sells or services it provides, infringes upon or is inconsistent with any of the Intangible Assets, the infringement of which would have Material Adverse Effect. (c) Except as set forth in SCHEDULE 5.13, to Seller's Knowledge: (i) all of the registrations or grants relating to the Intangible Assets are subsisting and unexpired, free of all Liens, and have not been abandoned; (ii) the Seller is an owner of record of each application, registration or grant for each of the Intangible Assets, and has properly executed and recorded all documents necessary to perfect its title to such Intangible Assets; and (iii) there has been no claim to the title of any right to the Intangible Assets which could have a Material Adverse Effect on title or use of such Intangible Asset. (d) To Seller's Knowledge, SCHEDULE 5.13 sets forth a correct and complete list, of all material existing licenses, sublicenses, and permissions to use any of the Intangible Assets (in each case identifying the Intangible Asset licensed, the license parties, and the date of the license agreement or other agreement permitting use of the item). To Seller's Knowledge, Page 44 of 272 SCHEDULE 5.13 sets forth a correct and complete list of all material licenses, sublicenses, and permissions to use any of the Intangible Assets to which the Seller is a party. To Seller's Knowledge, there is no material default by the Seller under such licenses, sublicenses, or permissions that is reasonably likely to have a Material Adverse Effect. 5.14 Employees. (a) SCHEDULE 5.14 annexed hereto sets forth an accurate and complete list of all Employment Agreements related to the Business to which the Seller is a party or is bound; (b) there are no material controversies pending or, to the knowledge of the Seller, threatened involving any employee or group of employees, other than Management Employees, in connection with the Business which would have a Material Adverse Effect; (c), except as set forth in SCHEDULE 5.14, there are no other collective bargaining or other union contracts involving the Business; (d) except as set forth on SCHEDULE 5.14, there is no unfair labor practice charge or complaint against or related to the Business pending ; (e) to Seller's Knowledge Seller has not received notice of the intent of any federal, state or local governmental authority responsible for enforcement of labor or employment laws to conduct an investigation with respect to the Business; (f) no such investigation is in progress. In the last five years, the Business has not suffered or sustained any work stoppage;, and (g) no such work stoppage is threatened. 5.15 Employee Benefit Matters. (a) SCHEDULE 5.15 annexed hereto lists the all Employee Benefit Plans of the Seller. Listed separately, and designated as such on SCHEDULE 5.15, are all Pension Plans subject to Title IV of ERISA, all Multiemployer Plans, any union sponsored multiemployer welfare benefit fund and any "welfare benefit fund" defined in Section 419(e) of the Code. (b) There is no pending dispute between Seller or ERISA Affiliate, and any Multiemployer Plan concerning payment of contributions or payment of withdrawal liability payments. (c) None of the Company or any ERISA Affiliate has incurred any liability under, arising out of or by operation of Title IV of ERISA (other than liability for premiums to the Pension Benefit Guaranty Corporation (the "PBGC") arising in the ordinary course), including, without limitation, any material liability in connection with (i) the termination or reorganization of any employee pension benefit plan subject to Title IV of ERISA or (ii) the withdrawal from any Multiemployer Plan or Multiple Employer Plan, and no fact or event exists which could give rise to any such material liability. Except as set forth on SCHEDULE 5.15, no complete or partial termination has occurred within the five years preceding the date hereof with respect to any Employee Benefit Plan. (d) Each of the Employee Benefit Plans sponsored by Seller intended to qualify under Section 401 of the Code ("Qualified Plans") so qualifies, and, except as disclosed on SCHEDULE 5.15, nothing has occurred with respect to the operation of any such plan which, either individually or in the aggregate, would cause the loss of such qualification or the imposition of any liability, penalty or tax under ERISA or the Code. (e) All contributions and premiums required by law or by the terms of any Employee Benefit Plan or any agreement relating thereto have been timely made (without regard Page 45 of 272 to any waivers granted with respect thereto) and, except as disclosed on SCHEDULE 5.15, no accumulated funding deficiencies exist in any of the Employee Benefit Plans subject to Section 412 of the Code. (f) The liabilities of each Employee Benefit Plan that has been terminated or otherwise wound up, have been fully discharged in compliance with applicable law. (g) There has been no "reportable event" as that term is defined in Section 4043 of ERISA and the regulations thereunder with respect to any of the Employee Benefit Plans subject to Title IV of ERISA which would require the giving of notice, or any event requiring notice to be provided under Section 4063(a) of ERISA. (h) There has been no violation of ERISA with respect to the filing of applicable returns, reports, documents and notices regarding any of the Seller's Employee Benefit Plans with the Secretary of Labor or the Secretary of the Treasury or the furnishing of such notices or documents to the participants or beneficiaries of the Employee Benefit Plans which, either individually or in the aggregate, could result in material liability to the Company. (i) Complete and correct copies of the following documents, with respect to each of the Seller's Employee Benefits Plans (as applicable), have been delivered to Buyer: (i) any plan documents and related trust documents, and all amendments thereto; (ii) the most recent Forms 5500 and schedules thereto; (iii) the most recent IRS determination letter; (iv) the most recent summary plan descriptions; and (v) written descriptions of all nonwritten agreements relating to the Seller's Employee Benefit Plans. (j) There are no pending legal proceedings which have been asserted or instituted against any of the Employee Benefit Plans, the assets of any such plans or the Company or any of the Seller, the plan administrator or any fiduciary of the Employee Benefit Plans with respect to the operation of such plans (other than routine, uncontested benefits claims). (k) Each of the Seller's Employee Benefit Plans has been maintained, in all material respects, in accordance with its terms and all provisions of applicable laws and regulations. All amendments and actions required to bring each of the Seller's Employee Benefit Plans into conformity in all material respects with all of the applicable provisions of ERISA and other applicable laws and regulations have been made or taken except to the extent that such amendments or actions are not required by law to be made or taken until a date after the Closing Date. 5.16 Compliance With Laws. To Seller's Knowledge, the Seller's Business at the Genesee Brewery and the Assets substantially comply, and have substantially complied, with all applicable Laws, Judgments, Licenses and Permits, except for violations, if any, which are not either, individually or in the aggregate, reasonably likely to have a Material Adverse Effect with respect to the Genesee Brewery. With respect to the Business, to the Seller's Knowledge, no changes are required in connection with the Genesee Brewery's manufacturing or packaging processes, properties or procedures to comply with such Laws, Judgments and Licenses and Permits, and the Seller has received no notice which alleges or suggests any non-compliance that has not been cured. To Seller's Knowledge, all material notices and complaints of violations or alleged violations of Laws and Judgments received in the last three years by the Seller in connection with the Business or any of the are set forth on SCHEDULE 5.16. Page 46 of 272 5.17 Licenses and Permits. SCHEDULE 5.17 annexed hereto contains an accurate and complete list (including the name of the licensor, a summary of the license and the date of expiration or renewal) of any licenses, permits, approvals, franchises, registrations, accreditations, authorizations or variances issued to the Seller and used in connection with the Genesee Brewery, necessary to the conduct of the Business or required by any Governmental Authority or Law for the conduct of the Business,(except where the lack of such license or permit would not have a Material Adverse Effect on the Business), or applications therefor (collectively, the "Licenses and Permits"). Except as set forth in SCHEDULE 5.9 or SCHEDULE 5.17, all Licenses and Permits are valid and in full force and effect. Except as set forth on SCHEDULE 5.17, there are no pending or, to Seller's Knowledge, threatened proceedings which could result in the termination, revocation, limitation or impairment of any of such Licenses and Permits. The Licenses and Permits are sufficient to enable the ownership and conduct of the Business, as currently conducted. Except as set forth on SCHEDULE 5.17, none of the Licenses and Permits are transferable to Purchaser. Purchaser shall be responsible for affecting the transfer of any Licenses and Permits that are transferable and for acquiring in its name any Licenses and Permits that cannot be transferred, all at Purchaser's expense, provided that Seller shall, prior to the Closing Date and for a period of one year thereafter, execute and deliver to Purchaser any document and provide such other assistance as may reasonably be requested by Purchaser to effect any such transfer or in connection with the transfer or acquisition by Purchaser of any Licenses and Permits. To Seller's Knowledge, all notices and complaints of violations or alleged violations of Licenses and Permits received by the Seller in the last three years are set forth in SCHEDULE 5.17. 5.18 Legal Proceedings. Except as disclosed in SCHEDULE 5.18 annexed hereto: (a) the Seller is not engaged in or a party to or, to the knowledge of the Seller, threatened with any Legal Proceeding with respect to the Assets or the Business; (b) the Seller has not received notice of any investigation threatened or contemplated by any Governmental Authority with respect to the Assets; (c) neither the Seller, the Business nor the Assets is subject to any Judgment or other agreement which, among other things, restricts or adversely affects the ability of the Seller from operating its business at the Genesee Brewery, as it is currently conducted, which would have a Material Adverse Effect on the Seller or which restricts the ability of the Seller to consummate the transactions contemplated by this Agreement; and (d) there is no Legal Proceeding pending or, to the knowledge of the Seller, threatened by or before any Governmental Authority which questions the validity of this Agreement or any action taken or to be taken by the Seller in connection with the transactions contemplated hereby. 5.19 Contracts. To Seller's Knowledge: (a)the Seller is not a party to any material Contract relating to the Business which is not set forth in SCHEDULE 5.19 annexed hereto; (b) the Contracts listed in SCHEDULE 5.19 are valid, binding and enforceable on all parties thereto and in full force and effect; (c) the Seller has not violated any of the terms thereof in any material respect; (d) no material violation of the terms thereof by any party thereto has occurred and is continuing; (e) no claim has been made by any party thereto that any other party is in default thereunder; and the Seller has not received notice that any such Contract is being or will be cancelled. Except as described in SCHEDULE 5.19, neither the execution of this Agreement nor the consummation of the transactions contemplated hereby will or constitutes an event which will, upon the giving of notice, lapse of time or both, result in a default under or termination of any such Contract. Page 47 of 272 5.20 Books and Records. To Seller's Knowledge, no Books and Records have been altered or destroyed in contemplation of this transaction. 5.21 No Brokers. Except as set forth in SCHEDULE 5.21 annexed hereto, to Seller's Knowledge, the Seller has not entered into any Contract, arrangement or understanding with any Person which may result in the obligation of any party hereto to pay any finder's fees, brokerage or agent's commissions or other like payments in connection with the negotiations leading to this Agreement or the transactions contemplated hereby. 5.22 Proxy Statement. The Proxy Statement of GC which will be used in connection with the special or annual meeting of GC shareholders to be called pursuant to Section 7.16 hereof will not, at the date of the Shareholders Meeting, contain any untrue statement of a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; except that no representation is made by Seller with respect to statements therein as to information concerning Purchaser or its Affiliates supplied in writing by Purchaser or its Affiliates specifically for inclusion in the Proxy Statement. 5.23 Independence of Representations. Each of the separate representations and warranties set forth in this Article V will not affect the interpretation of any other Section. The lack or omission of a representation or warranty on specific subject matter will not be construed to exclude that subject matter from the scope of a more general representation or warranty applicable thereto. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE PURCHASER The Purchaser hereby represents and warrants to the Seller as follows: 6.1 Organization, Standing, Power and Qualification. The Purchaser is a limited liability company duly organized, validly existing and in good standing under the laws of the State of New York, and has all necessary power and authority (i) to carry on its business as now conducted; (ii) to enter into this Agreement; (iii) to carry out its obligations hereunder; and (iv) to consummate the transactions contemplated hereby. The Purchaser is, or will at Closing be, duly qualified as a foreign limited liability company, and is in good standing, in New York and in each other jurisdiction where the failure to so qualify would have a Material Adverse Effect. The execution, delivery and performance of this Agreement and the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed and delivered by the Purchaser, and assuming due authorization, execution and delivery by the Seller, this Agreement constitutes a legal, valid and binding obligation of the Purchaser enforceable against the Purchaser in accordance with its terms, except as may be limited by bankruptcy, moratorium and insolvency laws and by other laws affecting the rights of creditors generally and except as may be limited by the availability of equitable remedies. 6.2 No Conflict. The execution and delivery of this Agreement do not, and the consummation of the transactions described herein and contemplated hereby, and the compliance by Purchaser with any of the provisions hereof, will not, result in or constitute (a) a default, Page 48 of 272 breach or violation of the Articles of Organization or the Operating Agreement of the Purchaser; (b) subject to the receipt of the Consents required as set forth on SCHEDULE 6.3 annexed hereto, an event which (with notice or lapse of time or both) would permit any Person to terminate, accelerate the performance required by, or accelerate the maturity of any material indebtedness or obligation of the Purchaser under any material Contract to which the Purchaser is a party or by which any of its material assets are bound; (c) the creation or imposition of any Lien on any property of the Purchaser, under any material Contract to which the Purchaser is a party or by which any of its material assets are bound; or (d) a violation of any Law or Judgment of any court or other Governmental Authority or any other restriction of any kind or character by which the Purchaser or any of its material assets are bound, except, in each case, for such defaults, breaches, violations, events, Liens or restrictions as would not prevent the Purchaser from performing any of its material obligations under this Agreement and would not have a Material Adverse Effect on the Purchaser. 6.3 Consents. Except as set forth on SCHEDULE 6.3 annexed hereto, the execution and delivery of this Agreement by the Purchaser do not, and the performance of this Agreement by the Purchaser will not, require any Consent, other than routine filings, if any, required by the corporate laws of jurisdictions in which the Purchaser is qualified to transact business as a foreign corporation, except where the failure to obtain such Consent would not have a Material Adverse Effect. 6.4 Legal Proceedings. There is no Legal Proceeding pending or, to the knowledge of the Purchaser, threatened, by or before any Governmental Authority which questions the validity of this Agreement or any action taken or to be taken by the Purchaser in connection with the transactions contemplated hereby. 6.5 No Brokers. Except as set forth in SCHEDULE 6.5 annexed hereto, the Purchaser has not entered into any Contract, arrangement or understanding with any Person which may result in the obligation of any party hereto to pay any finder's fees, brokerage or agent's commissions or other like payments in connection with the negotiations leading to this Agreement or the transactions contemplated hereby. 6.6 No Other Agreements To Sell The Assets Or Capital Stock Of The Purchaser. The Purchaser does not have any legal obligation, absolute or contingent, other than the obligations of the Purchaser under this Agreement or related agreements with Seller or any debt or equity financing commitments to any person or firm to (a) sell assets other than in the ordinary course of business consistent with past practices, (b) sell any equity or debt obligations of the Purchaser (other than as described in SCHEDULE 1.19) or effect any merger, consolidation or other reorganization of the Purchaser or (c) enter into any agreement with respect to any of the foregoing. 6.7 Purchaser's History, Etc. Purchaser has been organized solely for the purpose of consummating the transactions contemplated hereunder, has conducted no business or operations of any nature and has incurred no obligations or liabilities other than those created by or in connection with this Agreement. Purchaser is its own "ultimate parent entity," as such term is defined under the HSR Act. Purchaser is not a $10 million person, as determined under the HSR Act. Page 49 of 272 6.8 Purchaser's Solvency. After giving effect to the consummation of the transactions contemplated hereunder, as of the Closing the assets of Purchaser will exceed its liabilities and it will have the financial resources and ability to pay and discharge its obligations as they become due. 6.9 Projections. The Projections have been prepared in good faith based upon reasonable assumptions, reasonably believed by the Purchaser to be reasonable and fair as of the Execution Date in the context of the Seller's history and current and reasonably foreseeable business conditions. 6.10 Financing and Availability of Funds. The financing provided for under the Debt Financing Commitments together with the Equity Financing Commitments described in SCHEDULE 1.19 which Purchaser is seeking to raise will be sufficient to allow Purchaser to pay the Purchase Price at the times and in the manner set forth in this Agreement, to satisfy all its other obligations under this Agreement and to Purchaser's Knowledge are reasonably believed to be sufficient to otherwise carry out its business plan. At Closing, the Purchaser will have available sufficient funds to enable it to consummate the transactions contemplated by this Agreement. 6.11 No Knowledge of Inconsistent Information. The Purchaser does not have any Knowledge of, and has not learned of, any information that is inconsistent with any of the representations or warranties of Seller made herein, including the information contained in each of the Schedules annexed hereto. 6.12 No Impediment to Governmental Approvals. To Purchaser's Knowledge neither the Management Employees, nor any officer, director, employee or source of debt or equity financing to Purchaser is subject to any condition, status or circumstance that would prevent Purchaser from being issued any federal, state or local permits, licenses or other governmental approvals needed to operate the Business after the Closing. 6.13 Proxy Statement. The information to be supplied by Purchaser or its Affiliates for inclusion in the Proxy Statement shall not, on the date the Proxy Statement (or any amendment or supplement thereto) is first mailed to GC shareholders and at the time of the Shareholders Meeting, contain any statement which, at such time and in light of the circumstances under which it shall be made, is false or misleading with respect to any material fact, or omit to state any material fact necessary in order to make such statements made in the Proxy Statement not false or misleading. If any time prior to the Shareholders Meeting any event relating to the Purchaser or any of its Affiliates, officers or directors should be discovered by Purchaser which should be set forth in a supplement to the Proxy Statement, Purchaser shall promptly inform Seller. ARTICLE VII COVENANTS From and after the date hereof and until the Closing, the parties hereby covenant and agree as follows: Page 50 of 272 7.1 Conduct of Business. Except as otherwise expressly contemplated by this Agreement or reflected on a Schedule hereto, or as specifically consented to in writing by the Chief Executive Officer or Chief Financial Officer of the Purchaser, from and after the Execution Date until the Closing Date, the Seller will use its commercially reasonable best efforts to preserve its present relationships with Persons having business dealings with the Business, operate its business at the Genesee Brewery in the ordinary course, maintain its Books and Records in accordance with good business practices on a basis consistent with prior practices, and maintain all material Insurance and Licenses and Permits necessary for the conduct of the Business as currently conducted, and without limiting the generality of the foregoing the Seller will not take any of the following actions or permit to occur any of the following events, except in the ordinary course of business: (i) sell, assign, transfer or otherwise dispose of any Asset, except as consistent with past practices or except as otherwise permitted hereunder; (ii) damage, harm or destroy any Asset in any manner; (iii) cancel or waive any claims or rights of value or sell, transfer, distribute or otherwise dispose of any Asset; (iv) dispose of or permit to lapse any rights in, to or for the use of any of the Assets (including, without limitation, the Intangible Assets) except pursuant to judicial or administrative process; (v) disclose to any Person not an employee of the Seller any confidential or proprietary information not heretofore a matter of public knowledge; (vi) in any way increase respective indebtedness levels with respect to any of the Assets, except for Payables; (vii) grant any increase in base compensation or other payment to any of its directors, officers, employees or agents from the Assets of the Business; (viii) enter into, amend or modify in any respect any collective bargaining agreement; (ix) borrow any funds or incur or assume, directly or indirectly (by way of guaranty or otherwise), any Liabilities (whether accrued, contingent, absolute or otherwise) on behalf of the Business; (x) mortgage, pledge or subject to any Lien any Asset (whether real, personal or mixed, or tangible or intangible); (xi) fail to maintain in full force and effect adequate Insurance coverage for destruction, damage to, or loss of any of the Assets; (xii) enter into any Contract which would bind Purchaser after the time of Closing in connection with the Business except as otherwise permitted hereunder; Page 51 of 272 (xiii) take or omit to take any action with respect to the Assets which would, individually or in the aggregate, have a Material Adverse Effect; (xiv) take or omit to take any action with respect to the Assets which would, individually or in the aggregate, have a Hazardous Environmental Effect; or (xv) agree or commit orally or in writing to do any of the foregoing. 7.2 Alternative Proposal. In the event that the Seller receives from a responsible person or entity a proposal to acquire the Seller or the Assets and the Special Committee, after consultation with and based upon the advice of independent counsel, determines in good faith that furnishing information to, or entering into discussions or negotiations and/or an agreement with such person or entity is necessary for the Special Committee and/or the Board of GC to comply with its fiduciary duties to shareholders under applicable law (an "Alternative Proposal"), the Seller shall promptly notify the Purchaser of such Alternative Proposal and the terms thereof and Purchaser shall have 20 days to submit an improved offer. 7.3 Employment Matters. (a) The Purchaser shall offer employment, effective at the Closing, to all then active employees of Seller and all employees out on disability, or leave under the Family Medical Leave Act or any other approved leave except those employees specified by name, job description or employment unit listed on SCHEDULE 7.3 annexed hereto. All employees of the Seller who are hired by the Purchaser are referred to in the remaining subsections of this Section 7.3 as "Transferred Employees" and Purchaser shall defend and indemnify Seller from and against any liability under the WARN Act with respect to those employees. (b) The Purchaser shall, effective as of the Closing Date, adopt for the benefit of the Transferred Employees all the Employee Benefit Plans listed on SCHEDULE 5.15 that cover employees of the Seller immediately prior to the Closing Date (except that portion of any plan providing retiree medical and life insurance benefits to Seller's retired employees). With respect to each such plan, the Purchaser shall be solely responsible on or after the Closing Date for all plan liabilities and responsibilities that apply to a plan sponsor, except to the extent of unfunded liabilities or benefits. (c) The Seller agrees to cooperate with the Purchaser, both before and after the Closing Date, in providing such information or taking such other action as the Purchaser may reasonably request so as to secure an orderly and effective transition of the plan sponsor responsibilities (except for unfunded liabilities or benefits) of the Employee Benefit Plans from the Seller to the Purchaser. The Seller agrees that from the date of this Agreement to the Closing Date it shall maintain the Employee Benefit Plans in the ordinary course and that it will not, except with the written consent of the Purchaser (which agrees not to withhold such consent unreasonably) make any material modifications to such plans or to the procedures and policies by which they are operated. (d) If any employee of the Seller as of the Closing Date ceases to be covered by an insured Employee Benefit Plan because such employee is not included as a Transferred Employee, the Seller agrees that such employee shall continue benefit coverage through the end Page 52 of 272 of the period for which premiums have been paid and, with respect to medical benefits, any COBRA coverage to which the employee or any other qualified beneficiary may be entitled. (e) The Seller agrees that it shall be solely responsible for the following obligations whether or not they relate to an event described in (c) above: (1) making all employer contributions to plans due prior to the Closing Date; (2) paying all benefits due under a plan's terms and conditions in effect up to the Closing Date except those set forth in (c) above as being the responsibility of the Purchaser upon the termination of plan participation; (3) paying all severance benefits due under any severance arrangement with any employee who ceases employment with the Seller and does not become a Transferred Employee, including WARN Act obligations; and (4) providing retiree health and life insurance benefits for persons who retire from the Seller on or prior to the Closing Date in accordance with the Seller's plan or plans (for this purpose, Seller agrees to establish and be the plan sponsor of such plans as may be required to provide such benefits). (f) The Purchaser shall be responsible for all claims submitted with respect to the Transferred Employees under the Employee Benefit Plans on or after the Closing Date, whether the circumstances giving rise to such claims occur before or after the Closing Date. In addition, the Purchaser agrees to provide coverage for and to administer COBRA coverage for all persons having such coverage or entitled to receive notice of such coverage as of the Closing Date under an Employee Benefit Plan that is a medical benefit plan, including coverage for any employee of the Seller who does not become a Transferred Employee but as of the Closing Date has a qualifying event for COBRA purposes. (g) Purchaser and Seller intend that the sale of the assets pursuant to this Agreement shall constitute a sale of assets under Section 4204 of ERISA with regard to each Multiemployer Plan listed in SCHEDULE 5.15 annexed hereto with respect to which the Seller may incur withdrawal liability on the sale in order to avoid the imposition of complete or partial withdrawal liability to Seller under each such Multiemployer Plan. Purchaser and Seller agree to comply with the provisions of Section 4204 of ERISA with respect to the Multiemployer Plan: (i) Purchaser agrees to contribute to each Multiemployer Plan for substantially the same number of contribution base units (as defined by Section 4001(a)(11) of ERISA) for which Seller had an obligation to contribute immediately prior to the Closing to each Multiemployer Plan within the meaning of Section 4204(a)(1)(A) of ERISA, provided, however, that thereafter Purchaser shall not be obligated to contribute more contribution base units than Purchaser is required to contribute under the applicable collective bargaining agreements taking into account any right that Purchaser may have to terminate its employees. (ii) To the extent required, Purchaser agrees to comply with the provisions of Section 4204(a)(1)(B) of ERISA and provide to each Multiemployer Plan for a period of five (5) plan years commencing with the first plan year beginning after the Closing Date, a bond issued by a corporate surety company that is an acceptable surety within the meaning of Section 4204(a)(1)(B) of ERISA, or an amount (including a letter of credit, if acceptable to the plan) held in escrow by a bank or similar financial institution satisfactory to the plan, in an amount (calculated separately for each such plan) equal to the greater of (A) the average annual contribution required to be made by Seller with respect to the Multiemployer Plan for the three (3) plan years preceding the plan year in which the Closing Date occurs, or (B) the annual contribution that Seller was required to make with respect to the Multiemployer Plan for Page 53 of 272 the last plan year before the plan year in which the Closing Date occurs, which bond (or escrowed funds or letter of credit) shall be paid to the Multiemployer Plan if Purchaser withdraws from the plan or fails to make a contribution to the plan when due, at any time during the first five (5) plan years beginning after the Closing Date; provided, however, that Purchaser shall not be obligated to provide such bond (or escrowed funds or letter of credit) if excepted from such obligation under a variance that may be obtained under applicable law, including, without limitation, the provisions of 29 C.F.R. Section 4204.11, 4204.13 and 4204.21 and further provided that the aforesaid amount shall be doubled if the Multiemployer Plan is in reorganization, within the meaning of ERISA, in the plan year in which the Closing occurs. Notwithstanding any of the foregoing provisions, Purchaser shall have no obligation to provide such bond (or escrowed funds or letter of credit) until notified by the plan trustees of their decision with respect to Purchaser's application to the Multiemployer Plan for variance from such obligation as set forth herein, provided Purchaser timely applies for any variance. The cost of each bond, escrow or letter of credit (and any deposits necessary with regard to any of the foregoing) shall be paid by Purchaser and Purchaser shall be the sole obligor thereunder. (iii) If Purchaser withdraws from the Multiemployer Plan in a complete withdrawal, or a partial withdrawal, during the first five (5) plan years beginning after the Closing Date, Purchaser shall be liable for any withdrawal liability resulting from such action. If the Purchaser withdraws in a complete withdrawal, or a partial withdrawal, with respect to operations during such first five (5) plan years, Seller shall be secondarily liable to the Multiemployer Pension Plan for any withdrawal liability it would have had to the Multiemployer Plan with respect to the operations (but for Section 4204 of ERISA) if the liability of Purchaser with respect to the Multiemployer Plan is not paid. (iv) If at any time after the Closing, and prior to the end of the five (5) year period referred to in (iii) above, the Seller intends to distribute all, or substantially all, of its assets or liquidate, the Seller shall give the Purchaser 90 days notice prior to taking any such action. In such event and assuming the waiver referred to below in this Section 7.3(g)(iv) is not obtained, the Purchaser and the Seller shall each post such bond, escrow or letter of credit in an amount, for the period of time, and in a form that complies with its respective obligations under Section 4204(a)(3) of ERISA. The Purchaser shall on a timely basis seek from the Multiemployer Plan a waiver of the requirement for Seller to post such bond, escrow or letter of credit based on the criteria set forth in PBGC Regulation Sections 4204.12 and 4204.13 and such other factors as the Purchaser, in its sole discretion, deems appropriate (but with no requirement to agree to any concessions requested by the Fund which are not legally required). The Seller hereby authorizes the Purchaser to seek such waiver on its behalf and agree to cooperate with it as reasonably necessary with regard to execution of documents and providing of information. (h) The Purchaser acknowledges that Seller shall have (as of closing) terminated all collective bargaining agreements with unions representing employees past and present. Purchaser shall be responsible for all claims by Transferred Employees alleging breach of a collective bargaining agreement by Seller. 7.4 Purchaser's Access to Information. From the date hereof, the Purchaser and its counsel, accountants, representatives and agents shall have full access, upon reasonable notice and during normal business hours, to the Genesee Brewery, including all financial, legal and other representatives of the Seller with knowledge of the Business, the Assets and the offices, properties, books, facilities and records of the Business and, upon reasonable notice, shall be Page 54 of 272 furnished in confidence copies of all relevant documents, records and other information concerning the business, finances and properties of the Seller and the Business that they may reasonably request. 7.5 Consents, Cooperation. Each of the parties hereto will in good faith use its reasonable efforts and shall fully cooperate with each other party to make promptly all registrations, filings and applications, give all notices and obtain all governmental and third party consents, permits, approvals, orders, authorizations, authorities, qualifications, exemptions and waivers necessary for the consummation of the sale and purchase of the Assets contemplated by this Agreement (collectively, the "Consents"). In furtherance of the foregoing, and not by way of limitation, Seller and Purchaser will fully cooperate with each other, use reasonable efforts and work closely together to achieve (a) an assignment of that certain Amended and Restated Agreement, dated April 30, 1997, between Seller and Boston Beer Company on terms acceptable to both Seller and Purchaser (subject to Seller's right of termination set forth in Section 12.1(g) of this Agreement), (b) an assignment of the Contract Manufacturing Supply Agreement dated August 1, 2000 between Seller and Mark Anthony Brewing, Inc., on terms acceptable to both Seller and Purchaser, (c) amendments as desired by Purchaser and Seller with respect to those certain Union and collective bargaining agreements listed and described in SCHEDULE 7.5(C) annexed hereto, on terms acceptable to both Seller and Purchaser (subject to Seller's right of termination set forth in Section 12.1(h) of this Agreement), and (d) an assignment of the agreements and contractual obligations listed in SCHEDULE 5.3 annexed hereto. 7.6 Notification of Certain Matters. The parties hereto each agree to give prompt notice to the other of any fact or occurrence or failure to occur of any event, which fact or occurrence or failure to occur would or could reasonably be expected to (i) cause any representation or warranty contained in this Agreement to be materially untrue or inaccurate at any time from the date hereof to the Closing Date, (ii) cause any Material Adverse Effect on the Business or any party hereto, (iii) cause any Hazardous Environmental Effect on the Business or the Genesee Brewery or (iv) cause any material inability or failure on its part to comply with, perform, consummate or satisfy any covenant, condition, transaction or agreement to be performed, consummated, complied with or satisfied by it hereunder. 7.7 Financing Commitments. The Purchaser shall diligently pursue and use its best efforts to obtain Debt and Equity Financing Commitments as soon as practicable after the Execution Date and prior to the Financing Commitment Date and to consummate the equity financing contemplated thereby and to close the financing necessary to close the transactions hereunder. Purchaser shall provide Seller with true and complete copies of the Debt and Equity Financing Commitments and any amendments thereto promptly upon securing them. Seller shall be deemed to have approved any such Debt and Equity Financing Commitments, unless Purchaser is notified to the contrary within 24 hours after Purchaser has provided copies of both to Seller. 7.8 Supplements to Schedules. Prior to the Closing, the parties hereto will supplement or amend the Schedules hereto with respect to any matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Schedules. No supplement or amendment of the Schedules made pursuant to this Section 7.8 shall be deemed to cure any breach of any representation or warranty made in this Agreement unless the other parties hereto specifically agree thereto in writing. Page 55 of 272 7.9 Title Insurance. The Purchaser will obtain at its cost in preparation for the Closing with respect to the Real Property a commitment for an ALTA Owner's Policy of Title Insurance (10/17/92) with Standard New York Endorsement, in such amount as the Purchaser reasonably may determine to be the fair market value of such real property (including all Improvements located thereon), and shall at Closing purchase insurance thereunder insuring title to the Real Property insuring the interests of Purchaser as of the Closing. The title insurance policy delivered under this Section 7.9 shall insure title to the Real Property subject to the Real Property Permitted Exceptions. The title policy affirmatively shall (a) insure that the Real Property includes all property as shown on the Survey, (b) contain an endorsement insuring that each street adjacent to the Real Property is a public street and that there is direct and unencumbered vehicular access to such streets from the Real Property, and (c) include such endorsements available in New York as Purchaser may elect to obtain. 7.10 Environmental Site Assessments. Seller has retained Haley & Aldrich of New York to conduct a Phase I environmental site assessment of the Real Property at the Genesee Brewery, and has provided to the Purchaser for its independent review and comment an Environmental Phase I Report, dated December, 1999 and related information and documents. The cost and expense of the Environmental Phase I Report and environmental site assessment has been or shall be paid solely by the Seller. Seller has also retained Haley & Aldrich of New York to conduct an environmental Phase II investigation and report (a "Phase II Investigation") mutually agreeable to the Purchaser and Seller in scope, nature and schedule, the cost and expense of the Phase II Investigation to be paid solely by the Seller. Seller has made the final Phase II Study available to Purchaser and the same is satisfactory to Purchaser. Seller makes no representations and warranties to Purchaser as to the accuracy or reliability of the work product prepared by Haley & Aldrich or any third party on behalf of the Seller regarding the environmental condition of the Real Property and Improvements. In the event this Agreement is terminated before consummation, Purchaser shall return to Seller all copies of the Environmental Phase I Report and Phase II Investigation and related information and documents in the possession of Purchaser, its officers, directors, employees, agents, attorneys, lenders, consultants and any other representative. 7.11 Surveys. With respect to the Real Property, and as to which a title insurance policy is to be procured pursuant to Section 7.9 above, the Seller has provided a survey dated February 21, 2000 made by Charles J. Costich ("Survey")_which is acceptable in all respects to Purchaser except the following which Seller shall complete prior to the Closing: (a) Certify the Survey to Purchaser, Purchaser's lender(s), Purchaser's counsel and the title insurance company issuing the title insurance policy pursuant to SECTION 7.9 of this Agreement. (b) Redate the Survey to not more than thirty (30) days prior to the closing. 7.12 Transfer Tax Forms. Seller shall deliver at Closing New York State and, if applicable, City of Rochester or Monroe County transfer tax forms, completed and ready for filing (except for Purchaser's signature and acknowledgment), and Seller shall pay and be liable for all New York State and, if applicable, City of Rochester or Monroe County real property transfer taxes associated with the sale of the Real Property to Purchaser. Page 56 of 272 7.13 Title Conditions. Seller and Purchaser acknowledge that the Real Property consists of various parcels of real estate assembled over decades, and that the title to the Real Property may be subject to easements, covenants or restrictions, reservations of mineral rights or other matters, some of which may have lapsed, have otherwise become invalid, ineffective or inoperative ("Title Conditions") all of which shall be set forth in the title insurance commitment to be obtained by Purchaser pursuant to SECTION 7.9. It shall be Seller's obligation to undertake, at its sole expense and prior to Closing, such commercially reasonable steps as are necessary or desirable to remove from title such Title Conditions which have a Material Adverse Effect and for which the title insurance to be obtained by Purchaser does not provide affirmative coverage reasonably acceptable to Purchaser. Upon Purchaser's request, Seller shall cooperate with Purchaser after the Closing to take commercially reasonable steps without substantial expense to Seller (not exceeding $5,000.00) to remove from title such Title Conditions which were neither removed from title prior to Closing nor for which affirmative coverage, reasonably satisfactory to Purchaser was provided. 7.14 Zoning and Land Use Letter. Seller shall cooperate with Purchaser, if Purchaser so elects, in seeking to obtain from the relevant authorities in the City of Rochester a "comfort letter" regarding Seller's compliance with all applicable zoning and land use restrictions currently in effect, including but not limited to compliance with height and setback requirements, parking requirements, density restrictions and certificates of occupancy (copies of which shall, to the extent in Seller's possession, be delivered to Purchaser). 7.15 Additional Agreement. The Seller shall cause GC to enter into agreements with the principals in the Purchaser consistent with the terms stated in EXHIBIT D. 7.16 GC Support. Provided that Purchaser obtains, by September 15, 2000, the written consent of Boston Brewing Co., Inc. to the assignment of the Amended and Restated Agreement between Boston Brewing Company, Inc. ("Boston") and Seller dated April 30, 1997 on terms satisfactory to Seller in its sole discretion, Seller agrees to obtain from GC its agreement to indemnify Boston from all Damages which it sustains from a breach by Purchaser of the assigned contract, to a maximum of Five Million Dollars ($5,000,000), which sum shall include any claim by Boston for the unamortized cost of the No. 2 bottling line attributable to Boston's contribution to the purchase thereof. Purchaser agrees to provide to Seller at Closing Purchaser's agreement to indemnify GC from any Damages resulting from GC's indemnification payments to Boston and to cause any debt obligations of Purchaser issued to its equity investors to be subordinate to Seller's right to indemnification from Purchaser required in this Section. Purchaser will use its best efforts to secure from governmental sources such contribution to, or participation in, the indemnification of Boston to the end that the GC indemnification is reduced to the minimum possible amount. 7.17 Shareholder Meeting. Prior to the Financing Commitment Date, Seller shall cause GC to call a special or annual meeting of GC shareholders ("Shareholder Meeting") at which it shall present for a vote proposals ("Shareholder Approval Proposal") to approve the sale of the Assets and the Business in accordance with this Agreement ("Shareholder Approval"). The GC proxy statement for the Shareholder Meeting (as amended or supplemented, the "Proxy Statement") shall include the Shareholder Approval Proposal and GC shall give Purchaser and its counsel reasonable opportunity to review and comment on the Proxy Statement before its being sent to GC shareholders. GC shall give reasonable consideration to any comments Purchaser or Page 57 of 272 its counsel may provide with respect to the Proxy Statement or any amendment or supplement thereto insofar as it relates to the Shareholder Approval Proposal. ARTICLE VIII CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS The obligation of the Purchaser to consummate the purchase of the Assets and the assumption of the Assumed Liabilities as of the time of the Closing and all other transactions contemplated by this Agreement is subject to the satisfaction at or prior to the Closing Date of the following conditions, any of which may be waived in writing by the Purchaser: 8.1 Accuracy of the Seller's Representations and Warranties. Subject to such exceptions as would not, individually or in the aggregate, result in a Material Adverse Effect, the representations and warranties of the Seller shall be true and correct in all material respects as of the date when made and as of the Closing Date, as though made at that time, and the Purchaser shall have received a certificate dated as of the Closing Date attesting thereto signed by a duly authorized officer of the Seller. 8.2 Performance by the Seller. Subject to such exceptions as would not, individually or in the aggregate, result in a Material Adverse Effect, the Seller shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement and the Purchaser shall have received a certificate dated as of the Closing Date of a duly authorized officer of the Seller to such effect. 8.3 Consents. The Seller shall have obtained all (a) Consents of Governmental Authorities which are required for the consummation of the purchase and sale and all other transactions contemplated by this Agreement, other than those Consents the failure to obtain would not, individually or in the aggregate, result in a Material Adverse Effect or render such consummation illegal, and (b) third party Consents listed in SCHEDULE 5.3. 8.4 Delivery of Documents. The Seller shall have executed and delivered or caused to be delivered to the Purchaser the deliveries listed in Section 4.3. 8.5 Material Adverse Change. Since the Execution Date, there shall not have occurred a Material Adverse Effect. 8.6 Absence of Litigation and Prohibitions. There shall not (a) have been issued and be in effect any Law or any Judgment of any court or tribunal of competent jurisdiction which prohibits or restrains, or (b) be any pending or threatened Legal Proceeding which Purchaser reasonably believes has a substantial likelihood of succeeding and, if successful, would or would seek to prohibit or restrain the validity or legality of the purchase of the Assets or the performance of other transactions contemplated by this Agreement by the Purchaser. Purchaser agrees that the legal proceedings disclosed in SCHEDULE 5.18 are not a violation of this condition. 8.7 Liens. The Assets will be free and clear of all Liens except for the Permitted Exceptions and Real Property Permitted Exceptions and Liens which, individually or in the aggregate, would not have a Material Adverse Effect. Page 58 of 272 8.8 Corporate Documents. The Purchaser will have received from the Seller all documents relating to the existence of the Seller and certified copies of the resolutions duly adopted by the board of directors and shareholder of the Seller and the shareholders of GC approving the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, (including changing Seller's name to one which does not include "Genesee" or "High Falls"), and such resolutions will be in full force and effect as of the Closing Date; and Purchaser will have received evidence that a Certificate of Amendment changing Seller's name has been filed with the New York Secretary of State. 8.9 Legal Opinion. Purchaser shall have received from Seller's legal counsel an opinion addressed to Purchaser and dated the Closing Date in the form of SCHEDULE 8.9 annexed hereto. 8.10 Survey; Title Insurance. The Survey shall not disclose any material survey defect or encroachment from or onto the Real Property which has not been cured or insured over prior to Closing, other than those which, individually or in the aggregate, would not have a Material Adverse Effect. The Purchaser shall have obtained the title insurance policy contemplated by SECTION 7.9, above. 8.11 Licenses and Permits. All material Licenses and Permits set forth in SCHEDULE 8.11 shall have been transferred to Purchaser as of the Closing Date, or transferred to Purchaser promptly following the Closing Date, as a ministerial matter. The reissuance of the Monroe County Pure Waters contract and permit shall contain substantially the same terms and conditions as the present contract and permit, unless otherwise satisfactory to Purchaser. In the event any such License or Permits of material consequences cannot be transferred to Purchaser as a matter of law, Seller shall, to the extent possible, cooperate with Purchaser in obtaining an equivalent permit (or permits). 8.12 WARN. If required by applicable law, Seller shall have satisfied the sixty (60) day written notice requirement under the WARN Act in connection with the mass layoff of employees at the Genesee Brewery. To the extent Seller breaches this covenant such that Purchaser could be subject to liabilities under the WARN Act, Seller agrees to indemnify Purchaser for any such liability, that occurs following the Closing Date. 8.13 Conduct of Business. There shall not have been any changes in Seller's current operations or conduct of Business which individually or in the aggregate, would have a Material Adverse Effect not previously disclosed to Purchaser in writing in this Agreement or a Schedule hereto. 8.14 Additional Agreement. GC shall have executed and delivered to the principals of the Purchaser the agreements described in EXHIBIT D. 8.15 Financing Commitments. Purchaser shall have obtained the Debt Financing Commitments and the Equity Financing Commitments and the lenders who provided the Debt Financing Commitments and the investors providing the Equity Financing Commitments shall have provided the funds contemplated thereunder in accordance with the terms thereof. Page 59 of 272 8.16 Net Working Capital. The Seller shall have a positive Net Working Capital position at Closing. ARTICLE IX CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS The obligations of the Seller to consummate the sale, transfer and assignment to the Purchaser of the Assets, the assignment of any Assumed Liabilities, and all other transactions contemplated by this Agreement as of the time of the Closing is subject to the satisfaction at or prior to the Closing Date of the following conditions, any of which may be waived in writing by the Seller: 9.1 Accuracy of the Purchaser's Representations and Warranties. The representations and warranties of the Purchaser shall be true and correct in all material respects as of the date when made and as of the Closing Date, as though made at that time, and the Seller shall have received a certificate dated as of the Closing Date attesting thereto signed by a duly authorized officer of the Purchaser. 9.2 Performance by the Purchaser. The Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement and the Seller shall have received a certificate dated as of the Closing Date of a duly authorized officer of the Purchaser to such effect. 9.3 Consents. The Purchaser shall have obtained all Consents of Governmental Authorities which are required for the consummation of the purchase and sale and all other transactions contemplated by this Agreement, other than those Consents the failure to obtain would not prohibit, jeopardize or delay the consummation of such transactions or render such consummation illegal. 9.4 Delivery of Documents. The Purchaser shall have executed and delivered to the Seller, at the Closing, all deliveries in Section 4.4. 9.5 Absence of Litigation and Prohibitions. There shall not (a) have been issued and be in effect any Law or any Judgment of any court or tribunal of competent jurisdiction which prohibits or restrains, or (b) be any pending or threatened Legal Proceeding which Seller reasonably believes has a substantial likelihood of succeeding and, if successful, would or would seek to prohibit or restrain the validity or legality of the sale of the Assets or the performance of other transactions contemplated by this Agreement by the Seller. 9.6 Legal Opinion. Seller shall have received from Purchaser's outside legal counsel an opinion addressed to Seller and dated the Closing Date, in the form of SCHEDULE 9.6 annexed hereto. 9.7 Labor Contracts and Employee Benefit Plans. Seller shall have negotiated its release from and termination of all material union and collective bargaining agreements related to the Genesee Brewery and Employee Benefit Plans on terms acceptable to Seller, in its sole discretion. Seller shall also have negotiated its release from all obligations to Closing Date under Page 60 of 272 the Employee Benefit Plans administered by trustees and terms acceptable to Seller, in its sole discretion. 9.8 Management Employees Releases and Certificates. Seller shall have received from the Management Employees (a) general releases releasing Seller and GC and their respective Affiliates, representatives and agents from any all claims, damages or losses of any kind other than rights to stock options previously issued to them and rights under severance agreements entered into with Seller in the form of EXHIBIT D annexed hereto and (b) certificates wherein they certify to not having any Knowledge of information that is inconsistent with or would otherwise cause, any of the representations and warranties of Seller or Purchaser surviving the Closing to be untrue or inaccurate in any respect or if such information exists, stating such information in appropriate detail. 9.9 Other Contracts. Seller shall have received consents required for transfer to Purchaser of all other contracts to be assigned hereunder on terms satisfactory to Seller in its sole discretion. 9.10 Fairness Opinion. Within 10 days after the Financing Commitment Date, Seller shall have received from Houlihan Lokey Howard & Zukin their opinion as to the fairness, from a financial points of view, to GC and shareholders of GC of the consideration to be received by Seller in this transaction. 9.11 Financing. Purchaser shall have received the proceeds of debt and equity financing of Purchaser on terms previously approved by Seller. 9.12 GC's Shareholders' Approval. The transactions contemplated by this Agreement shall have been approved by the shareholders of GC. 9.13 Environmental Matters. Purchaser shall have executed and delivered to Seller the Settlement and Release attached hereto as EXHIBIT E. ARTICLE X ADDITIONAL POST-CLOSING COVENANTS 10.1 Further Assurances. From time to time after the Closing Date, the Seller shall at the reasonable request of the Purchaser, without further consideration, promptly execute, acknowledge and deliver such other and further documents and take such other and further action as the Purchaser may reasonably request in order (i) to vest in the Purchaser all rights and titles to the Assets; and (ii) to comply with all the terms of this Agreement and consummate the transactions herein provided. From time to time after the Closing Date, the Purchaser shall at the reasonable request of the Seller, without further consideration, promptly execute, acknowledge and deliver such other and further instruments of assumption and take such other and further action as the Seller may reasonably request to give effect to the Purchaser's assumption of the Assumed Liabilities. 10.2 Access to Information. From time to time subsequent to the Closing Date both the Purchaser and the Seller will allow the other at reasonable times and upon reasonable notice, to have access to, and to copy and use, any records or information and personnel which may be Page 61 of 272 relevant in connection with the preparation of any Tax Returns, any audit or other examination by any authority, or any judicial or administrative proceedings relating to Liability for Taxes, or any other legitimate purpose. The party requesting assistance hereunder shall reimburse the other party for reasonable expenses incurred in providing such assistance. Any information obtained pursuant to this Section shall be held in strict confidence and shall be used solely in connection with the reason for which it was requested. 10.3 Mail. The Seller agrees that subsequent to the Closing, Purchaser will have the right and authority to open all mail and other communications received by the Business, even if addressed to the Seller, for processing or forwarding to the Seller, as appropriate. 10.4 Existing Insurance Coverage. As of the Closing Date, the Seller will remove the Assets from coverage under any insurance policies and any and all costs associated with such policies shall be borne by the Seller, except that Seller shall continue its products liability coverage for the joint benefit of Seller and Purchaser with respect to all products manufactured and distributed by Seller prior to Closing hereunder for a term of three (3) years after Closing. Such "tail" coverage shall provide coverage in the same amounts and upon the same terms as Seller's present coverage. 10.5 Confidentiality. (a) By the Seller. Except as required by applicable law or by Governmental Authorities having jurisdiction over the Real Property or the Improvements, Seller and its representatives will not disclose any information which is confidential, proprietary or otherwise not publicly available ("Confidential Information") about (i) the Genesee Brewery, or (ii) the Purchaser obtained in the performance of this Agreement, in either case for a period of five years following the Closing Date. (b) By the Purchaser. Except as required by applicable law or by Governmental Authorities having jurisdiction over the Real Property or the Improvements, the Purchaser and its representatives will not disclose any Confidential Information including but not limited to, the Environmental Phase I Report and any Phase II Study, about the Seller and/or the environmental conditions of the Real Property or the Improvements obtained in the performance of the Agreement (other than with respect to the Genesee Brewery, the Assets and/or the Business), for a period of five years following the Closing Date. Notwithstanding the foregoing, Purchaser may disclose the Environmental Phase I Report and any Phase II Study to an actual or prospective lender of Purchaser or other party who may acquire an interest (including a leasehold interest) in all or any portion of the Real Property Improvements or the Business, provided that in connection with any such disclosure, Purchaser will obtain such party(ies) agreement to comply with the confidentiality requirements of this Section. (c) Exceptions. The obligations provided for in this Section 10.5 will not apply to information which: (i) can be reasonably shown to have been in the possession of the party receiving the information as of the date of receipt; (ii) is disclosed to the receiving party by a third party which has a legal right to make such disclosure; (iii) was in the public domain or generally available as of the date of disclosure through no fault of the receiving party; or (iv) which is required by law to be disclosed. 10.6 Consents of Third Parties. Page 62 of 272 (a) Notwithstanding anything in this Agreement to the contrary, this Agreement shall not constitute an agreement to assign any asset or any claim or right or any benefit arising thereunder or resulting therefrom if any attempted assignment thereof, without the consent of a third party, would constitute a breach or other contravention thereof, would be ineffective with respect to any party thereto or would in a substantial way adversely affect the rights of the Seller or, upon transfer, the Purchaser, thereunder; and, subject to paragraph (b) of this Section, any transfer or assignment by the Seller to, or any assumption by, the Purchaser of any interest in, or liability, obligation or commitment under, any such asset that requires the consent of a third party shall be made subject to such consent being obtained. To the extent any Assumed Contract may not be assigned to the Purchaser by reason of the absence of any such consent, the Purchaser shall not be required to assume any Assumed Liabilities arising under such Assumed Contract. (b) If any such consent is not obtained prior to the Closing, the Seller and the Purchaser shall cooperate (at their own expense) in any lawful and reasonable arrangement under which Purchaser shall obtain the economic claims, rights and benefits under the asset, claim or right with respect to which the consent has not been obtained in accordance with this Agreement, including subcontracting, sublicensing or subleasing to the Purchaser and enforcement of any and all rights of the Seller against the other party thereto arising out of a breach or cancellation thereof by the other party, provided, however, that if such an arrangement is made and the Purchaser obtains the economic claims, rights and benefits under any such asset, claim or right, any liability, obligation or commitment of the Seller under such asset, claim or right shall be an Assumed Liability. 10.7 Employment Matters. The Seller shall provide coverage and be liable for all payments and other termination benefits that may be required to be made under any termination, severance or similar plan, policy or arrangement as in effect on the date of this Agreement with respect to employees of Seller or any of Seller's subsidiaries or affiliates who become employees of the Purchaser and who are terminated by Purchaser, in Purchaser's sole discretion, within four (4) months of the Closing Date; provided, however, that (i) Seller shall not be liable to any such employee for amounts greater than Seller would have been obligated to pay had the employee been terminated at the Closing, and (ii) the maximum aggregate amount for which Seller will be liable under this Section 10.7 is Two Hundred Fifty Thousand Dollars ($250,000). ARTICLE XI INDEMNIFICATION AND RELATED MATTERS 11.1 Indemnification by the Seller. Subject to the provisions of this Article XI, the Seller agrees to indemnify and hold the Purchaser harmless from and against all Damages sustained by the Purchaser resulting from, arising from, arising out of, relating to, or caused by: (a) the Seller's (or in the event any third party alleges facts that, if true, would mean a breach has occurred) breach of any of the representations, warranties, covenants or agreements of the Seller contained in this Agreement or in any certificate delivered by the Seller at the Closing pursuant to this Agreement (such breach to be determined for this purpose without regard to any materiality, Material Adverse Effect, or similar standard or limitation (other than Page 63 of 272 Knowledge where applicable) set forth in any representation or warranty) when made or as of the Closing Date, it being understood that to the extent that any of such representations or warranties were made as of a specified date the same shall apply only to the failure of such representations and warranties to be true as of such specified date; (b) regardless of whether a breach of any representation, warranty or covenant under this Agreement exists, (i) any failure of the Seller to transfer to the Purchaser good and marketable title to any of the Assets other than the Real Property, free of all Liens other than Permitted Exceptions; and (ii) any failure of the Seller to transfer to Purchaser insurable title free and clear of all Liens other than the Real Property Permitted Exceptions except to the extent covered by title insurance; (c) regardless of whether a breach of any representation, warranty or covenant under this Agreement exists, any Excluded Liabilities; or (d) regardless of whether a breach of any representation, warranty or covenant under this Agreement exists, the operation of the Business by Seller, or the ownership of the Assets prior to the time of Closing, including without limitation Liabilities (except for Assumed Liabilities that involve "new releases" as contemplated by Section 11.2(c)) arising from any Hazardous Environmental Effect existing prior to the Closing, subject to reduction, if any, to the extent the Liabilities have been exacerbated by Purchaser or Purchaser has failed to use reasonable efforts to mitigate such Assumed Liabilities. 11.2 Indemnification by the Purchaser. Subject to the provisions of this Article XI, the Purchaser agrees to indemnify and hold the Seller harmless from and against all Damages sustained by the Seller resulting from, arising from, arising out of, relating to, or caused by: (a) The Assumed Liabilities; (b) the Purchaser's (or in the event any third party alleges facts that, if true, would mean a breach has occurred) breach of any of the representations, warranties, covenants or agreements of the Purchaser contained in this Agreement or in any certificate delivered by the Purchaser at the Closing pursuant to this Agreement (such breach to be determined for this purpose without regard to any materiality, Material Adverse Effect, or similar standard or limitation (other than Knowledge where applicable) set forth in any representation or warranty) when made or as of the Closing Date, it being understood that to the extent that any of such representations or warranties were made as of a specified date the same shall apply only to the failure of such representations and warranties to be true as of such specified date; and (c) the operation of the Business or ownership of the Assets on or after the Closing, including but not limited to all Liabilities, Hazardous Environmental Effects, Environmental Claims and environmental harms of whatever nature, occupation or operation, any Hazardous Material contamination on, under, from or into the Real Property or Improvements caused by a new release of Hazardous Materials by Purchaser (for the avoidance of doubt, "a new release" shall be construed to mean an independent spill or other affirmative event and any exacerbation of or failure by Purchaser to use reasonable efforts to mitigate such Liabilities after the Closing Date, to the extent Purchaser actually knew or should have known of such Liabilities). Page 64 of 272 11.3 Limitation on Indemnification Liabilities. No claim for indemnification under this Article XI may be brought or maintained by the Purchaser unless and until the aggregate dollar amount of all Damages sought by it to be indemnified against under such aforesaid Article exceeds $250,000 (the "Threshold Amount"); provided, however, that the Threshold Amount shall not be applicable with respect to Purchaser's claim for indemnification for breach of Sections 7.3, 7.13, 8.7 or 14.6 and Purchaser's right for indemnification for such claims shall be from the first dollar of Damages claimed by Purchaser. No claim for indemnification under Section 11.2 may be brought or maintained by the Seller unless and until the aggregate dollar amount of all Damages sought by it to be indemnified against under the aforesaid Section exceeds the Threshold Amount. The maximum amount of liability of Seller to Purchaser under this Article XI shall not exceed $4, 500,000. 11.4 Survival of Representations, Warranties, Covenants and Indemnities. The parties agree that (a) Seller's representations and warranties in Sections 5.6, (as to environmental matters only), 5.7 and 5.9 shall survive the Closing and continue in full force and effect until the expiration of the applicable statutes of limitation; (b) Seller's representations and warranties, in Sections 5.14 and 5.15 shall survive the Closing and continue in full force and effect until 36 months after the Closing Date; and (c) all of the other representations, warranties and covenants of the Seller and the Purchaser shall survive the Closing and continue in full force and effect until 18 months after the Closing Date. All indemnity claims for breach of a representation, warranty or covenant herein must be brought prior to expiration of the applicable survival period. Any indemnity claim which is made prior to the expiration of the applicable survival period shall survive until final adjudication or other disposition. 11.5 Notice of Indemnification. In the event any Legal Proceeding shall be threatened or instituted or notice thereof given or any claim or demand shall be asserted by any Person in respect of which payment may be sought by one party hereto from the other party under the provisions of this Article XI for breach of any of the representations, warranties, covenants or agreements set forth herein, the party seeking indemnification (the "Indemnitee") shall promptly cause written notice of the assertion of any such claim of which it has knowledge which is covered by this indemnity to be forwarded to the other party (the "Indemnitor"), which notice must be received by the Indemnitor not later than the conclusion of the applicable survival period set forth in Section 11.4. Any notice of a claim by reason of any of the representations, warranties, covenants or agreements contained in this Agreement shall state in reasonable detail the representation, warranty, covenant or agreement with respect to which the claim is made, the facts giving rise to an alleged basis for the claim, and the amount of the liability asserted against the Indemnitor by reason of the claim. 11.6 Indemnification Procedure for Third-Party Claims. Except as otherwise provided in this Article XI, in the event of the initiation of any Legal Proceeding against an Indemnitee by a third party, once the Indemnitee has given notice of the matter to the Indemnitor, the Indemnitor may defend against the matter in any manner it reasonably may deem appropriate. The Indemnitor will reimburse the Indemnitee for all reasonable expenses (including, without limitation, fees and expenses of counsel selected by the Indemnitee) as they are accrued in connection with investigating and defending against any such matter. The Indemnitor will not consent to the entry of a judgment or enter into any settlement with respect to such matter without the written consent of the Indemnitee (which shall not be unreasonably withheld or delayed). The Indemnitee shall cooperate in all reasonable respects with the Indemnitor and its attorneys in the investigation, trial and defense of any Legal Proceeding and any appeal from Page 65 of 272 (including the filing in the Indemnitee's name of appropriate cross claims and counterclaims). The Indemnitee may, at its own cost, participate in any investigation, trial and defense of such Legal Proceeding controlled by the Indemnitor and any appeal arising therefrom. If the Indemnitor does not notify the Indemnitee within 30 days after the Indemnitee has given notice of the matter that the Indemnitor is assuming all responsibility therefor, the Indemnitee, with the consent of the Indemnitor which consent shall not be unreasonably withheld, may defend against, consent to the entry of judgment or enter into any settlement with respect to the matter in any manner the Indemnitee reasonably deems appropriate without waiving any right to indemnity therefor by the Indemnitor. 11.7 Exclusive Remedy. Indemnification pursuant to this Article XI shall constitute the exclusive remedy available to any party under this Agreement on account of any claim which it may have arising after the Closing for any Damages. Any claim by Purchaser for any Damages shall be limited to Four Million Five Hundred Thousand Dollars ($4,500,000) and may only be satisfied by Purchaser by offsetting such Damages against the Subordinated Note delivered by Purchaser to Seller at the Closing Date as contemplated by Section 3.1. Purchaser shall give Seller written notice of any claim for Damages, specifying the details thereof and if Seller objects thereto, Purchaser shall deduct the amount of such claim from the payments(s) due to Seller under the Subordinate Note and pay said amount to a joint bank account in the names of Purchaser and Seller at a mutually agreeable bank. Withdrawal of that amount may only be made if the Seller and Purchaser consent thereto in writing or if a court determines in a final non-appealable order or judgment that the Damages are owed by Seller to Purchaser. Payment to the joint bank account shall be deemed a payment under the Subordinated Note and interest under the Subordinated Note shall stop accruing on such payment. Interest earned in the joint account shall follow the principal paid out therefrom. In any event, the right of offset shall be exercised against payments due under the Subordinated Note only in the inverse order in which they are due. Notwithstanding the foregoing, indemnification for money Damages under this Article XI shall not preclude injunctive relief for any claims for breach of any of the representations, warranties or covenants contained in Sections 7.2, 10.1, 10.2, or 10.5. ARTICLE XII TERMINATION 12.1 Termination. This Agreement may be terminated prior to the Closing Date as follows: (a) By mutual written consent of the Seller and the Purchaser; (b) By either the Purchaser on one hand or the Seller on the other, so long as the terminating party has not breached in any material respect any of its obligations hereunder, after October 31, 2000 or such later date to which the Closing may be extended by written agreement of the parties hereto (such date being herein referred to as the "Outside Closing Date"), if the Closing shall not have occurred on or before such date; (c) By the Seller at any time, by written notice given to Purchaser prior to the Financing Commitment Date, if the Special Committee determines in good faith, upon advice of legal counsel, that termination of this Agreement is required for the directors of GC to fulfill their fiduciary duties and obligations under New York law so that Seller may continue operation Page 66 of 272 of the Genesee Brewery, liquidate the Genesee Brewery or pursue another course of action other than sale or other disposition of the Genesee Brewery; and by the Seller at any time, if the Special Committee does not approve the terms of the Equity or Debt Financing Commitments which have been delivered to it by Purchaser prior to the Financing Commitment Date. (d) By the Seller at any time if the Special Committee determines in good faith, upon advice of legal counsel, that termination of this Agreement is required for the directors of GC to fulfill their fiduciary duties and obligations under New York law. (e) By the Seller, if the proposed terms of the consent to assignment of the agreements identified in Sections 7.5(a), (b) and (d) hereof, or the consequences to Seller of the non-assignment thereof are not satisfactory to Seller in its sole discretion. (f) By the Seller, if the termination of those certain Union and collective bargaining agreements listed and described in SCHEDULE 7.5(C) and the Employee Benefit Plans are not satisfactory to Seller, in its sole discretion. (g) By Seller if it fails to receive from Houlihan Lokey Howard & Zukin a favorable opinion as to the fairness, from a financial point of view, to GC and the public shareholders of GC of the consideration to be received by GC in connection with the transactions hereunder; or if GC fails to receive from its shareholders approval of this transaction. (h) By Purchaser by giving written notice to the Seller at any time prior to the Closing in the event the Seller has within the ten (10) previous Business Days given Purchaser any notice pursuant to Section 7.6 and Seller has failed to cure any defect that would have a Material Adverse Effect set forth in such notice within ten (10) Business Days of the date that it learns of such defect; (i) By the Seller by giving written notice to the Purchaser at any time prior to the Closing in the event Purchaser has within the ten (10) previous Business Days given Seller any notice pursuant to Section 7.6 and Purchaser has failed to cure any defect that would have a Material Adverse Effect set forth in such notice within ten (10) Business Days of the date that it learns of such defect; (j) By the Seller, so long as the Seller has not breached any of its obligations hereunder, if the Purchaser fails to perform any covenant in this Agreement when performance thereof is due and does not cure any such failure that would have a Material Adverse Effect within ten (10) Business Days after the Seller delivers written notice thereof to the Purchaser; and (k) By the Purchaser so long as the Purchaser has not breached any of its obligations hereunder, if the Seller fails to perform any covenant in this Agreement when performance thereof is due and does not cure any such failure that would have a Material Adverse Effect within ten (10) Business Days after written notice by the Purchaser thereof to the Seller. (l) In the event that after the Execution Date and before Closing the Real Property, Improvements, Tangible Property or Machinery are damaged in the amount of $500,000 or more, or to an extent that the ability of Purchaser to continue normal operations Page 67 of 272 would be substantially impaired, then either Seller or Purchaser may terminate this Agreement. If Purchaser elects to proceed to Closing and Seller does not terminate this Agreement, then Purchaser shall have a credit against the cash portion of the Purchase Price for the reasonable cost of repair less the amount of insurance proceeds which are payable to Seller as a result of the damage and are assigned by Seller to Purchaser. 12.2 Effect of Termination. If this Agreement is terminated pursuant to Section 12.1, all rights and obligations of the parties hereunder shall terminate, except for the confidentiality covenants set forth in Section 10.5 hereof, and none of the parties will have any Liability to any other party hereunder, except that Sections 11.7, 12.3, 14.5 and 14.7 will remain in effect, and provided that nothing herein will relieve any party from Liability for any intentional breach of any representation, warranty, covenant or agreement in this Agreement prior to such termination. 12.3 Purchaser's Right to Damages or Expenses. Notwithstanding anything herein to the contrary, if this Agreement is terminated by Seller in breach of this Agreement or for any reason other than Purchaser's failure under Section 7.7 diligently to pursue and use its best efforts to obtain the Debt and Equity Financing Commitments set forth in SCHEDULE 1.19 (of which Seller shall give Purchaser 10 days' notice to cure), then Seller shall pay the sum of Purchaser's aggregate reasonable documented costs, fees and expenses incurred in connection with the transactions contemplated by this Agreement and the financing thereof, not to exceed $250,000 , provided that appropriate supporting documentation is delivered to Seller by Purchaser. In consideration of the foregoing, Purchaser agrees that under no circumstances shall Seller be liable to Purchaser for Damages prior to Closing in excess of $250,000, whether claimed under the preceding sentence or as a result of an alleged breach by Seller. ARTICLE XIII SPECIFIC PERFORMANCE Each of the Parties acknowledges and agrees that the other Party would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each of the Parties agrees that the other Party shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in the State of New York, as prescribed in Section 14.4 below, in addition to any other remedy to which it may be entitled, at law or in equity. ARTICLE XIV GENERAL AND MISCELLANEOUS 14.1 Prorations. All taxes relating to the Assets shall be prorated by the parties as of the Closing Date, and all such taxes applicable to periods of time prior to the Closing date shall be the sole obligation responsibility and expense of the Seller and shall be paid by the Seller. All such assessments and taxes applicable to periods following the closing Date shall be the sole obligation, responsibility and expense of the Purchaser and shall be paid by the Purchaser. All utility services to the Real Property shall either have final readings as of the Closing or be adjusted by Seller and Purchaser as of the Closing. Page 68 of 272 14.2 Waiver of Compliance with Bulk Transfer Laws. The Purchaser hereby waives compliance by the Seller with the provisions of the bulk transfer laws of any jurisdiction in connection with the transactions contemplated by this Agreement, and in exchange therefor the Seller agrees to be liable for and to pay, honor and discharge when due any claims of creditors asserted against the Purchaser by reason of such noncompliance. 14.3 Entire Agreement. This Agreement (with its Schedules and Exhibits) and related documents delivered concurrently herewith or at the Closing hereunder, contain, and are intended as, a complete statement of all of the terms and the arrangements between the parties hereto with respect to the matters provided for herein, and supersedes any and all previous agreements and understandings between the parties hereto with respect to those matters, including but not limited to certain Memorandums of Proposal and memorandums from Seller's representatives commenting thereon and a certain letter agreement dated June 8, 2000 regarding the payment of certain expenses and fees up to a maximum of $150,000. Neither party has executed this Agreement in reliance on any representation or promise not contained herein or therein, including, without limitation, any representation or promise as to the admissibility of any oral representation or agreement. There are no restrictions, promises, warranties, covenants or undertakings other than those expressly set forth herein or in the Schedules or Exhibits hereto. 14.4 Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of New York without giving effect to any choice or conflict of law provision or rule. All actions and proceedings arising out of or relating to this Agreement shall be heard and determined in any New York state or federal court sitting in Rochester, New York, and the parties hereto hereby consent to the jurisdiction of such courts in any such action or proceeding. 14.5 Costs. If any legal action or proceeding is brought relating to this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, a party or parties who receive more than a majority of the money damages initially alleged in such action or proceeding, shall be entitled to recover reasonable attorneys' fees and other costs incurred in that action or proceeding, in addition to any other relief to which it or they may be entitled. 14.6 Transfer Taxes. The Seller shall pay all transfer and documentary gains, excise and other transfer or similar Taxes and fees imposed with respect to instruments of conveyance in the transaction contemplated hereby and Purchaser shall pay all sales, use and similar Taxes on the transfer of the Assets contemplated hereunder, including any and all recording fees. The Purchaser or the Seller, as the case may be, shall execute and deliver to the other at the Closing any certificates or other documents as the other may reasonably request to perfect any exemption from any such transfer, documentary, sales, gains, excise or use Tax. 14.7 Expenses. Except as otherwise provided in Section 12.3, each of the parties hereto shall bear its own expenses (including without limitation, fees and disbursements of its counsel, accountants and other experts), incurred by it in connection with the preparation, negotiation, execution, delivery and performance of this Agreement, each of the other documents and instruments executed in connection with or contemplated by this Agreement and the consummation of the transactions contemplated hereby and thereby. Page 69 of 272 14.8 Headings. The section headings of this Agreement are for reference purposes only and are to be given no effect in the construction or interpretation of this Agreement. 14.9 Notices. All notices and other communications under this Agreement shall be in writing and shall be deemed duly given when delivered personally or by facsimile or four days after being mailed by registered mail, return receipt requested, or by documented overnight delivery to a party at the following address (or to such other address as such party may have specified by notice given to the other party pursuant to this provision): If to the Seller, to: William Buckingham, Chairman Special Board Committee The Genesee Corporation P.O. Box 762 Rochester, New York 14603 with a copy to: Harry P. Messina, Jr., Esq. Woods Oviatt Gilman LLP 700 Crossroads Bldg. 2 State Street Rochester, New York 14614 If to the Purchaser, to: Samuel T. Hubbard, Jr. Monroe Brewing Co., LLC c/o Genesee Brewery 445 St. Paul Street Rochester, New York 14605 with a copy to: Underberg & Kessler LLP 1800 Chase Square Rochester, New York 14604 Attn: Michael C. Dwyer, Esq. 14.10 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement will nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any adverse manner to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto will negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an Page 70 of 272 acceptable manner so that the transactions contemplated hereby are fulfilled to the greatest extent possible. 14.11 Binding Effect, No Assignment. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. Nothing in this Agreement, express or implied, is intended to confer on any Person other than the parties hereto or their respective successor and assigns any rights, remedies or liabilities under or by any reason of this Agreement. No assignment of this Agreement or of any rights or obligations hereunder may be made by any party (by operation of law or otherwise) without the prior written consent of each of the other parties hereto and any attempted assignment without such required consents shall be void; provided, however, Seller may assign this Agreement and its rights, interests and obligations hereunder to a liquidating trust or similar entity. 14.12 Amendments. This Agreement may be amended, supplemented or modified, and any provision hereof may be waived, only pursuant to a written instrument making specific reference to this Agreement signed by each of the parties hereto. 14.13 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 14.14 Extension; Waiver. At any time, the parties may extend the time for the performance of any of the obligations or other acts of the other party, waive any inaccuracies in the representations and warranties contained in this Agreement and waive compliance with any of the agreements or conditions contained in this Agreement. Any agreement on the part of a party to any such extension or waiver will be valid only if set forth in an instrument signed on behalf of such party. The waiver by any party hereto of a breach of any provision hereunder will not operate to be construed as a waiver of any prior or subsequent breach of the same or any other provision hereunder. 14.15 Incorporation of Exhibits and Schedules. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. 14.16 Press Release and Public Announcements. Upon execution of this Agreement by the parties hereto, Seller may issue a news release and file a Form 8-K announcing the Agreement. Until the Closing, no party hereto or Affiliate thereof shall issue any press release or make any general public announcement relating to the subject matter of this Agreement without the prior written approval of the Purchaser and the Seller; provided, however, that any party hereto may make any public disclosure it believes in good faith is required by applicable law. [SIGNATURES APPEAR ON THE FOLLOWING PAGE] Page 71 of 272 IN WITNESS WHEREOF, the parties hereto have executed this instrument as of the date and year first above written. THE GENESEE BREWING COMPANY, INC. By the Special Board Committee: /s/ William A. Buckingham ------------------------------------ Name: William A. Buckingham Title: Chairman /s/ Stephen B. Ashley ------------------------------------ Name: Stephen B. Ashley Title: Member /s/ Charles S. Wehle ------------------------------------ Name: Charles S. Wehle Title: Member & Chairman of the Board MONROE BREWING CO., LLC By: /s/ Samuel T. Hubbard, Jr. --------------------------------- Name: Samuel T. Hubbard, Jr. Title: Chief Executive Officer Page 72 of 272 SCHEDULES --------- 1.19 Purchaser's Financing 1.56 Seller's Fiscal 2001 Budget 1.58 Example of Net Working Capital Calculation 2.1(a) Machinery 2.1(c) Intangible Assets 2.1(e) Working Capital Assets 2.1(h) Reports, Permits and Surveys 2.2 Excluded Assets 2.3(b) Leases, Customer Contracts and Other Obligations Assumed 2.3(c) Working Capital Liabilities 2.4(l) Excluded Liabilities 3.3 Allocation of Purchase Price 5.1 Jurisdictions Where Qualified (Seller) 5.3 Consents Required 5.4 Seller's Operational Statements 5.6 Absence of Certain Developments 5.7 Tax Exceptions 5.7(d) Tax Investigations 5.8 Real Property Permitted Exceptions 5.8(b) Condemnation Proceedings, Etc. 5.9 Environmental, Health and Safety Exceptions 5.11 Tangible Property Permitted Exceptions 5.12 Machinery, Permitted Exceptions and Leases 5.12(i) Leases Not Fully Assignable 5.13 Intangible Assets Exceptions [(b), (c) and (d)] 5.14 Employee Exceptions 5.15 Employee Benefit Plans and Exceptions 5.16 Law Compliance-Notices, Etc. 5.17 Licenses and Permits and Exceptions 5.18 Legal Proceedings 5.19 Material Contracts 5.21 Brokers - Seller 6.3 Consents for Purchaser 6.5 Brokers - Purchaser 7.3 Non-Transferred Employees 7.5(c) Union/Collective Bargaining Agreements 7.10 Environmental Site Assessments 8.9 Legal Opinion - Seller's Counsel 8.11 Material Environmental Permits and Licenses 9.7 Legal Opinion - Purchaser's Counsel Page 73 of 272 EXHIBITS -------- A. Real Property B-1 Subordinated Promissory Note B-2 Security Agreement B-3 Investor Subordinated Note C. Management Agreement D. GC Agreement With Management Employees E. Settlement and Release EX-10.2 3 l85770aex10-2.txt EXHIBIT 10-2 Page 74 of 272 EXHIBIT 10-2 ------------ AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT This AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT (this "AMENDMENT NO. 1") is made as of the 15th day of December, 2000, by and between HIGH FALLS BREWING COMPANY, LLC, a New York limited liability company ("PURCHASER"), and THE GENESEE BREWING COMPANY, INC., a New York corporation ("SELLER"). R E C I T A L S : A. Seller and Purchaser are parties to that certain Asset Purchase Agreement dated as of August 29, 2000 (the "PURCHASE AGREEMENT"). B. The parties to the Purchase Agreement desire to amend the Purchase Agreement as set forth herein. C. Capitalized terms used, but not defined herein shall have the meanings given thereto in the Purchase Agreement. P R O V I S I O N S : NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1. INTERCREDITOR AGREEMENT, ETC. The parties agree to execute and deliver at Closing, provided the same is executed and delivered by each of the other parties thereto, an Intercreditor Agreement in the form of EXHIBIT K attached hereto. The execution of such agreement shall be added to the "Deliveries by Purchaser to Seller" set forth in Section 4.4 of the Purchase Agreement. The form of Investor Subordinated Note (referred to in Section 3.1) shall be in the form of EXHIBIT B-3 attached hereto and copies of each executed Note shall be delivered to Seller at Closing. 2. EXHIBIT C MANAGEMENT AGREEMENT. The form of this EXHIBIT C, mentioned in Section 3.5 of the Purchase Agreement, is attached hereto, none having been previously attached to the Purchase Agreement. 3. EXHIBIT D MANAGEMENT SEPARATION AGREEMENT. The revised forms of this EXHIBIT D, mentioned in Sections 4.3 and 7.15 of the Purchase Agreement, are attached hereto, EXHIBIT D-1 being for Samuel T. Hubbard, Jr. and EXHIBIT D-2 being for all other management employees. Page 75 of 272 4. EXHIBIT E SETTLEMENT AND RELEASE. The form of this EXHIBIT E, mentioned in Section 9.13 of the Purchase Agreement, is attached hereto, none having been previously attached to the Purchase Agreement. 5. SECTION 3.1 PURCHASE PRICE AND PAYMENT. The parties amend Section 3.1 of the Purchase Agreement to read in its entirety as follows: The consideration (the "Purchase Price") to be paid by the Purchaser to the Seller for the sale, assignment, delivery and transfer of the Assets and the Seller's other obligations made under this Agreement shall be the sum of (a) Twenty-Two Million Dollars ($22,000,000) plus or minus the Net Working Capital; (b) the Purchaser's assumption if the Assumed Liabilities; and (c) the amount paid by Seller to purchase the Gallina property in accordance with EXHIBIT A-1 to the Asset Purchase Agreement, if the Seller has obtained title thereto prior to Closing and transfers same to Purchaser, or, if Seller has not obtained title, the sum of $7,000, being the deposit paid by Seller in connection with the Purchase and Sale Agreement for the Gallina property (items (a) through (c) being collectively the "Initial Payment"). The Initial Payment shall be paid at the Closing as follows: Eleven Million Dollars ($11,000,000) plus or minus the amount of the Net Working Capital, as determined from the Estimated Closing Date Balance Sheet, plus the amounts referred to in (c) above, by wire transfer of immediately available funds to the account or accounts designated by Seller, with the remaining balance of Eleven Million Dollars ($11,000,000) as follows: (a) By delivery of Purchaser's $4.5 Million Junior Subordinated Note (the "$4.5 Million Note"), in the form attached hereto as EXHIBIT B-1. The $4.5 Million Note will be secured by a perfected security interest in all of Purchaser's assets exclusive of real property and motor vehicles granted pursuant to a general security agreement in the form attached hereto as EXHIBIT B-2. (b) By delivery of Purchaser's $3.5 Million First Senior Bridge Note (the "$3.5 Million Note"), in the form attached hereto as EXHIBIT B-4. The $3.5 Million Note will be secured by a perfected security interest exclusive of motor vehicles in the Machinery, Tangible Property and Intangible Assets granted pursuant to a security agreement in the form attached hereto as EXHIBIT B-2 and by the mortgage referred to in 5(c). (c) By delivery of Purchaser's $3 Million Second Senior Bridge Note (the "$3 Million Note"), in the form attached hereto as EXHIBIT B-5. The $3 Million Note will be secured by a first mortgage lien on the Real Property (and a first perfected security interest in all fixtures). The first lien shall be granted pursuant to a mortgage in the form attached hereto as EXHIBIT B-6, limited to $3 Million, and Purchaser shall pay all costs of recording same, including the mortgage tax. (d) The $4.5 Million Note and the Boston Beer Note (hereinafter defined) are subject to Purchaser's right of offset to the extent that Purchaser is entitled to indemnification by Seller pursuant to a certain Indemnification Agreement between Seller and Purchaser of even date as a result of Seller's breach of its covenant in Section 6 of its Page 76 of 272 Limited Performance Guaranty given to Boston Brewing Company, Inc., d/b/a The Boston Beer Co. for itself and as sole general partner of Boston Brewing Company Limited Partnership. The right of offset shall survive until the expiration of the applicable Statute of Limitations and shall follow the procedures set forth in the second, third and fourth sentences of Section 11.7 of the Purchase Agreement. Purchaser shall have no other right of offset under the Boston Beer Note except as specifically provided in this Section 3.1(d). Purchaser shall have no right of offset against the $3.5 Million Note or the $3.0 Million Note, regardless of the nature of Purchaser's claim. 6. SECTION 3.3 ALLOCATION OF PURCHASE PRICE. The parties agree that Schedule 3.3 will not be attached to either the Purchase Agreement or this Amendment No. 1 and that each party shall allocate the Purchase Price among the Acquired Assets according to their fair market value. 7. SECTIONS 7.5, 7.16, 8.3 AND 9.3 CONSENTS, ETC. Provided that Boston Brewing Company, Inc. d/b/a The Boston Beer Company, a Massachusetts corporation, for itself and as the sole general partner of Boston Beer Company Limited Partnership, a Massachusetts limited partnership (collectively, "BOSTON BREWING") executes and delivers to Purchaser the Consent in the form of EXHIBIT F attached hereto, the parties agree to execute and deliver at Closing in satisfaction of the relevant portions of Sections 7.5, 8.3 and 9.3, the following forms attached hereto: Assignment and Assumption Agreement - Exhibit A to Consent Limited Performance Guaranty - Exhibit B to Consent Indemnification Agreement - Exhibit to Assignment and Assumption Agreement The parties agree that the Purchaser will pay, and be solely responsible for, any liabilities or monies due Boston Brewing under the Production Agreement for any change parts, modifications or new equipment of Seller paid, funded or provided by Boston Brewing, including, but not limited to, the amount that may be due for Seller's No. 2 line. In the event the Purchaser's "contract production," from all contract customers, for the three (3) year period commencing immediately after Closing is less than 2.5 million barrels, the parties agree that so long as no Event of Default has occurred and is continuing under the promissory note executed and delivered by Purchaser to Seller pursuant to the above-mentioned Indemnification Agreement for payments made under the Production Agreement (the "Boston Beer Note"), then the third (3rd) anniversary $3.0 million principal payment due under the $4.5 Million Note referred to in Section 3.1 of the Purchase Agreement (as amended by this Amendment No. 1) shall be paid as follows: (a) $1.0 million (together with all other principal and interest unpaid under such note, less $2,000,000) shall be paid on the third (3rd) anniversary of the Closing; Page 77 of 272 (b) $1.0 million shall be paid on the fourth (4th) anniversary of the Closing; and (c) $1.0 million shall be paid on the fifth (5th) anniversary of the Closing; each such payment being subject to the default and acceleration terms of the said Subordinated Note. As used herein, "CONTRACT PRODUCTION" means all beverages of any kind produced by Purchaser at any facilities and sold to third parties ("CONTRACTING PARTIES") for resale by and under such third party's labels, as measured by barrels shipped. Not later than January 31, 2002 and 2003, Purchaser shall cause to be prepared and delivered to Seller a certificate executed by an officer of Purchaser setting forth the names of all of Contracting Parties and the contract production for each of the Contracting Parties during the calendar years 2001 and 2002 and the cumulative amount since the Closing. Not more than thirty (30) days after the end of each full nine (9), ten (10) and eleven (11) calendar month period following December 31, 2002, Purchaser shall cause to be prepared and delivered to Seller a similar certificate setting forth the contract production for each such full nine (9), ten (10) and eleven (11) calendar month period and the cumulative amount since the Closing, as well as a certificate for the cumulative amount from Closing to December 15, 2003, to be delivered by December 31, 2003. If requested by Seller, Purchaser shall make available copies of each of the contracts between the Purchaser and each Contracting Party and all records necessary for Seller to verify the contents of the officer's certificate. In addition, the parties agree to add the following subsection to the end of Section 7.5 (while deleting the word "and" from immediately prior to (d) and placing it at the end of (d): "and (e) an assignment of the letter agreement dated September 25, 2000 between UDV of North America, Inc. ("UDV") and Seller (a copy of which is attached hereto as EXHIBIT G) and any agreement pursuant thereto (the "UDV AGREEMENTS"). Purchaser agrees to assume and comply with the terms of the UDV Agreements. 8. SECTION 3.2 ADDITIONAL PURCHASE PRICE. The parties agree that the only benefits received by Purchaser from the over-funded pension plan which shall require payment of additional purchase price under subsection (a) of Section 3.2 shall be receipt of a loan or equity investment by Purchaser (through any means or device, including, but not limited to, an ESOP investment by plan trustees) or by reversion of excess assets to Purchaser. Page 78 of 272 9. SECTION 9.7 LABOR CONTRACTS AND EMPLOYEE BENEFIT PLANS. The parties agree that the execution and delivery by Purchaser to Seller of the Indemnity Agreement in the form attached hereto as EXHIBIT H shall satisfy the conditions set forth in Section 9.7. 10. SECTION 11.3 LIMITATION ON INDEMNIFICATION LIABILITIES. The parties agree that the Threshold Amount referred to in Section 11.3 shall exclude any Taxes for which Seller is liable under the Purchase Agreement as owner and operator of Genesee Brewery through the Closing, and any Damages incurred or suffered by Seller's breach of its obligations under its Limited Performance Guaranty (Exhibit B) to Boston Brewing. Page 79 of 272 11. SCHEDULES. The following Schedules to the Purchase Agreement are amended and, as amended, are - attached to this Amendment No. 1: Schedule 2.2 - Excluded Assets Schedule 2.3(b) - Assumed Liabilities Schedule 5.7 - Taxes Schedule 5.8 - Real Property Permitted Exceptions Schedule 5.11 - Tangible Property Permitted Schedule 5.17 - Licenses and Permits Exceptions Schedule 5.18 - Legal Proceedings Schedule 7.3 - Excluded Employees 12. LIMITED LIABILITY COMPANY GUARANTY. In accordance with the requirements of Section 2.5 of the Purchase Agreement, GENESEE BREWING EQUIPMENT, LLC ("GB Equipment"), a New York limited liability company has been formed by filing Articles of Organization with the New York Secretary of State. The required publication of a Notice of Organization has not commenced. At Closing or before, Seller shall transfer and assign to GB Equipment in exchange for 100% of the membership interests in GB Equipment, that portion of Seller's Machinery and Tangible Property (as defined in the Purchase Agreement) which on transfer to an entity not owned by the transferor would be subject to New York State sales tax. At Closing, Seller shall transfer to Purchaser Seller's membership interest in GB Equipment whereupon Purchaser shall cause GB Equipment to guaranty each of the Purchaser's Notes to Seller (described above) as well as Purchaser's other monetary obligations to Seller, and to grant Seller a security interest in all assets transferred to it by Seller, which guaranty and security interest shall be in accordance with the form Guaranty and Security Agreement attached hereto as EXHIBIT_I and EXHIBIT J, respectively. 13. NAME CHANGE. Immediately prior to Closing, Monroe Brewing Co., LLC shall change its name to HIGH FALLS BREWING COMPANY, LLC and all instruments of transfer and certificate from Seller to Purchaser shall be addressed to Purchaser's new name while all security agreements, mortgage and certificates from Purchaser to Seller shall be from Purchaser's new name. 14. EFFECTIVENESS. This Amendment No. 1 shall be effective as of the date first above written when executed by Seller and Purchaser. 15. COUNTERPARTS. This Amendment No. 1 may be executed in two or more counterparts (including by means of telecopied signature pages), all of which shall be considered one and the same agreement. 16. GOVERNING LAW. This Amendment No. 1 shall be governed by and construed in accordance with the laws of the State of New York, without regard to the choice of law provisions thereof. Page 80 of 272 17. INCORPORATION OF AMENDMENT. On and after the date hereof, each reference in the Purchase Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of like import shall be a reference to the Purchase Agreement as amended hereby. 18. NO OTHER AMENDMENTS. Except as expressly set forth in this Amendment No. 1, no other amendment or modification is made to any other provisions of the Purchase Agreement, and the Purchase Agreement shall remain in full force and effect, as amended hereby, and as so amended the Seller and Purchaser hereby reaffirm all of their respective rights and obligations thereunder. IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1 as of the date first written above. HIGH FALLS BREWING COMPANY, LLC By: /s/ Samuel T. Hubbard, Jr. ------------------------------ Name: Title: Manager THE GENESEE BREWING COMPANY, INC. By: /s/ Mark W. Leunig ------------------------------ Name: Mark W. Leunig Title: Vice President Page 81 of 272 EXHIBITS TO THIS AMENDMENT NO. 1 -------------------------------- Exhibit B-1 - $4.5 Million Note Exhibit B-2 - Security Agreement of Monroe Exhibit B-4 - $3.5 Million Note Exhibit B-5 - $3 Million Note Exhibit B-6 - Mortgage Exhibit C - Management Agreement Exhibit D-1 - Management Separation Agreement (Hubbard) Exhibit D-2 - Management Separation Agreement (Others) Exhibit E - Settlement and Release Exhibit F - Consent, with Exhibits A. Assignment and Assumption Agreement, with Exhibit Page 82 of 272 - Indemnification Agreement, with Exhibit A. Promissory Note B. Limited Performance Guaranty Exhibit G - UDV Letter Agreement (9/25/00) Exhibit H - Indemnity Agreement (re: union contracts and benefit plans) Exhibit I - Guaranty of Genesee Brewing Equipment, LLC Exhibit J - Security Agreement of Genesee Brewing Equipment, LLC AMENDED SCHEDULES ----------------- (See Section 12) EX-10.3 4 l85770aex10-3.txt EXHIBIT 10-3 Page 83 of 272 EXHIBIT 10-3 ------------ FIRST SENIOR BRIDGE NOTE - ------------------------ $3,500,000.00 December 15, 2000 FOR VALUE RECEIVED, HIGH FALLS BREWING COMPANY, LLC, a New York limited liability company with an address at 445 St. Paul Street, Rochester, New York 14605 ("MAKER"), promises to pay to THE GENESEE BREWING COMPANY, INC. a New York Corporation ("PAYEE"), at its office at 445 St. Paul Street, Rochester, New York 14605 or at such other address as may hereafter be specified by Payee, in lawful money of the United States of America, the principal sum of THREE MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($3,500,000.00), together with interest thereon at the rate, in the installments and at the times hereinafter provided. 1. MATURITY DATE; PRINCIPAL AND INTEREST PAYMENTS; PREPAYMENTS. 1.1 Maturity. The outstanding principal balance of this Note plus all accrued and unpaid interest thereon and all other sums due hereunder shall be due and payable by Maker in full on or before midnight on June 1, 2004 (the "MATURITY DATE"). 1.2 Interest Rate. Prior to Acceleration (defined below), the principal sum outstanding from time to time hereunder shall bear interest at a rate (the "INTEREST RATE") equal to the prime rate of Manufactures & Traders Trust Company ("M&T") as announced from time to time plus one percent (1%) per annum. In the event that M&T's prime rate is hereafter increased or decreased, then the Interest Rate will be automatically, without notice, increased or decreased as of the date of such change so that the Interest Rate shall at all times be one percent (1%) higher than the "prime rate," as announced by M&T from time to time. Upon the occurrence, and during the continuance, of an Event of Default, Payee may, at its option, increase the Interest Rate by three percent (3%) over the "prime rate". 1.3 Payments of Principal and Interest. Maker shall pay all accrued interest on each March 15, June 15, September 15 and December 15 of each year (each a "PAYMENT DATE"), commencing March 15, 2001. Unless earlier accelerated, Maker shall make a principal payment of $125,000 on September 15, 2001 and subsequent principal payments of $125,000 each on each subsequent Payment Date, and continuing thereafter until the Maturity Date, when the entire remaining principal balance of this Note, plus all accrued and unpaid interest thereon, shall be paid in full. 1.4 Mandatory Prepayments. Maker shall on the same business day that it receives any proceeds from the HUD Financing or the Alternative Financing, whichever occurs earlier, pay all proceeds therefrom directly to Maker as a prepayment of the principal outstanding hereunder until such principal amount and all accrued interest Page 84 of 272 thereon have been paid in full, provided, however, that if the HUD Financing or the Alternative Financing closes in more than one transaction or if the HUD Financing or Alternative Financing does not yield sufficient proceeds to prepay in their entirety both this Note and Maker's Second Bridge Note, then Maker may direct how the proceeds from any such financing shall be applied in the prepayment of this Note and the Second Bridge Note. For the purposes of this Note, the following terms shall apply: "ACT" means the Housing and Community Development Act of 1974, Pub. L. No. 93-383 codified as 42 U.S.C. 5301 et seq., as amended, and regulations promulgated thereunder. "ALTERNATIVE FINANCING" means financing (other than the JDA Financing) in the aggregate amount of Six Million Five Hundred Thousand Dollars ($6,500,000) less the principal amount received or to be received pursuant to the HUD Loan and the EDI Grant amount received or to be received pursuant to the EDI Grant. "CITY" means the City of Rochester, New York, a New York municipal corporation. "EDI GRANT" means a grant under HUD's Economic Development Initiative in the amount of One Million Five Hundred Thousand Dollars ($1,500,000) or such lesser amount as may actually be disbursed to Maker after Maker exerts best efforts to secure a grant in the amount of no less than One Million Five Hundred Thousand Dollars ($1,500,000). "HUD" means the United States Department of Housing and Urban Development and fiscal agents and other entities involved in Section 108 Loan Guarantee funding transactions with the City. "HUD LOAN" means one or more loans to the Maker from the City of Rochester from the proceeds of a loan made to the City by the Federal Short-Term U.S. Government Trust or such other entity designated by HUD to which HUD provides financial accommodations in the aggregate principal amount of up to $5,000,000 or such lesser principal amount as the City may actually loan to the Maker after the Maker exerts best efforts to secure a loan from the City under this program in the principal amount of $5,000,000; the HUD Loan shall consist of a $2,000,000 term loan secured only by a first lien on all Sankey Cooperage and filling equipment of the Maker and a $3,000,000 twenty (20) year first mortgage loan secured by all real property of the Maker, each bearing interest at a fixed rate not exceeding that of a Treasury note or bond of comparable maturity plus 2% per annum. "HUD FINANCING" means the EDI Grant and the HUD Loan. Page 85 of 272 "HUD FINANCING CLOSING" shall mean the closing and funding of the HUD Financing or any Alternative Financing. "JDA" means the New York Job Development Authority d/b/a Empire State Development Corporation. "JDA COMMITMENT" means the commitment letter dated October 23, 2000 issued by the JDA. "JDA FINANCING" means the financing contemplated in the JDA Commitment. "SECOND BRIDGE NOTE" shall mean Maker's Second Senior Bridge Note of even date herewith payable to Payee in the original principal amount of Three Million Dollars ($3,000,000). "SECTION 108" means Section 108 of the Act, codified as 42 U.S.C. 5308, as amended, and regulations promulgated thereunder. 1.5 Voluntary Prepayments. Subject to the Intercreditor Agreement referred to below, this Note may be prepaid in whole or in part at any time prior to the Maturity Date without prior notice to Payee, without penalty or premium. Any partial prepayments shall be applied to installments of principal last falling due, and shall have no effect on Maker's mandatory prepayment obligations under Section 1.4. No partial prepayment shall postpone or interrupt payments of interest or the payment of the remaining principal balance, all of which shall continue to be due and payable at the time and in the manner set forth above. 1.6 Time and Manner of Payments. (a) All payments (including prepayments) to be made in respect of principal, interest or other amounts due from Maker hereunder shall be made to Payee in United States dollars in funds immediately available, without set-off, counterclaim or other deduction of any nature. Maker acknowledges that it shall have no right to offset against any installments of principal of, or interest due under, this Note, whether under the Asset Purchase Agreement dated August 29, 2000, as amended by Amendment No. 1 dated December 15, 2000 (the "ASSET PURCHASE AGREEMENT"), or any other agreement or instrument of any kind. (b) All payments hereunder shall be applied in the following order of priority: costs, expenses, accrued interest and thereafter to the reduction of principal. After payment of the foregoing, all prepayments of any kind shall be applied to the extent of available proceeds to the principal installments payable hereunder in the inverse order of maturity. All prepayments of any kind shall be accompanied by all accrued interest due on the prepaid principal at the time of prepayment. Page 86 of 272 (c) All interest shall be payable in arrears. Interest hereon shall be calculated on the basis of a 360-day year applied to the actual number of days elapsed. All payments of interest and principal shall be payable in lawful currency of the United States of America. 2. SECURITY. As security for the payment when due of the principal of and interest on this Note, the Maker has, under a "SECURITY AGREEMENT" dated of even date herewith and financing statements filed pursuant thereto, granted to Payee a continuing perfected security interest in all of the personal property of Maker, and all proceeds and products of such property, including insurance payable by reason of loss or damage (collectively, the "Collateral"). 3. INTERCREDITOR AGREEMENT. This Note and the Security Agreement and the rights of Payee hereunder and thereunder are subject to an Intercreditor Agreement (the "INTERCREDITOR AGREEMENT") by and among Payee, M&T and Cephas Capital Partners, L.P. ("CEPHAS") and such other creditors of Maker as the three named creditors may determine to make a party to such Intercreditor Agreement. Payment of this Note is guaranteed by a certain secured Guaranty of even date herewith executed by Genesee Brewing Equipment, LLC. 4. REPRESENTATIONS AND WARRANTIES. Maker represents and warrants to Payee that: 4.1 Organization, Authority, Etc. (a) Maker's execution and delivery of this Note and the enforceability against Maker of the transactions hereby contemplated, including the HUD Financing and the JDA Financing, have been duly authorized by all requisite limited liability company action; (b) this Note has been duly and validly executed and delivered by Maker and constitutes Maker's legal, valid and binding obligation; (c) the execution and delivery of this Note by Maker does not, and the performance by it of the transactions hereby contemplated will not result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under its Articles of Organization or Operating Agreement or any terms, conditions or provisions of any note, debenture, security agreement, lien, mortgage or other agreement, instrument or obligation, oral or written, to which Maker is a party (whether as an original party or as an assignee or successor) or by which it or any of its properties is or will be bound; (d) except as set forth in EXHIBIT A annexed hereto, Maker has all licenses, permits, approvals, franchises, registrations, accreditations, authorizations, variances and the like (the "PERMITS") necessary for the conduct of its intended business after closing the acquisition pursuant to the Asset Purchase Agreement (the "Acquisition"), all of which are in full force and effect; (e) no approval or consent by any third party or governmental authority under any statutes, regulations or the Permits (collectively, "GOVERNMENTAL REGULATIONS") is required in connection with Maker's execution and delivery of this Note and the transactions hereby contemplated; and (f) Maker has provided Payee with true and complete copies of the JDA Commitment letter and all amendments thereto and extensions thereof and to the knowledge of the Maker, the JDA Commitment is in full force and effect. Page 87 of 272 4.2 Pro Forma Financial Statements. (a) Maker's Pro Forma Financial Statements dated December 7, 2000 ("Pro Forma Financial Statements") delivered by Maker to Payee and their underlying assumptions are reasonable and have been prepared by Maker in good faith; and (b) except as set forth in Maker's Recission Offer dated December 8, 2000, nothing has come to the Maker's attention since the preparation thereof that would lead it to believe that the Pro Forma Financial Statements are inaccurate, incomplete or misleading in any material respect. 4.3 Debt, Etc. Except for indebtedness and obligations to Payee and third parties contemplated by the Asset Purchase Agreement between Maker and Payee of even date herewith, set forth on EXHIBIT A annexed hereto is a complete and correct list of all credit agreements, indentures, guaranties, capital leases, and other investments, agreements, and arrangements presently in effect providing for or related to borrowed money; and the maximum principal or face amounts of the credits in questions, outstanding or to be outstanding, are correctly stated, and all security interests, liens or encumbrances of any nature given or agreed to be given as security therefor are correctly described or indicated in such Schedule. 4.4 Capitalization. (i) Maker has provided Payee with a true and complete copy of its Articles of Organization and Operating Agreement and all subscription agreements and there are no obligations for the repurchase or acquisition of any membership or other equity interest in Maker except with respect to the repurchase obligations for the warrants issued to Cephas Capital Partners, L.P. on even date herewith, (ii) the capitalization of Maker is as set forth on EXHIBIT B annexed hereto; and (iii) all issued and outstanding membership, capital distribution or interests in Maker are fully paid and non-assessable. 4.5 Solvency. Both before and after giving effect to the transactions contemplated by the Asset Purchase Agreement and the financing therefor, Maker is and will be Solvent. As used herein, "SOLVENT" means Maker (i) has assets having a fair value in excess of its Debts, and (ii) has and expects to continue to have adequate capital for the conduct of its business and the ability to pay its Debts as the same mature. For a definition of "Debt" see Section 16 of Exhibit C. 5. COVENANTS. So long as any portion of the principal amount of this Note remains outstanding and unpaid or any accrued interest has not been paid, (a) Maker shall comply with each of the affirmative covenants set forth in EXHIBIT C annexed hereto and (b) without the prior written consent of the Payee, Maker shall observe and not violate any of the negative covenants set forth in EXHIBIT D annexed hereto. All exhibits are incorporated herein by reference. 6. EVENTS OF DEFAULT. Each of the following shall constitute an event of default (each, an "EVENT OF DEFAULT") hereunder: Page 88 of 272 6.1 Payment Failure. If Maker fails to make any payment of any installment of interest and/or principal hereunder or any other sum due hereunder within ten (10) days after such payment is due. 6.2 Failure to Perform, Etc. (a) Any representation or warranty made or deemed made by Maker herein, in the Security Agreement or the Intercreditor Agreement shall prove to have been incorrect, incomplete or misleading in any material respect on or as of the date made or deemed made. (b) Maker shall fail to perform or observe any term, covenant or agreement set forth on EXHIBIT C, which failure is not cured within thirty (30) days after receipt of notice from Payee, or Maker fails to observe or abide by any term, covenant or agreement contained in EXHIBIT D. 6.3 Bankruptcy. If any proceeding under the Bankruptcy Code or any law of the United States or of any state relating to insolvency, receivership, or debt adjustment is instituted by Maker or any Guarantor, or if any such proceeding is instituted against Maker or any Guarantor and is consented to by the respondent or an order for relief shall be entered in such proceeding or such proceeding shall remain undismissed for sixty (60) days, or if a trustee or receiver is appointed for any substantial part of Maker's or any Guarantor's property and such appointment remains undismissed for sixty (60) days, or if Maker or any Guarantor makes an assignment for the benefit of creditors, admits in writing its inability to pay debts generally as they become due or becomes insolvent. 6.4 Cross-Default. Maker shall (i) fail to pay any Debt for borrowed money of Maker (including but not limited to Manufacturers and Traders Trust Company, Cephas Capital, L.P., financing provided by Maker pursuant to the Asset Purchase Agreement and certain investor notes issued by Maker pursuant to the Offering Summary dated September 20, 2000 and Recission Offer dated December 8, 2000), or any interest or premium thereon, when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise); (ii) fail to perform or observe any term, covenant, or condition on its part to be performed or observed under any agreement or instrument relating to any such Debt when required to be performed or observed, if the effect of such failure to perform or observe is to accelerate, or to permit the acceleration after the giving of notice or passage of time, or both, of the maturity of such Debt, whether or not such failure to perform or observe shall be waived by the holder of such Debt, or any such Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; (iii) materially breach the Asset Purchase Agreement; or (iv) Maker shall fail to perform or observe any material term, covenant or agreement set forth in any agreement or instrument executed by Maker with or in favor of Payee (other than in the Asset Purchase Agreement and other than those items referred to above in this Section 6.4), which failure is not cured within thirty (30) days after receipt of notice from Payee. Page 89 of 272 6.5 Judgment. A final judgment or order for the payment of money in excess of $100,000 shall be rendered against the Maker or any Guarantor and such judgment or order shall continue unsatisfied, in effect and unstayed for a period of thirty (30) consecutive days. 6.6 Discontinuance of Business. Maker's failure to conduct business in the ordinary course, dissolution or termination of existence. 6.7 Change of Control. The occurrence of a Change of Control. As used herein a "CHANGE OF CONTROL" means a change of control of the Maker of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act, whether or not the Maker is then subject to such reporting requirement; provided, that, without limitation, such a Change of Control shall be deemed to have occurred if: (i) any "person" (as defined in Sections 13(d) and 14(d) of the Exchange Act) or "group" (as defined in Section 13(d) of the Exchange Act) other than the Management Group is or becomes the "beneficial owner" (as defined in Rule 13(d)(3) of the Exchange Act), directly or indirectly, of securities of Maker representing 30% or more of the combined voting power of the Maker's then outstanding securities in the election of Managers or with respect to any sale or disposition by Maker of its assets or the dissolution of Maker ("VOTING power"); (ii) the members of the Maker approve a merger or consolidation of the Maker with any other limited liability company or corporation, other than a merger or consolidation which would result in the voting securities of the Maker outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 70% of the combined voting power of the voting securities of the Maker or such surviving entity outstanding immediately after such merger or consolidation; (iii) if any recapitalization event occurs as a result of which the holders of voting securities of the Maker outstanding immediately prior thereto do not continue to hold at least 70% of the combined voting power of the voting securities of the Maker immediately after such recapitalization event; (iv) the members of the Maker approve a plan of complete liquidation of the Maker or an agreement for the sale or disposition by the Maker of all or substantially all of the Maker's assets. 6.8 Intercreditor Agreement. The Intercreditor Agreement shall at any time after its execution and delivery and for any reason cease to be in full force and effect or shall be declared null and void, or the enforceability thereof shall be contested by any party thereunder other than Payee, or any such party shall deny that it is bound thereby. Page 90 of 272 6.9 Guarantees. Any guaranty of this Note shall at any time after its executed and delivery for any reason cease to be in full force and effect or shall be declared null and voice, or the validity or enforceability thereof shall be contested by any guarantor, or any guarantor shall deny it has any further liability or obligation under, or shall fail to perform its obligations under the Security Agreement. 6.10 Boston Beer. The occurrence of any event which would entitle Boston Brewing Company, Inc. d/b/a The Boston Beer Company, a Massachusetts corporation, for itself and as the sole general partner of Boston Beer Company Limited Partnership, a Massachusetts limited partnership (collectively, "BOSTON BEER") to receive payment from Payee on its Guaranty of even date herewith made in favor of Boston Beer by Payee for the benefit of the Maker in respect of a certain Amended and Restated Agreement dated April 30, 1997, other than (i) pursuant to a Refunding Obligation Payment (as defined in an Indemnification Agreement of even date herewith between Maker and Payee) or (ii) a breach by Payee of its "Net Worth" covenant under its Guaranty in favor of Boston Beer Company. 6.11 UDV Agreement. Borrower shall fail to execute an agreement before January 3, 2001 with UDV North America, Inc. ("UDV") upon the terms and conditions referenced in that certain letter agreement by UDV to Maker dated September 25, 2000. 6.12 Security Agreement. The Security Agreement shall at any time after its execution and delivery and for any reason cease (a) to create a valid and perfected security interest in and to the property purported to be subject to such Security Agreement, except as provided in the Intercreditor Agreement; or (b) to be in full force and effect or shall be declared null and void, or the validity or enforceability thereof shall be contested by Maker or Maker shall deny it has any further liability or obligation under the Security Agreement, or Maker shall fail to perform in any material respect any of its obligations under the Security Agreement. 7. REMEDIES. Upon the occurrence of any Event of Default hereunder, the entire unpaid principal balance of this Note, together with all accrued and unpaid interest thereon and all other sums owing hereunder shall, at the option of Payee, become immediately due and payable (an "ACCELERATION"), without presentation, demand or further action of any kind, and Payee may forthwith exercise, singly, concurrently, successively or otherwise, any and all rights and remedies available to Payee hereunder. The failure of payee to accelerate the outstanding principal balance of this Note upon the occurrence of an Event of Default hereunder shall not constitute a waiver of such Event of Default or of the right to accelerate this Note at any time thereafter so long as the Event of Default remains uncured. If Payee retains the services of counsel in order to enforce any remedy available to Payee hereunder, all reasonable attorneys' fees which are actually incurred by Payee shall be payable upon demand. Upon the occurrence and continuation of any one or more Events of Default, and whether or not the Payee shall have accelerated the maturity of this Note, the Payee may, proceed to protect and enforce its rights by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Note or any instrument Page 91 of 272 pursuant to which the obligations to the Payee are evidenced, including as permitted by applicable law the obtaining of the ex parte appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of the Payee. No remedy herein conferred upon the Payee or the holder of this Note is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of law. 8. INTEREST LIMITATIONS. Nothing herein contained nor any transaction related hereto shall be construed or shall operate either presently or prospectively to require Maker to pay interest at a rate greater than is now lawful in such case to contract for, but shall require payment of interest only to the interest paid in excess of the lawful rate shall be refunded to Maker. 9. SEVERABILITY. In the event that for any reason one or more of the provisions of this Note or their application to any person or circumstance shall be held to be invalid, illegal or unenforceable in any respect or to any extent, such provisions shall, to such extent, be held for naught as though not herein contained but shall nevertheless remain valid, legal and enforceable in all such other respects and to such extent as may be permissible. In addition, any such invalidity, illegality or unenforceability shall not affect any other provisions of this Note, but this Note shall be construed as if such invalid, illegal or unenforceable provisions had never been contained herein. 10. SUCCESSORS AND ASSIGNS. This Note inures to the benefit of Payee, its successors and assigns, and is binding upon Maker, its successors and assigns, provided that any successor or assign of the Payee of this Note first executes a written undertaking agreeing to be bound by all of the provisions of the Intercreditor Agreement. The words "Payee" and "Maker" whenever used herein shall be deemed and construed to include such respective successors and assigns. 11. NOTICES. All notices required to be given to any of the parties hereunder shall be in writing and shall be deemed to have been sufficiently given for all purposes when given in accordance with the terms and conditions of the Asset Purchase Agreement. 12. CAPTIONS. The captions or headings of the sections in this Note are for convenience only and shall not control or affect the meaning or construction of any of the terms or provisions of this Note. 13. GOVERNING LAW; AMENDMENT. This Note shall be governed by and construed in accordance with the laws of the State of New York. This Note may only be amended by an instrument in writing signed by both Maker and Payee. Page 92 of 272 IN WITNESS WHEREOF, Maker, intending to be legally bound hereby, has duly executed this Note, under seal, on the date and year first above written. MAKER: HIGH FALLS BREWING COMPANY, LLC By: /s/ Samuel T. Hubbard, Jr. ------------------------------- Name: Samuel T. Hubbard, Jr. Title: President Page 93 of 272 EXHIBIT A REQUIRED PERMITS AND LICENSES 1. Ohio Beer Malt Beverage Certificate of Registration - Application in process per Donna Cuccio of Ohio Liquor Authority. 2. New Jersey Limited Wholesale License (transfer from Seller) - Seeking temporary license. 3. Colorado Non-Resident Manufacturer License - State will issue upon proof of closing of Acquisition. 4. Connecticut Out-of-State Beer Permit - State will issue upon closing of Acquisition. 5. Arizona Out-of-State Brewer's License - State will issue week of 12/10/00. 6. Delaware Suppliers' License - State will issue week of 12/10/00, per Edith Butler of Delaware Liquor Authority. 7. Arkansas Non-Resident Beer Seller Permit - Transfer permitted by State; awaiting documentation. 8. Alabama Out-of-State Manufacturer's License (Transfer) - Transfer allowed upon surrender of Seller's license. Page 94 of 272 EXHIBIT C AFFIRMATIVE COVENANTS --------------------- So long as the outstanding principal amount under the Note and all accrued interest thereon has not been paid in full, the Maker shall: 1. MAINTENANCE OF EXISTENCE. Preserve and maintain, and cause each Person required to become a guarantor (each a "GUARANTOR") of this Note to preserve and maintain, its corporate existence and good standing in the jurisdiction of its incorporation, and qualify and remain qualified, as a foreign corporation in each jurisdiction in which qualification is required. 2. MAINTENANCE OF PERMITS. Maintain in full force and effect all license, permits, approvals, franchises, registrations, accreditations, authorizations, variances and the like necessary for the conduct of its intended business after closing the Acquisition. 3. MAINTENANCE OF RECORDS. Keep, and cause any Guarantor to keep, adequate records and books or account, in which complete entries will be made in accordance with GAAP consistently applied. 4. MAINTENANCE OF PROPERTIES. Maintain, keep, and preserve, and cause any Guarantor to maintain, keep, and preserve, all of its material properties (tangible and intangible) necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted. 5. CONDUCT OF BUSINESS. Continue to engage in an efficient and economical manner in a business of the same general type as proposed to be conducted by it upon consummation of the Acquisition. 6. MAINTENANCE OF INSURANCE. Maintain, and cause any Guarantor to maintain, insurance with financially sound and reputable insurance companies or associations in such amounts and covering such risks as are usually carried by companies engaged in the same or a similar business and similarly situated, which insurance may provide for reasonable deductibility from coverage thereof and which shall name the Payee as additional insured and loss payee, as its interests may appear. 7. COMPLIANCE WITH LAWS. Comply, and cause each Guarantor to comply, in all material respects with all applicable laws, rules, regulations, and orders, such compliance to include, without limitation, paying before the same become delinquent all taxes, assessments, governmental charges imposed upon it or upon its property. 8. RIGHT OF INSPECTION. At any reasonable time and from time to time, permit the Payee or any agent or representative thereof to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Maker and any Guarantor, and to discuss the affairs, finances, and accounts of the Maker and any Guarantor with any of their respective officers and directors and the Makers' independent accountants. 9. REPORTING REQUIREMENTS. Furnish to Payee: (a) Financial Statements. -------------------- Page 95 of 272 (i) As soon as available and in any event within one hundred twenty (120) days after the end of Maker's fiscal year ending on or after December 31, 2001, consolidated and consolidating balance sheets of Maker and its subsidiaries as of the end of such Fiscal Year, consolidated and consolidating statements of income and retained earnings of Maker and its Subsidiaries for such Fiscal Year, and consolidated and consolidating statements of changes in financial position of Maker and its subsidiaries for such Fiscal Year, all in reasonable detail and stating in comparative form the respective figures for the corresponding dates and period in the prior fiscal year or in the Pro Forma Financial Statements, as the case may be, all prepared in accordance with GAAP consistently applied and as to the consolidated statements accompanied by an opinion thereon acceptable to the Payee by Arthur Anderson & Co. or other independent accountants acceptable to the Payee; (ii) As soon as available and in any event within one hundred twenty (120) days after the end of Fiscal Year 2000, internally prepared and certified consolidated and consolidating balance sheets of Maker and its subsidiaries as of the end of such fiscal year, consolidated and consolidating statements of income and retained earnings of Maker and its subsidiaries for such fiscal year, and consolidated and consolidating statements of changes in financial position of Maker and its subsidiaries for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the corresponding dates and period in the prior fiscal year or in the Pro Forma Financial Statements, as the case may be, all prepared in accordance with GAAP consistently applied. (iii) As soon as available and in any event within twenty-five (25) days after the end of March 31, June 30, September 30 and December 31 of each Fiscal Year, consolidated and individual balance sheets of Maker and its Subsidiaries as of the end of the three month period then ended (each a "Fiscal Quarter") and the period to date then ended of the then current fiscal year, consolidated and individual statements of income and retained earnings of Maker and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such month, and consolidated and individual statements of changes in financial position of Maker and its Subsidiaries for the portion of the fiscal year ended with the last day of such month, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the previous fiscal year and with the Pro Forma Financial Statements and all prepared in accordance with GAAP consistently applied and certified, to the best of his knowledge, by the chief financial officer of Maker (subject to year-end adjustments); (b) Management Letters. Promptly upon receipt thereof, copies of any reports submitted to the Maker by independent certified public accountants in connection with examination of the financial statements of the Maker made by such accountants; Page 96 of 272 (c) Quarterly Compliance Certificate. Within twenty-five (25) days after the end of each Fiscal Quarter, a certificate of the chief financial officer of Maker (a) certifying that to the best of his knowledge no Event of Default has occurred and is continuing, or if an Event of Default has occurred and is continuing, a statement as to the nature thereof and the action which is proposed to be taken with respect thereto; and (b) containing computations demonstrating compliance with the covenants contained in Section 15 of this Exhibit C; (d) Accountant's Report. Simultaneously with the delivery of the annual financial statements required under this Note, a certificate of the independent public accountants who audited such statements to the effect that, in making the examination necessary for the audit of such statements, they have obtained no knowledge of any condition or event which constitutes an Event of Default, or if such accountants shall have obtained knowledge of any such condition or event, specifying in such certificate each such condition or event of which they have knowledge and the nature and status thereof; (e) Notice of Litigation. Promptly after the commencement thereof, notice of all actions, suits, and proceedings before any court or governmental department, commission, board, bureau, agency, or instrumentality, domestic or foreign, affecting the Maker or any Guarantor which, if determined adversely to the Maker or such Guarantor, could have a material adverse effect on the financial condition, properties, or operations of the Maker or such Guarantor; (f) Notice of Defaults and Events of Default. As soon as possible and in any event within five (5) days after the occurrence of each Event of Default, a written notice setting forth the details of such Event of Default and the action which is proposed to be taken by the Maker with respect thereto; (g) Reports to Other Creditors. Promptly after the furnishing thereof, copies of any statements or report furnished to any other party pursuant to the terms of any indenture, loan, credit, or similar agreement and not otherwise required to be furnished to the Maker pursuant to any other clause above; and (h) General Information. Such other information respecting the condition or operations, financial or otherwise, of Maker or any Guarantor as the Payee may from time to time reasonably request. 10. ENVIRONMENT. Be and remain, and cause any Guarantor to be and remain, in compliance in all material respects with the provisions of all federal, state, and local environmental, health, and safety laws, codes and ordinances, and all rules and regulations issued thereunder; notify Payee promptly of any notice of a hazardous discharge or environmental complaint received from any governmental agency or any other party; notify Payee promptly of any hazardous discharge occurring after the date of this Note from or affecting its premises; undertake and complete all removal and other remedial actions required of Maker by a governmental authority with respect to such hazardous discharge, in compliance in all material respects with Page 97 of 272 all applicable laws; promptly pay any fine or penalty assessed in connection therewith; permit the Payee to inspect all books, correspondence, and records pertaining thereto; and at the Payee's request, and at the Maker's expense, provide a report of a qualified environmental engineer, satisfactory in scope, form, and content to the Payee, and such other and further assurances reasonably satisfactory to the Payee that the condition has been corrected as required in accordance with applicable law. 11. GUARANTORS. Cause each subsidiary of Maker created or acquired after the date hereof to execute and deliver to the Payee a guaranty of payment of this Note and all other Debt of Maker to Payee of any kind, whereby such subsidiary shall guaranty payment of all such Debt, together with legal opinions in form and substance satisfactory to the Payee as to validity and enforceability of such guaranty, and to such other matters as the Payee may reasonably request. In addition, Maker shall notify the Payee of the acquisition or creation of any new subsidiary. (Each guarantor of this Note is referred to herein as a "Guarantor"). 12. HUD FINANCING CLOSING. Take all actions necessary to consummate the HUD Financing on the terms previously disclosed to Payee and use best efforts to consummate the HUD Financing on or prior to September 30, 2000. The Maker shall not undertake or enter into any transaction that would prevent the consummation of the HUD Financing or which would prevent the Maker from obtaining such financing. In the event that Maker is unable to obtain the HUD Financing, then Maker shall exert best efforts to secure and close Alternative Financing as soon as reasonably practicable. Upon request by the Payee, Maker shall provide Payee with copies of all correspondence, written communications and draft documents delivered to Maker, HUD, the City and/or any lender proposing to provide the Alternative Financing by one another relating to, or involving the HUD Financing. 13. JDA FINANCING CLOSING. Exert best efforts to close the JDA Financing as soon as reasonably practicable, but in no event later than the expiration date provided for under the JDA Commitment. Upon request by the Payee, Maker shall provide Payee with copies of all correspondence between the JDA and Maker. 14. FURTHER ASSURANCES. Cooperate with the Payee and execute such further instruments and documents as the Payee shall reasonably request to carry out to its satisfaction the transactions contemplated by this Note and all related agreements and documents. 15. CASH FLOW. Maintain Cash Flow Coverage of not less than 1.0 to 1.0 for the immediately preceding twelve (12) month period (or for the first three (3) Fiscal Quarters following the date hereof for the period since the date hereof to the end of such Fiscal Quarter), measured as of the end of each Fiscal Quarter as shown on the financial statements required to be provided by Maker to Payee pursuant to Section 9(a) above. Page 98 of 272 16. CERTAIN DEFINITIONS. As used herein, the following terms shall apply: "CAPITAL EXPENDITURES" means for the applicable period, expenditures made to acquire or construct fixed assets, plant and equipment (including improvements, renovations and replacements required to be classified in accordance with GAAP as capital expenditures, but excluding maintenance and repairs not required to be so classified). Capital Expenditures shall include the capital leases. "CASH FLOW COVERAGE" means, for the applicable measurement period, EBITDA plus the proceeds from the issuance of membership, capital, distribution or other equity interests ("EQUITY INTERESTS") or Debt for borrowed money issued by Maker after the date hereof (other than in connection with the financing of the Acquisition or any refinancing or modification thereof) subordinated to this Note (in form satisfactory to Payee) (including any amendments, modifications or replacements hereof), compared to (i) for the measurement periods ending through and including December 31, 2002, interest, principal and tax payments due and/or paid plus cash required to fund repurchases of Equity Interests and (ii) for measurement periods ending thereafter, interest, principal and tax payments due and/or paid plus Capital Expenditures to the extent not funded by Debt for borrowed money plus cash required to fund repurchases of Equity Interests. "DEBT" means (a) indebtedness or liability for borrowed money; (b) obligations evidenced by bonds, debentures, notes or other similar instruments; (c) obligations for the deferred purchase price of property or services (including trade obligations); (d) obligations as lessee under capital leases; (e) current liabilities in respect of unfunded vested benefits under plans covered by ERISA; (f) obligations under letters of credit; (g) obligations under acceptance facilities; (h) all guarantees, endorsements (other than for collection or deposit in the ordinary course of business), and other contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any person or entity, or otherwise to assure a creditor against loss; and (i) obligations secured by any liens, whether or not the obligations have been assumed. "EBITDA" means Maker's consolidated earnings before interests, taxes, depreciation, amortizations, dividends, distributions, and the like. 17. AMENDMENTS TO INVESTMENT NOTES. Without Payee's prior written consent, Maker shall not agree to any amendment to its Investor Notes issued pursuant to Maker's Offering Summary dated September 20, 2000 and Recission Offer dated December 8, 2000. Page 99 of 272 EXHIBIT D --------- NEGATIVE COVENANTS So long as the Note shall remain unpaid, Maker will not, and will not permit any Guarantor to: 1. LIENS. Create, incur assume, or suffer to exist, or permit any Guarantor to create, incur, assume, or suffer to exist, any mortgage, deed of trust, pledge, security interest, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), or preference, priority, or other security agreement or preferential arrangement, charge, or encumbrance of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction to evidence any of the foregoing) (each a "LIEN") upon or with respect to any of its properties, now owned or hereafter acquired, except: (a) Liens in favor of M&T securing Debt to M&T to the extent such Debt is permitted by Section 2; (b) Liens in favor of the Payee; (c) Liens subordinated on terms satisfactory to the Payee to the Maker's obligations under this Note and the Maker's Second Senior Bridge Note; (d) Liens for taxes or assessments or other government charges or levies if not yet due and payable or, if due and payable, if they are being contested in good faith by appropriate proceedings and for which appropriate reserves are maintained; (e) Liens imposed by law, such as mechanics', materialmen's, landlords', warehousemen's, and carriers' Liens, and other similar Liens, securing obligations incurred in the ordinary course of business which are not past due for more than forty five (45) days or which are being contested in good faith by appropriate proceedings and for which appropriate reserves have been established; (f) Lien's under workers' compensation, unemployment insurance, Social Security, or similar legislation; (g) Liens, deposits, or pledges to secure the performance of bids, tenders, contracts (other than contracts for the payment of money), leases (permitted under the terms of this Agreement), public or statutory obligations, surety, stay, appeal, indemnity, performance or other similar bonds, or other similar obligations arising in the ordinary course of business; (h) Judgments and other similar Liens arising in connection with court proceedings, provided that, if the amount in question exceeds $100,000.00, the execution or other enforcement of such Liens is effectively stayed and the claims Page 100 of 272 secured thereby are being actively contested in good faith and by appropriate proceedings; (i) Easements, rights-of-way, restrictions, and other similar encumbrances which, in the aggregate, do not materially interfere with the occupation, use, and enjoyment by the Maker or any Guarantor of the property or assets encumbered thereby in the normal course of its business or materially impair the value of the property subject thereto; and (j) Purchase money security interests securing Debt permitted pursuant to Section 2(g), provided that no such Lien (i) secures any other Debt, or (ii) extends to assets not acquired with the proceeds of such permitted Debt; and (k) Other Liens set forth in Exhibit B and not otherwise described above. 2. DEBT. Create, incur, assume, or suffer to exist, or permit any Guarantor to create, incur, assume, or suffer to exist, any Debt, except: (a) Debt of the Maker to M&T (i) pursuant to the Revolving Loan and Term Loan Agreement dated December 15, 2000 between M&T and Maker (the "M&T AGREEMENT") and (ii) as otherwise permitted by, and subject to the limitations set forth in, the Intercreditor Agreement; (b) Debt outstanding under this Note, the Maker's Second Bridge Note or another Debt to Payee; (c) Debt disclosed on EXHIBIT B (provided that the HUD Loan described therein are on terms reasonably satisfactory to Payee), but no voluntary prepayments, renewals, extensions, or refinancing thereof; (d) Debt subordinated on terms satisfactory to the Payee to the Maker's obligations under this Note and the Maker's Second Senior Bridge Note; (e) Debt of Maker to any Guarantor or of any Guarantor to Maker; (f) Accounts payable to trade creditors for goods or services which are aged not more than ninety (90) days from the billing date and current operating liabilities (other than for borrowed money) which are not more than ninety (90) days past due, in each case incurred in the ordinary course of business, as presently conducted, and paid within the specified time, unless contested in good faith and by appropriate proceedings; and (g) Debt incurred to finance the acquisition of fixed or capital assets and secured by Liens permitted by Section 1(j), including capital leases, provided that the aggregate principal balance of all such Debt does not exceed such amount as permitted by the M&T Agreement at any time. Page 101 of 272 3. MERGERS, ETC. Wind up, liquidate or dissolve itself, reorganize, merge or consolidate with or into, or convey, sell, assign, transfer, lease, or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to any individual, entity or organization, (each a "Person"), or acquire all of substantially all of the assets or the business of any Person, except that (a) any Guarantor may merge into or transfer assets to Maker and (b) any Guarantor may merge into or consolidate with or transfer assets to any other Guarantor, so long as such merger does not violate the covenants set forth herein. 4. LEASES. Create, incur, assume, or suffer to exist, any obligation as lessee for the rental or hire of any real or personal property, except (a) leases existing on the date of this Agreement as described on EXHIBIT B and any extensions or renewals thereof; (b) leases (other than capital leases) which do not in the aggregate require the Maker and the Guarantors on a consolidated basis to make payments (including taxes, insurance, maintenance, and similar expenses which the Maker or the Guarantors are required to pay under the terms of any lease) in any Fiscal Year in excess of such amount as is permitted under the M&T Agreement; and (c) leases between the Maker and any Guarantor or between any Guarantors. 5. SALE AND LEASEBACK. Sell, transfer, or otherwise dispose of, any real or personal property to any Person and thereafter directly or indirectly lease back the same or similar property. 6. RESTRICTED PAYMENTS. Maker shall not declare or pay any dividends, other than reasonable "tax distributions" sufficient to cover the members' tax liabilities associated with their membership interests in Maker; or pay more than $200,000 per year to, purchase, redeem, retire, or otherwise acquire for value any of its equity interests now or hereafter outstanding, or make any distribution of assets to its members or other holders of equity securities issued by Maker; or allocate or otherwise set apart any sum for the payment of any dividend or distribution on, or for the purchase, redemption, or retirement of any membership interest, whether in income, distributions, capital or otherwise; or make any other distribution by reduction of capital or otherwise in respect of any membership interest. 7. SALE OF ASSETS. Sell, lease, assign, transfer, or otherwise dispose of, or permit any Guarantor to sell, lease, assign, transfer, or otherwise dispose of, any of its now owned of hereafter acquired assets (including, without limitation, shares of stock and Debt of Subsidiaries, receivables, and leasehold interests), except: (a) inventory disposed of in the ordinary course of business; and (b) the sale or other disposition of assets no longer used or useful in the conduct of its business. 8. INVESTMENTS. Make any loan or advance to any Person; or purchase or otherwise acquire, any capital stock, assets, obligations, or other securities of, make any capital contribution to, or otherwise invest in or acquire any interest in any Person, or participate as a partner or joint venture with any other Person, except for Page 102 of 272 investments money market mutual funds, provided that: (a) the total amount of cash so invested at any one time does not exceed $250,000.00, (b) after giving effect to each such investment, no Default or Event of Default shall have occurred hereunder, (c) the Maker shall give the Payee notice of each such investment as soon as practical and in any event within thirty (30) days thereof and (d) the Maker shall provide the Payee with such additional information (including semi-annual financial statements) about any investment under this Section 8 as it may reasonably request. 9. GUARANTIES, ETC. Assume, guarantee, endorse, or otherwise be or become directly or contingently responsible or liable (including, but not limited to, an agreement to purchase any obligation, stock, assets, goods, or services, or to supply or advance any funds, assets, goods, or services, or an agreement to maintain or cause such Person to maintain a minimum working capital or net worth or otherwise to assure the creditors of any Person against loss), for obligations of any Person, except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business. 10. TRANSACTIONS WITH AFFILIATES. Enter into any transaction or series of related transactions for a consideration (singly or in the aggregate) of more than $50,000, including, without limitation, the purchase, sale, or exchange of property or the rendering of any service, with any Affiliate, except in the ordinary course of and pursuant to the reasonable requirements of Maker's or Guarantor's business and upon fair and reasonable terms no less favorable to Maker or such Guarantor than would obtain in a comparable arm's-length transaction with a Person not an Affiliate. 11. BUSINESS ACTIVITIES. Engage directly or indirectly (whether through Subsidiaries or otherwise) in any type of business not engaged in on the date hereof, unless incidental or related to any type of business engaged in by such Person on such date. 12. CAPITALIZATION. The Maker will not and will not permit any Guarantor to issue any Equity Interests interest having debt-like features (such as mandatory cash dividends, mandatory redemption provisions or other provisions which create monetary obligations payable in cash), except to the extent that the same, (i) if classified as Debt, would be permitted by Section 2 hereof and (ii) would not require Maker to violate section 6 hereof. 13. FISCAL YEAR. Change the date of its fiscal year end from December 31. 14. MANAGEMENT GROUP. Make any change in the composition or duties and authority of the Management Group other than by reason of death or disability. 15. MODIFICATIONS TO JDA COMMITMENT AND SUBORDINATED FINANCING DOCUMENTS. Without Payee's prior written consent, agree or consent to any Page 103 of 272 changes or modifications in the JDA Commitment or any of the terms of the financing contemplated thereunder or any subordinated financing documents. 16. MODIFICATIONS TO CERTAIN FINANCING DOCUMENTS. Without Payee's written consent, agree or consent to any changes or modifications to any financing documents or any of the terms of the financing contemplated thereunder (other than a certain Revolving Loan and Term Loan Agreement dated December 15, 2000) or any subordinated financing documents. 17. CERTAIN DEFINITIONS. As used herein, the following terms shall apply: "DEBT" means (a) indebtedness or liability for borrowed money; (b) obligations evidenced by bonds, debentures, notes or other similar instruments; (c) obligations for the deferred purchase price of property or services (including trade obligations); (d) obligations as lessee under capital leases; (e) current liabilities in respect of unfunded vested benefits under plans covered by ERISA; (f) obligations under letters of credit; (g) obligations under acceptance facilities; (h) all guarantees, endorsements (other than for collection or deposit in the ordinary course of business), and other contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any person or entity, or otherwise to assure a creditor against loss; and (i) obligations secured by any Liens, whether or not the obligations have been assumed. "MANAGEMENT GROUP" means Samuel T. Hubbard, Jr., John B. Henderson, Gary C. Geminn and Howard R. Jacobson. EX-10.4 5 l85770aex10-4.txt EXHIBIT 10-4 Page 104 of 272 EXHIBIT 10-4 ------------ SECOND SENIOR BRIDGE NOTE ------------------------- $3,000,000.00 DECEMBER 15, 2000 FOR VALUE RECEIVED, HIGH FALLS BREWING COMPANY, LLC, a New York limited liability company with an address at 445 St. Paul Street, Rochester, New York 14605 ("MAKER"), promises to pay to THE GENESEE BREWING COMPANY, INC. a New York Corporation ("PAYEE"), at its office at 445 St. Paul Street, Rochester, New York 14605 or at such other address as may hereafter be specified by Payee, in lawful money of the United States of America, the principal sum of THREE MILLION AND 00/100 DOLLARS ($3,000,000.00), together with interest thereon at the rate, in the installments and at the times hereinafter provided. 1. MATURITY DATE; PRINCIPAL AND INTEREST PAYMENTS; PREPAYMENTS. 1.1 Maturity. The outstanding principal balance of this Note plus all accrued and unpaid interest thereon and all other sums due hereunder shall be due and payable by Maker in full on or before midnight on June 1, 2004 (the "MATURITY DATE"). 1.2 Interest Rate. Prior to Acceleration (defined below), the principal sum outstanding from time to time hereunder shall bear interest at a rate (the "INTEREST RATE") equal to the prime rate of Manufactures & Traders Trust Company ("M&T") as announced from time to time plus one percent (1%) per annum. In the event that M&T's prime rate is hereafter increased or decreased, then the Interest Rate will be automatically, without notice, increased or decreased as of the date of such change so that the Interest Rate shall at all times be one percent (1%) higher than the "prime rate," as announced by M&T from time to time. Upon the occurrence, and during the continuance, of an Event of Default, Payee may, at its option, increase the Interest Rate by three percent (3%) over the "prime rate". 1.3 Payments of Principal and Interest. .Maker shall pay accrued interest on the 15th day of each month commencing on January 15, 2001 and continuing through and until August 15, 2001. Unless earlier Accelerated, commencing on September 15, 2001 and continuing on a monthly basis thereafter until the unpaid principal balance of this Note together with all accrued interest thereon shall be paid in full, on the 15th day of each month (each a "PAYMENT DATE") Maker shall make installment payments of principal and accrued, but unpaid, interest equal to the amount required to completely amortize this Note over a two hundred forty (240) month period commencing on September 15, 2001, and continuing on in a like manner on each succeeding Payment Date through the Maturity Date, when the entire remaining principal balance of this Note, plus all accrued and unpaid interest thereon, shall be paid in full Page 105 of 272 1.4 Mandatory Prepayments. Maker shall on the same business day that it receives any proceeds from the HUD Financing or the Alternative Financing, whichever occurs earlier, pay all proceeds therefrom directly to Maker as a prepayment of the principal outstanding hereunder until such principal amount and all accrued interest thereon have been paid in full, provided, however, that if the HUD Financing or the Alternative Financing closes in more than one transaction or if the HUD Financing or Alternative Financing does not yield sufficient proceeds to prepay in their entirety both this Note and Maker's First Bridge Note, then Maker may direct how the proceeds from any such financing shall be applied in the prepayment of this Note and the First Bridge Note. For the purposes of this Note, the following terms shall apply: "ACT" means the Housing and Community Development Act of 1974, Pub. L. No. 93-383 codified as 42 U.S.C. 5301 et seq., as amended, and regulations promulgated thereunder. "ALTERNATIVE FINANCING" means financing (other than the JDA Financing) in the aggregate amount of Six Million Five Hundred Thousand Dollars ($6,500,000) less the principal amount received or to be received pursuant to the HUD Loan and the EDI Grant amount received or to be received pursuant to the EDI Grant. "CITY" means the City of Rochester, New York, a New York municipal corporation. "EDI GRANT" means a grant under HUD's Economic Development Initiative in the amount of One Million Five Hundred Thousand Dollars ($1,500,000) or such lesser amount as may actually be disbursed to Maker after Maker exerts best efforts to secure a grant in the amount of no less than One Million Five Hundred Thousand Dollars ($1,500,000). "FIRST BRIDGE NOTE" shall mean Maker's First Senior Bridge Note of even date herewith payable to Payee in the original principal amount of Three Million Five Hundred Thousand Dollars ($3,500,000). "HUD" means the United States Department of Housing and Urban Development and fiscal agents and other entities involved in Section 108 Loan Guarantee funding transactions with the City. "HUD LOAN" means one or more loans to the Maker from the City of Rochester from the proceeds of a loan made to the City by the Federal Short-Term U.S. Government Trust or such other entity designated by HUD to which HUD provides financial accommodations in the aggregate principal amount of up to $5,000,000 or such lesser principal amount as the City may actually loan to the Maker after the Maker exerts best efforts to secure a loan from the City under this program in the principal amount of $5,000,000; the HUD Loan shall consist of a $2,000,000 ten (10) year term loan secured only by a first lien on all Sankey Cooperage and filling equipment of the Maker and Page 106 of 272 a $3,000,000 twenty (20) year first mortgage loan secured by all real property of the Maker, each bearing interest at a fixed rate not exceeding that of a Treasury note or bond of comparable maturity plus 2% per annum. "HUD FINANCING" means the EDI Grant and the HUD Loan. "HUD FINANCING CLOSING" shall mean the closing and funding of the HUD Financing or any Alternative Financing. "JDA" means the New York Job Development Authority d/b/a Empire State Development Corporation. "JDA COMMITMENT" means the commitment letter dated October 23, 2000 issued by the JDA. "JDA FINANCING" means the financing contemplated in the JDA Commitment. "SECTION 108" means Section 108 of the Act, codified as 42 U.S.C. 5308, as amended, and regulations promulgated thereunder. 1.5 Voluntary Prepayments. Subject to the Intercreditor Agreement referred to below, this Note may be prepaid in whole or in part at any time prior to the Maturity Date without prior notice to Payee, without penalty or premium. Any partial prepayments shall be applied to installments of principal last falling due, and shall have no effect on Maker's mandatory prepayment obligations under Section 1.4. No partial prepayment shall postpone or interrupt payments of interest or the payment of the remaining principal balance, all of which shall continue to be due and payable at the time and in the manner set forth above. 1.6 Time and Manner of Payments. (a) All payments (including prepayments) to be made in respect of principal, interest or other amounts due from Maker hereunder shall be made to Payee in United States dollars in funds immediately available, without set-off, counterclaim or other deduction of any nature. Maker shall have no right to offset against any installments of principal of, or interest due under, this Note, whether under the Asset Purchase Agreement dated August 29, 2000, as amended by Amendment No. 1 dated December 15, 2000 (the "ASSET PURCHASE AGREEMENT") or any other agreement or instrument of any kind. (b) All payments hereunder shall be applied in the following order of priority: costs, expenses, accrued interest and thereafter to the reduction of principal. After payment of the foregoing, all prepayments of any kind shall be applied to the extent of available proceeds to the principal installments payable hereunder in the inverse order of Page 107 of 272 maturity. All prepayments of any kind shall be accompanied by all accrued interest due on the prepaid principal at the time of prepayment. (c) All interest shall be payable in arrears. Interest hereon shall be calculated on the basis of a 360-day year applied to the actual number of days elapsed. All payments of interest and principal shall be payable in lawful currency of the United States of America. 2. SECURITY. As security for the payment when due of the principal of and interest on this Note, the Maker has, (a) under a "SECURITY AGREEMENT" dated of even date herewith and financing statements filed pursuant thereto, granted to Payee a continuing perfected security interest in all of the personal property of Maker, and all proceeds and products of such property, including insurance payable by reason of loss or damage and (b) under a "MORTGAGE" dated of even date herewith, granted Payee a mortgage lien on the real property located at 445 St. Paul Street, Rochester, New York and the improvements thereon (collectively, the "COLLATERAL"). 3. INTERCREDITOR AGREEMENT. This Note and the Security Agreement and the rights of Payee hereunder and thereunder are subject to an Intercreditor Agreement (the "INTERCREDITOR AGREEMENT") by and among Payee, M&T and Cephas Capital Partners, L.P. ("CEPHAS") and such other creditors of Maker as the three named creditors may determine to make a party to such Intercreditor Agreement. Payment of this Note is guaranteed by a certain secured Guaranty of even date herewith executed by Genesee Brewing Equipment, LLC. 4. REPRESENTATIONS AND WARRANTIES. Maker represents and warrants to Payee that: 4.1 Organization, Authority, Etc. (a) Maker's execution and delivery of this Note and the enforceability against Maker of the transactions hereby contemplated, including the HUD Financing and the JDA Financing, have been duly authorized by all requisite limited liability company action; (b) this Note has been duly and validly executed and delivered by Maker and constitutes Maker's legal, valid and binding obligation; (c) the execution and delivery of this Note by Maker does not, and the performance by it of the transactions hereby contemplated will not result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default or event of default (or give rise to any right of termination, cancellation or acceleration) under its Articles of Organization or Operating Agreement or any terms, conditions or provisions of any note, debenture, security agreement, lien, mortgage or other agreement, instrument or obligation, oral or written, to which Maker is a party (whether as an original party or as an assignee or successor) or by which it or any of its properties is or will be bound; (d) except as set forth in EXHIBIT A annexed hereto, Maker has all licenses, permits, approvals, franchises, registrations, accreditations, authorizations, variances and the like (the "PERMITS") necessary for the conduct of its intended business after closing the acquisition pursuant to the Asset Purchase Agreement (the "Acquisition"), all of which are in full force and effect; (e) no approval or consent by any third party or governmental authority Page 108 of 272 under any statutes, regulations or the Permits (collectively, the"GOVERNMENTAL REGULATIONS") is required in connection with Maker's execution and delivery of this Note and the transactions hereby contemplated; and (f) Maker has provided Payee with true and complete copies of the JDA Commitment letter and all amendments thereto and extensions thereof and to the knowledge of the Maker, the JDA Commitment is in full force and effect. 4.2 Pro Forma Financial Statements. (a) Maker's Pro Forma Financial Statements dated December 7, 2000 ("Pro Forma Financial Statements") delivered by Maker to Payee and their underlying assumptions are reasonable and have been prepared by Maker in good faith; and (b) except as set forth in Maker's Recission Offer dated December 8, 2000, nothing has come to the Maker's attention since the preparation thereof that would lead it to believe that the Pro Forma Financial Statements are inaccurate, incomplete or misleading in any material respect. 4.3 Debt, Etc. Except for indebtedness and obligations to Payee and third parties contemplated by the Asset Purchase Agreement between Maker and Payee of even date herewith, set forth on EXHIBIT A annexed hereto is a complete and correct list of all credit agreements, indentures, guaranties, capital leases, and other investments, agreements, and arrangements presently in effect providing for or related to borrowed money; and the maximum principal or face amounts of the credits in questions, outstanding or to be outstanding, are correctly stated, and all security interests, liens or encumbrances of any nature given or agreed to be given as security therefor are correctly described or indicated in such Schedule. 4.4 Capitalization. (i) Maker has provided Payee with a true and complete copy of its Articles of Organization and Operating Agreement and all subscription agreements and there are no obligations for the repurchase or acquisition of any membership, capital, distribution or other equity interest in Maker except with respect to the repurchase obligations for the warrants issued to Cephas Capital Partners, L.P. on even date herewith, (ii) the capitalization of Maker is as set forth on EXHIBIT B; and (iii) all issued and outstanding membership, capital distribution or equity interests in Maker are fully paid and non-assessable. 4.5 Solvency. Both before and after giving effect to the transactions contemplated by the Asset Purchase Agreement and the financing therefor, Maker is and will be Solvent. As used herein, "SOLVENT" means Maker (i) has assets having a fair value in excess of its Debts, and (ii) has and expects to continue to have adequate capital for the conduct of its business and the ability to pay its Debts as the same mature. For a definition of "Debt" see Section 16 of Exhibit C. 5. COVENANTS. So long as any portion of the principal amount of this Note remains outstanding and unpaid or any accrued interest has not been paid, (a) Maker shall comply with each of the affirmative covenants set forth in EXHIBIT C annexed hereto and (b) without the prior written consent of the Payee, Maker shall observe and not violate any of the negative covenants set forth in EXHIBIT D annexed hereto. All exhibits are incorporated herein by reference. Page 109 of 272 6. EVENTS OF DEFAULT. Each of the following shall constitute an event of default (each, an "EVENT OF DEFAULT") hereunder: 6.1 Payment Failure. If Maker fails to make any payment of any installment of interest and/or principal hereunder or any other sum due hereunder within ten (10) days after such payment is due. 6.2 Failure to Perform, Etc. (a) Any representation or warranty made or deemed made by Maker herein, in the Security Agreement or the Intercreditor Agreement shall prove to have been incorrect, incomplete or misleading in any material respect on or as of the date made or deemed made. (b) Maker shall fail to perform or observe any term, covenant or agreement set forth on EXHIBIT C, which failure is not cured within thirty (30) days after receipt of notice from Payee, or Maker fails to observe or abide by any term, covenant or agreement contained in EXHIBIT D. 6.3 Bankruptcy. If any proceeding under the Bankruptcy Code or any law of the United States or of any state relating to insolvency, receivership, or debt adjustment is instituted by Maker or any Guarantor, or if any such proceeding is instituted against Maker or any Guarantor and is consented to by the respondent or an order for relief shall be entered in such proceeding or such proceeding shall remain undismissed for sixty (60) days, or if a trustee or receiver is appointed for any substantial part of Maker's or any Guarantor's property and such appointment remains undismissed for sixty (60) days, or if Maker or any Guarantor makes an assignment for the benefit of creditors, admits in writing its inability to pay debts generally as they become due or becomes insolvent. 6.4 Cross-Default. Maker shall (i) fail to pay any Debt for borrowed money of Maker (including but not limited to Manufacturers and Traders Trust Company, Cephas Capital, L.P., financing provided by Maker pursuant to the Asset Purchase Agreement and certain investor notes issued by Maker pursuant to the Offering Summary dated September 20, 2000 and Recission Offer dated December 8, 2000), or any interest or premium thereon, when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise); (ii) fail to perform or observe any term, covenant, or condition on its part to be performed or observed under any agreement or instrument relating to any such Debt when required to be performed or observed, if the effect of such failure to perform or observe is to accelerate, or to permit the acceleration after the giving of notice or passage of time, or both, of the maturity of such Debt, whether or not such failure to perform or observe shall be waived by the holder of such Debt, or any such Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; (iii) materially breach the Asset Purchase Agreement; or (iv) Maker shall fail to perform or observe any material term, covenant or agreement set forth in any agreement or instrument executed by Maker with or in favor of Payee (other than in the Asset Page 110 of 272 Purchase Agreement and other than those instruments referred to above in this Section 6.4), which failure is not cured within thirty (30) days after receipt of notice from Payee. 6.5 Judgment. A final judgment or order for the payment of money in excess of $100,000 shall be rendered against the Maker or any Guarantor and such judgment or order shall continue unsatisfied, in effect and unstayed for a period of thirty (30) consecutive days. 6.6 Discontinuance of Business. Maker's failure to conduct business in the ordinary course, dissolution or termination of existence. 6.7 Change of Control. The occurrence of a Change of Control. As used herein a "CHANGE OF CONTROL" means a change of control of the Maker of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act, whether or not the Maker is then subject to such reporting requirement; provided, that, without limitation, such a Change of Control shall be deemed to have occurred if: (i) any "person" (as defined in Sections 13(d) and 14(d) of the Exchange Act) or "group" (as defined in Section 13(d) of the Exchange Act) other than the Management Group is or becomes the "beneficial owner" (as defined in Rule 13(d)(3) of the Exchange Act), directly or indirectly, of securities of Maker representing 30% or more of the combined voting power of the Maker's then outstanding securities in the election of Managers or with respect to any sale or disposition by Maker of its assets or the dissolution of Maker ("VOTING power"); (ii) the members of the Maker approve a merger or consolidation of the Maker with any other limited liability company or corporation, other than a merger or consolidation which would result in the voting securities of the Maker outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 70% of the combined voting power of the voting securities of the Maker or such surviving entity outstanding immediately after such merger or consolidation; (iii) if any recapitalization event occurs as a result of which the holders of voting securities of the Maker outstanding immediately prior thereto do not continue to hold at least 70% of the combined voting power of the voting securities of the Maker immediately after such recapitalization event; (iv) the members of the Maker approve a plan of complete liquidation of the Maker or an agreement for the sale or disposition by the Maker of all or substantially all of the Maker's assets. 6.8 Intercreditor Agreement. The Intercreditor Agreement shall at any time after its execution and delivery and for any reason cease to be in full force and effect or shall be declared null and void, or the enforceability thereof shall be contested by any party thereunder other than Payee, or any such party shall deny that it is bound thereby. Page 111 of 272 6.9 Guarantees. Any guaranty of this Note shall at any time after its executed and delivery for any reason cease to be in full force and effect or shall be declared null and voice, or the validity or enforceability thereof shall be contested by any guarantor, or any guarantor shall deny it has any further liability or obligation under, or shall fail to perform its obligations under the Security Agreement. 6.10 Boston Beer. The occurrence of any event which would entitle Boston Brewing Company, Inc. d/b/a The Boston Beer Company, a Massachusetts corporation, for itself and as the sole general partner of Boston Beer Company Limited Partnership, a Massachusetts limited partnership (collectively, "BOSTON BEER") to receive payment from Payee on its Guaranty of even date herewith made in favor of Boston Beer by Payee for the benefit of the Maker in respect of a certain Amended and Restated Agreement dated April 30, 1997, other than (i) pursuant to a Refunding Obligation Payment (as defined in an Indemnification Agreement of even date herewith between Maker and Payee) or (ii) a breach by Payee of its "Net Worth" covenant under its Guaranty in favor of Boston Beer Company. 6.11 UDV Agreement. Borrower shall fail to execute an agreement before January 3, 2001 with UDV North America, Inc. ("UDV") upon the terms and conditions referenced in that certain letter agreement by UDV to Maker dated September 25, 2000. 6.12 Security Agreement. The Security Agreement shall at any time after its execution and delivery and for any reason cease (a) to create a valid and perfected security interest in and to the property purported to be subject to such Security Agreement, except as provided in the Intercreditor Agreement; or (b) to be in full force and effect or shall be declared null and void, or the validity or enforceability thereof shall be contested by Maker or Maker shall deny it has any further liability or obligation under the Security Agreement, or Maker shall fail to perform in any material respect any of its obligations under the Security Agreement. 7. REMEDIES. Upon the occurrence of any Event of Default hereunder, the entire unpaid principal balance of this Note, together with all accrued and unpaid interest thereon and all other sums owing hereunder shall, at the option of Payee, become immediately due and payable (an "ACCELERATION"), without presentation, demand or further action of any kind, and Payee may forthwith exercise, singly, concurrently, successively or otherwise, any and all rights and remedies available to Payee hereunder. The failure of payee to accelerate the outstanding principal balance of this Note upon the occurrence of an Event of Default hereunder shall not constitute a waiver of such Event of Default or of the right to accelerate this Note at any time thereafter so long as the Event of Default remains uncured. If Payee retains the services of counsel in order to enforce any remedy available to Payee hereunder, all reasonable attorneys' fees which are actually incurred by Payee shall be payable upon demand. Upon the occurrence and continuation of any one or more Events of Default, and whether or not the Payee shall have accelerated the maturity of this Note, the Payee may, proceed to protect and enforce its rights by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Note or any instrument pursuant to which the obligations to the Payee are evidenced, including as permitted by Page 112 of 272 applicable law the obtaining of the ex parte appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of the Payee. No remedy herein conferred upon the Payee or the holder of this Note is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of law. 8. INTEREST LIMITATIONS. Nothing herein contained nor any transaction related hereto shall be construed or shall operate either presently or prospectively to require Maker to pay interest at a rate greater than is now lawful in such case to contract for, but shall require payment of interest only to the interest paid in excess of the lawful rate shall be refunded to Maker. 9. SEVERABILITY. In the event that for any reason one or more of the provisions of this Note or their application to any person or circumstance shall be held to be invalid, illegal or unenforceable in any respect or to any extent, such provisions shall, to such extent, be held for naught as though not herein contained but shall nevertheless remain valid, legal and enforceable in all such other respects and to such extent as may be permissible. In addition, any such invalidity, illegality or unenforceability shall not affect any other provisions of this Note, but this Note shall be construed as if such invalid, illegal or unenforceable provisions had never been contained herein. 10. SUCCESSORS AND ASSIGNS. This Note inures to the benefit of Payee, its successors and assigns, and is binding upon Maker, its successors and assigns, provided that any successor or assign of the Payee of this Note first executes a written undertaking agreeing to be bound by all of the provisions of the Intercreditor Agreement. The words "Payee" and "Maker" whenever used herein shall be deemed and construed to include such respective successors and assigns. 11. NOTICES. All notices required to be given to any of the parties hereunder shall be in writing and shall be deemed to have been sufficiently given for all purposes when given in accordance with the terms and conditions of the Asset Purchase Agreement. 12. CAPTIONS. The captions or headings of the sections in this Note are for convenience only and shall not control or affect the meaning or construction of any of the terms or provisions of this Note. 13. GOVERNING LAW; AMENDMENT. This Note shall be governed by and construed in accordance with the laws of the State of New York. This Note may only be amended by an instrument in writing signed by both Maker and Payee. IN WITNESS WHEREOF, Maker, intending to be legally bound hereby, has duly executed this Note, under seal, on the date and year first above written. Page 113 of 272 MAKER: HIGH FALLS BREWING COMPANY, LLC By: /s/ Samuel T. Hubbard, Jr. --------------------------- Name: Samuel T. Hubbard, Jr. Title: President Page 114 of 272 EXHIBIT A REQUIRED PERMITS AND LICENSES 1. Ohio Beer Malt Beverage Certificate of Registration - Application in process per Donna Cuccio of Ohio Liquor Authority. 2. New Jersey Limited Wholesale License (transfer from Seller) - Seeking temporary license. 3. Colorado Non-Resident Manufacturer License - State will issue upon proof of closing of Acquisition. 4. Connecticut Out-of-State Beer Permit - State will issue upon closing of Acquisition. 5. Arizona Out-of-State Brewer's License - State will issue week of 12/10/00. 6. Delaware Suppliers' License - State will issue week of 12/10/00, per Edith Butler of Delaware Liquor Authority. 7. Arkansas Non-Resident Beer Seller Permit - Transfer permitted by State; awaiting documentation. 8. Alabama Out-of-State Manufacturer's License (Transfer) - Transfer allowed upon surrender of Seller's license. Page 115 of 272 EXHIBIT C AFFIRMATIVE COVENANTS --------------------- So long as the outstanding principal amount under the Note and all accrued interest thereon has not been paid in full, the Maker shall: 1. MAINTENANCE OF EXISTENCE. Preserve and maintain, and cause each Person required to become a guarantor (each a "GUARANTOR") of this Note to preserve and maintain, its corporate existence and good standing in the jurisdiction of its incorporation, and qualify and remain qualified, as a foreign corporation in each jurisdiction in which qualification is required. 2. MAINTENANCE OF PERMITS. Maintain in full force and effect all license, permits, approvals, franchises, registrations, accreditations, authorizations, variances and the like necessary for the conduct of its intended business after closing the Acquisition. 3. MAINTENANCE OF RECORDS. Keep, and cause any Guarantor to keep, adequate records and books or account, in which complete entries will be made in accordance with GAAP consistently applied. 4. MAINTENANCE OF PROPERTIES. Maintain, keep, and preserve, and cause any Guarantor to maintain, keep, and preserve, all of its material properties (tangible and intangible) necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted. 5. CONDUCT OF BUSINESS. Continue to engage in an efficient and economical manner in a business of the same general type as proposed to be conducted by it upon consummation of the Acquisition. 6. MAINTENANCE OF INSURANCE. Maintain, and cause any Guarantor to maintain, insurance with financially sound and reputable insurance companies or associations in such amounts and covering such risks as are usually carried by companies engaged in the same or a similar business and similarly situated, which insurance may provide for reasonable deductibility from coverage thereof and which shall name the Payee as additional insured and loss payee, as its interests may appear. 7. COMPLIANCE WITH LAWS. Comply, and cause each Guarantor to comply, in all material respects with all applicable laws, rules, regulations, and orders, such compliance to include, without limitation, paying before the same become delinquent all taxes, assessments, governmental charges imposed upon it or upon its property. 8. RIGHT OF INSPECTION. At any reasonable time and from time to time, permit the Payee or any agent or representative thereof to examine and make copies of and abstracts from the records and books of account of, and visit the properties Page 116 of 272 of, the Maker and any Guarantor, and to discuss the affairs, finances, and accounts of the Maker and any Guarantor with any of their respective officers and directors and the Makers' independent accountants. 9. REPORTING REQUIREMENTS. Furnish to Payee: (a) Financial Statements. (i) As soon as available and in any event within one hundred twenty (120) days after the end of Maker's fiscal year ending on or after December 31, 2001, consolidated and consolidating balance sheets of Maker and its subsidiaries as of the end of such Fiscal Year, consolidated and consolidating statements of income and retained earnings of Maker and its Subsidiaries for such Fiscal Year, and consolidated and consolidating statements of changes in financial position of Maker and its subsidiaries for such Fiscal Year, all in reasonable detail and stating in comparative form the respective figures for the corresponding dates and period in the prior fiscal year or in the Pro Forma Financial Statements, as the case may be, all prepared in accordance with GAAP consistently applied and as to the consolidated statements accompanied by an opinion thereon acceptable to the Payee by Arthur Anderson & Co. or other independent accountants acceptable to the Payee; (ii) As soon as available and in any event within one hundred twenty (120) days after the end of Fiscal Year 2000, internally prepared and certified consolidated and consolidating balance sheets of Maker and its subsidiaries as of the end of such fiscal year, consolidated and consolidating statements of income and retained earnings of Maker and its subsidiaries for such fiscal year, and consolidated and consolidating statements of changes in financial position of Maker and its subsidiaries for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the corresponding dates and period in the prior fiscal year or in the Pro Forma Financial Statements, as the case may be, all prepared in accordance with GAAP consistently applied. (iii) As soon as available and in any event within twenty-five (25) days after the end of March 31, June 30, September 30 and December 31 of each Fiscal Year, consolidated and individual balance sheets of Maker and its Subsidiaries as of the end of the three month period then ended (each a "Fiscal Quarter") and the period to date then ended of the then current fiscal year, consolidated and individual statements of income and retained earnings of Maker and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such month, and consolidated and individual statements of changes in financial position of Maker and its Subsidiaries for the portion of the fiscal year ended with the last day of such month, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the previous fiscal year and with the Pro Forma Financial Statements and all prepared in accordance with GAAP consistently applied and certified, to the best of his knowledge, by the chief financial officer of Maker (subject to year-end adjustments); Page 117 of 272 (b) Management Letters. Promptly upon receipt thereof, copies of any reports submitted to the Maker by independent certified public accountants in connection with examination of the financial statements of the Maker made by such accountants; (c) Quarterly Compliance Certificate. Within twenty-five (25) days after the end of each Fiscal Quarter, a certificate of the chief financial officer of Maker (a) certifying that to the best of his knowledge no Event of Default has occurred and is continuing, or if an Event of Default has occurred and is continuing, a statement as to the nature thereof and the action which is proposed to be taken with respect thereto; and (b) containing computations demonstrating compliance with the covenants contained in Section 15 of this Exhibit C; (d) Accountant's Report. Simultaneously with the delivery of the annual financial statements required under this Note, a certificate of the independent public accountants who audited such statements to the effect that, in making the examination necessary for the audit of such statements, they have obtained no knowledge of any condition or event which constitutes an Event of Default, or if such accountants shall have obtained knowledge of any such condition or event, specifying in such certificate each such condition or event of which they have knowledge and the nature and status thereof; (e) Notice of Litigation. Promptly after the commencement thereof, notice of all actions, suits, and proceedings before any court or governmental department, commission, board, bureau, agency, or instrumentality, domestic or foreign, affecting the Maker or any Guarantor which, if determined adversely to the Maker or such Guarantor, could have a material adverse effect on the financial condition, properties, or operations of the Maker or such Guarantor; (f) Notice of Defaults and Events of Default. As soon as possible and in any event within five (5) days after the occurrence of each Event of Default, a written notice setting forth the details of such Event of Default and the action which is proposed to be taken by the Maker with respect thereto; (g) Reports to Other Creditors. Promptly after the furnishing thereof, copies of any statements or report furnished to any other party pursuant to the terms of any indenture, loan, credit, or similar agreement and not otherwise required to be furnished to the Maker pursuant to any other clause above; and (h) General Information. Such other information respecting the condition or operations, financial or otherwise, of Maker or any Guarantor as the Payee may from time to time reasonably request. 10. ENVIRONMENT. Be and remain, and cause any Guarantor to be and remain, in compliance in all material respects with the provisions of all federal, state, and local environmental, health, and safety laws, codes and ordinances, and all rules and regulations issued thereunder; notify Payee promptly of any notice of a hazardous Page 118 of 272 discharge or environmental complaint received from any governmental agency or any other party; notify Payee promptly of any hazardous discharge occurring after the date of this Note from or affecting its premises; undertake and complete all removal and other remedial actions required of Maker by a governmental authority with respect to such hazardous discharge, in compliance in all material respects with all applicable laws; promptly pay any fine or penalty assessed in connection therewith; permit the Payee to inspect all books, correspondence, and records pertaining thereto; and at the Payee's request, and at the Maker's expense, provide a report of a qualified environmental engineer, satisfactory in scope, form, and content to the Payee, and such other and further assurances reasonably satisfactory to the Payee that the condition has been corrected as required in accordance with applicable law. 11. GUARANTORS. Cause each subsidiary of Maker created or acquired after the date hereof to execute and deliver to the Payee a guaranty of payment of this Note and all other Debt of Maker to Payee of any kind, whereby such subsidiary shall guaranty payment of all such Debt, together with legal opinions in form and substance satisfactory to the Payee as to validity and enforceability of such guaranty, and to such other matters as the Payee may reasonably request. In addition, Maker shall notify the Payee of the acquisition or creation of any new subsidiary. (Each guarantor of this Note is referred to herein as a "Guarantor"). 12. HUD FINANCING CLOSING. Take all actions necessary to consummate the HUD Financing on the terms previously disclosed to Payee and use best efforts to consummate the HUD Financing on or prior to September 30, 2000. The Maker shall not undertake or enter into any transaction that would prevent the consummation of the HUD Financing or which would prevent the Maker from obtaining such financing. In the event that Maker is unable to obtain the HUD Financing, then Maker shall exert best efforts to secure and close Alternative Financing as soon as reasonably practicable. Upon request by the Payee, Maker shall provide Payee with copies of all correspondence, written communications and draft documents delivered to Maker, HUD, the City and/or any lender proposing to provide the Alternative Financing by one another relating to, or involving the HUD Financing. 13. JDA FINANCING CLOSING. Exert best efforts to close the JDA Financing as soon as reasonably practicable, but in no event later than the expiration date provided for under the JDA Commitment. Upon request by the Payee, Maker shall provide Payee with copies of all correspondence between the JDA and Maker. 14. FURTHER ASSURANCES. Cooperate with the Payee and execute such further instruments and documents as the Payee shall reasonably request to carry out to its satisfaction the transactions contemplated by this Note and all related agreements and documents. 15. CASH FLOW. Maintain Cash Flow Coverage of not less than 1.0 to 1.0 for the immediately preceding twelve (12) month period (or for the first three (3) Page 119 of 272 Fiscal Quarters following the date hereof for the period since the date hereof to the end of such Fiscal Quarter), measured as of the end of each Fiscal Quarter as shown on the financial statements required to be provided by Maker to Payee pursuant to Section 9(a) above. 16. CERTAIN DEFINITIONS. As used herein, the following terms shall apply: "CAPITAL EXPENDITURES" means for the applicable period, expenditures made to acquire or construct fixed assets, plant and equipment (including improvements, renovations and replacements required to be classified in accordance with GAAP as capital expenditures, but excluding maintenance and repairs not required to be so classified). Capital Expenditures shall include the capital leases. "CASH FLOW COVERAGE" means, for the applicable measurement period, EBITDA plus the proceeds from the issuance of membership, capital, distribution or other equity interests ("EQUITY INTERESTS") or Debt for borrowed money issued by Maker after the date hereof (other than in connection with the financing of the Acquisition or any refinancing or modification thereof) subordinated to this Note (in form satisfactory to Payee) (including any amendments, modifications or replacements hereof), compared to (i) for the measurement periods ending through and including December 31, 2002, interest, principal and tax payments due and/or paid plus cash required to fund repurchases of Equity Interests and (ii) for measurement periods ending thereafter, interest, principal and tax payments due and/or paid plus Capital Expenditures to the extent not funded by Debt for borrowed money plus cash required to fund repurchases of Equity Interests. "DEBT" means (a) indebtedness or liability for borrowed money; (b) obligations evidenced by bonds, debentures, notes or other similar instruments; (c) obligations for the deferred purchase price of property or services (including trade obligations); (d) obligations as lessee under capital leases; (e) current liabilities in respect of unfunded vested benefits under plans covered by ERISA; (f) obligations under letters of credit; (g) obligations under acceptance facilities; (h) all guarantees, endorsements (other than for collection or deposit in the ordinary course of business), and other contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any person or entity, or otherwise to assure a creditor against loss; and (i) obligations secured by any liens, whether or not the obligations have been assumed. "EBITDA" means Maker's consolidated earnings before interests, taxes, depreciation, amortizations, dividends, distributions, and the like. 17. AMENDMENTS TO INVESTMENT NOTES. Without Payee's prior written consent, Maker shall not agree to any amendment to its Investor Notes issued pursuant to Maker's Offering Summary dated September 20, 2000 and Recission Offer dated December 8, 2000. Page 120 of 272 EXHIBIT D --------- NEGATIVE COVENANTS So long as the Note shall remain unpaid, Maker will not, and will not permit any Guarantor to: 1. LIENS. Create, incur assume, or suffer to exist, or permit any Guarantor to create, incur, assume, or suffer to exist, any mortgage, deed of trust, pledge, security interest, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), or preference, priority, or other security agreement or preferential arrangement, charge, or encumbrance of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction to evidence any of the foregoing) (each a "LIEN") upon or with respect to any of its properties, now owned or hereafter acquired, except: (a) Liens in favor of M&T securing Debt to M&T to the extent such Debt is permitted by Section 2; (b) Liens in favor of the Payee; (c) Liens subordinated on terms satisfactory to the Payee to the Maker's obligations under this Note and the Maker's Second Senior Bridge Note; (d) Liens for taxes or assessments or other government charges or levies if not yet due and payable or, if due and payable, if they are being contested in good faith by appropriate proceedings and for which appropriate reserves are maintained; (e) Liens imposed by law, such as mechanics', materialmen's, landlords', warehousemen's, and carriers' Liens, and other similar Liens, securing obligations incurred in the ordinary course of business which are not past due for more than forty five (45) days or which are being contested in good faith by appropriate proceedings and for which appropriate reserves have been established; (f) Lien's under workers' compensation, unemployment insurance, Social Security, or similar legislation; (g) Liens, deposits, or pledges to secure the performance of bids, tenders, contracts (other than contracts for the payment of money), leases (permitted under the terms of this Agreement), public or statutory obligations, surety, stay, appeal, indemnity, performance or other similar bonds, or other similar obligations arising in the ordinary course of business; (h) Judgments and other similar Liens arising in connection with court proceedings, provided that, if the amount in question exceeds $100,000.00, the execution or other enforcement of such Liens is effectively stayed and the claims Page 121 of 272 secured thereby are being actively contested in good faith and by appropriate proceedings; (i) Easements, rights-of-way, restrictions, and other similar encumbrances which, in the aggregate, do not materially interfere with the occupation, use, and enjoyment by the Maker or any Guarantor of the property or assets encumbered thereby in the normal course of its business or materially impair the value of the property subject thereto; and (j) Purchase money security interests securing Debt permitted pursuant to Section 2(g), provided that no such Lien (i) secures any other Debt, or (ii) extends to assets not acquired with the proceeds of such permitted Debt; and (k) Other Liens set forth in Exhibit B and not otherwise described above. 2. DEBT. Create, incur, assume, or suffer to exist, or permit any Guarantor to create, incur, assume, or suffer to exist, any Debt, except: (a) Debt of the Maker to M&T (i) pursuant to the Revolving Loan and Term Loan Agreement dated December 15, 2000 between M&T and Maker (the "M&T AGREEMENT"); and (ii) as otherwise permitted by, and subject to the limitations set forth in, the Intercreditor Agreement; (b) Debt outstanding under this Note, the Maker's Second Bridge Note or another Debt to Payee; (c) Debt disclosed on EXHIBIT B (provided that the HUD Loan described therein are on terms reasonably satisfactory to Payee), but no voluntary prepayments, renewals, extensions, or refinancing thereof; (d) Debt subordinated on terms satisfactory to the Payee to the Maker's obligations under this Note and the Maker's Second Senior Bridge Note; (e) Debt of Maker to any Guarantor or of any Guarantor to Maker; (f) Accounts payable to trade creditors for goods or services which are aged not more than ninety (90) days from the billing date and current operating liabilities (other than for borrowed money) which are not more than ninety (90) days past due, in each case incurred in the ordinary course of business, as presently conducted, and paid within the specified time, unless contested in good faith and by appropriate proceedings; and (g) Debt incurred to finance the acquisition of fixed or capital assets and secured by Liens permitted by Section 1(j), including capital leases, provided that the aggregate principal balance of all such Debt does not exceed such amount as permitted by the M&T Agreement at any time. Page 122 of 272 3. MERGERS, ETC. Wind up, liquidate or dissolve itself, reorganize, merge or consolidate with or into, or convey, sell, assign, transfer, lease, or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to any individual, entity or organization, (each a "Person"), or acquire all of substantially all of the assets or the business of any Person, except that (a) any Guarantor may merge into or transfer assets to Maker and (b) any Guarantor may merge into or consolidate with or transfer assets to any other Guarantor, so long as such merger does not violate the covenants set forth herein. 4. LEASES. Create, incur, assume, or suffer to exist, any obligation as lessee for the rental or hire of any real or personal property, except (a) leases existing on the date of this Agreement as described on EXHIBIT B and any extensions or renewals thereof; (b) leases (other than capital leases) which do not in the aggregate require the Maker and the Guarantors on a consolidated basis to make payments (including taxes, insurance, maintenance, and similar expenses which the Maker or the Guarantors are required to pay under the terms of any lease) in any Fiscal Year in excess of such amount as is permitted under the M&T Agreement; and (c) leases between the Maker and any Guarantor or between any Guarantors. 5. SALE AND LEASEBACK. Sell, transfer, or otherwise dispose of, any real or personal property to any Person and thereafter directly or indirectly lease back the same or similar property. 6. RESTRICTED PAYMENTS. Maker shall not declare or pay any dividends, other than reasonable "tax distributions" sufficient to cover the members' tax liabilities associated with their membership interests in Maker; or pay more than $200,000 per year to, purchase, redeem, retire, or otherwise acquire for value any of its equity interests now or hereafter outstanding, or make any distribution of assets to its members or other holders of equity securities issued by Maker; or allocate or otherwise set apart any sum for the payment of any dividend or distribution on, or for the purchase, redemption, or retirement of any membership interest, whether in income, distributions, capital or otherwise; or make any other distribution by reduction of capital or otherwise in respect of any membership interest. 7. SALE OF ASSETS. Sell, lease, assign, transfer, or otherwise dispose of, or permit any Guarantor to sell, lease, assign, transfer, or otherwise dispose of, any of its now owned of hereafter acquired assets (including, without limitation, shares of stock and Debt of Subsidiaries, receivables, and leasehold interests), except: (a) inventory disposed of in the ordinary course of business; and (b) the sale or other disposition of assets no longer used or useful in the conduct of its business. 8. INVESTMENTS. Make any loan or advance to any Person; or purchase or otherwise acquire, any capital stock, assets, obligations, or other securities of, make any capital contribution to, or otherwise invest in or acquire any interest in any Person, or participate as a partner or joint venture with any other Person, except for investments money market mutual funds, provided that: (a) the total amount of Page 123 of 272 cash so invested at any one time does not exceed $250,000.00, (b) after giving effect to each such investment, no Default or Event of Default shall have occurred hereunder, (c) the Maker shall give the Payee notice of each such investment as soon as practical and in any event within thirty (30) days thereof and (d) the Maker shall provide the Payee with such additional information (including semi-annual financial statements) about any investment under this Section 8 as it may reasonably request. 9. GUARANTIES, ETC. Assume, guarantee, endorse, or otherwise be or become directly or contingently responsible or liable (including, but not limited to, an agreement to purchase any obligation, stock, assets, goods, or services, or to supply or advance any funds, assets, goods, or services, or an agreement to maintain or cause such Person to maintain a minimum working capital or net worth or otherwise to assure the creditors of any Person against loss), for obligations of any Person, except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business. 10. TRANSACTIONS WITH AFFILIATES. Enter into any transaction or series of related transactions for a consideration (singly or in the aggregate) of more than $50,000, including, without limitation, the purchase, sale, or exchange of property or the rendering of any service, with any Affiliate, except in the ordinary course of and pursuant to the reasonable requirements of Maker's or Guarantor's business and upon fair and reasonable terms no less favorable to Maker or such Guarantor than would obtain in a comparable arm's-length transaction with a Person not an Affiliate. 11. BUSINESS ACTIVITIES. Engage directly or indirectly (whether through Subsidiaries or otherwise) in any type of business not engaged in on the date hereof, unless incidental or related to any type of business engaged in by such Person on such date. 12. CAPITALIZATION. The Maker will not and will not permit any Guarantor to issue any Equity Interests interest having debt-like features (such as mandatory cash dividends, mandatory redemption provisions or other provisions which create monetary obligations payable in cash), except to the extent that the same, (i) if classified as Debt, would be permitted by Section 2 hereof and (ii) would not require Maker to violate Section 6 hereof. 13. FISCAL YEAR. Change the date of its fiscal year end from December 31. 14. MANAGEMENT GROUP. Make any change in the composition or duties and authority of the Management Group other than by reason of death or disability. 15. MODIFICATIONS TO JDA COMMITMENT AND SUBORDINATED FINANCING DOCUMENTS. Without Payee's prior written consent, agree or consent to any changes or modifications in the JDA Commitment or any of the terms of the financing contemplated thereunder or any subordinated financing documents. Page 124 of 272 16. MODIFICATIONS TO CERTAIN FINANCING DOCUMENTS. Without Payee's written consent, agree or consent to any changes or modifications to any financing documents or any of the terms of the financing contemplated thereunder (other than a certain Revolving Loan and Term Loan Agreement dated December 15, 2000) or any subordinated financing documents. 17. CERTAIN DEFINITIONS. As used herein, the following terms shall apply: "DEBT" means (a) indebtedness or liability for borrowed money; (b) obligations evidenced by bonds, debentures, notes or other similar instruments; (c) obligations for the deferred purchase price of property or services (including trade obligations); (d) obligations as lessee under capital leases; (e) current liabilities in respect of unfunded vested benefits under plans covered by ERISA; (f) obligations under letters of credit; (g) obligations under acceptance facilities; (h) all guarantees, endorsements (other than for collection or deposit in the ordinary course of business), and other contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any person or entity, or otherwise to assure a creditor against loss; and (i) obligations secured by any Liens, whether or not the obligations have been assumed. "MANAGEMENT GROUP" means Samuel T. Hubbard, Jr., John B. Henderson, Gary C. Geminn and Howard R. Jacobson. EX-10.5 6 l85770aex10-5.txt EXHIBIT 10-5 Page 125 of 272 EXHIBIT 10-5 ------------ MORTGAGE -------- This MORTGAGE, made the 15th day of December, 2000 between HIGH FALLS BREWING COMPANY, LLC, a limited liability company organized and existing under the laws of the State of New York, with an office and place of business at 445 St. Paul Street, Rochester, New York 14605 (herein called the "MORTGAGOR"), and THE GENESEE BREWING COMPANY, INC., a New York corporation with its principal office at 445 St. Paul Street, Rochester, New York 14605 (herein called the "MORTGAGEE"). W I T N E S S E T H, to secure the payment of an indebtedness in the sum of THREE MILLION AND NO/100 DOLLARS ($3,000,000.00) lawful money of the United States to be paid with interest thereon to be computed from the date hereof, to be paid according to a certain bond, note, or obligation bearing even date herewith (the "NOTE"), the Mortgagor hereby mortgages to the Mortgagee the premises described in SCHEDULE "A" attached hereto and made a part hereof (herein called the "MORTGAGED PREMISES" or "PREMISES"). TOGETHER with all the right, title and interest of the Mortgagor in and to any and all unearned premiums accrued, accruing or to accrue under any and all insurance policies now or hereafter obtained by the Mortgagor on the Mortgaged Premises, TOGETHER with the appurtenances and all the estate and rights of the Mortgagor in and to said Premises, TOGETHER with all and singular the tenements, hereditaments, and appurtenances belonging or in any way appertaining to said Premises, and the reversion and reversions, remainder and remainders, rents, issues and profits thereof. TOGETHER with and including any and all strips and gores of land adjoining or abutting said Premises, TOGETHER with all right, title, and interest of the Mortgagor in and to the land lying in the bed of any street, road, avenue or alley, open or proposed, in front of, running through or adjoining said Premises, TOGETHER with all buildings, structures, and improvements now or at any time hereafter erected, constructed or situated upon the Premises, and all fixtures and equipment and other personal property (and the proceeds thereof) now or hereafter affixed to or constituting a portion of the Premises or used in the operation of the buildings standing on said Premises, together with any and all replacements thereof and additions thereto, Page 126 of 272 TOGETHER with all awards heretofore and hereafter made to the Mortgagor for taking by eminent domain the whole or any part of said Premises or any easement therein, including any awards for changes of grade of streets, which said awards are hereby assigned to the Mortgagee, who is hereby authorized to collect and, except as provided herein, receive the proceeds of such awards and to give proper receipts and acquittances therefor, and to apply the same toward the payment of the mortgage debt, notwithstanding the fact that the amount owing thereof may not then be due and payable; and the said Mortgagor hereby agrees, upon request, to make, execute and deliver any and all assignments and other instruments sufficient for the purpose or assigning said awards to the Mortgagee, free, clear, and discharged of any encumbrances of any kind or nature whatsoever, This is a purchase money mortgage. The Mortgagor covenants with the Mortgagee that: PAY INDEBTEDNESS. The Mortgagor will pay the indebtedness secured hereby with interest thereon as herein provided and according to the Note, and if default shall be made in the payment of part thereof, the Mortgagee shall have power to foreclose this Mortgage and sell the Mortgaged Premises according to law. In addition to and not in limitation of the foregoing, Mortgagee may, either with or without entry or taking possession of the mortgaged property as provided in this Mortgage or otherwise, personally or by its agents or attorneys, and without prejudice to the right to bring an action for foreclosure of this Mortgage, sell the mortgaged property or any part thereof pursuant to any procedures provided by applicable laws, including, without limitation, the procedures set forth in Article 14 of the New York Real Property Actions and Proceedings Law (and any amendments or substitute statutes in regard thereto), and all estate, right, title, interest, claim and demand therein, and right of redemption thereof, at one or more sales as an entity or in parcels, and at such time and place upon such terms and after such notice thereof as may be required or permitted by applicable law. INSURANCE. The Mortgagor will keep the buildings on the Premises and the fixtures and articles of personal property covered by the Mortgage insured against loss by fire and other hazards, casualties and contingencies, including flood insurance if required by law, regulation or Mortgagee, for the benefit of the Mortgagee in an amount not less than the unpaid principal balance due hereunder. The fire insurance policy as required hereby shall contain the usual extended coverage endorsement and shall provide for twenty (20) days written notice to Mortgagee prior to cancellation. In addition thereto the Mortgagor within thirty (30) days after notice and demand will keep the Premises insured against war risk and any other hazard that may reasonably be required by law, regulation or Mortgagee. The Mortgagor will assign and deliver said policies to the Mortgagee and the Mortgagor will reimburse the Mortgagee for any premiums paid for the insurance made by the Mortgagee on the Mortgagor's default in so insuring the buildings or in so assigning and delivering the policies. All the provisions of this paragraph or of any other provisions of the Mortgage pertaining to fire insurance or any other additional insurance which may be required hereunder shall be construed in accordance with Section 254 Subdivision 4 of the Page 127 of 272 New York Real Property Law, but, said section to the contrary notwithstanding, the Mortgagor consents that the Mortgagee may without qualification or limitation by virtue of said section, retain and apply the proceeds of any such insurance in satisfaction or reduction of the Mortgage, or it may at its election pay the same, either in whole or in part, to the Mortgagor or his heirs or assigns for the repair or replacement of the buildings or of the insured articles of personal property or for any other purpose or object satisfactory to the holder of the Mortgage, and if the Mortgagee shall receive and retain such insurance money, the lien of the Mortgage shall be affected only by a reduction of the amount of such lien by the amount of such insurance money received and retained by the Mortgagee. ALTERATIONS, DEMOLITION OR REMOVAL. Except for improvements on the Gallina property and the actions described in the following sentence, no building, fixtures or personal property covered by the Mortgage shall be removed, demolished, or substantially altered without the prior written consent of the Mortgagee. Mortgagor may remove, demolish or substantially alter those improvements necessary to relocate the rail line on the Premises due to the condition of the CSX trestle, provided that Mortgagor performs and completes such relocation so that rail service to the Premises is restored with all reasonable dispatch (the "Railway Relocation"). WASTE, MAINTENANCE AND REPAIRS. The Mortgagor will not commit any waste on the Premises or make any change in the use of the Premises which will in any way increase any ordinary fire or other hazard arising out of construction or operation. The Mortgagor will keep and maintain or cause to be kept and maintained all buildings and other improvements now or at any time hereafter erected upon or constituting any portion of the Mortgaged Premises, and the sidewalks and curbs abutting the same, in good order and condition and in a rentable and tenantable state or repair, and will make or cause to be made, as and when the same shall become necessary, all structural and non-structural exterior and interior, ordinary and extraordinary, foreseen and unforeseen repairs, renewals, and replacements necessary to that end. In the event that the Mortgaged Premises shall be damaged or destroyed in whole or in part, by fire or any other casualty, or in the event of a taking of a portion of the Mortgaged Premises as a result of any exercise of the power of eminent domain, the Mortgagor shall promptly restore, replace, rebuild or alter the same as nearly as possible to the condition they were in immediately prior to such fire, other casualty or taking, provided Mortgagor is allowed to retain and use the proceeds of any insurance covering such loss or the condemnation proceeds relating to such taking. Although damage to or destruction of the Mortgaged Premises, or any portion thereof, shall not of itself constitute a default hereunder, the failure of the Mortgagor promptly to restore, replace, rebuild, or alter the same, as hereinabove provided, shall constitute a default hereunder but only if the amount of the insurance proceeds or condemnation award or settlement recovered in connection with such damage or destruction has been paid to Mortgagor or to the contractors retained by Mortgagor to perform the restoration, replacement or rebuilding. The Mortgagor covenants that it will give to the Mortgagee prompt written notice of any damage or injury to the Mortgaged Premises and will give like notice to the Mortgagee of the commencement of any condemnation proceeding affecting the whole or any portion of Mortgaged Premises. The Page 128 of 272 Mortgagor shall have the right, at any time and from time to time, to remove and dispose of building service equipment which may have become obsolete or unfit for use or which is no longer useful in the operation of the building now or hereafter constituting a portion of the Mortgaged Premises. The Mortgagor agrees promptly to replace with other building service equipment, free of superior title, liens or claims, not necessarily of the same character but of at least equal usefulness and quality, any such building service equipment so removed or disposed of, except that, if by reason of technological or other developments in the operation and maintenance of buildings of the general character of the building constituting a portion of the Mortgaged Premises, no replacement of the building service equipment so removed or disposed of is necessary or desirable in the proper operation or maintenance of said building, the Mortgagor shall not be required to replace the same. TAXES, ASSESSMENTS, ETC. The Mortgagor will pay all taxes, assessments, insurance premiums, sewer rents, or water rates, and in default thereof, the Mortgagee may pay the same. Any sums so advanced by the Mortgagee shall bear interest at the maximum legal rate of interest at the time of such advance or at the highest rate of interest set forth herein or in the Note, whichever is greater, and any such sum and the interest thereon shall be a lien on said Premises, prior to any right, or title to, interest in or claim upon said Premises, or accruing subsequent to the lien of the Mortgage and shall be deemed secured hereby. Upon written request from Mortgagee, Mortgagor shall deliver to Mortgagee receipted tax bills showing payment of all taxes on the Premises within the applicable grace period. ESTOPPEL STATEMENT. The Mortgagor within five (5) days upon request in person or within ten (10) days upon request by mail will furnish a written statement duly acknowledged of the amount due on the Mortgage and whether any offsets or defenses exist against the Note and Mortgage. MORTGAGEE MAY CURE MORTGAGOR'S DEFAULTS. The Mortgagor covenants and agrees with the Mortgagee that the holder of the Mortgage may cure any default of Mortgagor on the Mortgage or any prior or subsequent mortgage, including payment of any installments of principal and interest or part thereof, and that all costs and expenses, including reasonable attorneys' fees together with interest thereon at the highest rate of interest set forth herein or in the Note secured by the Mortgage, whichever is the greater, paid by the Mortgagee in so curing said default, shall be repaid by the Mortgagor to the Mortgagee on demand and the same shall be deemed to be secured by the Mortgage and to be collectible in like manner as the principal sum. WARRANTY OF TITLE. The Mortgagor warrants the title to the Premises and will execute any further assurance of the title to the Premises as Mortgagee may require. LIEN LAW COVENANT. The Mortgagor will, in compliance with Section 13 of the New York Lien Law, receive the advances secured hereby and will hold the right to receive such advances as a trust fund to be applied first for the purpose of paying the cost Page 129 of 272 of the improvement and will apply the same first to the payment of the cost of the improvements before using any part of the total of the same for any other purpose. ESCROW FOR TAXES/INSURANCE. The Mortgagee may request at any time after a default by Mortgagor in payment when due of property taxes and/or insurance premiums on the Mortgaged Premises that, in addition to the monthly payments of principal and interest, the Mortgagor will pay monthly to the Mortgagee on or before the first day of each and every calendar month, until the Note is fully paid, a sum equal to one-twelfth (1/12th) of the known or estimated yearly taxes, assessments, liens and charges levied or to be levied against the Mortgaged Premises and/or premiums for insurance held or required by Mortgagee. The Mortgagee shall hold such payments in trust without obligation to pay interest thereon, except such interest as may be made mandatory by law or regulation, to pay such taxes, assessments, liens, charges and insurance premiums within a reasonable time after they become due. If the total of payments made by the Mortgagor for taxes, assessments, liens, charges and insurance premiums shall exceed the amount of payments actually made by the Mortgagee, such excess shall be credited by the Mortgagee on subsequent payments to be made by the Mortgagor. If the total of payments made by the Mortgagor for taxes, assessments, liens, charges and insurance premiums shall not be sufficient to pay therefor, then the Mortgagor shall pay to the Mortgagee any amount necessary to make up the deficiency on or before the date when such amounts shall be due. LATE CHARGES. If any payment required to be made under the Mortgage or the Note or the obligations secured by the Mortgage shall be overdue in excess of ten (10) days, a late charge of the lesser of $150 or $.06 of each $1.00 so overdue will be paid by the Mortgagor for the purpose of defraying the expenses incident to handling such delinquent payments. ACCELERATION OF PRINCIPAL ON TRANSFER, ETC. The principal sum with interest thereon shall become immediately due and payable, upon the voluntary or involuntary conveyance or transfer by operation of law or otherwise of all or any part of the Mortgaged Premises, or any interest or estate therein, including lease and conveyance by land contract. Acceptance of payments by the Mortgagee subsequent to any such conveyance, transfer, or encumbering shall not be deemed a waiver of any of the Mortgagee's rights. ACCELERATION OF PRINCIPAL ON DEFAULT, ETC. The whole of the principal sum and interest shall become due at the option of the Mortgagee, after (a) default in the payment of any installment of principal or of interest for thirty (30) days; or, (b) default in the payment of any tax, water rate, assessment, insurance premiums, or sewer rent for thirty (30) days after notice and demand or default after notice and demand either in assigning and delivering the policies insuring the buildings against any casualty or in reimbursing the Mortgagee for premiums paid on such insurance, as herein provided; or (c) default upon request in furnishing a statement of the amount due and whether any offsets or defenses exist against the mortgage debt, as herein provided; or (d) failure to exhibit to the Mortgagee, within ten (10) days after demand, receipts showing payment of Page 130 of 272 all taxes, water rates, sewer rents and assessments; or (e) except for the removal of the improvements on the Gallina property or the actions with respect to the Railway Relocation described in ALTERATIONS, DEMOLITION OR REMOVAL above, the actual or threatened alteration, demolition or removal of any improvement on the Premises without the written consent of the Mortgagee; or (f) the assignment of the rents of the Premises or any part thereof without the written consent of the Mortgagee; or (g) the buildings on said Premises are not maintained in reasonably good repair; or (h) failure to comply with any requirement or order or notice of violation of law or ordinance issued by any governmental department claiming jurisdiction over the Premises within two (2) months from the issuance thereof; or (i) refusal of two or more fire insurance companies lawfully doing business in the State of New York to issue policies insuring the buildings on the premises; or (j) the removal, demolition or destruction in whole or in part of any of the fixtures, chattels or articles of personal property covered hereby, unless the same are promptly replaced by similar fixtures, chattels and articles of personal property at least equal in quality and condition to those replaced, free from security interests or other encumbrances thereon and free from any reservation of title thereof, or unless prior written approval has been obtained from Mortgagee; or (k) thirty (30) days notice to the Mortgagor, in the event of the passage of any law deducting from the value of land for the purposes of taxation any lien thereon, or changing in any way the laws for the taxation of mortgages or debts secured thereby for state or local purposes; or (1) the Mortgagor fails to keep, observe and perform within thirty (30) days after notice any of the other covenants, conditions or agreements contained in the Mortgage; or (m) use of said Premises for any unlawful purpose or public or private nuisance; or (n) the Mortgagor commits or permits waste; or (o) any default under any mortgage or other lien on the Premises or any default under any other note, loan agreement or other instrument evidencing Mortgagor's indebtedness to Mortgagee; or (p) the Mortgagor is no longer personally liable for repayment of the indebtedness secured hereby. NOTICES. Notice and demand to or request upon the Mortgagor shall be in writing and, if in writing, may be served in person or by registered or certified mail, return receipt requested. APPOINTMENT OF RECEIVER. The Mortgagee, in any action to foreclose the Mortgage, shall be entitled, without notice or demand and without regard to the adequacy of any security for the indebtedness hereby or the solvency or insolvency of any person liable for the payment thereof, to the appointment of a receiver of the rents, issues and profits of the Mortgaged Premises. SALE IN ONE PARCEL. In case of a foreclosure sale, said Premises, or so much thereof as may be affected by the Mortgage, may be sold in one parcel, any provision of law to the contrary notwithstanding. In addition to and not in limitation of the foregoing, Mortgagee may, either with or without entry or taking possession of the mortgaged property as provided in this Mortgage or otherwise, personally or by its agents or attorneys, and without prejudice to the right to bring an action for foreclosure of this Mortgage, sell the mortgaged property or any part thereof pursuant to any procedures provided by applicable laws, including, without limitation, the procedures set forth in Page 131 of 272 Article 14 of the New York Real Property Actions and Proceedings Law (and any amendments or substitute statutes in regard thereto), and all estate, right, title, interest, claim and demand therein, and right of redemption thereof, at one or more sales as an entity or in parcels, and at such time and place upon such terms and after such notice thereof as may be required or permitted by applicable law. ASSIGNMENT OF RENTS. The Mortgagor hereby absolutely and unconditionally assigns, transfers and conveys to the Mortgagee the rents, issues, and profits of the Premises as further security for the payment of the Note, it being the intention of Mortgagor and Mortgagee that this assignment be treated and construed as an absolute assignment and not an assignment for additional security only. The Mortgagor further grants to the Mortgagee the right to enter upon and to take possession of the Premises for the purpose of collecting the same and to let the Premises or any part thereof, and to apply the rents, issues and profits, after payment of all necessary charges and expenses, on account of the Note. This assignment and grant shall continue in effect until the Note is paid. The Mortgagee hereby waives the right to enter upon and to take possession of the Premises for the purpose of collecting the rents, issues, and profits, and the Mortgagor shall be entitled to collect and receive the rents, issues and profits as trustee for the benefit of Mortgagee and Mortgagor until default under any of the covenants, conditions, or agreements contained in the Mortgage; Mortgagor agrees to use such rents, issues and profits in payment of principal and interest and in payment of taxes, assessments, sewer rents, water rates, and carrying charges against the Premises, but such right of the Mortgagor may be revoked by the Mortgagee upon any default, on five (5) days written notice. The Mortgagor will not, without the written consent of the Mortgagee, receive or collect rent from any tenant of the Premises or any part thereof for a period of more than one month in advance, and in the event of any default under the Mortgage will pay monthly in advance to the Mortgagee, or to any receiver appointed to collect the rents, issues and profits, the fair and reasonable rental value for the use and occupation of the Premises or of such part thereof as may be in the possession of the Mortgagor, and upon default in any such payment will vacate and surrender the possession of the Premises to the Mortgagee or to such receiver, and in default thereof may be evicted by summary proceedings. Mortgagor shall and does hereby agree to indemnify and hold Mortgagee and its representatives harmless of and from any and all liability, loss of damage which Mortgagor or its representatives may or might incur under or by reason of (a) any tenant of the Premises, (b) this Mortgage, (c) any action taken by Mortgagee or its representatives hereunder, unless constituting willful misconduct or gross negligence, or (d) claims and demands which may be asserted against Mortgagee or its representatives by reason of any alleged obligations or undertakings on its or their part to perform or discharge any of the terms, covenants or agreements contained in any lease affecting the Premises. This Mortgage shall not operate to place upon Mortgagee any responsibility for the management, operation or maintenance of the Premises, and the execution of this Mortgage by Mortgagor shall constitute conclusive evidence that all responsibility for the management, operation and maintenance of the Premises is, shall be and shall remain that of Mortgagor, in the absence of the taking of actual possession of the Premises by Mortgagee. The provisions of the foregoing indemnification obligation shall survive the Page 132 of 272 assignment or repayment of the Note, the assignment, satisfaction, foreclosure or other termination of this Mortgage and the sale or other transfer or conveyance of the Premises. SECURITY AGREEMENT. The Mortgage constitutes a security agreement under the Uniform Commercial Code and creates a security interest in all fixtures and equipment and other personal property (and the proceeds thereof) now or hereafter affixed to or constituting a portion of the Premises. Mortgagor shall execute, deliver, file and refile any financing statement, continuation statements, or other security agreements Mortgagee may require from time to time to confirm the lien of the Mortgage with respect to such property. Without limiting the foregoing, Mortgagor hereby irrevocably appoints Mortgagee and its successors in interest as attorney-in-fact of Mortgagor to execute, deliver and file such instruments, for and on behalf of Mortgagor. ANTI-MARSHALLING. The Mortgagee may resort for the payment of any indebtedness, liability, or obligation secured hereby to its several securities therefor, in such order and manner as it may see fit, and the Mortgagee may maintain an action to foreclose the Mortgage notwithstanding the pendency of any action to recover any part of the indebtedness secured hereby, or the recovery of any judgment in such action. The Mortgagee shall not be required during the pendency of any action to foreclose the Mortgage, to obtain leave of any court in order to commence or maintain any other action to recover any part of the indebtedness secured hereby. The Mortgagee shall also have the right in the event of default under the Mortgage or the obligation secured hereby to proceed against any or all interests of the Mortgagor and the Mortgagor agrees that the Mortgagee shall have the right to elect in writing not to cut off any interest that any Mortgagor might have and in the event that Mortgagee shall so elect, Mortgagor agrees that all of its duties and obligations as to such interest shall continue. COMPLIANCE WITH LAWS, ETC. The Mortgagor will comply with, or cause compliance with, all present and future laws, ordinances, rules, regulations, zoning and other requirements of all governmental authorities whatsoever having jurisdiction of or with respect to the Mortgaged Premises or any portion thereof or the use or occupation thereof; provided, however, that the Mortgagor may postpone such compliance if and so long as the validity or legality of any such governmental requirement shall be contested by the Mortgagor, with diligence and in good faith, by appropriate legal proceedings. COMPLIANCE WITH ZONING, ETC. The Mortgagor covenants: (a) that, to the best of its knowledge, the buildings and improvements now on the Mortgaged Premises are in full compliance with all applicable zoning codes, ordinances and regulations and deed restrictions, if any; and (b) buildings or improvements hereafter constructed on such Premises shall be in compliance as in (a) hereof provided, shall lie wholly within the boundaries of such Premises and, shall be independent and self-contained operating units (except for utility lines and conduits coming directly to the Premises from a public road or from a private road an easement over which for the maintenance of such utilities is covered by the lien hereof). Page 133 of 272 LEGAL EXPENSES. If any action or proceeding be commenced (except an action to foreclose the Mortgage or to collect the debt secured thereby), to which action or proceeding the Mortgagee is made a party, or in which it becomes necessary to defend or uphold the lien of the Mortgage, all sums paid by the Mortgagee for the expense of any litigation to prosecute or defend the rights and lien created by the Mortgage (including reasonable counsel fees), shall be paid by the Mortgagor, together with interest thereon at the legal rate of interest at the time of said payment or at the highest rate of interest set forth herein or in the Note secured by the Mortgage, whichever is greater, and any such sum and interest thereon shall be a lien on said Premises, prior to any right, or title to, interest in or claim upon said Premises attaching or accruing subsequent to the lien of the Mortgage, and shall be deemed to be secured by the Mortgage. If the Mortgage is referred to attorneys for collection or foreclosure, the Mortgagor shall pay all sums, including attorneys' fees, incurred by the Mortgagee, together with all statutory costs, disbursements, and allowances, with or without the institution of an action or proceeding. All such sums with interest thereon at the rate set forth herein shall be deemed to be secured by the Mortgage and collectible out of the Mortgaged Premises. INTEREST ON CONDEMNATION AWARD. In the event of condemnation, or taking by eminent domain, the Mortgagee shall not be limited to the interest paid on the award by the condemning authority but shall be entitled to receive out of the award interest on the entire unpaid principal sum at the rate herein provided; the Mortgagor does hereby assign to the Mortgagee so much of the balance of the award payable by the condemning authority as is required to pay such total interest. INTEREST IN THE EVENT OF DEFAULT. If default be made in the payment of the said indebtedness when due, pursuant to the terms hereof, the Mortgagee shall be entitled to receive interest on the entire unpaid principal sum at the legal rate of interest at the time of such default or at the highest rate of interest set forth herein or in the Note secured by the Mortgage, whichever is the greater, to be computed from the due date and until the actual receipt and collection of the entire indebtedness. This charge shall be added to and shall be deemed secured by the Mortgage. The within clause, however, shall not be construed as an agreement or privilege to extend the Mortgage, nor as a waiver of any other right or remedy accruing to the Mortgagee by reason of any such default. RENT/BUSINESS INTERRUPTION INSURANCE. The Mortgagor will keep the buildings and improvements now erected or hereafter to be erected on the Mortgaged Premises and all personal property and fixtures covered by the Mortgage insured for the benefit of the Mortgagee against loss of rents or business income, as the case may be, by reason of fire or other casualties and in such amounts as may from time to time be required by the Mortgagee and in companies satisfactory to the Mortgagee, and will assign and deliver to the Mortgagee such policies of insurance. Page 134 of 272 NO SECONDARY FINANCING. Except as allowed by the Asset Purchase Agreement between Mortgagor and Mortgagee dated August 29, 2000, as amended by Amendment No. 1 dated December 15, 2000 (together the "Asset Purchase Agreement"), the Mortgagor will not, without the Mortgagee's prior written consent, mortgage (including the so-called "wrap-around mortgage"), pledge, assign, grant a security interest in, cause any lien or encumbrance to attach to or any levy to be made on the Mortgaged Premises except for (a) taxes and assessments not yet delinquent and (b) any mortgage, pledge, security interest, assignment or other encumbrance to the Mortgagee. BANKRUPTCY. Upon the making of an assignment for the benefit of creditors by, or upon the filing of a petition in bankruptcy by or against the Mortgagor, or any person or corporation who is the guarantor hereof or whose indebtedness is secured hereby, or upon the application for the appointment of a receiver of the property of the Mortgagor or any such person or corporation, or of the property of any person or corporation which may become and be owner of the Mortgaged Premises, or upon any act of insolvency or bankruptcy of the Mortgagor or any such person or corporation or of any such subsequent owner, or upon the legal incapacity of the Mortgagor or any such person or corporation or owner, or any of them, the whole of said indebtedness of every kind or nature held by the Mortgagee and now or hereafter secured hereby shall immediately become due and payable with interest thereon, and Mortgagor and any guarantor(s) hereby waive presentment, demand of payment, protest, notice of non-payment, and/or protest of any instrument on which the Mortgagor or such guarantors are or may become liable now or hereafter secured hereby, and the Mortgagor expressly agrees that the Mortgagee may release or extend the time of any party liable on any such obligation without notice and without affecting his obligation thereon or under this instrument. LIENS. Except as provided in the Asset Purchase Agreement, the Premises shall be kept free and clear from any liens and/or encumbrances of any type and description. Upon the recording of any lien or encumbrance, and the same not having been cleared or bonded of record within thirty (30) days after filing thereof, the entire debt secured hereby shall immediately become due and payable. RIGHT TO INSPECT. The Mortgagee and any persons authorized by Mortgagee shall have the right, on reasonable notice, to enter and inspect the Mortgaged Premises at all reasonable times during usual business hours. WAIVER. No waiver by the Mortgagee of the breach of any of the covenants contained in the Note, the Mortgage, or other loan document, or failure of the Mortgagee to exercise any option given to it, shall be deemed to be a waiver of any other breach of the same or any other covenant, or of its rights thereafter to exercise any such option. MODIFICATION. No change, amendment, modification, cancellation or discharge hereof, or any part hereof, shall be valid unless in writing and signed by the parties hereto or their respective successors and assigns. Page 135 of 272 COVENANTS SHALL RUN WITH THE LAND, ETC. The covenants contained in the Mortgage shall run with the land and bind the Mortgagor, the heirs, personal representatives, successors and assigns of the Mortgagor and all subsequent owners, encumbrancers, tenants and subtenants of the Premises, and shall inure to the benefit of the Mortgagee, the personal representatives, successors and assigns of the Mortgagee and all subsequent holders of the Mortgage. PURCHASE MONEY MORTGAGE. This is a purchase money mortgage for the amount above stated. LIMITED LIABILITY COMPANY MORTGAGOR. The Mortgagor covenants that it is duly formed and validly existing under the laws of the State of New York, and that execution of the Mortgage and related instruments is authorized by the Operating Agreement and/or all members entitled to vote thereon. ENVIRONMENTAL REPRESENTATIONS, WARRANTIES AND COVENANTS. Mortgagor, after diligent inquiry, makes the following representations, warranties and covenants which shall survive the closing of this loan: 1. Mortgagor is and shall remain in material compliance with, and agrees to cause all operators, tenants, subtenants, licensees and occupants of the Premises to materially comply with, all applicable environmental laws, rules, regulations and requirements and agrees to obtain and operate in material compliance with, and agrees to cause all operators, tenants and subtenants, licensees and occupants of the Premises to obtain and materially comply with, all environmental permits, licenses, authorizations, orders and approvals. 2. Mortgagor shall not cause or permit any change to be made in the present or intended use of the Premises which would (i) involve the commercial use of the Premises as a landfill or hazardous and toxic substance or other waste, generation, treatment, storage or disposal site, (ii) violate any applicable environmental law, rule, regulation or requirement, or (iii) constitute non-compliance with any environmental permit, license, authorization or order reasonably likely to give rise to an adverse environmental condition. 3. Mortgagor agrees to promptly notify Mortgagee in writing in the event of any reportable spill or other release or threat of release of any hazardous or toxic substance on, at or from the Premises or of any accusation or allegation of any such spill or release and promptly provide Mortgagee with a copy of all notifications or other communication of whatever nature which it gives or receives with respect to any past or present release or threat of a release of any hazardous and toxic substance on, at or from the Premises or any property adjacent to or within the immediate vicinity of the Premises. 4. Mortgagor agrees, at its sole cost and expense, to undertake and complete all investigations, studies, sampling and testing and all removal and other remedial actions Page 136 of 272 required of Mortgagor by a governmental authority to contain, remove and clean up all hazardous and toxic substances that are determined to be present at the Premises in accordance with all applicable environmental laws, rules, regulations, requirements and orders, and all environmental permits, licenses and authorizations, and to promptly pay when due any fines or assessments against Mortgagor associated therewith. 5. Mortgagor agrees to allow at all times Mortgagee, Mortgagee's successors or assigns, and its officers, employees, agents, representatives, contractors and subcontractors reasonable access to the Premises for the purposes of ascertaining site conditions, including, but not limited to, a detailed visual inspection of the Premises, samplings of soil, surface and groundwater and such other inspection or analysis reasonably necessary or appropriate to complete this environmental assessment of the Premises. 6. If at any time Mortgagee reasonably believes that potential environmental problems exist at the Premises, Mortgagee may require that an environmental site assessment with respect to the Premises conducted in accordance with ASTM or another generally accepted standard be prepared by an environmental engineer or other qualified person mutually acceptable to the parties, at Mortgagor's expense. If such assessment indicates the release or the threat of a release of any hazardous and toxic substance on, at or from the Premises, Mortgagor shall promptly undertake and diligently pursue to completion all necessary, appropriate and legally required investigative, containment, removal, clean up and other remedial actions, using methods acceptable to the appropriate federal, state and local agencies or authorities. 7. Mortgagor agrees to defend, indemnify and hold harmless Mortgagee, Mortgagee's successors and assigns, its employees, agents, officers and directors from and against any claims, actions, demands, penalties, fines, liabilities, settlements, damages, costs or expenses (including, without limitation, attorney and consultant fees, investigation and laboratory fees, court costs and litigation expenses) of whatever kind or nature known or unknown contingent or otherwise arising out of or in any way related to: A. The disposal, release or threatened release or omission of any hazardous or toxic substances on the Premises occurring after the date of this Mortgage; B. Any personal injury (including wrongful death or property damage, real or personal) arising out of or related to hazardous or toxic substances arising from the disposal, release, or a threatened release or emission occurring after the date of this Mortgage; C. Any lawsuit brought or threatened, claim asserted, fine or penalty assessed, settlement reached or government order given relating to hazardous or toxic substances released or disposed or emitted after the date of this Mortgage or to the extent any pre-existing condition was exacerbated by the Mortgagor after the date of this Mortgage; and/or Page 137 of 272 D. Any violation of any law, order, regulation, requirement, or demand of any government authority, or any policies or requirements of Mortgagee, which are based upon or in any way related to hazardous or toxic substances released, disposed or emitted after the date of this Mortgage and to the extent such violation arose from the exacerbation of any pre-existing condition by the Mortgagor after the date of this Mortgage. 8. Unless waived in writing by Mortgagee, the breach of any of the covenants and warranties contained in this section shall be an event of default under the Mortgage. 9. For purposes of this section, "hazardous and toxic substances," includes, without limit, asbestos-containing materials, PCBs, petroleum and petroleum products, any flammable explosives, radioactive materials, hazardous materials, hazardous wastes, hazardous or toxic substances or related materials defined in the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, the Hazardous Materials Transportation Act, as amended, the New York State Environmental Conservation Law, the Resource Conservation and Recovery Act, as amended, and the regulations adopted and publications promulgated pursuant thereto. The provisions of this section shall be in addition to any other obligations and liabilities Mortgagor may have to Mortgagee at common law, and shall survive the transactions contemplated herein. 10. Mortgagor agrees to defend, indemnify and hold harmless the Mortgagee, its successors and assigns, and its officers, directors, employees and agents, from and against any loss, damage, fine, penalty or expense (including reasonable attorneys' fees and reasonable costs of investigation) incurred as a result of any misrepresentation of Mortgagor herein or breach by Mortgagor, its successors and assigns, of any covenant herein. The foregoing representations, warranties and covenants are subject to and shall be applied in conjunction with Mortgagee's representations, warranties and covenants under that Asset Purchase Agreement between Mortgagor as Purchaser and Mortgagee as Seller and dated August 29, 2000. In the event of a conflict between the provisions of the two agreements, the Asset Purchase Agreement shall be controlling. TAX ON NOTE. That in the event that hereafter it is claimed by any governmental agency that any tax or other governmental charge or imposition is due, unpaid and payable by the Mortgagor or the Mortgagee upon the Note (other than a tax on the interest receivable by the Mortgagee thereunder), the Mortgagor will upon sixty (60) days prior written notice either (a) pay such tax and within a reasonable time thereafter deliver to the Mortgagee satisfactory proof of payment thereof or (b) deposit with the Mortgagee the amount of such claimed tax, together with interest and penalties thereon, pending an application for a review of the claim for such tax, and within a reasonable time, deliver to the Mortgagee either (i) evidence satisfactory to the Mortgagee that such claim of taxability has been withdrawn or defeated in which event any such deposit shall be returned to the Mortgagor or (ii) a direction from the Mortgagor to the Mortgagee to pay the same out of the deposit above mentioned, any excess due over the Page 138 of 272 amount of said deposit to be paid by the Mortgagor directly to the taxing authority and any excess of such deposit over such payment by the Mortgagee to be returned to the Mortgagor. Upon the failure of the Mortgagor to comply with the provisions of this Article, the whole of said principal sum and interest secured by the Mortgage shall at the option of the Mortgagee become due and payable. If liability for such tax is asserted against the Mortgagee, the Mortgagee will give to the Mortgagor prompt notice of such claim, and the Mortgagor, upon complying with the provisions of this Article, shall have full right and authority to contest such claim of taxability. CONSTRUCTION. The word "Mortgagor" shall be construed as if it read "Mortgagors" and the "Mortgagee" shall be construed as if it read "Mortgagees" whenever the sense of the Mortgage so requires. This Mortgage shall be governed by and construed in accordance with the laws of the State of New York. CONFLICT WITH OTHER LOAN AGREEMENTS. Mortgagor represents and warrants to Mortgagee that the execution and delivery of this Mortgage and all related documents and the performance of any term, covenant, condition herein provided in any agreement or instrument executed in connection therewith, are within Mortgagor's power as a New York limited liability company, have been duly authorized on behalf of the Mortgagor by all proper and necessary action, and are not in conflict with, or result in any breach of, or constitute a default under or violate: A. Mortgagor's Articles of Organization or Operating Agreement; or B. Any of the terms, conditions, or provisions of any agreement, lease or other instrument to which Mortgagor is a party or subject to; or C. Any law, regulation, order, writ, injunction or decree to which Mortgagor is subject or any rules or regulations of any administrative agency which have jurisdiction over Mortgagor or over any property of Mortgagor that would have a material adverse affect on Mortgagor's business or financial condition. SEVERABILITY. In the event any one or more of the provisions of the Mortgage or the Note shall for any reason be invalid, illegal or unenforceable in whole or in part, then only such provision or provisions shall be deemed to be null and void and of no force or effect, but shall not affect any other provision of the Mortgage or the Note. MARGINAL NOTES OR CAPTIONS. The marginal notes or captions herein are inserted only as a matter of convenience and for reference and are not and shall not be deemed to be any part of the Mortgage. IN WITNESS WHEREOF, the Mortgage has been duly executed by the Mortgagor, the day and year first above written. Page 139 of 272 MONROE BREWING CO., LLC By: /s/ Samuel T. Hubbard, Jr. --------------------------------- Samuel T. Hubbard, Jr. President STATE OF NEW YORK) COUNTY OF MONROE) ss.: On the 15th of December in the year 2000 before me, the undersigned, a Notary Public in and for said State, personally appeared Samuel T. Hubbard, Jr., personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument. -------------------------------- Notary Public EX-10.6 7 l85770aex10-6.txt EXHIBIT 10-6 Page 140 of 272 EXHIBIT 10-6 ------------ THIS NOTE IS SUBJECT TO A CERTAIN INTERCREDITOR AGREEMENT DATED DECEMBER 15, 2000 AMONG HIGH FALLS BREWING COMPANY, LLC AND MANUFACTURERS AND TRADERS TRUST COMPANY, CEPHAS CAPITAL PARTNERS, LLP. AND THE GENESEE BREWING COMPANY, INC., AND AN ASSET PURCHASE AGREEMENT DATED AUGUST 29, 2000 BETWEEN THE GENESEE BREWING COMPANY, INC. AND HIGH FALLS BREWING COMPANY, LLC, AS AMENDED BY AMENDMENT NO. 1 DATED DECEMBER 15, 2000. SUBORDINATED PROMISSORY NOTE - ---------------------------- $4,500,000.00 December 15, 2000 FOR VALUE RECEIVED, HIGH FALLS BREWING COMPANY, LLC, a New York limited liability company with an address at 445 St. Paul Street, Rochester, New York 14605 ("MAKER"), promises to pay to THE GENESEE BREWING COMPANY, INC., a New York Corporation ("PAYEE"), at its office at 445 St. Paul Street, Rochester, New York 14605 or at such other address as may hereafter be specified by Payee, in lawful money of the United States of America, the principal sum of FOUR MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($4,500,000.00), together with interest thereon at the rate, in the installments and at the times hereinafter provided. 1. MATURITY DATE; PRINCIPAL AND INTEREST PAYMENTS; PREPAYMENTS. 1.1 Maturity Date. The outstanding principal balance of this Note plus all accrued and unpaid interest thereon and all other sums due hereunder shall be due and payable in full on or before midnight on December 15, 2003 (the "ORIGINAL MATURITY DATE"), unless payment is extended in accordance with Section 1.3(b) of this Note, in which case the all such sums shall become due and payable December 15, 2005 (the "EXTENDED MATURITY DATE"). 1.2 Interest Rate. Prior to Acceleration (as defined hereafter), the principal sum outstanding from time to time hereunder shall bear interest at a rate (the "INTEREST RATE") equal to twelve percent (12%) per annum. Upon the occurrence, and during the continuance, of an Event of Default, Payee may, at its option, increase the Interest Rate by two percent (2%) over the rate which would otherwise apply. Page 141 of 272 1.3 Payments of Principal and Interest. (a) Maker shall pay accrued interest on a quarterly basis on each March 15, June 15, September 15 and December 15, commencing March 15, 2001, and shall pay the amount of $500,000 principal on the first anniversary of the date of this Note, the amount of $1,000,000 principal on the second anniversary of the date of this Note, and (subject to Section 1.3(b) of this Note) shall pay the entire remaining principal balance, plus all accrued and unpaid interest thereon, on the Original Maturity Date . (b) Notwithstanding the foregoing and provided that no Event of Default has occurred and is continuing hereunder, if as of the Original Maturity Date the conditions relating to "contract production" under Section 7 of Amendment No. 1 to the Asset Purchase Agreement by and between Payee and Maker dated August 29, 2000 (together the "PURCHASE AGREEMENT") exist such that under the terms thereof the principal amount due on the Original Maturity Date is to be reduced from $3,000,000 to $1,000,000, then the Original Maturity Date shall be extended to the Extended Maturity Date and the principal outstanding hereunder as of the Original Maturity Date shall be paid as follows: $1,000,000 (plus such additional principal and interest as may be necessary to reduce the Note balance to $2,000,000) on December 15, 2003 $1,000,000 on December 15, 2004 $1,000,000 on the Extended Maturity Date Notwithstanding the foregoing, Maker shall have a credit of up to $100,000 against the principal payments due under this Note upon the terms set forth in Section 4 of a certain Settlement and Release Agreement between Maker and Payee dated this date (and described as EXHIBIT E in the Purchase Agreement). 1.4 Time and Manner of Payments. (a) All payments (including prepayments) to be made in respect of principal, interest or other amounts due from Maker hereunder shall be made to Payee in United States dollars in funds immediately available at Payee's office set forth in the caption of this Note or as otherwise specified by Payee, without set-off, counterclaim or other deduction of any nature except as permitted pursuant to the terms of the Purchase Agreement. Maker shall have the right to offset against any installments of principal of, or interest on, this Note in the manner and to the extent provided in the Purchase Agreement. (b) All payments hereunder shall be applied in the following order of priority: costs, expenses, accrued interest and thereafter to the reduction of principal. After payment of the foregoing, all prepayments of any kind shall be applied to the extent of available proceeds to the principal installments payable hereunder in the inverse order of Page 142 of 272 maturity. All prepayments of any kind shall be accompanied by all accrued interest due on the prepaid principal at the time of prepayment. (c) All interest shall be payable in arrears. Interest hereon shall be calculated on the basis of a 360-day year applied to the actual number of days elapsed. All payments of interest and principal shall be payable in lawful currency of the United States of America. 1.5 Prepayments. Subject to the terms of the Intercreditor Agreement referred to below, this Note may be prepaid in whole or in part at any time prior to the maturity date without prior notice to Payee, without penalty or premium. Any partial prepayments shall be applied to installments of principal last falling due. No partial prepayment shall postpone or interrupt payments of interest or the payment of the remaining principal balance, all of which shall continue to be due and payable at the time and in the manner set forth above. 2. REPRESENTATIONS AND WARRANTIES. Maker represents and warrants to Payee that: 2.1 Pro Forma Financial Statements. (a) Maker's Pro Forma Financial Statements dated December 7, 2000 ("Pro Forma Financial Statements") delivered by Maker to Payee and their underlying assumptions are reasonable and have been prepared by Maker in good faith; and (b) except as set forth in the Recisssion Offer dated December 8, 2000 nothing has come to the Maker's attention since the preparation thereof that would lead it to believe that the Pro Forma Financial Statements are inaccurate, incomplete or misleading in any material respect. 2.2 Debt, Etc. Except for indebtedness and obligations to Payee and third parties contemplated by the Asset Purchase Agreement between Maker and Payee of even date herewith, set forth on EXHIBIT A annexed hereto is a complete and correct list of all credit agreements, indentures, guaranties, capital leases, and other investments, agreements, and arrangements presently in effect for or related to borrowed money; and the maximum principal or face amounts of the credits in questions, outstanding or to be outstanding, are correctly stated, and all security interests, liens or encumbrances of any nature given or agreed to be given as security therefor are correctly described or indicated in such Schedule. 2.3 Capitalization. (a) Maker has provided Payee with a true and complete copy of its Articles of Organization and Operating Agreement and all subscription agreements and there are no obligations for the repurchase or acquisition of any membership or other equity interest in Maker, except for certain repurchase obligations with respect to warrants issued to Cephas Capital Partners, L.P. on even date herewith, (b) the capitalization of Maker is as set forth on EXHIBIT B annexed hereto; and (c) all issued and outstanding membership, capital distribution or interests in Maker are fully paid and non-assessable. Page 143 of 272 3. SECURITY. As security for the payment when due of the principal of and interest on this Note, the Maker has, under a "SECURITY AGREEMENT" dated of even date herewith and financing statements filed pursuant thereto, granted to Payee a continuing perfected security interest in all of the personal property of Maker, and all proceeds and products of such property, including insurance payable by reason of loss or damage (collectively, the "Collateral"). This Note is also guaranteed by Genesee Brewing Equipment, LLC pursuant to a secured Guaranty of even date herewith. Maker shall cause each subsidiary of Maker created or acquired after the date hereof to execute and deliver to the Payee a guaranty of payment of this Note and all other Debt of Maker to Payee of any kind, whereby such subsidiary shall guaranty payment of all such Debt. In addition, Maker shall notify the Payee of the acquisition or creation of any new subsidiary. 4. SUBORDINATION. The priority or subordination of this Note and the rights of Payee hereunder are subject to an Intercreditor Agreement by and among Payee, Manufacturers and Traders Trust Company ("M&T BANK") and Cephas Capital Partners, L.P. ("CEPHAS") (the "INTERCREDITOR AGREEMENT") and such other creditors of Maker as the three named creditors may determine to make a party to such Intercreditor Agreement. 5. EVENTS OF DEFAULT. Each of the following shall constitute an event of default (each, an "EVENT OF DEFAULT") hereunder: 5.1 Payment Failure. If Maker fails to make any payment of any installment of interest and/or principal hereunder or any other sum due hereunder within ten (10) days after such payment is due. 5.2 Failure to Perform, Etc. Any representation or warranty made or deemed made by Maker herein shall prove to have been incorrect, incomplete or misleading in any material respect. 5.3 Bankruptcy. If any proceeding under the Bankruptcy Code or any law of the United States or of any state relating to insolvency, receivership, or debt adjustment is instituted by Maker or any guarantor of this Note (a "Guarantor"), or if any such proceeding is instituted against Maker or any Guarantor and is consented to by the respondent or an order for relief shall be entered in such proceeding or such proceeding shall remain undismissed for sixty (60) days, or if a trustee or receiver is appointed for any substantial part of Maker's or any Guarantor's property and such appointment remains undismissed for sixty (60) days, or if Maker or any Guarantor makes an assignment for the benefit of creditors, admits in writing its inability to pay debts generally as they become due or becomes insolvent. 5.4 Cross-Default. Maker shall (i) fail to pay any debt for borrowed money of Maker (including but not limited to M&T, Cephas Capital, L.P., financing provided by Maker pursuant to the Asset Purchase Agreement and certain investor notes issued by Maker pursuant to the Offering Summary dated September 20, 2000 and Recission Offer dated December 8, 2000), or any interest or premium thereon, when due Page 144 of 272 (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise); (ii) fail to perform or observe any term, covenant, or condition on its part to be performed or observed under any agreement or instrument relating to any such debt when required to be performed or observed, if the effect of such failure to perform or observe is to accelerate, or to permit the acceleration, after the giving of notice or passage of time, or both, of the maturity of such debt, whether or not such failure to perform or observe shall be waived by the holder of such debt, (provided, that any failure to perform or observe under financing documents between Maker and M&T shall not become an Event of Default unless and until M&T gives written notice to Maker of such failure and declares its intentions to pursue its rights and/or remedies under such documents) or any such debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; (iii) materially breach the Purchase Agreement; or (iv) fail to perform or observe any material term, covenant or agreement set forth in any agreement or instrument executed by Maker with or in favor of Payee other than in the Asset Purchase Agreement and other than those items referred to above in this Section 5.4, which failure is not cured within thirty (30) days after receipt of notice from Payee. 5.5 Judgment. A final judgment or order for the payment of money in excess of $100,000 shall be rendered against the Maker or any Guarantor and such judgment or order shall continue unsatisfied, in effect and unstayed for a period of thirty (30) consecutive days. 5.6 Discontinuance of Business. Maker's failure to conduct business in the ordinary course, dissolution or termination of existence. 5.7 Change of Control. The occurrence of a Change of Control. As used herein a "CHANGE OF CONTROL" means a change of control of the Maker of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act, whether or not the Maker is then subject to such reporting requirement; provided, that, without limitation, such a Change of Control shall be deemed to have occurred if: (i) any "person" (as defined in Sections 13(d) and 14(d) of the Exchange Act) or "group" (as defined in Section 13(d) of the Exchange Act) other than the Management Group is or becomes the "beneficial owner" (as defined in Rule 13(d)(3) of the Exchange Act), directly or indirectly, of securities of Maker representing 30% or more of the combined voting power of Maker's then outstanding securities in the election of Managers or with respect to the sale or disposition by Maker of its assets or the dissolution of Maker ("VOTING power"); (ii) the members of the Maker approve a merger or consolidation of the Maker with any other limited liability company or corporation, other than a merger or consolidation which would result in the voting securities of the Maker outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 70% of the combined Page 145 of 272 voting power of the voting securities of the Maker or such surviving entity outstanding immediately after such merger or consolidation; (iii) if any recapitalization event occurs as a result of which the holders of voting securities of the Maker outstanding immediately prior thereto do not continue to hold at least 70% of the combined voting power of the voting securities of the Maker immediately after such recapitalization event; (iv) the members of the Maker approve a plan of complete liquidation of the Maker or an agreement for the sale or disposition by the Maker of all or substantially all of the Maker's assets. As used herein, "MANAGEMENT GROUP" means Samuel T. Hubbard, Jr., John B. Henderson, Gary C. Geminn and Howard R. Jacobson. 5.8 Boston Beer. The occurrence of any event which would entitle Boston Beer Company to receive payment from Payee on its Guaranty of even date herewith made in favor of Boston Beer Company by Payee for the benefit of the Maker in respect of a certain Amended and Restated Agreement dated April 30, 1997, other than (i) pursuant to a Refunding Obligation Payment (as defined in an Indemnification Agreement of even date herewith between Maker and Payee), or (ii) a breach by Payee of its "Net Worth" covenant under its Guaranty in favor of Boston Beer Company. 5.9 Guarantees. Any guaranty of this Note shall at any time after its execution and delivery for any reason cease to be in full force and effect or shall be declared null and void, or the validity or enforceability thereof shall be contested by any Guarantor, or any Guarantor shall deny it has any further liability or obligation under, or shall fail to perform its obligations under any Security Agreement. 5.10 Security Agreement. The Security Agreement shall at any time after its execution and delivery and for any reason cease (a) to create a valid and perfected security interest in and to the property purported to be subject to such Security Agreement, except as provided in the Intercreditor Agreement; or (b) to be in full force and effect or shall be declared null and void, or the validity or enforceability thereof shall be contested by Maker or Maker shall deny it has any further liability or obligation under the Security Agreement, or Maker shall fail to perform in any material respect any of its obligations under the Security Agreement. 6. REMEDIES. Upon the occurrence of any Event of Default hereunder, the entire unpaid principal balance of this Note, together with all accrued and unpaid interest thereon and all other sums owing hereunder shall, at the option of the holder hereof, become immediately due and payable (an "ACCELERATION"), without presentation, demand or further action of any kind, and Payee may forthwith exercise, singly, concurrently, successively or otherwise, any and all rights and remedies available to Payee hereunder. The failure of the holder hereof to accelerate the outstanding principal balance of this Note upon the occurrence of an Event of Default hereunder shall not constitute a waiver of such Page 146 of 272 default or of the right to accelerate this Note at any time thereafter so long as the Event of Default remains uncured. If Payee retains the services of counsel in order to enforce any remedy available to Payee hereunder, all reasonable attorneys' fees which are actually incurred by Payee shall be payable upon demand. Upon the occurrence and continuation of any one or more Events of Default, and whether or not the Payee shall have accelerated the maturity of this Note, the Payee may, proceed to protect and enforce its rights by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Note or any instrument pursuant to which the obligations to the Payee are evidenced, including as permitted by applicable law the obtaining of the ex parte appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of the Payee. No remedy herein conferred upon the Payee or the holder of this Note is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of law. 7. AMENDMENTS AND MODIFICATIONS TO INVESTOR NOTES. Maker shall not agree to any amendment to its subordinated Investor Notes issued by Maker pursuant to the Offering Summary Statement dated September 5, 2000 and the Recission Offer dated December 8, 2000 made by Maker with respect to payment terms, maturity date, interest rate and subordination without the Payee's prior written consent. 8. RESTRICTED PAYMENTS. Maker shall not declare or pay any dividends, other than reasonable "tax distributions" sufficient to cover the members' tax liabilities associated with their membership interests in Maker; or pay more than $200,000 per year to, purchase, redeem, retire, or otherwise acquire for value any of its equity interests now or hereafter outstanding, or make any distribution of assets to its members or other holders of equity securities issued by Maker; or allocate or otherwise set apart any sum for the payment of any dividend or distribution on, or for the purchase, redemption, or retirement of any membership interest, whether in income, distributions, capital or otherwise; or make any other distribution by reduction of capital or otherwise in respect of any membership interest. 9. FINANCIAL STATEMENTS. Maker will furnish to Payee: (a) As soon as available and in any event within one hundred twenty (120) days after the end of Maker's fiscal year ending on or after December 31, 2001, consolidated and consolidating balance sheets of Maker and its subsidiaries as of the end of such Fiscal Year, consolidated and consolidating statements of income and retained earnings of Maker and its Subsidiaries for such Fiscal Year, and consolidated and consolidating statements of changes in financial position of Maker and its subsidiaries for such Fiscal Year, all in reasonable detail and stating in comparative form the respective figures for the corresponding dates and period in the prior fiscal year or in the Pro Forma Financial Statements, as the case may be, all prepared in accordance with GAAP consistently applied and as to the consolidated statements accompanied by an opinion thereon acceptable to the Payee by Arthur Anderson & Co. or other independent accountants acceptable to the Payee; Page 147 of 272 (b) As soon as available and in any event within one hundred twenty (120) days after the end of Fiscal Year 2000, internally prepared and certified consolidated and consolidating balance sheets of Maker and its subsidiaries as of the end of such fiscal year, consolidated and consolidating statements of income and retained earnings of Maker and its subsidiaries for such fiscal year, and consolidated and consolidating statements of changes in financial position of Maker and its subsidiaries for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the corresponding dates and period in the prior fiscal year or in the Pro Forma Financial Statements, as the case may be, all prepared in accordance with GAAP consistently applied. (c) As soon as available and in any event within twenty-five (25) days after the end of March 31, June 30, September 30 and December 31 of each Fiscal Years , consolidated and individual balance sheets of Maker and its Subsidiaries as of the end of the three month period then ended and the period to date then ended of the then current fiscal year, consolidated and individual statements of income and retained earnings of Maker and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such month, and consolidated and individual statements of changes in financial position of Maker and its Subsidiaries for the portion of the fiscal year ended with the last day of such month, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the previous fiscal year and with the Pro Forma Financial Statements and all prepared in accordance with GAAP consistently applied and certified, to the best of his knowledge, by the chief financial officer of Maker (subject to year-end adjustments). 10. INTEREST LIMITATIONS. Nothing herein contained nor any transaction related hereto shall be construed or shall operate either presently or prospectively to require Maker to pay interest at a rate greater than is now lawful in such case to contract for, but shall require payment of interest only to the interest paid in excess of the lawful rate shall be refunded to Maker. 11. SEVERABILITY. In the event that for any reason one or more of the provisions of this Note or their application to any person or circumstance shall be held to be invalid, illegal or unenforceable in any respect or to any extent, such provisions shall, to such extent, be held for naught as though not herein contained but shall nevertheless remain valid, legal and enforceable in all such other respects and to such extent as may be permissible. In addition, any such invalidity, illegality or unenforceability shall not affect any other provisions of this Note, but this Note shall be construed as if such invalid, illegal or unenforceable provisions had never been contained herein. 12. SUCCESSORS AND ASSIGNS. This Note inures to the benefit of Payee, its successors and assigns, and is binding upon Maker, its successors and assigns, provided that any successor or assign of the Payee of this Note first executes a written undertaking agreeing to be bound by all of the provisions of the Intercreditor Agreement. The words "Payee" and "Maker" whenever used herein shall be deemed and construed to include such respective successors and assigns. Page 148 of 272 13. NOTICES. All notices required to be given to any of the parties hereunder shall be in writing and shall be deemed to have been sufficiently given for all purposes when given in accordance with the terms and conditions of the Purchase Agreement. 14. CAPTIONS. The captions or headings of the sections in this Note are for convenience only and shall not control or affect the meaning or construction of any of the terms or provisions of this Note. 15. GOVERNING LAW; AMENDMENT. This Note shall be governed by and construed in accordance with the laws of the State of New York. This Note may only be amended by an instrument in writing signed by both Maker and Payee. IN WITNESS WHEREOF, Maker, intending to be legally bound hereby, has duly executed this Note, under seal, on the date and year first above written. MAKER: HIGH FALLS BREWING COMPANY, LLC By: /s/ Samuel T. Hubbard, Jr. ------------------------------------ Name: Samuel T. Hubbard, Jr. Title: President Page 149 of 272 Exhibit A --------- 1. All obligations to Manufacturers and Traders Trust Company pursuant to a Revolving Loan and Term Agreement of even date herewith and all agreements and instruments executed in connection therewith, Cephas Capital Partners, L.P. pursuant to a Note and Warrant Purchase Agreement of even date herewith and all agreements and instruments executed in connection therewith and Maker's investors as described in the Offering Summary dated September 5, 2000 and the Recission Offer dated December 8, 2000. 2. UDV North America, Inc. ("UDV") advance of up to One Million Dollars ($1,000,000) to the Maker for the purchase and/or renovation of equipment used to produce the UDV product "Smirnoff Ice" pursuant to a letter agreement dated September 25, 2000. The advance is to be secured by a security interest in the equipment purchased. 3. Boston Brewing Company, d/b/a The Boston Beer Company ("Boston Beer") maintains a first priority lien on certain equipment to secure its investment made in the Maker's Number 2 bottling line pursuant to an Amended and Restated Agreement signed between Seller and Boston Beer, dated as of April 30, 1997 4. All obligations to Boston Beer arising out of its consent to assignment of its Production Agreement with Payee dated April 30, 1997. 5. Obligation to lease twenty (20) vehicles from PHH Vehicle Management Services pursuant to Car Requisitions by Seller dated June 5, 2000. EX-10.7 8 l85770aex10-7.txt EXHIBIT 10-7 Page 150 of 272 EXHIBIT 10-7 ------------ SECURITY AGREEMENT This SECURITY AGREEMENT (this "AGREEMENT"), dated as of December 15, 2000, is executed by HIGH FALLS BREWING COMPANY, LLC, a limited liability company organized under the laws of New York ("HIGH FALLS"), in favor of THE GENESEE BREWERY, INC., a New York corporation ("GENESEE"). R E C I T A L S : A. Pursuant to an Asset Purchase Agreement, dated as of August 29, 2000, as amended by Amendment No. 1 dated December 15, 2000 (the "PURCHASE AGREEMENT"), by and between Genesee, as seller, and High Falls, as purchaser, Genesee has agreed to sell to High Falls, and High Falls has agreed to purchase, substantially all of the assets of Genesee's brewing operations on the terms and conditions contained therein. B. Genesee has agreed to accept as partial payment for the Purchase Price (as defined in the Purchase Agreement) promissory notes from High Falls totaling $11,000,000 in original principal amount (including High Falls' $3,500,000 First Senior Bridge Note, $3,000,000 Second Senior Bridge Note and $4,500,000 Subordinated Promissory Note, collectively, the "NOTES"), and to provide certain accommodations in connection with a certain production agreement with Boston Brewing, etc., for which High Falls has indemnified Lender pursuant to an Indemnification Agreement of even date herewith (the "INDEMNIFICATION AGREEMENT") subject, among other conditions, to receipt by Genesee of this Security Agreement, duly executed by High Falls, and the perfection of the security interest granted herein to secure any and all obligations and indebtedness to Genesee, whenever arising or with respect to any financial accommodation loans. A G R E E M E N T : NOW, THEREFORE, in consideration of the above recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, High Falls hereby agrees with Genesee as follows: 1. DEFINITIONS AND INTERPRETATION. When used in this Security Agreement, the following terms shall have the following respective meanings: "ACCOUNT DEBTOR" shall have the meaning given to that term in Section 3(g). "BOSTON BEER INDEMNIFICATION AGREEMENT" shall mean the Indemnification Agreement between Genesee and High Falls pursuant to which the parties Page 151 of 272 have agreed to certain indemnification terms in connection with obligations and liabilities under an Amended and Restated Agreement dated as of April 30, 1997 (the "BOSTON BEER AGREEMENT") between Genesee and Boston Brewing Company, Inc., d/b/a The Boston Beer Company, a Massachusetts corporation, for itself and as the sole general partner of Boston Beer Company Limited Partnership, a Massachusetts limited partnership "BOSTON BEER NOTE" shall mean a certain Promissory Note that after the date hereof may be executed and delivered by High Falls to Genesee pursuant to the Boston Beer Indemnification Agreement. "CEPHAS" shall mean Cephas Capital Partners, L.P. and it successors and assigns. "COLLATERAL" shall mean any and all assets of any kind of High Falls excepting real property, but including the Equipment, the Inventory, the Receivables, the Related Contracts and the General Intangibles and all other property not otherwise heretofore described (including, without limitation, all money, certificated securities, uncertificated securities, documents and goods), in which High Falls has an interest now or in the future, and which are now exiting or hereafter created or acquired (including but not limited to any and all bottling lines, equipment or other assets of any kind or interest therein hereafter acquired under the Boston Beer Agreement), together with all proceeds of the foregoing (including, without limitation, whatever is receivable or received when Collateral or proceeds is sold, collected, exchanged, returned, substituted or otherwise disposed of, whether such disposition is voluntary or involuntary, including rights to payment and return premiums and insurance proceeds under insurance with respect to any Collateral, and all rights to payment with respect to any cause of action affecting or relating to the Collateral). "EQUIPMENT" shall mean equipment and fixtures (including, without limitation, fermenting/conditioning tanks, brew kettles, bottling line, kegs, furniture, vehicles and other machinery, brewing and office equipment), together with all additions and accessions thereto and replacements therefor; "FIRST SENIOR BRIDGE NOTE" shall mean High Falls' $3,500,000 First Senior Bridge Note issued to Genesee in partial payment of the purchase price due under the Purchase Agreement. "GENERAL INTANGIBLES" shall mean all general intangibles and contract rights of High Falls of any kind or nature whatsoever not otherwise described in any of the other Collateral (including, without limitation, (i) customer and supplier lists and contracts, books and records, insurance policies, tax refunds, contracts for the purchase of real or personal property; (ii) all patents, copyrights, trademarks, trade names, service marks and trade dress, including, but not limited to, those described on EXHIBIT A attached hereto, (iii) all licenses to use, applications for, and other rights to, such patents, copyrights, trademarks, trade names and service marks, and (iv) all goodwill of High Falls, including, but not limited to, related to the marks described in (ii) above, and the formulae, know-how, label Page 152 of 272 and bottle designs and other packaging, and research and development related thereto, including, but not limited to, any and all names, insignias, labels, logos, commercial symbols, slogans and other identification schemes, patents, patent applications, copyrights, trademarks, service marks, trade names, trade dress, trade secrets, customer or supplier lists, manuals, operating instructions, permits and franchises and/or applications that may be controlled from time to time by High Falls for use in association with the Marks and/or the products manufactured, marketed and sold by High Falls under its own labels. "GENESEE" shall have the meaning given to that term in the preamble to this Agreement. "HIGH FALLS" shall have the meaning given to that term in the preamble to this Agreement. "INVENTORY" shall mean all inventory (including, without limitation, (i) all ales, finished products, packaging materials, and all other raw materials, work in process and finished goods and (ii) all such goods which are returned to or repossessed by High Falls), together with all additions and accessions thereto, replacements therefor, products thereof and documents therefor. "M&T" shall mean Manufacturers and Traders Trust Company, and it successor and assigns. "MARK ANTHONY CELLARS AGREEMENT" shall mean that certain agreement by and between Genesee, as the original party, and Mark Anthony Cellars. "OBLIGATIONS" shall mean any and all obligations, indebtedness or liabilities of Genesee, by or arising under the First Senior Bridge Note, the Second Senior Bridge Note, the Seller Junior Subordinated Note, the Boston Beer Indemnification Agreement and the Boston Beer Note (including all amendments thereto and replacements thereof), and all sums expended by Genesee for protection of its interest such as payments made for taxes, insurance and expenses of collection. "PURCHASE AGREEMENT" shall have the meaning given to that term in Recital A. "RECEIVABLES" shall mean all accounts, chattel paper, instruments, deposit accounts and other rights to the payment of money (including, without limitation, general intangibles and contract rights) (collectively, the "RECEIVABLES") and all contracts, security agreements, leases, guaranties and other agreements evidencing, securing or otherwise relating to the Receivables (including, without limitation, the Related Contracts). "RELATED CONTRACTS" means any and all production contracts for beverages of any kind now existing or hereafter entered into, including, but not limited to, the Boston Beer Agreement, the Mark Anthony Cellars Agreement and the letter agreement dated Page 153 of 272 September 25, 2000 between UDV North America, Inc. and Genesee, as an original party, and all amendments and modifications thereof. "SECOND SENIOR BRIDGE NOTE" shall mean High Falls' $3,000,000 Second Senior Bridge Note issued to Genesee in partial payment of the purchase price due under the Purchase Agreement. "SELLER JUNIOR SUBORDINATED NOTE" shall mean High Falls' $4,500,000 Subordinated Promissory Note issued to Genesee in partial payment of the purchase price due under the Purchase Agreement. "UCC" shall mean the Uniform Commercial Code as in effect in the State of New York from time to time. Unless otherwise defined herein, all terms defined in the UCC shall have the respective meanings given to those terms in the UCC. 2. GRANT OF SECURITY INTEREST. As security for the payment and performance of the Obligations, High Falls hereby pledges and assigns to Genesee and grants to Genesee a security interest in all right, title and interest of High Falls in and to the Collateral. This security interest is specifically intended to be a continuing interest and shall cover the Collateral in which High Falls acquires and interest after the date of this Agreement as well as Collateral in which High Falls now has an interest. This security interest shall continue until terminated as described in this Agreement even if all Obligations are paid in full from time to time. Genesee shall have the right to apply the Collateral and any proceeds therefrom to all or any part of the Obligations as and in the order Genesee may elect, whether or not such Obligations are otherwise secured. 3. PARTIAL RELEASE OF LIEN. Notwithstanding anything to the contrary contained herein, Genesee agrees to release or assign the security interest granted hereunder with respect to certain Sankey equipment and cooperage, together with all related parts, accessories, drawings, plans and related items (whether now existing or hereafter acquired) to Genesee in conjunction with the Closing of High Falls' presently contemplated HUD 108 term loan financing; provided that such equipment to be released and the form and substance of the release or assignment documentation shall be satisfactory to Genesee in its sole discretion. 4. REPRESENTATIONS AND WARRANTIES. High Falls represents and warrants to Genesee as follows: (a) High Falls is the legal and beneficial owner of the Collateral (or, in the case of after-acquired Collateral, at the time High Falls acquires rights in the Collateral, will be the legal and beneficial owner thereof). No other Person has (or, in the case of after-acquired Collateral, at the time High Falls acquires rights therein, will have) any right, title, claim or interest (by way of Lien, purchase option or otherwise) in, against or to the Page 154 of 272 Collateral, other than with respect to the Liens permitted under the First Senior Bridge Note and the Second Senior Bridge Note (the "PERMITTED LIENS"). (b) Genesee has (or in the case of after-acquired Collateral, at the time High Falls acquires rights therein, will have) a perfected security interest in the Collateral subject only to the Permitted Liens in favor of M&T, Cephas and the Investors according to the priority therefor set forth in the Intercreditor Agreement. (c) All Equipment and Inventory are (i) located at the locations indicated on EXHIBIT B annexed hereto, (ii) in transit to such locations or (iii) in transit to a third party purchaser which will become obligated on a Receivable to High Falls upon receipt. High Falls has exclusive possession and control of the Inventory and Equipment. (d) All Inventory has been (or, in the case of hereafter produced Inventory, will be) produced in compliance with all applicable Governmental Rules, including the Fair Labor Standards Act (if applicable). (e) High Falls keeps all records concerning the Receivables and the originals of all Related Contracts at its chief executive office located at the address set forth on EXHIBIT B. (f) High Falls has delivered to Genesee, together with all necessary stock powers, endorsements, assignments and other necessary instruments of transfer, the originals of all Receivables consisting of instruments and chattel paper. (g) To the best of High Falls' knowledge, each Receivable is genuine and enforceable against the party obligated to pay the same (an "ACCOUNT DEBTOR"), free from any right of rescission, defense, setoff or discount, other than the rights of distributors to setoff deposits given to High Falls against Receivables. (h) Each insurance policy maintained by High Falls is validly existing and is in full force and effect. High Falls is not in default in any material respect under the provisions of any insurance policy, and there are no facts which, with the giving of notice or passage of time (or both), would result in such a default under any provision of any such insurance policy. 5. COVENANTS. High Falls hereby agrees as follows: (a) High Falls, at High Falls' expense, shall promptly procure, execute and deliver to Genesee all documents, instruments and agreements and perform all acts which are necessary or desirable, or which Genesee may reasonably request, to establish, maintain, preserve, protect and perfect the Collateral, the Lien granted to Genesee therein and the priority of such Lien or to enable Genesee to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the preceding sentence, High Falls shall (i) procure, execute and deliver to Genesee all stock powers, endorsements, assignments, financing statements and other instruments of transfer Page 155 of 272 reasonably requested by Genesee, (ii) deliver to Genesee promptly upon receipt all originals of Collateral consisting of instruments, documents and chattel paper and certificated securities and (iii) take such action as may be necessary and requested by Genesee to perfect the lien of Genesee in any Collateral consisting of investment property (including in those jurisdictions where appropriate or where Genesee may otherwise request), causing such liens to be recorded or registered in the books of any financial intermediary or clearing corporation requested by Genesee. (b) High Falls shall not use or permit any Collateral to be used in violation of (i) any material provision of this Agreement, (ii) any applicable Governmental Rule, or (iii) any policy of insurance covering the Collateral. (c) High Falls shall pay promptly when due all taxes and other governmental charges, all Liens (other than Permitted Liens) and all other charges now or hereafter imposed upon, relating to or affecting any Collateral. (d) Without thirty (30) days' prior written notice to Genesee, High Falls shall not (i) change High Falls' name or place of business (or, if High Falls has more than one place of business, its chief executive office), or the office in which High Falls' records relating to Receivables or the originals of Related Contracts are kept, (ii) keep Collateral consisting of chattel paper and documents at any location other than its chief executive office set forth on EXHIBIT B; or (iii) keep Collateral consisting of Equipment, Inventory or other goods at any location other than the locations set forth on EXHIBIT B. (e) High Falls shall appear in and defend any action or proceeding which may affect its title to or Genesee's interest in the Collateral. (f) If Genesee gives value to enable High Falls to acquire rights in or the use of any Collateral, High Falls shall use such value for such purpose. (g) High Falls shall keep separate, accurate and complete records of the Collateral, and shall provide Genesee with such records and such other reports and information relating to the Collateral as Genesee may reasonably request from time to time. (h) High Falls shall not surrender or lose possession of (other than to Genesee), sell, encumber, lease, rent, option, or otherwise dispose of or transfer any Collateral or right or interest therein (other than (i) Inventory sold in the ordinary course of High Falls' business and (ii) purchase money security interests in Equipment, provided that any such purchase money security interests only cover Equipment the acquisition of which was financed by indebtedness which does not exceed the purchase price of the Equipment so financed), and, notwithstanding any provision of the Credit Agreement, High Falls shall keep the Collateral free of all Liens, other than Permitted Liens. (i) High Falls shall type, print or stamp conspicuously on the face of all original copies of all Collateral consisting of chattel paper and documents not in the Page 156 of 272 possession of Genesee a legend satisfactory to Genesee indicating that such chattel paper is subject to the security interest granted hereby. (l) High Falls shall collect, enforce and receive delivery of the Receivables in accordance with past practice until otherwise notified by Genesee. (m) High Falls shall comply with all material laws, rules and regulations promulgated by Governmental Authorities applicable to High Falls which relate to the production, possession, operation, maintenance and control of the Collateral (including, without limitation, the Fair Labor Standards Act). (n) High Falls shall (i) maintain and keep in force insurance of the types and in amounts customarily carried from time to time during the term of this Agreement in its lines of business, including fire, public liability, property damage and worker's compensation, such insurance to be carried with companies and in amounts satisfactory to Genesee, (ii) deliver to Genesee from time to time, as Genesee may request, schedules setting forth all insurance then in effect, and (iii) deliver to Genesee copies of each policy of insurance which replaces, or evidences the renewal of, each existing policy of insurance at least fifteen (15) days prior to the expiration of such policy. Genesee shall be named as additional insured or additional loss payee, as appropriate, on all liability and property insurance of High Falls and such policies shall contain such additional endorsements as shall reasonably be required by Genesee. Prior to the occurrence and the continuance of an Event of Default, all proceeds of any property insurance paid as a result of any event or occurrence shall be paid to High Falls. All proceeds of any property insurance paid after the occurrence and during the continuance of an Event of Default shall be paid to Genesee to be held as Collateral and applied as provided in the Purchase Agreement or, at the election of Genesee, returned to High Falls. (o) Without the prior written consent of Genesee, High Falls shall not create, incur, assume or permit to exist any indebtedness or liabilities resulting from borrowings, loans or advances, whether secured or unsecured, matured or unmatured, liquidated or unliquidated, joint or several. 6. AUTHORIZED ACTION BY GENESEE. High Falls hereby irrevocably appoints Genesee as its attorney-in-fact and agrees that Genesee may perform (but Genesee shall not be obligated to, and shall incur no liability to High Falls or any third party for failure to do so) any act which High Falls is obligated by this Agreement to perform, and to exercise such rights and powers as High Falls might exercise with respect to the Collateral, including, without limitation, the right to (a) collect by legal proceedings or otherwise and endorse, receive and receipt for all dividends, interest, payments, proceeds and other sums and property now or hereafter payable on or on account of the Collateral; (b) enter into any extension, reorganization, deposit, merger, consolidation or other agreement pertaining to, or deposit, surrender, accept, hold or apply other property in exchange for the Collateral; (c) insure, process, preserve and enforce the Collateral; (d) make any compromise or settlement, and take any action it deems advisable, with respect to the Collateral; (e) pay any Indebtedness of High Falls relating to the Collateral; and (f) execute UCC financing statements and other documents, instruments and agreements required hereunder; Page 157 of 272 PROVIDED, HOWEVER, that Genesee may exercise such powers only after the occurrence and during the continuance of an Event of Default. High Falls agrees to reimburse Genesee upon demand for all reasonable costs and expenses, including attorneys' fees, Genesee may incur while acting as High Falls' attorney-in-fact hereunder, all of which costs and expenses are included in the Obligations. High Falls agrees that such care as Genesee gives to the safekeeping of its own property of like kind shall constitute reasonable care of the Collateral when in Genesee's possession; PROVIDED, HOWEVER, that Genesee shall not be required to make any presentment, demand or protest, or give any notice and need not take any action to preserve any rights against any prior party or any other Person in connection with the Obligations or with respect to the Collateral. 7. DEFAULT AND REMEDIES. High Falls shall be deemed in default under this Agreement upon the occurrence and during the continuance of an Event of Default under any promissory note evidencing any of the Obligations. In addition to all other rights and remedies granted to Genesee by this Agreement, a Mortgage of even date herewith or any note, the UCC and other applicable Governmental Rules, Genesee may, upon the occurrence and during the continuance of any Event of Default, exercise any one or more of the following rights and remedies: (a) collect, receive, appropriate or realize upon the Collateral or otherwise foreclose or enforce Genesee's security interests in any or all Collateral in any manner permitted by applicable Governmental Rules or in this Agreement; (b) notify any or all Account Debtors to make payments on Receivables directly to Genesee; (c) direct any depository bank or intermediary to liquidate the account(s) maintained by it, pay all amounts payable in connection therewith to Genesee and/or deliver any proceeds thereof to Genesee; (d) sell or otherwise dispose of any or all Collateral at one or more public or private sales, whether or not such Collateral is present at the place of sale, for cash or credit or future delivery, on such terms and in such manner as Genesee may determine; (e) require High Falls to assemble the Collateral and make it available to Genesee at a place to be designated by Genesee; (f) enter onto any property where any Collateral is located and take possession thereof with or without judicial process; and (g) prior to the disposition of the Collateral, store, process, repair or recondition any Collateral consisting of goods, perform any obligations and enforce any rights of High Falls under any Related Contracts or otherwise prepare and preserve Collateral for disposition in any commercially reasonable manner and to the extent Genesee reasonably deems appropriate. In furtherance of Genesee's rights hereunder, High Falls hereby grants to Genesee an irrevocable, non-exclusive license (exercisable without royalty or other payment by Genesee) to use, license or sublicense any patent, trademark, tradename, copyright or other intellectual property in which High Falls now or hereafter has any right, title or interest, together with the right of access to all media in which any of the foregoing may be recorded or stored (but only to the extent High Falls is not prohibited from granting such irrevocable, non-exclusive license under applicable law or any material agreement to which it is a party). In any case where notice of any sale or disposition of any Collateral is required, High Falls hereby agrees that seven (7) days notice of such sale or disposition is reasonable. Page 158 of 272 8. AUTHORIZATIONS, WAIVERS, ETC. (a) Authorizations. High Falls authorizes Genesee, in its reasonable discretion, without notice to High Falls except as required by applicable law, irrespective of any change in the financial condition of High Falls or any other guarantor of the Obligations since the date hereof, and without affecting or impairing in any way the liability of High Falls hereunder, from time to time to: (i) Exercise any right or remedy Genesee may have against High Falls or any guarantor of the Obligations or any security, including, without limitation, the right to foreclose upon any such security by judicial or nonjudicial sale; (ii) Settle, compromise with, release or substitute any one or more makers, endorsers or guarantors of the Obligations; and (iii) To, assign the Obligations, this Agreement or any other credit document in whole or in part. (b) Waivers. High Falls hereby waives: (i) Any right to require Genesee to (A) proceed against High Falls or any other guarantor of the Obligations, (B) proceed against or exhaust any security received from High Falls or any other guarantor of the Obligations or otherwise marshall the assets of High Falls or (C) pursue any other remedy in Genesee's power whatsoever; (ii) Any defense arising by reason of the application by High Falls of the proceeds of any borrowing; (iii) Any defense resulting from the absence, impairment or loss of any right of reimbursement, subrogation, contribution or other right or remedy of Genesee against High Falls, any other guarantor of the Obligations or any security, whether resulting from an election by Genesee to foreclose upon security by non-judicial sale, or otherwise; (iv) Any benefit arising from any setoff or counterclaim of High Falls or any defense which results from any disability or other defense of High Falls or the cessation or stay of enforcement from any cause whatsoever of the liability of Monroe Brewing (including, without limitation, the lack of validity or enforceability of any note evidencing any of the Obligations, but excluding any set-off asserted by High Falls against the Seller Junior Subordinated Note to the extent permitted therein); (v) Until all Obligations have been fully, finally and indefeasibly paid, any right of subrogation, reimbursement, indemnification or contribution and other similar right to enforce any remedy which Genesee or any other Person now has or may hereafter have against High Falls on account of the Obligations, and any benefit of, and any right to participate in, any security now or hereafter received by Genesee or any other Person account of the Obligations; (vi) All presentments, demands for performance, notices of non-performance, protests, notice of dishonor, and notices of acceptance of this Agreement Page 159 of 272 and of the existence, creation or incurring of new or additional Obligations and notices of any public or private foreclosure sale; (viii) Any appraisement, valuation, stay, extension, moratorium redemption or similar law or similar rights for marshalling; (ix) Any defense arising from an election for the application of Section 1111(b)(2) of the United States Bankruptcy Code which applies to the Obligations; and (x) Any defense based upon any borrowing or grant of a security interest under Section 364 of the United States Bankruptcy Code. Without limiting the scope of any of the foregoing provisions of this Section 7, High Falls hereby further waives all rights and defenses arising out of an election of remedies by Genesee, even though that election of remedies has destroyed Genesee's rights of subrogation and reimbursement against High Falls 9. MISCELLANEOUS. (a) Notices. Except as otherwise provided herein, all notices, requests, demands, consents, instructions or other communications to or upon High Falls or Genesee under this Agreement shall be in writing and mailed or delivered at his or its respective address first set forth above (or to such other address for each party as indicated in any notice given by that party to the other party). All such notices and communications shall be effective (i) when sent by Federal Express or other overnight service of recognized standing, on the second day following the deposit with such service; (ii) when mailed, first class postage prepaid and addressed as aforesaid through the United States Postal Service, upon receipt; and (iii) when delivered by hand, upon delivery. (b) Expenses. High Falls shall pay on demand all reasonable fees and expenses, including reasonable attorneys' fees and expenses, incurred by Genesee in the enforcement or attempted enforcement of this Agreement or in preserving any of Genesee's rights and remedies (including, without limitation, all such fees and expenses incurred in connection with any "workout" or restructuring affecting this Agreement or any bankruptcy or similar proceeding involving High Falls). The obligations of High Falls under this Section 8(b) shall survive the payment and performance of the Obligations and the termination of this Agreement. (c) Waivers; Amendments. This Agreement may not be amended or modified, nor may any of its terms be waived, except by written instruments signed by High Falls and Genesee. Each waiver or consent under any provision hereof shall be effective only in the specific instances for the purpose for which given. No failure or delay on Genesee's part in exercising any right hereunder shall operate as a waiver thereof or of any other right nor shall any single or partial exercise of any such right preclude any other further exercise thereof or of any other right. (d) Assignments. This Agreement shall be binding upon and inure to the benefit of Genesee, High Falls and their respective successors and assigns, except that High Page 160 of 272 Falls may not assign or transfer any of its rights and obligations under this Agreement without the prior written consent of Genesee. (e) Partial Invalidity. If at any time any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions of this Agreement nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. (f) Cumulative Rights, Etc.. The rights, powers and remedies of Genesee under this Agreement shall be in addition to all rights, powers and remedies given to Genesee by virtue of any applicable law, rule or regulation of any governmental authority, the Purchase Agreement or any note or other agreement, all of which rights, powers, and remedies shall be cumulative and may be exercised successively or concurrently without impairing Genesee's rights hereunder. High Falls waives any right to require Genesee to proceed against any Person or to exhaust any Collateral or to pursue any remedy in Genesee's power. (g) Payments Free of Taxes, Etc. All payments made by High Falls under this Agreement shall be made by High Falls free and clear of and without deduction for any and all present and future taxes, levies, charges, deductions and withholdings. In addition, High Falls shall pay upon demand any stamp or other taxes, levies or charges of any jurisdiction with respect to the execution, delivery, registration, performance and enforcement of this Agreement. Upon request by Genesee, High Falls shall furnish evidence satisfactory to Genesee that all requisite authorizations and approvals by, and notices to and filings with, Governmental Authorities and regulatory bodies have been obtained and made and that all requisite taxes, levies and charges have been paid. (h) High Falls's Continuing Liability. Prior to a foreclosure of Genesee's security interest in the Collateral or the payment in full of the Obligations, notwithstanding any provision of this Agreement or any other credit document or any exercise by Genesee of any of its rights hereunder or thereunder (including, without limitation, any right to collect or enforce any Collateral), (i) High Falls shall remain liable to perform its obligations and duties in connection with the Collateral (including, without limitation, the Related Contracts and all other agreements relating to the Collateral) and (ii) Genesee shall not assume any liability to perform such obligations and duties or to enforce any of High Falls's rights in connection with the Collateral (including, without limitation, the Related Contracts and all other agreements relating to the Collateral). (i) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without reference to conflicts of law rules (except to the extent otherwise provided in the UCC). [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] Page 161 of 272 IN WITNESS WHEREOF, High Falls has caused this Agreement to be executed as of the day and year first above written. HIGH FALLS BREWING COMPANY, LLC By: /s/ Samuel T. Hubbard, Jr. ------------------------------ Name: Samuel T. Hubbard, Jr. Title: President and Manager Page 162 of 272 EXHIBIT A TO SECURITY AGREEMENT ------------------ List of Trademarks, Etc. Page 163 of 272 EXHIBIT B TO SECURITY AGREEMENT ------------------ LOCATIONS OF COLLATERAL AND CHIEF EXECUTIVE OFFICE See Attachment. EX-10.8 9 l85770aex10-8.txt EXHIBIT 10-8 Page 164 of 272 EXHIBIT 10-8 ------------ INTERCREDITOR AGREEMENT THIS INTERCREDITOR AGREEMENT is entered into and is effective as of December 15, 2000 by and among: HIGH FALLS BREING COMPANY, LLC, a New York limited liability company with an address of 445 St. Paul Street, Rochester, New York 14605 (the "Borrower"), MANUFACTURERS AND TRADERS TRUST COMPANY, New York banking corporation with an address of 255 East Avenue, Rochester, New York 14604 (the "Senior Creditor"), CEPHAS CAPITAL PARTNERS, L.P., a New York limited partnership, having an address of 16 West Main Street, Rochester, New York 14614 (the "Subordinated Creditor"), and THE GENESEE BREWING COMPANY, INC., a New York corporation having an address of 445 St. Paul Street, Rochester, New York 14604 (the "Seller"). As of this date, Borrower has requested that the Creditors each provide financial accommodations and/or credit to Borrower. Borrower and the Creditors each represent and acknowledge that they will benefit as a result of the proposed transactions and acknowledges receipt of valuable consideration for entering into this Agreement. The Borrower and the Creditors agree as follows: 1. Definitions. The following words shall have the following meanings when used in this Agreement. All reference to dollar amounts shall mean amounts in lawful money of the United States of America. "Agreement" shall mean this Intercreditor Agreement together with all exhibits and schedules attached to this Agreement from time to time, if any, and as amended from time to time. "Alternative Financing" shall have the same meaning as it is given in the Revolving Credit and Term Loan Agreement between the Borrower and the Senior Creditor as in effect on the date hereof. "Boston Beer Agreement" shall mean the Indemnification Agreement between Seller and Borrower pursuant to which the parties have agreed to certain Page 165 of 272 indemnification terms in connection with obligations and liabilities under an Amended and Restated Agreement dated as of April 30, 1997 between Seller and Boston Brewing Company, Inc. d/b/a/ The Boston Beer Company, a Massachusetts corporation, for itself and as the sole general partner of Boston Beer Company Limited Partnership, a Massachusetts limited partnership (which agreement has been assigned by Seller to Borrower on even date herewith) (the Production Agreement). "Boston Beer Collateral" shall mean any and all bottling lines, equipment, and capital assets of any kind that are transferred at any time to Borrower pursuant to the Production Agreement for the consideration paid by Seller therefor, and in which Borrower grants Seller a Security Interest to secure the Boston Beer Note, and all additions and accessions thereto and replacements therefor and the proceeds thereof. "Boston Beer Deficiency" shall mean any obligations that remain unpaid with respect to the Boston Beer Note after an Event of Default under the same and application to the payment thereof of all proceeds of disposition of the Boston Beer Collateral. "Boston Beer Note" shall mean a Promissory Note, if any, that after the date hereof may be executed and delivered by Borrower to Seller pursuant to the Boston Beer Agreement by way of reimbursement for the purchase price of the Boston Beer Collateral, or such other instrument evidencing the obligation of Buyer to Seller in respect thereof. "Business Day" shall mean any day that commercial banks settle transactions in the State of New York. "Credit Agreements" shall mean, collectively, the Senior Credit Agreements, the Subordinated Credit Agreements, the Seller Senior Credit Agreements, and the Seller Junior Credit Agreements. "Creditors" shall mean, collectively, the Senior Creditor, the Subordinated Creditor, and the Seller, each as defined in the Preamble to this Agreement. "Event of Default" shall mean any event that constitutes an "Event of Default" under the respective Credit Agreements. "Investor Note(s)" shall mean the Investor Subordinated Note(s) dated on even date herewith made by the Borrower in favor of various investors as contemplated by the Offering Summary Statement dated September 5, 2000 and the Rescission Offer dated December 8, 2000 made by the Borrower. "Mortgage" shall mean the Mortgage delivered on even date herewith by Borrower to Seller covering Borrower's real estate located at 445 St. Paul Boulevard, Rochester, New York and the improvements thereon, which secures the Second Seller Page 166 of 272 Bridge Note of even date herewith issued by Borrower to Seller in the original principal amount of $3,000,000. "Sankey Equipment" shall mean equipment more particularly described on Schedule A attached to and made a part of this Agreement as well as Sankey equipment acquired by Borrower after the date hereof. "Security Interest" shall mean and include without limitation any type of collateral security, whether in the form of a security interest, lien, charge, mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract or otherwise. "Seller" shall mean the Seller defined in the Preamble to this Agreement, and its successors and assigns. "Seller Junior Credit Agreements" shall mean the $4,500,000 Subordinated Promissory Note of even date herewith issued by Borrower to Seller, evidencing the $4,500,000 loan given by Borrower in favor of Seller and all related collateral and other documents and agreements, as the same may be amended, modified, extended, or replaced from time to time. "Seller Junior Indebtedness" shall mean and include without limitation all present and future indebtedness, obligations, liabilities, claims, rights and demands owing from Borrower to the Seller except the Seller Senior Indebtedness and the Boston Beer Note, including without limitation obligations of the Borrower to the Seller arising under the Seller Junior Credit Agreements. "Seller Senior Credit Agreements" shall mean (i) the First Seller Bridge Note of even date herewith issued by Borrower to the Seller evidencing a $3,500,000 loan by Seller to the Borrower, (ii) the Second Seller Bridge Note of even date herewith issued by Borrower to the Seller evidencing a $3,000,000 loan by Seller to the Borrower, and (iii) all related collateral and other documents and agreements, as the same may be amended, modified, extended, or replaced from time to time. "Seller Senior Indebtedness" shall mean all present and future indebtedness, obligations, liabilities, claims, rights and demands owing from Borrower to the Seller arising under the Seller Senior Credit Agreements, as well as indebtedness to any successor or assign of the Seller that replaces such original Seller Senior Indebtedness provided that the principal amount of such replacement Seller Senior Indebtedness, at the time incurred, shall not exceed the Seller Senior Indebtedness and the Boston Beer Note outstanding on the date of this Agreement. Page 167 of 272 "Seller Standstill Period" shall mean the Seller Standstill Period relating to the Seller Subordinated Indebtedness and the Boston Beer Deficiency as described in Section 11 of this Agreement. "Senior Credit Agreement" shall mean the Revolving Credit and Term Loan Agreement between the Borrower and the Senior Creditor, dated of even date herewith, and all related collateral and other documents and agreements, as the same may be amended, modified, extended, or replaced from time to time. "Senior Creditor" shall mean the Senior Creditor defined in the Preamble to this Agreement. Senior Creditor shall also mean any successors or assign with respect to the Senior Indebtedness as described in the definition of Senior Indebtedness. "Senior Indebtedness" shall mean all indebtedness, obligations, liabilities, claims, rights, and demands committed or outstanding under the Senior Credit Agreement as it exists on the date hereof ("Original Senior Indebtedness") and any additional indebtedness of Borrower to Senior Creditor or any indebtedness that replaces such Original Senior Indebtedness provided that such additional indebtedness when added to the Original Senior Indebtedness, or replacement Indebtedness, in each case when aggregated with the Sellers Senior Indebtedness, does not exceed three (3) times Borrower's EBITDA (as defined in the Senior Credit Agreement as it exists on the date hereof), calculated according to generally accepted accounting principles as shown in Borrower's most recent audited financial statement for the 12-months then ended provided to the Creditors (or during 2001 only, three (3) times Borrower's projected EBITDA for that year. "Standstill Period" shall mean collectively, or individually as applicable, the Seller Standstill Period and the Subordinated Creditor Standstill Period as described in Section 11 of this Agreement. "Subordinated Credit Agreements" shall mean the Subordinated Note and the Note and Warrant Purchase Agreement between the Borrower and the Subordinated Creditor, each dated on even date herewith, and all related collateral and other documents and agreements, as the same may be amended, modified, extended, or replaced from time to time. "Subordinated Creditor" shall mean the Subordinated Creditor defined in the Preamble to this Agreement, and its successors and assigns. "Subordinated Creditor Standstill Period" shall mean the Subordinated Creditor Standstill Period as described in Section 11 of this Agreement. "Subordinated Indebtedness" shall mean and include without limitation all present and future indebtedness, obligations, liabilities, claims, rights and demands owing from Borrower to the Subordinated Creditor including without limitation obligations of the Borrower to the Subordinated Creditor arising under the Subordinated Credit Agreements as they exist on the date hereof; provided, however, that when Subordinated Indebtedness Page 168 of 272 is used to refer to the rights of the Subordinated Creditor relative to the Seller Junior Indebtedness, it shall not include the Subordinated Creditor's rights with respect to warrants or any put rights or other monetary obligations with respect thereto or any equity securities issued or to be issued thereunder. 2. Subordination of Seller Junior Indebtedness and Subordinated Indebtedness. As provided for in this Agreement: (a) all Seller Junior Indebtedness is junior and shall be subordinated in all respects to the Senior Indebtedness, the Seller Senior Indebtedness, indebtedness under the Boston Beer Note, and the Subordinated Indebtedness, and (b) all Subordinated Indebtedness is junior and shall be subordinated in all respects to the Senior Indebtedness, the Seller Senior Indebtedness, and indebtedness under the Boston Beer Note. 3. Relationship of Senior Indebtedness and Seller Senior Indebtedness. (a) Borrower has on the date hereof delivered a Security Interest to Senior Creditor covering all assets of Borrower (other than its real estate and the improvements thereon) and has delivered a Security Interest to Seller covering all of the assets of Borrower. Seller expressly acknowledges and agrees that Seller's Security Interest, other than the Mortgage and its Security Interest in the Boston Beer Collateral, is and all rights with respect thereto, are hereby subordinate and subject in all respects to any Security Interest held by Senior Creditor irrespective of the order of filing any financing statements or otherwise. On the date hereof Borrower has delivered the Mortgage to Seller, and on or after the date hereof Borrower may deliver the Boston Beer Note and the Boston Beer Collateral to Seller. Senior Creditor acknowledges and agrees that the Seller's rights with respect to the Mortgage (including without limitation proceeds from enforcement) as they relate to the Seller Senior Indebtedness (but not the Seller Junior Indebtedness or indebtedness under the Boston Beer Note), and the Seller's rights with respect to the Boston Beer Collateral (including without limitation proceeds from enforcement) as they relate to indebtedness under the Boston Beer Note, each are senior to and shall not be subordinate in any respects to any Security Interest held by Senior Creditor. (b) Borrower will not make and Seller will not accept, at any time while any Senior Indebtedness is owing (i) any payment upon any Seller Senior Indebtedness, (ii) any payment upon the Boston Beer Note, (iii) any advance, transfer or assignment of assets to Seller in any form whatsoever that would reduce at any time or in any way the amount of Seller Senior Indebtedness or the Boston Beer Note, or (iv) any transfer of any assets as security for the Seller Senior Indebtedness or the Boston Beer Note, except in each case upon Senior Creditor's prior written consent. Notwithstanding anything to the contrary contained herein, (i) Seller may receive proceeds of the Mortgage, (ii) Seller may receive the Security Interest described in Section 3a hereof and the proceeds thereof, and (iii) Borrower may make and Seller may receive regularly scheduled payments to Seller under Page 169 of 272 the Seller Senior Credit Agreements and the Boston Beer Note. In no event, however, shall Borrower make or Seller accept (i) prepayments on the Seller Senior Indebtedness except for (a) prepayments from the proceeds of Alternative Financing, (b) subject to Section 3(d) hereof, prepayments following acceleration of maturity due to a payment default by Borrower, or (c) prepayment following acceleration of maturity at least 120 days after any other Event of Default, or (ii) prepayments on the Boston Beer Note other than by reason of acceleration of maturity and liquidation of the Boston Beer Collateral. (c) Through and including September 30, 2001, any waiver granted by the Senior Creditor of any Event of Default with respect to the Senior Indebtedness shall also act as a waiver of any like Event of Default with respect to the Seller Senior Indebtedness and the Boston Beer Note, if applicable. (d) Through and including September 30, 2001, Seller agrees that it will not accelerate any Seller Senior Indebtedness or the Boston Beer Note, if applicable, unless Senior Creditor either has accelerated the Senior Indebtedness or has consented to acceleration of the Seller Senior Indebtedness. (e) If this Agreement requires that any payment be held in trust for and/or paid over to Senior Creditor with respect to the Senior Indebtedness and Seller with respect to the Seller Senior Indebtedness, as between Senior Creditor and Seller the Senior Creditor shall have a priority right to receive such payment for application to the Senior Indebtedness over the rights of Seller to receive such payment for application to the Seller Senior Indebtedness. 4. Miscellaneous Collateral Issues/Preferential Payments and the Like. (a) In connection with the closing of any Alternative Financing, Senior Creditor, Subordinated Creditor, and Seller each agree to release their respective Security Interests in the Sankey Equipment provided the proceeds thereof are applied to the Seller Senior Indebtedness. (b) Seller, as holder of the Mortgage, has entered into a Mortgagee Waiver on even date herewith in favor of Senior Creditor and Subordinated Creditor (as it may be amended, restated, or modified from time to time, the "Mortgagee Waiver"). The Mortgagee Waiver is intended to be supplemental to any rights granted and obligations imposed under this Agreement. (c) In the event that any of the Creditors (the "Disgorging Creditor"), as a result of the assertion of any claim for the return of moneys (including the proceeds of any collateral) received or applied by it in partial or full payment of indebtedness to such Disgorging Creditor (including without limitation all claims based upon allegations that moneys so received by the Disgorging Creditor constituted trust funds under the Lien Law of the State of New York or other applicable laws, or that the payment of such moneys or the giving of such collateral to the Disgorging Creditor constituted a preference or fraudulent transfer under the Bankruptcy Code or any other applicable statute), is required Page 170 of 272 to disgorge such moneys, any other Creditor (the "Receiving Creditor") that has received any moneys that it would not have been entitled to receive had the disgorged payment not been applied in the first instance to indebtedness held by the Disgorging Creditor, then the Receiving Creditor also shall disgorge the moneys to which it would not have been entitled to be paid to other Creditors in the order in which such moneys would have been applied but for the payment to the Disgorging Creditor. 5. Senior Creditor as Collateral Agent. The parties acknowledge that each of the parties' Security Interests covers certain motor vehicles and that perfection of the interests therein requires notation of such interests on the certificates of title to such vehicles. The parties also acknowledge that the New York Department of Motor Vehicles will not make a notation of multiple lien holders on such certificates of title. The parties therefore agree that the Senior Creditor, acting for itself and as collateral agent for the Seller and the Subordinated Creditor, shall have its interest noted on such certificates of title, and may freely and in its sole discretion add and release interests on such titles on existing and additional vehicles from time to time; provided, however, that if Senior Creditor intends to release its interest on vehicles in which the Borrower will retain ownership, Senior Creditor will make reasonable efforts to notify Subordinated Creditor and Seller of such intention reasonably in advance of the intended release date so that either of them, acting for itself and as agent for the other, may take appropriate steps to perfect their interests therein; provided, however, that Senior Creditor shall have no liability for any failure to make any such notification. To the extent that the Senior Creditor realizes proceeds from any such vehicles, such proceeds shall be applied in accordance with the priorities set forth elsewhere in this Agreement. With respect to this Section 5, the Senior Creditor (a) shall not be subject to any fiduciary or other implied duties, regardless of whether an Event of Default has occurred, (b) shall not have any duty to take any discretionary action or exercise any discretionary powers, and (c) except as expressly provided herein shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the motor vehicles or the Borrower that is communicated to or obtained by the Senior Creditor. The Senior Creditor shall not be liable in any manner for any action taken or not taken by it under this Section 5. 6. Payment With Respect To Seller Junior Indebtedness and Subordinated Indebtedness. Except as provided below, Borrower will not make and neither Seller nor Subordinated Creditor will accept, at any time while any Senior Indebtedness and/or Seller Senior Indebtedness is owing (i) any payment upon any Seller Junior Indebtedness, Boston Beer Deficiency, or Subordinated Indebtedness, (ii) any advance, transfer or assignment of assets to Seller or Subordinated Creditor in any form whatsoever that would reduce at any time or in any way the amount of Seller Junior Indebtedness, Boston Beer Deficiency, or Subordinated Indebtedness, (iii) any transfer of any assets as security for the Seller Junior Indebtedness, Boston Beer Deficiency, or the Subordinated Indebtedness, except upon Senior Creditor's and Seller's prior written consent. Notwithstanding the foregoing: Page 171 of 272 (a) Borrower may on the date hereof deliver a Security Interest to Subordinated Creditor covering all assets of Borrower (other than its real estate and the improvements thereon) which Security Interest and the rights thereunder are hereby expressly agreed to be subordinate and subject in all respects to any Security Interest held by Senior Creditor and held by Seller but limited to those held by Seller to secure Seller Senior Indebtedness, irrespective of the order of filing any financing statements or otherwise, (b) Borrower may make regularly scheduled payments (but not prepayments or payments due to the acceleration of maturity) to Subordinated Creditor under the Subordinated Credit Agreements and regularly scheduled payments (but not prepayments or payments due to the acceleration of maturity) to the Seller under the Seller Junior Credit Agreements, (c) Subordinated Creditor may receive the proceeds of life insurance policies assigned to Subordinated Creditor covering the lives of Samuel T. Hubbard, Jr. and John B. Henderson (the "Assignment of Life Insurance"), and (d) Borrower may on the date hereof deliver a Security Interest to Seller covering all assets of Borrower (other than its real estate and the improvements thereon) which Security Interest and the rights thereunder are hereby expressly agreed to be subordinate and subject in all respects to any Security Interest held by Senior Creditor, any Security Interest held by Seller to secure Seller Senior Indebtedness, and any Security Interest held by Subordinated Creditor, in each case irrespective of the order of filing any financing statements or otherwise; provided, (i) no direct or indirect payment by or on behalf of the Borrower of Seller Junior Indebtedness or Subordinated Indebtedness or any Boston Beer Deficiency, whether pursuant to the terms of the Seller Junior Credit Agreements, the Boston Beer Note, or the Subordinated Credit Agreements, upon acceleration or otherwise, shall be made (except from proceeds of the Assignment of Life Insurance) if at the time of such payment there exists an Event of Default under the Senior Credit Agreements and/or the Seller Senior Credit Agreements and such Event of Default shall not have been cured or waived by the Senior Creditor or Seller, as the case may be, in writing, and (ii) no direct or indirect payment by or on behalf of the Borrower of Seller Junior Indebtedness or any Boston Beer Deficiency, whether pursuant to the terms of the Seller Junior Credit Agreements or the Boston Beer Note, upon acceleration or otherwise, shall be made if at the time of such payment there exists an Event of Default under the Subordinated Credit Agreements and such Event of Default shall not have been cured or waived by the Subordinated Creditor in writing. Upon the occurrence of such cure or waiver, payment of scheduled payments (including past due scheduled payments) with respect to the Seller Junior Indebtedness, the Subordinated Indebtedness, and the Boston Beer Deficiency as the case may be, may be resumed. This section is not intended to preclude Seller or Subordinated Creditor from exercising their respective rights and remedies, subject to the terms of Section 11 of this Agreement, but to require that any payments or proceeds received other than as permitted Page 172 of 272 by this Section 6 shall be held in trust for Senior Creditor and Seller and applied to the Senior Indebtedness and Seller Senior Indebtedness, respectively, or in the case of an Event of Default under the Subordinated Credit Agreement absent a requirement that the payment be held in trust for the Senior Creditor or the Seller with respect to the Seller Senior Indebtedness, held in trust for the Subordinated Creditor and applied to the Subordinated Indebtedness. Without limiting its discretion in the administration of the Senior Credit Agreement, Senior Creditor agrees and undertakes to act in good faith in accordance with prudent commercial lending practices with respect to any Standstill Periods, but in no event shall Senior Creditor have any liability to Seller or Subordinated Creditor in respect of such agreement beyond what it would have in the absence thereof. 7. Insolvency. (a) In the event of any distribution, division, or application, whether partial or complete, voluntary or involuntary, by operation of law or otherwise, of all or any part of Borrower's assets, or the proceeds of Borrower's assets, in whatever form, to creditors of Borrower or upon any indebtedness of Borrower, whether by reason of liquidation, dissolution or other winding-up of Borrower, or by reasons of any execution sale, receivership, insolvency, or bankruptcy proceeding, assignment for the benefit of creditors, proceedings for reorganization, or readjustment of Borrower or Borrower's properties, then and in such event, (i) the Senior Indebtedness shall be paid in full before any payment is made upon the Seller Senior Indebtedness (other than from the proceeds of the Mortgage or, to the extent of indebtedness under the Boston Beer Note, the Boston Beer Collateral), (ii) the Senior Indebtedness and the Seller Senior Indebtedness shall be paid in full before any payment is made upon the Subordinated Indebtedness (other than from the proceeds of the Assignment of Life Insurance) or the Seller Junior Indebtedness, (iii) the Subordinated Indebtedness shall be paid in full before any payment is made upon the Seller Junior Indebtedness, (iv) the indebtedness under the Boston Beer Note (but not any Boston Beer Deficiency) shall be paid from the proceeds of the Boston Beer Collateral before any payment is made from the Boston Beer Collateral to the Senior Creditor, the Seller with respect to the Seller Senior Indebtedness, the Seller with respect to the Seller Junior Indebtedness, or the Subordinated Indebtedness, and (v) all payments and distributions, of any kind or character and whether in cash, property, or securities, which shall be payable or deliverable upon or in respect of the Seller Junior Indebtedness, the Boston Beer Deficiency, or the Subordinated Indebtedness shall be paid or delivered directly first to Senior Creditor (except for payments or distributions related to the Mortgage) and secondly to Seller as provided above, for application in payment of the amounts then due on the Senior Indebtedness and Seller Senior Indebtedness until the Senior Indebtedness and Seller Senior Indebtedness shall have been paid in full, but not including payments of proceeds of the Assignment of Life Insurance, and (vi) after payment of the Senior Indebtedness and Seller Senior Indebtedness in full, all payments and distributions, of any kind or character and whether in cash, property, or securities, which shall be payable or deliverable upon or in respect of the Seller Junior Indebtedness or the Boston Beer Deficiency shall be paid or delivered directly to Subordinated Creditor for application in payment of the amounts then due on the Subordinated Indebtedness until the Subordinated Indebtedness shall have been paid in full. Page 173 of 272 (b) The Senior Creditor is hereby authorized but is not obligated to file an appropriate claim for and on behalf of the Seller on account of the Seller Junior Indebtedness, and for and on behalf of the Subordinated Creditor on account of the Subordinated Indebtedness, if Seller or Subordinated Creditor respectively does not file, and there is not otherwise filed on behalf of the Seller or Subordinated Creditor, a proper claim or proof of claim in the form required in any dissolution, liquidation or reorganization proceeding prior to thirty (30) days before the expiration of the time to file such claim or claims. In the event that none of Senior Creditor, Subordinated Creditor, or Seller as holder of the Seller Junior Indebtedness, has filed and there is not otherwise filed on behalf of Seller as holder of the Seller Junior Indebtedness such a proper claim or proof of claim prior to twenty (20) days before expiration of the time to file such claims with respect to the Seller Junior Indebtedness, Seller as holder of the Seller Senior Indebtedness is hereby authorized but is not obligated to file an appropriate claim for and on behalf of the Seller as holder of the Seller Junior Indebtedness. In the event that neither Senior Creditor nor Subordinated Creditor has filed and there is not otherwise filed on behalf of Subordinated Creditor such a proper claim or proof of claim prior to twenty (20) days before expiration of the time to file such claims with respect to the Subordinated Indebtedness, Seller as holder of the Seller Senior Indebtedness is hereby authorized but is not obligated to file an appropriate claim for and on behalf of the Subordinated Creditor with respect to the Subordinated Indebtedness. In connection with each above authorization, the Seller and the Subordinated Creditor, as the case may be, hereby respectively irrevocably authorizes, empowers, and appoints the Senior Creditor and as applicable the Seller as the Seller's and/or the Subordinated Creditor's agent and attorney-in-fact to (i) execute, verify, deliver and file such proofs of claim and to receive, (ii) collect any and all dividends, payments, or other disbursements made thereon in whatever form the same may be paid or issued, and (iii) to apply the same first on account of the Senior Indebtedness and then on account of the Seller Senior Indebtedness, provided, however, that proceeds of the Boston Beer Collateral shall be applied first on account of the indebtedness under the Boston Beer Note, and that proceeds of the Mortgage shall be applied first on account of the Seller Senior Indebtedness. (c) The Subordinated Creditor is hereby authorized but not obligated to file an appropriate claim for and on behalf of the Seller on account of the Seller Junior Indebtedness if Seller and/or Senior Creditor does not file, and there is not otherwise filed on behalf of the Seller, a proper claim or proof of claim in the form required in any dissolution, liquidation or reorganization proceeding prior to ten (10) days before the expiration of the time to file such claim or claims. In connection with such authorization, the Seller hereby irrevocably authorizes, empowers, and appoints the Subordinated Creditor the Seller's agent and attorney-in-fact to execute, verify, deliver and file such proofs of claim and to receive and collect any and all dividends, payments, or other disbursements made thereon in whatever form the same may be paid or issued and to apply the same on account of the Subordinated Indebtedness after payment in full of the Senior Indebtedness and Seller Senior Indebtedness. Page 174 of 272 (d) Should any payment, distribution, security, or proceeds thereof be received by Seller and/or the Subordinated Creditor at any time on the Seller Junior Indebtedness, the Boston Beer Deficiency, or the Subordinated Indebtedness, as applicable, contrary to the terms of this Agreement, Seller and/or Subordinated Creditor immediately will deliver the same first to Senior Creditor with respect to the Senior Indebtedness, and after payment in full of the Senior Indebtedness to Seller with respect to the Seller Senior Indebtedness, and after payment in full of the Senior Indebtedness and Seller Senior Indebtedness, to Subordinated Creditor, in precisely the form received (except for the endorsement or assignment of Seller and/or Subordinated Creditor where necessary), for application on or to secure the Senior Indebtedness, Seller Senior Indebtedness, or Subordinated Indebtedness in the order described above, whether each of them as applicable is due or not due, and until so delivered the same shall be held in trust by Seller or Subordinated Creditor as property of Senior Creditor with respect to the Senior Indebtedness, Seller with respect to the Seller Senior Indebtedness, and Subordinated Creditor with respect to the Subordinated Indebtedness in the priority described herein. In the event Seller fails to make any such endorsements or assignment Senior Creditor or any of its officers on behalf of Senior Creditor, or after payment in full of the Senior Indebtedness Seller with respect to the Seller Senior Indebtedness or any of its officers on behalf of Seller, or after payment in full of both the Senior Indebtedness and Seller Senior Indebtedness, Subordinated Creditor or any of its officers on behalf of Subordinated Creditor, are hereby irrevocably authorized by Seller and/or Subordinated Creditor, as the case may be, to make the same. 8. Payments Upon Liquidation; Dissolution; Bankruptcy. Upon any distribution to creditors of the Borrower in a liquidation or dissolution of the Borrower or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Borrower or its property or in any assignment for the benefit of creditors or any marshaling of the assets and liabilities of the Borrower: (a) Senior Creditor shall be entitled to receive payment in full of all Senior Indebtedness (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Credit Agreements, whether or not such interest is an allowable claim in any such proceeding) before Seller and Subordinated Creditor shall be entitled to receive any payment of any Seller Senior Indebtedness, Seller Junior Indebtedness, any Boston Beer Deficiency, or Subordinated Indebtedness except, in the case of Seller, from proceeds of the Mortgage to the extent of the Seller Senior Indebtedness or the Boston Beer Note to the extent of the Boston Beer Collateral, and except in the case of Subordinated Creditor, proceeds of Life Insurance respectively; (b) Seller shall be entitled to receive payment in full of all Seller Senior Indebtedness (including interest after the commencement of any such proceeding at the rate specified in the applicable Seller Senior Credit Agreements, whether or not such interest is an allowable claim in any such proceeding), before Seller and Subordinated Creditor shall be entitled to Page 175 of 272 receive any payment of any Seller Junior Indebtedness or Subordinated Indebtedness (except in the case of Subordinated Creditor proceeds of Life Insurance) respectively; (c) Notwithstanding anything to the contrary herein, Seller shall be entitled to receive all proceeds from the Boston Beer Collateral to the extent of indebtedness under the Boston Beer Note (including interest after the commencement of any such proceeding at the rate specified in the Boston Beer Note whether or not such interest is an allowable claim in any such proceeding) before Senior Creditor, Seller with respect to the Seller Senior Indebtedness, Subordinated Creditor, or Seller with respect to the Seller Junior Indebtedness shall be entitled to receive any proceeds from the Boston Beer Collateral; (d) until all Senior Indebtedness with respect to the Senior Credit Agreements and all Seller Senior Indebtedness with respect to the Seller Senior Credit Agreements (as provided in subsections (a) and (b) above) is paid in full, any distribution to which Seller or Subordinated Creditor would be entitled but for this paragraph (but not including in the case of the Subordinated Creditor proceeds of the Assignment of Life Insurance) shall be made first to the Senior Creditor with respect to the Senior Indebtedness and, if the Senior Indebtedness is paid in full, to the Seller with respect to the Seller Senior Indebtedness; (e) after payment in full of the Senior Indebtedness and Seller Senior Indebtedness, Subordinated Creditor shall be entitled to receive payment in full of all Subordinated Indebtedness (including interest after the commencement of any such proceeding at the rate specified in the applicable Subordinated Credit Agreements, whether or not such interest is an allowable claim in any such proceeding) before Seller shall be entitled to receive any payment of any Seller Junior Indebtedness or the Boston Beer Deficiency; and (f) after payment in full of the Senior Indebtedness and Seller Senior Indebtedness, until all Subordinated Indebtedness with respect to the Subordinated Credit Agreements (as provided in subsection (e) above) is paid in full, any distribution to which Seller would be entitled with respect to the Seller Junior Indebtedness or the Boston Beer Deficiency but for this paragraph shall be made to the Subordinated Creditor. 9. Assignments. Senior Creditor, Seller, and Subordinated Creditor each agree not to sell, assign, pledge or otherwise transfer the Senior Indebtedness, Seller Senior Indebtedness, Seller Junior Indebtedness, Boston Beer Note, and Subordinated Indebtedness respectively except subject to all the terms and conditions of this Agreement. Any note evidencing the Senior Indebtedness, Seller Senior Indebtedness, Seller Junior Page 176 of 272 Indebtedness, or the Subordinated Indebtedness, and the Boston Beer Note, shall bear the following legend or a legend substantially similar thereto: "THIS NOTE IS SUBJECT TO A CERTAIN INTERCREDITOR AGREEMENT, DATED DECEMBER 15, 2000 AMONG HIGH FALLS BREWING COMPANY, LLC, MANUFACTURERS AND TRADERS TRUST COMPANY, CEPHAS CAPITAL PARTNERS, L.P., AND THE GENESEE BREWING COMPANY, INC." 10. Seller and Subordinated Creditor Representation and Warranties. Seller and Subordinated Creditor each represents and warrants to Senior Creditor, and Seller represents and warrants to Subordinated Creditor, that: (a) no representations or agreements of any kind have been made to such party which would limit or qualify in any way the terms of this Agreement, (b) Senior Creditor has made no representation to the Seller or Subordinated Creditor, and Subordinated Creditor has made no representation to the Seller, as to the creditworthiness of Borrower; (c) Seller has made no representation to the Senior Creditor as to the creditworthiness of Borrower; (d) Seller and Subordinated Creditor each has established adequate means of obtaining from Borrower on a continuing basis such information regarding Borrower's financial condition as such party deems necessary. Seller and Subordinated Creditor agree that Senior Creditor shall have no obligation to disclose to them, and Seller agrees that Subordinated Creditor shall have no obligation to disclose to it, information or material acquired by Senior Creditor or Subordinated Creditor respectively in the course of its relationships with Borrower. 11. Standstill Period. (a) Prior to the Seller notifying Senior Creditor and Subordinated Creditor that an Event of Default has occurred with respect to the Seller Junior Indebtedness or that a Boston Beer Deficiency exists, and during the Seller Standstill Period (defined below), the Seller shall have no authority to enforce the Seller Junior Indebtedness or the Boston Beer Deficiency by legal proceedings or otherwise, or in any manner interfere with the Security Interests held by Senior Creditor, Seller with respect to the Seller Senior Indebtedness, and/or Subordinated Creditor until all of the Senior Indebtedness, Seller Senior Indebtedness, and Subordinated Indebtedness have been paid in full. (b) Prior to the Subordinated Creditor notifying Senior Creditor and Seller that an Event of Default has occurred with respect to the Subordinated Indebtedness, and during the Subordinated Creditor Standstill Period (defined below), the Subordinated Creditor shall have no authority to enforce the Subordinated Indebtedness by legal Page 177 of 272 proceedings or otherwise, or in any manner interfere with the Security Interests held by Senior Creditor with respect to the Senior Indebtedness and Seller with respect to the Seller Senior Indebtedness until all of the Senior Indebtedness and Seller Senior Indebtedness have been paid in full; provided however, that Subordinated Creditor may enforce its rights to proceeds of the Assignment of Life Insurance. (c) The term "Subordinated Creditor Standstill Period" shall mean one hundred eighty (180) days following the date on which the Senior Creditor has notified the Subordinated Creditor and Seller that an Event of Default has occurred under the Senior Credit Agreements and has requested imposition of a standstill period. The term "Seller Standstill Period" shall mean two hundred forty (240) days following the date on which the Senior Creditor has notified the Subordinated Creditor and the Seller that an Event of Default has occurred under the Senior Creditor Agreements. If, during the respective Standstill Period, the Events of Default under the Senior Credit Agreements are cured or waived by the Senior Creditor, the applicable Standstill Period shall cease running, and a new Standstill Period shall commence running when the Senior Creditor has notified the Subordinated Creditor and the Seller of the occurrence of a new Event of Default with respect the Senior Indebtedness. The Standstill Period shall be tolled during any period of time that there is in effect an automatic stay under the Bankruptcy Code or an injunction or restraining order issued by a court prohibiting the Senior Creditor, Seller, and/or the Subordinated Creditor from exercising its remedies, until a court of competent jurisdiction has lifted such stay, injunction, or restraint. During the applicable Standstill Period, the Seller and/or Subordinated Creditor shall not take any action to exercise its rights and remedies with respect to the Seller Junior Indebtedness, the Boston Beer Deficiency, and/or Subordinated Indebtedness respectively, provided, however, that Subordinated Creditor may enforce its right hereunder to receive payments from the Assignment of Life Insurance. Nothing in this Agreement shall restrict or prohibit the Seller or the Subordinated Creditor from taking any action to declare the Borrower in default of its obligations to the Seller or Subordinated Creditor, taking such limited actions as may be required to prevent loss of rights due to the effect of any statute of limitations, and/or sending notice of any Event of Default under the Seller Junior Credit Agreements or Subordinated Credit Agreements. 12. Waivers. Each of Seller, Senior Creditor, and Subordinated Creditor waives any right to require any of the others: (a) to make, extend, renew, or modify any loan to Borrower or to grant any other financial accommodations to Borrower whatsoever; (b) to make any presentment, protest, demand, or notice of any kind, including notice of any nonpayment of any indebtedness or of any nonpayment related to any Security Interests, or except as expressly required by this Agreement notice of any action or nonaction or the part of Borrower or any other party to this Agreement as the case may be, any surety, endorser, or other guarantor in connection with any indebtedness, or in connection with the creation of new or additional indebtedness as the case may be; Page 178 of 272 (c) to resort for payment or to proceed directly or at once against any person, including Borrower; (d) to proceed directly against or exhaust any Security Interest; (e) to pursue any other remedy within any creditor's power; or (f) to commit any act or omission of any kind, at any time, with respect to any matter whatsoever. 13. Senior Creditor's and Seller's Rights. Except as otherwise expressly provided in this Agreement, Senior Creditor and Seller may take or omit any and all actions with respect to the Senior Indebtedness and Seller Senior Indebtedness or any Security Interests for the Senior Indebtedness and/or Seller Senior Indebtedness without affecting whatsoever any of Senior Creditor's or Seller's rights under this Agreement. In particular, without limitation, Senior Creditor and Seller (with respect to the Seller Senior Indebtedness) may, without notice of any kind to Seller or Subordinated Creditor: (a) make one or more additional loans to Borrower whether pursuant to the terms of the Senior Credit Agreements or Seller Senior Credit Agreements or otherwise; (b) repeatedly alter, amend, modify, or otherwise change the fees, or any part thereof, applicable under the Senior Credit Agreements or Seller Senior Credit Agreements; (c) repeatedly alter, compromise, renew, extend, accelerate, or otherwise change the time for payment or other terms of the Senior Indebtedness or Seller Senior Indebtedness or any part thereof, including increases and decreases of the rate of interest on the Senior Indebtedness or Seller Senior Indebtedness, and extensions may be repeated and may be for longer than the original loan term; (d) take and hold Security Interests for the payment of the Senior Indebtedness and Seller Senior Indebtedness, and exchange, enforce, waive, and release any such Security Interests, with or without the substitution of new collateral; (e) release, substitute, agree not to sue, or deal with any one or more of Borrower's sureties, endorsers, or guarantors on any terms or manner Senior Creditor or Seller (with respect to the Seller Senior Indebtedness) chooses; (f) determine how, when and what application of payments and credits shall be made on the Senior Indebtedness and Seller Senior Indebtedness; Page 179 of 272 (g) apply such security and direct the order or manner of sale thereof, as Senior Creditor and Seller (with respect to the Seller Senior Indebtedness) in their respective discretion may determine; and (h) assign this Agreement in whole or in part in connection with an assignment in whole or in part of the Senior Credit Agreements, Seller Senior Credit Agreements, or any interest therein; provided however, that notwithstanding anything to the contrary contained in this Agreement, after any such assignment the assignee shall have the rights of the Senior Creditor only with respect to Senior Indebtedness, or the Seller with respect to the Seller Senior Indebtedness, as the case may be as defined herein. 14. Subordinate Creditor's Rights. Subordinate Creditor may take or omit any and all actions with respect to the Subordinated Indebtedness or any Security Interests for the Subordinated Indebtedness without affecting whatsoever any of Subordinated Creditor's rights as related to those of the Seller with respect to the Seller Junior Indebtedness or the Boston Beer Deficiency under this Agreement. In particular, without limitation, Subordinated Creditor may, without notice of any kind to Seller: (a) make one or more additional loans to Borrower whether pursuant to the terms of the Subordinated Credit Agreements or otherwise; (b) repeatedly alter, amend, modify, or otherwise change the fees, or any part thereof, applicable under the Subordinated Credit Agreements; (c) repeatedly alter, compromise, renew, extend, accelerate, or otherwise change the time for payment or other terms of the Subordinated Indebtedness or any part thereof, including increases and decreases of the rate of interest on the Subordinated Indebtedness, and extensions may be repeated and may be for longer than the original loan term; (d) take and hold Security Interests for the payment of the Subordinated Indebtedness, and exchange, enforce, waive, and release any such Security Interests, with or without the substitution of new collateral; (e) release, substitute, agree not to sue, or deal with any one or more of Borrower's sureties, endorsers, or guarantors on any terms or manner Subordinated Creditor chooses; (f) determine how, when and what application of payments and credits shall be made on the Subordinated Indebtedness; (g) apply such security and direct the order or manner of sale thereof, as Subordinated Creditor in its discretion may determine; and Page 180 of 272 (h) assign this Agreement in whole or in part in connection with an assignment in whole or in part of the Subordinated Credit Agreements or any interest therein. 15. Marshaling. (a) Senior Creditor may foreclose on its Security Interests in any manner which it in its sole discretion chooses even though a higher price might have been realized if the Senior Creditor had proceeded to foreclose on its Security Interests in another manner. Without in any manner limiting the foregoing, the Seller and Subordinated Creditor agree that Senior Creditor may exercise its remedies against the property in which it holds Security Interests in any order that the Senior Creditor, in its sole discretion, chooses; and Seller and Subordinated Creditor confirm that the Senior Creditor shall in no manner be required to marshal its claims against one or more properties in which it holds a Security Interest. (b) Seller may foreclose on the Mortgage and its Security Interests in the Boston Beer Collateral in any manner which it in its sole discretion chooses even though a higher price might have been realized if the Seller had proceeded to foreclose on its Security Interests in another manner. Without in any manner limiting the foregoing, the Senior Creditor, Subordinated Creditor, and Seller with respect to the Seller Junior Indebtedness and Boston Beer Deficiency agree that Seller may exercise its remedies against the property covered by the Mortgage and the Boston Beer Collateral in any order that the Seller, in its sole discretion, chooses; and Senior Creditor, Seller with respect to the Seller Junior Indebtedness and any Boston Beer Deficiency, and Subordinated Creditor confirm that the Seller with respect to the Mortgage and the Boston Beer Collateral shall in no manner be required to marshal its claims against one or more properties in which it holds a Security Interest. (c) Subject to the rights of the Senior Creditor with respect to the Senior Creditor's Security Interests, Seller may foreclose on its Security Interests not covered by subsection (b) of this Section with respect to the Seller Senior Indebtedness in any manner which it in its sole discretion chooses even though a higher price might have been realized if the Seller had proceeded to foreclose on its Security Interests in another manner. Without in any manner limiting the foregoing, the Seller with respect to the Seller Junior Indebtedness and Boston Beer Deficiency, and the Subordinated Creditor, agree that Seller with respect to the Seller Senior Indebtedness may exercise its remedies against the property in which it holds Security Interests in any order that the Seller, in its sole discretion, chooses; and Seller with respect to the Seller Junior Indebtedness and any Boston Beer Deficiency, and Subordinated Creditor confirm that the Seller with respect to the Seller Senior Indebtedness shall in no manner be required to marshal its claims against one or more properties in which it holds a Security Interest. (d) Subject to the rights of Senior Creditor with respect to the Senior Indebtedness and Seller with respect to the Seller Senior Indebtedness under this Agreement, Subordinated Creditor may foreclose on its Security Interests in any manner Page 181 of 272 which it, in its sole discretion, chooses even though a higher price might have been realized if the Subordinated Creditor had proceeded to foreclose on its Security Interests in another manner. Without in any manner limiting the foregoing, the Seller with respect to the Seller Junior Indebtedness and any Boston Beer Deficiency agrees that Subordinated Creditor may exercise its remedies against the property in which it holds Security Interests in any order that the Subordinated Creditor, in its sole discretion, chooses; and Seller with respect to the Seller Junior Indebtedness and any Boston Beer Deficiency confirms that the Subordinated Creditor shall in no manner be required to marshal its claims against one or more properties in which it holds a Security Interest. 16. Modification of Seller Senior Indebtedness, Seller Junior Indebtedness, and Subordinated Indebtedness. Seller and Borrower waive any right to modify or amend the terms of the payment of interest or the repayment of principal with respect to the Seller Senior Indebtedness, the Seller Junior Indebtedness and the Boston Beer Note during the term of this Agreement absent the prior written consent of Senior Creditor, Seller with respect to the Seller Senior Indebtedness, and Subordinated Creditor. Subordinated Creditor and Borrower waive any right to modify or amend the terms of the payment of interest or the repayment of principal with respect to the Subordinated Indebtedness during the term of this Agreement absent the prior written consent of Senior Creditor and Seller with respect to the Seller Senior Indebtedness. Seller and Borrower waive any right to modify or amend the terms of the payment of interest or the repayment of principal with respect to the Seller Senior Indebtedness during the term of this Agreement absent the prior written consent of Senior Creditor. 17. Default by Borrower. If Borrower becomes insolvent or bankrupt, this Agreement shall remain in full force and effect. In the event of a corporate reorganization or corporate arrangement of Borrower under the provisions of the Bankruptcy Code, as amended, this Agreement shall remain in full force and effect and the court having jurisdiction over the reorganization or arrangement is hereby authorized and expressly requested to preserve such priority and subordination in approving any such plan or reorganization or arrangement. Any payment default under the terms of the Seller Junior Indebtedness, Seller Senior Indebtedness, Subordinated Indebtedness, or Senior Indebtedness, or any other Event of Default under the Seller Junior Credit Agreements, Seller Senior Credit Agreements, Subordinated Credit Agreements, or Senior Credit Agreements which could result in an acceleration of the Seller Junior Indebtedness, Seller Senior Indebtedness, Subordinated Indebtedness, or Senior Indebtedness respectively also shall be an Event of Default under the terms of each of the Seller Junior Indebtedness, Seller Senior Indebtedness, Subordinated Indebtedness, and Senior Indebtedness. 18. Investor Notes. The Investor Notes shall be subordinated to the Senior Indebtedness, Seller Senior Indebtedness, Subordinated Indebtedness, the Boston Beer Note and Seller Junior Indebtedness in the manner described in such Investor Notes. No right of the Senior Creditor, Seller with respect to the Seller Senior Indebtedness or the Boston Beer Note, Subordinated Creditor, or Seller with respect to the Seller Junior Indebtedness that is relative to the Investor Notes, other than to enforce the subordination provisions as contained therein on the date hereof, shall be exercised, amended, waived, Page 182 of 272 compromised, or settled except by unanimous consent of the Senior Creditor, Seller with respect to the Seller Senior Indebtedness, Subordinated Creditor, or Seller with respect to the Seller Junior Indebtedness or any Boston Beer Deficiency. 19. Duration and Termination. This Agreement shall remain in full force and effect until all of the Senior Indebtedness and Seller Senior Indebtedness have been irrevocably paid in full and the Senior Creditor's obligation to lend under the Senior Credit Agreements has been terminated, and until all of the Subordinated Indebtedness has been irrevocably paid in full. 20. Subrogation. After all Senior Indebtedness and Seller Senior Indebtedness is irrevocably paid in full and until the Subordinated Indebtedness is paid in full, Subordinated Creditor shall be subrogated to the rights of the Senior Creditor and Seller to receive distributions applicable to the Senior Indebtedness and Seller Senior Indebtedness to the extent that distributions otherwise payable to Subordinated Creditor have been applied to the payment of the Senior Indebtedness and Seller Senior Indebtedness. A distribution made under this Agreement to the Senior Creditor on account of the Senior Indebtedness and/or Seller on account of the Seller Senior Indebtedness which otherwise would have been made to Subordinated Creditor is not, as between the Subordinated Creditor and the Borrower, a payment by the Borrower on the Subordinated Indebtedness. After irrevocable payment in full of the Senior Indebtedness and Seller Senior Indebtedness, Subordinated Creditor shall be entitled to receive from the Senior Creditor and/or Seller any payments or distributions received by Senior Creditor and/or Seller in excess of the amounts sufficient to pay all Senior Indebtedness and Seller Senior Indebtedness in full. After all Senior Indebtedness, Seller Senior Indebtedness, and Subordinated Indebtedness are irrevocably paid in full and until the Seller Junior Indebtedness and Boston Beer Deficiency are paid in full, Seller shall be subrogated to the rights of the Senior Creditor to receive distributions applicable to the Senior Indebtedness, the rights of Seller to receive distributions applicable to the Seller Senior Indebtedness, and the rights of the Subordinated Creditor to receive distributions applicable to the Subordinated Indebtedness to the extent that distributions otherwise payable to Seller have been applied to the payment of the Senior Indebtedness, Seller Senior Indebtedness, and Subordinated Indebtedness. A distribution made under this Agreement to the Senior Creditor on account of the Senior Indebtedness, Seller on account of the Seller Senior Indebtedness, or to the Subordinated Creditor on account of the Subordinated Indebtedness, which otherwise would have been made to Seller is not, as between the Seller and the Borrower, a payment by the Borrower on the Seller Junior Indebtedness or Boston Beer Deficiency. After irrevocable payment in full of the Senior Indebtedness, Seller Senior Indebtedness, and Subordinated Indebtedness, Seller shall be entitled to receive from the Senior Creditor, Seller, and Subordinated Creditor any payments or distributions received by Senior Creditor, Seller, and Subordinated Creditor in excess of the amounts sufficient to pay all Senior Indebtedness, Seller Senior Indebtedness, and Subordinated Indebtedness respectively in full. Page 183 of 272 21. Rights of Setoff Against Seller Junior Indebtedness. Nothing in this Agreement shall be deemed to prevent Borrower from exercising any right of setoff against the Seller Junior Indebtedness as permitted by the Seller Junior Credit Agreements. 22. Obligations of Borrower Unconditional. Subject to the subordination provisions of this Agreement, nothing contained in this Agreement is intended to or shall impair, as between Borrower and the Seller or the Subordinated Creditor, the respective rights and remedies of the Seller and the Subordinated Creditor or the obligations of Borrower, which are absolute and unconditional, to pay to the Seller all obligations under the Seller Credit Agreements and to pay the Subordinated Creditor all obligations under the Subordinated Credit Agreements as and when the same shall become due and payable in accordance with their respective terms, or is intended to or shall affect the relative rights of the Seller and creditors of Borrower other than the Senior Creditor and Subordinated Creditor, or is intended to or shall affect the relative rights of the Subordinated Creditor and creditors of Borrower other than the Senior Creditor and Seller. 23. Notice to Seller, Subordinated Creditor and Senior Creditor by Borrower. (a) Borrower shall give prompt written notice to the Seller, Subordinated Creditor and Senior Creditor of any fact known to Borrower which would prohibit the making of any payment in respect of the Seller Junior Indebtedness or Subordinated Indebtedness, but failure to give such notice shall not affect the subordination of the Seller Junior Indebtedness to the Subordinated Indebtedness, Seller Senior Indebtedness, and the Senior Indebtedness, or the subordination of the Subordinated Indebtedness to the Senior Indebtedness and Seller Senior Indebtedness, in each case as provided in this Agreement. (b) Notwithstanding the provisions of this Agreement, the Subordinated Creditor shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment in respect of the Subordinated Indebtedness, unless and until the Subordinated Creditor shall have received written notice thereof from the Borrower, the Senior Creditor, and/or the Seller in respect of the Seller Senior Indebtedness. Prior to the receipt of any such written notice, subject to the provisions of this Agreement, the Subordinated Creditor shall be entitled in all respects to assume no such facts exist and to receive payments otherwise permitted hereunder; provided however notice shall not be a condition precedent to any prohibition of the making of any such payments if such prohibition is a result of a default with respect to the Subordinated Indebtedness. (c) Notwithstanding the provisions of this Agreement, the Seller shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment in respect of the Seller Junior Indebtedness, unless and until the Seller shall have received written notice thereof from the Borrower, the Senior Creditor, and/or the Subordinated Creditor. Prior to the receipt of any such written notice, subject to the provisions of this Agreement, the Seller shall be entitled in all respects to assume no such facts exist and to receive payments otherwise permitted hereunder; provided however notice shall not be a condition precedent to any prohibition of the making of any such Page 184 of 272 payments if such prohibition is a result of a default with respect to the Seller Junior Indebtedness or, so long as it is held by the Seller, the Seller Senior Indebtedness. 24. Miscellaneous Provisions. (a) Amendments. This Agreement constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. To the extent there is any conflict between this Agreement and any document evidencing the Seller Junior Indebtedness, the Seller Senior Indebtedness, the Senior Indebtedness, the indebtedness under the Boston Beer Note, or the Subordinated Indebtedness, this Agreement shall control. No alteration of or amendment to this Agreement shall be effective unless made in writing and signed by Senior Creditor, Borrower, Seller with respect to the Seller Junior Indebtedness, Seller with respect to the Seller Senior Indebtedness, Seller with respect to the Boston Beer Note, and Subordinated Creditor. (b) Attorney's Fees; Expenses. Borrower agree to pay upon demand all of Senior Creditor's and Seller's (with respect to the Seller Senior Indebtedness), and after payment in full of Senior Indebtedness and Seller Senior Indebtedness, Subordinated Creditor's costs and expenses, including attorneys' fees and legal expenses, incurred in connection with enforcement of this Agreement. Costs and expenses include Senior Creditor's, Seller's (with respect to the Seller Senior Indebtedness) and Subordinated Creditor's attorney's fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (and including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Borrower also shall pay all court costs and such additional fees as may be directed by the court. (c) Successors. Subject to the express terms of this Agreement related to assignments of Senior Indebtedness and Seller Senior Indebtedness, this Agreement shall extend to and bind the respective successors and assigns of the parties to this Agreement. The covenants of the parties hereto respecting subordination of the Subordinated Indebtedness in favor of Senior Indebtedness and the Seller Senior Indebtedness shall extend to, include, and be enforceable by any transferee or endorsee to whom Senior Creditor and/or Seller may transfer any or all of the Senior Indebtedness and/or Seller Senior Indebtedness respectively. The covenants of the parties hereto respecting subordination of the Seller Junior Indebtedness and Boston Beer Deficiency in favor of Senior Indebtedness, Seller Senior Indebtedness, and Subordinated Indebtedness shall extend to, include, and be enforceable by any transferee or endorsee to whom Senior Creditor and/or Seller may transfer any or all of the Senior Indebtedness and/or Seller Senior Indebtedness respectively, and to whom Subordinated Creditor may transfer any of all of the Subordinated Indebtedness. (d) General Waivers. No party shall be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by the party against whom such waiver is enforced. No delay or omission on the part of any party in exercising any right shall operate as a waiver of such right or any other right. A waiver by any party Page 185 of 272 of any provision of this Agreement shall not prejudice or constitute a waiver of such party's right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by any party, nor any course of dealing between any of the parties, shall constitute a waiver of any of such party's rights or of another party's obligations as to any further transactions. Whenever the consent of a party is required under this Agreement, the granting of such consent by such party in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such further consent may be granted or withheld in the sole discretion of such party. (e) Severability. In the event that any provision of this Agreement is deemed to be invalid, illegal or unenforceable by reason of the operation of any law or by reason of the interpretation placed thereon by any court or governmental authority, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby, and the affected provision shall be modified to the minimum extent permitted by law so as most fully to achieve the intention of this Agreement. (f) Notice. Any notice, demand, request, consent, or other communication hereunder shall be in writing, shall be addressed to the respective party shown in the preamble to this Agreement or to such other address as such party may, by notice given in compliance with this Section, designate. Notices shall be deemed to have been given and received upon the earlier of: (i) if by facsimile, upon confirmed transmission if transmission occurs between 8:00 a.m. and 5:00 p.m. New York time on any Business Day provided that a copy of such notice is deposited with Federal Express or other nationally recognized overnight delivery service for next Business Day delivery; (ii) if by Federal Express or other nationally recognized overnight delivery service deposited for next Business Day delivery, on the next Business Day following deposit with such delivery service; (iii) if by personal delivery, upon completion of delivery; or (iv) if by mail, three (3) Business Days after deposit in the U.S. Mail, first class, postage prepaid. (g) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard or reference to its conflict of laws principles. The parties each hereby consent to the jurisdiction of any state or federal court located in Monroe County, New York and irrevocably agree that all actions or proceedings arising out of or relating to this Agreement shall be litigated in such courts. Each of the parties accepts for itself the exclusive jurisdiction of the aforesaid courts and waives any defense of forum non coveniens. (h) WAIVER OF JURY TRIAL. EACH OF THE PARTIES WAIVES THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN RESPECT OF ANY DEALINGS AMONG THEM OR ANY ONE OF THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT. Page 186 of 272 (i) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (j) Reproductions. This Agreement may be reproduced by the parties hereto by any photographic, photostatic, microfilm, xerographic or similar process, and any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made in the regular course of business). (k) Entire Agreement. This Agreement constitutes the complete, final and exclusive understanding and agreement between parties with respect to the subject matter covered hereby, and supersedes any and all prior or contemporaneous oral or written representations, understandings, agreements, correspondence or communications concerning the subject matter hereof. IN WITNESS WHEREOF, each of the parties intending to be bound hereby has caused this Agreement to be executed by its duly authorized representative as of the date first above written. HIGH FALLS BREWING COMPANY, LLC ("Borrower") By: /s/ Samuel T. Hubbard, Jr. ---------------------------------- Its: --------------------------------- CEPHAS CAPITAL PARTNERS, L.P. ("Subordinated Creditor") By: Chephas LLC, its general partner, By: /s/ Jeffrey Holmes ------------------------------ Its: Managing Member Page 187 of 272 MANUFACTURERS AND TRADERS TRUST COMPANY ("Senior Creditor") By: /s/ Philip M. Smith ---------------------------------- Its: Vice President ---------------------------------- THE GENESEE BREWING COMPANY, INC. ("Seller") By: /s/ Mark W. Leunig ---------------------------------- Its: Vice President --------------------------------- Page 188 of 272 SCHEDULE A ---------- SANKEY EQUIPMENT DESCRIPTION EX-10.9 10 l85770aex10-9.txt EXHIBIT 10-9 Page 189 of 272 EXHIBIT 10-9 ------------ GUARANTY -------- This GUARANTY (this "GUARANTY") is made this 15th day of December, 2000, by THE GENESEE BREWING COMPANY, INC., a New York corporation ("GENESEE"), in favor of BOSTON BREWING COMPANY, INC., D/B/A THE BOSTON BEER COMPANY, a Massachusetts corporation, for itself and as the sole general partner of BOSTON BEER COMPANY LIMITED PARTNERSHIP, a Massachusetts limited partnership (collectively, "BOSTON BREWING"). R E C I T A L S : WHEREAS, Genesee and Boston Brewing are parties to an Amended and Restated Agreement dated as of April 30, 1997 (the "PRODUCTION AGREEMENT"), under which Genesee has agreed to supply Boston Brewing, and Boston Brewing has agreed to purchase from Genesee, on an as-ordered basis, Samuel Adams Boston Lager and certain other Boston Brewing products; WHEREAS, Genesee and Monroe Brewing Co., LLC ("MONROE BREWING") have entered into an Asset Purchase Agreement dated of August 29, 2000, as amended by Amendment No. 1 dated as of November ___, 2000 (collectively, the "PURCHASE AGREEMENT"), pursuant to which Genesee has agreed to sell to Monroe, and Monroe has agreed to purchase from Genesee, substantially all of the assets necessary to operate Genesee's brewing business, including, but not limited to, all of Genesee's right, title and interest in and to the Production Agreement; and WHEREAS, at Genesee's request, Boston Brewing has consented to the transfer of the Production Agreement from Genesee to Monroe Brewing pursuant to a certain Consent dated December ___, 2000 (the "CONSENT"), which conditions the effectiveness of consent on Genesee's execution and delivery to Boston Brewing of a guaranty in favor of Boston Brewing substantially in the form hereof; P R O V I S I O N S : NOW, THEREFORE, in consideration of the Consent provided by Boston Brewing and other good and valuable consideration, Genesee hereby agrees in favor of Boston Brewing as follows: Page 190 of 272 1. PERFORMANCE GUARANTY. (a) Subject to the terms and conditions herein, Genesee hereby guarantees the due, punctual and faithful performance by Monroe Brewing of its obligations, duties, covenants and responsibilities under the Production Agreement that arise after the closing under the Purchase Agreement based on facts occurring subsequent thereto. Genesee hereby specifically further agrees that in the event Monroe Brewing, for any reason, is obligated to perform under the Production Agreement and it fails to do so in accordance with the terms thereof, Genesee will, upon written notice from Boston Brewing, become liable to Boston Brewing for any sum or sums Monroe Brewing has to pay Boston Brewing under the terms of the Production Agreement for failure to perform or pay, subject to the terms and conditions contained therein or any defenses thereto which either Monroe Brewing may have or which Genesee may have. (b) Notwithstanding anything herein to the contrary, Genesee's obligations under this Guaranty and the Production Agreement shall terminate and be of no further force or effect upon the expiration of 1,095 days after the "Closing Date" (as defined in the Purchase Agreement) (the "TERMINATION DATE"), provided that any claims made against Genesee hereunder prior to the Termination Date and remaining unresolved or outstanding as of such date shall survive until the earlier to occur of the payment or the final resolution and satisfaction of such claims to the extent and subject to the terms and conditions herein. The period between the Closing Date and the Termination Date is referred to herein as the "GUARANTY PERIOD." 2. NET WORTH MAINTENANCE. (a) So long as Genesee has any liability hereunder, Genesee will maintain a Liquid Net Worth (defined for this purpose as the excess of (i) unencumbered (1) cash and currency on hand and on deposit, demand deposits and checks held, (2) short-term, highly liquid investments that are readily convertible to known amounts of cash plus (3) marketable securities over (ii) total liabilities, each as determined in accordance with generally accepted accounting practices), in an amount that, in the aggregate, is not less than the following: First 365 days after Closing Date: $7,250,000 Second 365 days after Closing Date: $7,000,000 Third 365 days after Closing Date: $5,150,000 3. ENFORCEMENT / NOTICE. (a) If Monroe Brewing fails to perform any of its duties under the Production Agreement guaranteed hereby, then Boston Brewing may proceed directly to make a claim against Genesee to be paid by Genesee without necessity of any suit or proceeding by Boston Brewing against Monroe Brewing. Genesee shall be entitled to assert any defenses or claims that Genesee or Monroe Brewing may have under the Production Agreement or otherwise against any claim made by Boston Brewing and does not otherwise waive any defenses whatsoever to its obligations hereunder. Anytime, with or without consideration or notice, Boston Brewing may waive enforcement of the terms, conditions Page 191 of 272 and provisions of this Guaranty with respect to any breach or default by Monroe Brewing, and such waiver will not diminish or otherwise affect Monroe Brewing's obligations to Boston Brewing under the Production Agreement. Genesee agrees that in the event any of the foregoing provisions are found to be unenforceable, that portion so found will in no way affect the purpose and intent of the remaining provisions, and to that extent those provisions will remain binding upon the parties. (b) Any claim, notice or other communication under this Guaranty shall be in writing, and shall be deemed duly given when delivered personally or by facsimile, or four days after being mailed by registered mail, return receipt requested, or by documented over-night delivery to a party at the following address (or such other address as such party may have specified by notice given to the other party pursuant to this provision): If to Genesee, to: Mark W. Leunig, Vice President The Genesee Corporation P.O. Box 762 Rochester, New York 14603 with a copy to: Monroe Brewing Co., LLC 445 St. Paul Street Rochester, New York 14605 Attention: Samuel T. Hubbard, Jr., President If to Boston Brewing, to: c/o The Boston Beer Company 75 Arlington Street Boston, MA 02116 Attention: Martin F. Roper, President 4. SUBROGATION. Genesee shall be entitled to, and shall be fully subrogated to all of Boston Brewing's rights under the Production Agreement with respect to, and to the extent of, payments made by Genesee pursuant to this Guaranty, and Boston Brewing hereby assigns any rights that may arise in connection with such payment to enforce any remedy which Boston Brewing may have against Monroe Brewing therefor. 5. AMENDMENTS AND MODIFICATION TO PRODUCTION AGREEMENT. As a condition to Genesee's continuing liability hereunder, by its acceptance hereof, Boston Brewing hereby acknowledges that Monroe Brewing has agreed with Genesee that, so long as Genesee has any liability to Boston Brewing, it shall not agree to amend or modify the Page 192 of 272 Production Agreement, or to accept any funding, advances or other monies or credit from Boston Brewing, in any manner that would in any way increase or enlarge Genesee's duties, obligations or liabilities Boston Brewing without Genesee's prior written consent. Accordingly, no such amendment or modification shall be effective unless it is accompanied or preceded by Genesee's written consent. 6. REPRESENTATIONS AND WARRANTIES. (a) Genesee has the corporate power and authority and legal right to execute and deliver this Guaranty, perform its obligations hereunder and consummate the transactions herein contemplated. The execution and delivery by Genesee of this Guaranty and the performance of its obligations and consummation of the transactions contemplated hereunder have been duly authorized by proper corporate proceedings, and this Guaranty constitutes the legal, valid and binding obligation of Genesee, enforceable against Genesee in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws of general applicability, and by the effect of general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law). (b) The execution, delivery and performance by Genesee of this Guaranty are within its corporate powers, have been duly authorized by all necessary corporate action, do not contravene or violate (i) its Certificate of Incorporation or By-Laws, (ii) any law, rule or regulation applicable to it, the contravention or violation of which would or could reasonably be expected to have a material adverse effect on Genesee's financial condition, (iii) any restrictions under any material agreement, contract or instrument to which it is a party or by which it or any of its property is bound, the contravention or violation of which would or could reasonably be expected to have a material adverse effect on Genesee's financial condition or (iv) any material order, writ, judgment, award, injunction or decree binding on or affecting it or its property, the contravention or violation of which would or could reasonably be expected to have a material adverse effect on Genesee's financial condition, and do not result in the creation or imposition of any adverse claim on the assets of Genesee. 7. ASSIGNMENT. (a) Notwithstanding anything herein to the contrary, Genesee may assign this Guaranty to its parent corporation or any affiliate thereof, provided that the assignee assumes all of Genesee's obligations hereunder, including, but not limited to, those set forth in Section 2 hereof, and provided that a copy of such assignment and assumption is delivered to Boston Brewing. Upon such delivery, Genesee shall be relieved of any obligations hereunder. (b) This Guaranty shall be for the sole benefit of Boston Brewing and its parent corporation or any affiliate thereof and may not be assigned by Boston Brewing other than as part of a corporate reorganization that does not effect a change in control, within the meaning of Section 10(e) of the Production Agreement, or enforced by anyone Page 193 of 272 but Boston Brewing and its parent corporation or any affiliate thereof, provided that no such assignment of this Guaranty to the parent corporation or any affiliate of Boston Brewing shall be valid unless such parent corporation or affiliate is also the assignee of the Production Agreement. 8. ENTIRE AGREEMENT; AMENDMENTS OR MODIFICATION. This Guaranty together with the Production Agreement (as modified hereby) and the Consent constitute the entire agreement between the parties regarding the subject matter hereof, and Genesee shall have no other liabilities or obligations of any kind to Boston Brewing with respect to the Production Agreement or otherwise, except as expressly provided herein. This Guaranty may not be amended or modified except with a writing executed by both parties. 9. GOVERNING LAW. This Guaranty, as well as all rights and obligations of the parties hereto, shall be given, construed and interpreted according to the internal laws of the State of New York. IN WITNESS WHEREOF, Genesee has executed this Guaranty as of the date first written above. THE GENESEE BREWING COMPANY, INC. By: /s/ Mark W. Leunig ------------------------------- Name: Mark W. Leunig Title: Vice President ACCEPTED AND AGREED: BOSTON BREWING COMPANY, INC. D/B/A THE BOSTON BEER COMPANY, FOR ITSELF AND AS THE SOLE GENERAL PARTNER OF BOSTON BEER COMPANY LIMITED PARTNERSHIP By: /s/ Richard P. Lindsay --------------------------------- Name: Richard P. Lindsay Title: Vice President EX-10.10 11 l85770aex10-10.txt EXHIBIT 10-10 Page 194 of 272 EXHIBIT 10-10 ------------- INDEMNIFICATION AGREEMENT ------------------------- This INDEMNIFICATION AGREEMENT is made as of this 15th day of December, 2000 by HIGH FALLS BREWING COMPANY, LLC a New York limited liability company ("HIGH FALLS"), and THE GENESEE BREWING COMPANY, INC., a New York corporation ("GENESEE"). R E C I T A L S : WHEREAS, Genesee and High Falls have entered into an Asset Purchase Agreement dated as of August 29, 2000, as amended by Amendment No. 1 dated as of December 15, 2000, (collectively, the "PURCHASE AGREEMENT"), pursuant to which Genesee has agreed to sell to High Falls, and High Falls has agreed to purchase from Genesee, substantially all of its assets necessary to operate Genesee's brewing business. WHEREAS, one of the assets to be transferred under the Purchase Agreement pursuant an Assignment and Assumption Agreement (the "ASSIGNMENT") includes all of Genesee's right, title and interest in and to an Amended and Restated Agreement dated as of April 30, 1997 (the "PRODUCTION AGREEMENT") between Genesee and Boston Brewing Company, Inc., d/b/a The Boston Beer Company, a Massachusetts corporation, for itself and as the sole general partner of Boston Beer Company Limited Partnership, a Massachusetts limited partnership (collectively, "BOSTON BREWING"), pursuant to which Genesee agreed to supply Boston Brewing, and Boston Brewing agreed to purchase from Genesee, on an as-ordered basis, Samuel Adams Boston Lager and certain other Boston Brewing products; WHEREAS, at Genesee's request, Boston Brewing has consented to the transfer of the Production Agreement from Genesee to High Falls pursuant to a certain Consent dated December 15, 2000, which conditions the effectiveness of consent on Genesee's execution and delivery to Boston Brewing of a guaranty in favor of Boston Brewing substantially in the form of Exhibit B attached to the Consent (as such guaranty may be amended or modified from time to time, the "GUARANTY") and High Falls' agreement that a breach by Genesee of its obligations under the Guaranty, including the Required Net Worth covenant, shall constitute a breach of the Production Agreement by High Falls; and WHEREAS, Genesee and High Falls have agreed to enter into this Indemnification Agreement to set forth their respective rights and obligations upon the occurrence of certain events; P R O V I S I O N S : NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows: 1. HIGH FALLS' INDEMNIFICATION OF GENESEE. Subject to the terms and conditions herein, as of and after the closing of the transactions contemplated under the Purchase Agreement, High Falls will defend, indemnify and hold Genesee and its parent corporation and Genesee's successors and assigns harmless from and against any and all Page 195 of 272 losses, liabilities, suits, proceedings, demands, settlements, judgments, fines, assessments, damages, expenses and costs which any of them may suffer or incur at any time (including reasonable attorneys' fees and litigation expenses) arising from or related to Genesee's liability, obligations and duties under the Guaranty, and any other costs, expenses, and obligations actually paid or incurred by Genesee in connection with investigating, litigating, being a witness in, defending, or participating in, or preparing to litigate, defend, be a witness in, or participate in any matter that is the subject of a proceeding involving the Production Agreement whatsoever, whether Genesee is a party thereto or not, including, without limitation, any attorney, accountant and expert fees and court costs. 2. PROCEDURE FOR HIGH FALLS' INDEMNIFICATION. (a) If Boston Brewing makes a claim on Genesee for payments under the Guaranty ("BOSTON BREWING CLAIM"), then before Genesee shall make such payment, it shall first give High Falls an opportunity to challenge and contest Boston Brewing's right to receive such payment pursuant to the terms of the Production Agreement, provided that High Falls shall satisfy Genesee on a continuing basis, in Genesee's sole discretion, that High Falls shall be able to promptly satisfy its obligations under Section 1 to pay any and all additional expenses, costs and interest which Genesee expects to incur under the Guaranty if High Falls is unsuccessful in any such challenge or contest. (b) Promptly after receipt by Genesee of a Boston Brewing Claim, or the commencement of a legal action to pursue any such claim, Genesee shall give written notice to High Falls of the commencement of such claim; provided, however, that the failure of Genesee to give notice as provided herein shall not relieve High Falls of its obligations under Section 1, except to the extent that High Falls is actually and materially prejudiced by such failure to give notice. (c) High Falls shall be entitled to participate in any legal claim brought against Genesee for which High Falls has indemnification and hold harmless obligations hereunder, and, to the extent that it may wish, to assume the defense thereof, with counsel reasonably satisfactory to Genesee; provided, however, that Genesee may, at its own expense, retain separate counsel to participate in such defense. Notwithstanding the foregoing, in any action or proceeding in which both High Falls and Genesee is, or is reasonably likely to become, a party, Genesee shall have the right to employ separate counsel at High Falls' expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to Genesee, (i) there are or may be legal defenses available to Genesee that are different from or additional to those available to High Falls or (ii) any conflict or potential conflict exists between High Falls and Genesee that would make such separate representation advisable; provided, however, that in no event shall High Falls be required to pay fees and expenses hereunder for more than one firm of attorneys representing Genesee (together, if appropriate, with one firm of local counsel per jurisdiction) in any one legal action or group of related legal actions. High Falls shall not be liable for any payment to Boston Brewing or for any settlement of any action or proceeding effected without its written consent, which consent shall not be unreasonably withheld. High Falls shall not, without the consent of Genesee, which consent shall not be unreasonably Page 196 of 272 withheld, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by Boston Brewing to Genesee of a release from all liability in respect to such claim or litigation, or which requires action other than the payment of money by High Falls. 3. HIGH FALLS' PAYMENT TERMS. (a) The indemnification and other payments due by Genesee hereunder (other than any such payment due as a result of a refund payment made by Genesee under Section 9(c) of the Production Agreement with respect to monies or amounts funded, paid or provided by Boston Brewing for any change parts, modifications or new equipment for Genesee's production facilities, including, without limitation, Genesee's No. 2 line (a "REFUNDING OBLIGATION Payment")) shall be made by periodic payments of the amount thereof as and when bills are delivered by Genesee to High Falls for amounts paid by Genesee to Boston Brewing or when liabilities or indemnifiable losses are incurred, and written notice thereof is given to High Falls. Interest shall accrue on all unpaid amounts hereunder at 12% per annum. (b) If Genesee makes a Refunding Obligation Payment, then the indemnity payment from High Falls to Genesee (the "REFUNDING OBLIGATION INDEMNITY PAYMENT") shall be due on the third (3rd) anniversary of the closing of the transactions contemplated under the Purchase Agreement (the "CLOSING DATE"), unless during the three (3) year period following the Closing Date Genesee's "contract production" from all "Contracting Parties" is less than 2.5 million barrels. In such case, the specified amount of the indemnification payment due from High Falls to Genesee for the Refunding Obligation Payment shall be one-third on the third (3rd) anniversary of the Closing Date, one-third on the fourth (4th) anniversary of the Closing Date and one-third on the fifth (5th) anniversary of the Closing Date. The Refunding Obligation Indemnity Payment shall be evidenced by a Promissory Note in the form of EXHIBIT A annexed hereto (the "NOTE"), with the blanks properly completed, signed by High Falls and delivered to Genesee. Notwithstanding the foregoing, in the event that Genesee makes a Refunding Obligation Payment and one of the Events of Default specified in the Note occurs, then the Refunding Obligation Indemnity Payment from High Falls to Genesee shall become due and payable immediately. The Note shall constitute an "Obligation" under a certain Security Agreement dated December 15, 2000 and pursuant thereto Genesee shall hold a first priority purchase money perfected security interest in all bottling lines, equipment and capital assets of any kind, title to which are transferred to High Falls (or a subsidiary or affiliate of High Falls) pursuant to the Production Agreement to the extent paid for by Genesee, and all additions, accessions thereof and replacements therefor together with all proceeds The Note shall be further secured by a security interest in all other personal property of Maker. As used herein, "CONTRACT PRODUCTION" means all beverages of any kind produced by High Falls at any facilities and sold to third parties ("CONTRACTING PARTIES") for resale by and under such third party's labels, as measured by barrels shipped. Page 197 of 272 (d) Not more than thirty (30) days after each of the first two anniversaries of the Closing Date, High Falls shall cause to be prepared and delivered to Genesee a certificate executed by an officer of High Falls setting forth the names of all Contracting Parties and the contract production for each of the Contracting Parties during the previous full twelve (12) month period, and the cumulative amount since the Closing Date. Not more than thirty (30) days after the end of each full nine (9), ten (10) and eleven (11) calendar month period following the second (2nd) anniversary of the Closing Date, High Falls shall cause to be prepared and delivered to Genesee a similar certificate setting forth the contract production for each such full nine (9), ten (10) and eleven (11) calendar month period and the cumulative amount since the Closing Date. If requested by Genesee, High Falls shall make available copies of each of the contracts between High Falls and each of the Contracting Parties and all records necessary for Genesee to verify the contents of the officer's certificate. 4. GENESEE'S INDEMNIFICATION OF HIGH FALLS. (a) In the event that High Falls becomes liable to Boston Brewing under the Production Agreement for any damages, losses, liabilities or expenses due to Genesee's breach of its obligations under the Guaranty, including, but not limited to, the Required Net Worth covenant thereunder, then Genesee shall indemnify, defend and hold harmless High Falls from all such obligations, liabilities and expenses, solely to the extent that they arise from and against all losses, liabilities, suits, proceedings, demands, settlements, judgments, fines, assessments, damages, expenses and costs which it may incur solely to the extent of Genesee's breach thereof. In the event that Boston Brewing makes a claim for any damages, losses, liabilities or expenses due to Genesee's breach of the Guaranty, High Falls shall give prompt written notice thereof to Genesee, provided, however, that the failure of High Falls to give notice as provided herein shall not relieve Genesee of its obligations under this Section 4, except to the extent that Genesee is actually and materially required thereby. (b) Genesee shall be entitled to participate in any legal claim brought against High Falls for which Genesee has indemnification and hold harmless obligations hereunder, and, to the extent that it may wish, to assume the defense thereof, with counsel reasonably satisfactory to High Falls; provided, however, that High Falls may, at its own expense, retain separate counsel to participate in such defense. Notwithstanding the foregoing, in any action or proceeding in which both High Falls and Genesee is, or is reasonably likely to become, a party, High Falls shall have the right to employ separate counsel at Genesee's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to High Falls, (i) there are or may be legal defenses available to High Falls that are different from or additional to those available to Genesee or (ii) any conflict or potential conflict exists between High Falls and Genesee that would make such separate representation advisable; provided, however, that in no event shall Genesee be required to pay fees and expenses hereunder for more than one firm of attorneys representing High Falls in any one legal action or group of related legal actions. Genesee shall not be liable for any payment to Boston Brewing or for any settlement of any action or proceeding effected without its written consent, which consent shall not be unreasonably withheld. Genesee shall not, without the consent of High Falls, which consent shall not be Page 198 of 272 unreasonably withheld, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by Boston Brewing to High Falls of a release from all liability in respect to such claim or litigation, or which requires action other than the payment of money by Genesee. 5. REPRESENTATIONS AND WARRANTIES. (a) High Falls represents and warrants to, and agrees with, Genesee as follows: (i) High Falls has the limited liability company power and authority and legal right to execute and deliver this Agreement, perform its obligations hereunder and consummate the transactions therein contemplated. The execution and delivery by High Falls of this Agreement, the performance of its obligations and consummation of the transactions contemplated hereunder have been duly authorized by proper limited liability company proceedings, and this Agreement constitutes the legal, valid and binding obligation of High Falls enforceable against High Falls in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws of general applicability and by the effect of general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law). (ii) The execution, delivery and performance by High Falls of this Agreement are within its corporate powers, have been duly authorized by all necessary corporate action, do not contravene or violate (i) its Articles of Organization or Operating Agreement, (ii) any law, rule or regulation applicable to it, the contravention or violation of which would or could reasonably be expected to have a material adverse effect on High Falls' financial condition, (iii) any restrictions under any material agreement, contract or instrument to which it is a party or by which it or any of its property is bound, the contravention or violation of which would or could reasonably be expected to have a material adverse effect on High Falls' financial condition or (iv) any material order, writ, judgment, award, injunction or decree binding on or affecting it or its property, the contravention or violation of which would or could reasonably be expected to have a material adverse effect on High Falls' financial condition, and do not result in the creation or imposition of any adverse claim on assets of High Falls. (b) Genesee represents and warrants to, and agrees with, High Falls as follows: (i) Genesee has the corporate power and authority and legal right to execute and deliver this Agreement, perform its obligations hereunder and consummate the transactions herein contemplated. The execution and delivery by Genesee of this Agreement, the performance of its obligations and consummation of the transactions contemplated hereunder have been duly authorized by proper corporate proceedings, and this Agreement constitutes the legal, valid and binding obligation of Genesee enforceable against Genesee in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws of general applicability and by Page 199 of 272 the effect of general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law). (ii) The execution, delivery and performance by Genesee of this Agreement are within its corporate powers, have been duly authorized by all necessary corporate action, do not contravene or violate (i) its Certificate of Incorporation or By-Laws, (ii) any law, rule or regulation applicable to it, the contravention or violation of which would or could reasonably be expected to have a material adverse effect on Genesee's financial condition, (iii) any restrictions under any material agreement, contract or instrument to which it is a party or by which it or any of its property is bound, the contravention or violation of which would or could reasonably be expected to have a material adverse effect on Genesee's financial condition or (iv) any material order, writ, judgment, award, injunction or decree binding on or affecting it or its property, the contravention or violation of which would or could reasonably be expected to have a material adverse effect on Genesee's financial condition, and do not result in the creation or imposition of any adverse claim on assets of Genesee's. 6. RIGHTS CUMULATIVE. The indemnification obligation contained in this Agreement shall be in addition to, and shall not apply to, limit or otherwise affect or detract in any way from the rights of Genesee or High Falls contained in the Purchase Agreement or the Assignment. 7. TERMINATION. All obligations of High Falls under this Agreement shall terminate only at such time as all liability of Genesee under the Guaranty is absolutely extinguished, and High Falls shall have fully paid and discharged any obligation to Genesee then accrued hereunder and under the Note. All representations, warranties and payments previously made under this Agreement shall survive the termination hereof. 8. NOTICES. All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be by registered or certified first-class mail, return receipt requested, courier service or personal delivery: (a) If to High Falls: High Falls Brewing Company, LLC, 445 St. Paul Street, Rochester, New York 14605, Attention: Samuel T. Hubbard, Jr., or at such other address as High Falls shall have furnished to Genesee in the manner set forth herein; (b) If to Genesee: Genesee Corporation, P.O. Box 762, Rochester, New York 14603, Attention: Mark Leunig, Chief Administrative Officer, or at such other address as Genesee shall have furnished to High Falls in the manner set forth herein. 9. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon the parties and their respective successors and assigns and shall inure to the benefit of such parties and their respective successors and permitted assigns. No party shall assign any of its rights or delegate any of its duties under this Agreement (by operation of law or otherwise) without the prior written consent of the other party. Any assignment of rights or delegation of duties Page 200 of 272 under this Agreement by any party without the prior written consent of the other party shall be void. 10. COUNTERPARTS. This Indemnification Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes constitute an agreement, binding on both of the parties, notwithstanding that both of the parties hereto are not signatories to the same counterpart. All references herein to this Indemnification Agreement are deemed to refer to all such counterparts. 11. SEVERABILITY. In the event any term, provision, sentence or paragraph of this Indemnification Agreement is declared by a court of competent jurisdiction to be void, such provision, sentence or paragraph shall be deemed severed from the remainder of the Indemnification Agreement and the balance of the Indemnification Agreement shall remain in effect. 12. MISCELLANEOUS. This Agreement is governed by New York law and may not be amended or terminated orally. Any litigation involving this Agreement shall be adjudicated in a court located in Monroe County, New York, to the jurisdiction and venue of which the parties consent. This is the entire agreement between the parties with respect to its subject matter. Any amendments, modifications or changes to this Agreement must be in a writing signed by all parties hereto. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] Page 201 of 272 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above. HIGH FALLS BREWING COMPANY, LLC By: /s/ Samuel T. Hubbard, Jr. ------------------------------- Name: Samuel T. Hubbard, Jr. Title: President and Manager THE GENESEE BREWING COMPANY,INC. By: /s/ Mark W. Leunig ------------------------------- Name: Mark Leunig Title: Vice President Page 202 of 272 EXHIBIT A TO INDEMNIFICATION AGREEMENT -------------------------------------- THIS NOTE IS SUBJECT TO A CERTAIN INTERCREDITOR AGREEMENT DATED DECEMBER 15, 2000 AMONG HIGH FALLS BREWING COMPANY, LLC AND MANUFACTURERS AND TRADERS TRUST COMPANY, CEPHAS CAPITAL PARTNERS, LLP. AND THE GENESEE BREWING COMPANY, INC. AND INDEMNIFICATION AGREEMENT BETWEEN HIGH FALLS BREWING COMPANY, LLC AND THE GENESEE BREWING COMPANY, INC. DATED DECEMBER 15, 2000. PROMISSORY NOTE --------------- $_______________ December 15, 2003 FOR VALUE RECEIVED, HIGH FALLS BREWING COMPANY, LLC, a New York limited liability company with an address at 445 St. Paul Street, Rochester, New York 14605 ("MAKER"), promises to pay to THE GENESEE BREWING COMPANY, INC., a New York Corporation ("PAYEE"), at its office at 445 St. Paul Street, Rochester, New York 14605 or at such other address as may hereafter be specified by Payee, in lawful money of the United States of America, the principal sum of ___________($__________), together with interest thereon at the rate, in the installments and at the times hereinafter provided. This Note is executed pursuant to Section 3 of a certain Indemnification Agreement dated December 15, 2000 ("Indemnification Agreement") (between Maker and Payee relating to an Amended and Restated Agreement dated April 30, 1997 between Payee and Boston Brewing Company, Inc. d/b/a The Boston Beer Company, a Massachusetts corporation, for itself and as the sole general partner of Boston Beer Company Limited Partnership, a Massachusetts limited partnership. This Note constitutes an "OBLIGATION" under a certain Security Agreement dated December 15, 2000 (the "SECURITY AGREEMENT") and pursuant thereto this Note is secured by a first priority perfected purchase money security interest in all bottling lines, equipment and capital assets of any kind, title to which are transferred to High Falls (or a subsidiary or affiliate of High Falls) pursuant to the Production Agreement (as defined in the Indemnification Agreement) to the extent paid for by funds furnished by Payee, and all additions, accessions thereof and replacements therefor and proceeds thereof. This Note is further secured by a security interest in all other personal property of Maker. The foregoing security interest are referred to herein as the "COLLATERAl". Page 203 of 272 1. MATURITY DATE; PRINCIPAL AND INTEREST PAYMENTS; PREPAYMENTS. 1.1 Maturity Date. The outstanding principal balance of this Note plus all accrued and unpaid interest thereon and all other sums due hereunder shall be due and payable in full on or before midnight on December 15, 2003 (the "ORIGINAL MATURITY DATE"), unless payment is extended in accordance with Section 1.3(b) of this Note, in which case, all such sums shall become due and payable on December 15, 2005 (the "EXTENDED MATURITY DATE"). 1.2 Interest Rate. Prior to Acceleration (as defined hereafter), the principal sum outstanding from time to time hereunder shall bear interest at a rate (the "INTEREST RATE") equal to twelve percent (12%) per annum. Upon the occurrence and during the continuance of an Event of Default, Payee may, at its option, increase the Interest Rate by two percent (2%) over the rate which would otherwise apply. 1.3 Payments of Principal and Interest. (a) Maker shall pay accrued interest on a quarterly basis on each January 31, April 30, July 31 and October 31, commencing the first such date that occurs after the date hereof and on each day that principal is paid hereunder. (b) Notwithstanding Section 1.1 and provided no Event of Default has occurred and is continuing hereunder, if as of the Original Maturity Date, the conditions relating to "contract production" set forth in Section 3(b) of the Indemnification Agreement exist such that under the terms thereof the principal amount due on the Original Maturity Date is reduced to one-third (1/3) of what would have been due but for those conditions, then the Original Maturity Date of this Note shall be extended to the Extended Maturity Date, and the outstanding principal hereunder shall be paid in three (3) equal installments, with the first payment due on the Original Maturity Date, the second payment due on December 15, 2004 and the third payment shall be due on the Extended Maturity Date. 1.4 Time and Manner of Payments. (a) All payments (including prepayments) to be made in respect of principal, interest or other amounts due from Maker hereunder shall be made to Payee in United States dollars in funds immediately available at Payee's office set forth in the caption of this Note or as otherwise specified by Payee, without set-off, counterclaim or other deduction of any nature., except as hereafter set forth. Maker shall have a right to offset against any installments of principal of, or interest due under, this Note, to the extent and in the manner (including payments into escrow and final judgments) provided in the Asset Purchase Agreement dated August 29, 2000, as amended by Amendment No. 1 dated December 15, 2000, with respect to indemnification payments due under the Indemnification Agreement. Maker acknowledges that it shall have no other right of offset of any kind under this Note. (b) All payments hereunder shall be applied in the following order of priority: costs, expenses, accrued interest and thereafter to the reduction of principal. After payment of the foregoing, all prepayments of any kind shall be applied to the extent of Page 204 of 272 available proceeds to the principal installments payable hereunder in the inverse order of maturity. All prepayments of any kind shall be accompanied by all accrued interest due on the prepaid principal at the time of prepayment. (c) All interest shall be payable in arrears. Interest hereon shall be calculated on the basis of a three hundred sixty (360) day year applied to the actual number of days elapsed. All payments of interest and principal shall be payable in lawful currency of the United States of America. 1.5 Prepayments. Subject to the terms of the Intercreditor Agreement referred to below, this Note may be prepaid in whole or in part at any time prior to the Maturity Date without prior notice to Payee, without penalty or premium. Any partial prepayments shall be applied to installments of principal last falling due. No partial prepayment shall postpone or interrupt payments of interest or the payment of the remaining principal balance, all of which shall continue to be due and payable at the time and in the manner set forth above. 2. REPRESENTATIONS AND WARRANTIES. Maker represents and warrants to Payee that: (a) Maker's execution and delivery of this Note and the enforceability against Maker of the transactions hereby contemplated have been duly authorized by all requisite limited liability company action; (b) this Note has been duly and validly executed and delivered by Maker and constitutes Maker's legal, valid and binding obligation; and (c) the execution and delivery of this Note by Maker does not, and the performance by it of the transactions hereby contemplated will not result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under its Articles of Organization or Operating Agreement or any terms, conditions or provisions of any note, debenture, security agreement, lien, mortgage or other agreement, instrument or obligation, oral or written, to which Maker is a party (whether as an original party or as an assignee or successor) or by which it or any of its properties is or will be bound. 3. INTERCREDITOR AGREEMENT. This Note and the rights of Payee hereunder are subject to an Intercreditor Agreement by and among Payee, Manufacturers and Traders Trust Company ("M&T BANK") and Cephas Capital Partners, L.P. ("CEPHAS") (the "INTERCREDITOR AGREEMENT") and such other creditors of Maker as the three named creditors may determine to make a party to such Intercreditor Agreement. 4. EVENTS OF DEFAULT. Each of the following shall constitute an event of default (each, an "EVENT OF DEFAULT") hereunder: Page 205 of 272 4.1 Payment Failure. If Maker fails to make any payment of any installment of interest and/or principal hereunder or any other sum due hereunder within ten (10) days after such payment is due. 4.2 Failure to Perform, Etc. Any representation or warranty made or deemed made by Maker herein or in the Intercreditor Agreement shall prove to have been incorrect, incomplete or misleading in any material respect on or as of the date made or deemed made. 4.3 Bankruptcy. If any proceeding under the Bankruptcy Code or any law of the United States or of any state relating to insolvency, receivership, or debt adjustment is instituted by Maker or any guarantor of this Note (a "Guarantor"), or if any such proceeding is instituted against Maker or any Guarantor and is consented to by the respondent or an order for relief shall be entered in such proceeding or such proceeding shall remain undismissed for sixty (60) days, or if a trustee or receiver is appointed for any substantial part of Maker's or any Guarantor's property and such appointment remains undismissed for sixty (60) days, or if Maker or any Guarantor makes an assignment for the benefit of creditors, admits in writing its inability to pay debts generally as they become due or becomes insolvent. 4.4 Cross-Default. Maker shall (i) fail to pay any debt for borrowed money of Maker (including but not limited to Manufacturers and Traders Trust Company, Cephas Capital, L.P., financing provided by Maker pursuant to the Asset Purchase Agreement by and between Payee and Maker dated August 29, 2000, as amended by Amendment No 1 thereto, and certain investor notes issued by Maker pursuant to the Maker's Offering Summary dated September 20, 2000 and Recission Offer dated December 8, 2000 (the "INVESTOR NOTES")), or any interest or premium thereon, when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise); (ii) fail to perform or observe any term, covenant, or condition on its part to be performed or observed under any agreement or instrument relating to any such debt when required to be performed or observed, if the effect of such failure to perform or observe is to accelerate, or to permit the acceleration after the giving of notice or passage of time, or both, of the maturity of such debt, whether or not such failure to perform or observe shall be waived by the holder of such debt, or any such debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; (iii) materially breach the Asset Purchase Agreement; or (iv) fail to perform or observe any material term, covenant or agreement set forth in any agreement or instrument executed by Maker with or in favor of Payee other than in the Asset Purchase Agreement and other than those items referred to above in this Section 4.4, which failure is not cured within thirty (30) days after receipt of notice from Payee. 4.5 Judgment. A final judgment or order for the payment of money in excess of $100,000 shall be rendered against the Maker or any Guarantor and such judgment or order shall continue unsatisfied, in effect and unstayed for a period of thirty (30) consecutive days. Page 206 of 272 4.6 Discontinuance of Business. Maker's failure to conduct business in the ordinary course, dissolution or termination of existence. 4.7 Change of Control. The occurrence of a Change of Control. As used herein a "CHANGE OF CONTROL" means a change of control of the Maker of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act, whether or not the Maker is then subject to such reporting requirement; provided, that, without limitation, such a Change of Control shall be deemed to have occurred if: (i) any "person" (as defined in Sections 13(d) and 14(d) of the Exchange Act) or "group" (as defined in Section 13(d) of the Exchange Act) other than the Management Group is or becomes the "beneficial owner" (as defined in Rule 13(d)(3) of the Exchange Act), directly or indirectly, of securities of Maker representing 30% or more of the combined voting power of Maker's then outstanding securities in the election of Managers or with respect to the sale or disposition by Maker of its assets or the dissolution of Maker ("VOTING power"); (ii) the members of the Maker approve a merger or consolidation of the Maker with any other limited liability company or corporation, other than a merger or consolidation which would result in the voting securities of the Maker outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 70% of the combined voting power of the voting securities of the Maker or such surviving entity outstanding immediately after such merger or consolidation; (iii) if any recapitalization event occurs as a result of which the holders of voting securities of the Maker outstanding immediately prior thereto do not continue to hold at least 70% of the combined voting power of the voting securities of the Maker immediately after such recapitalization event; (iv) the members of the Maker approve a plan of complete liquidation of the Maker or an agreement for the sale or disposition by the Maker of all or substantially all of the Maker's assets. As used herein, "MANAGEMENT GROUP" means Samuel T. Hubbard, Jr., John B. Henderson, Gary C. Geminn and Howard R. Jacobson. 4.8 Guarantees. Any guaranty shall at any time after its executed and delivery for any reason cease to be in full force and effect or shall be declared null and voice, or the validity or enforceability thereof shall be contested by any Guarantor, or any Guarantor shall deny it has any further liability or obligation under, or shall fail to perform its obligations under the Security Agreement. 4.9 Security Agreement. The Security Agreement shall at any time after its execution and delivery and for any reason cease (a) to create a valid and perfected Page 207 of 272 security interest in and to the property purported to be subject to such Security Agreement, except as provided in the Intercreditor Agreement; or (b) to be in full force and effect or shall be declared null and void, or the validity or enforceability thereof shall be contested by Maker or Maker shall deny it has any further liability or obligation under the Security Agreement, or Maker shall fail to perform in any material respect any of its obligations under the Security Agreement. 5. REMEDIES. Upon the occurrence of any Event of Default hereunder, the entire unpaid principal balance of this Note, together with all accrued and unpaid interest thereon and all other sums owing hereunder shall, at the option of the holder hereof, become immediately due and payable (an "ACCELERATION"), without presentation, demand or further action of any kind, and Payee may forthwith exercise, singly, concurrently, successively or otherwise, any and all rights and remedies available to Payee hereunder. The failure of the holder hereof to accelerate the outstanding principal balance of this Note upon the occurrence of an Event of Default hereunder shall not constitute a waiver of such default or of the right to accelerate this Note at any time thereafter so long as the Event of Default remains uncured. If Payee retains the services of counsel in order to enforce any remedy available to Payee hereunder, all reasonable attorneys' fees which are actually incurred by Payee shall be payable upon demand. Upon the occurrence and continuation of any one or more Events of Default, and whether or not the Payee shall have accelerated the maturity of this Note, the Payee may proceed to protect and enforce its rights by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Note or any instrument pursuant to which the obligations to the Payee are evidenced, including as permitted by applicable law the obtaining of the ex parte appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of the Payee. No remedy herein conferred upon the Payee or the holder of this Note is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of law. 6. INVESTOR NOTES. Maker shall not agree to any amendment to its subordinated Investor Notes. 7. RESTRICTED PAYMENTS. Maker shall not declare or pay any dividends, other than reasonable "tax distributions" sufficient to cover the members' tax liabilities associated with their membership interests in Maker to fund actual tax obligations; or pay more than $200,000 per year to, purchase, redeem, retire, or otherwise acquire for value any of its equity interests now or hereafter outstanding, or make any distribution of assets to its members or other holders of equity securities issued by Maker; or allocate or otherwise set apart any sum for the payment of any dividend or distribution on, or for the purchase, redemption, or retirement of any membership interest, whether in income, distributions, capital or otherwise; or make any other distribution by reduction of capital or otherwise in respect of any membership interest. 8. FINANCIAL STATEMENTS. Maker will furnish to Payee: Page 208 of 272 (i) As soon as available and in any event within one hundred twenty (120) days after the end of Maker's fiscal year ending on or after December 31, 2001, consolidated and consolidating balance sheets of Maker and its subsidiaries as of the end of such Fiscal Year, consolidated and consolidating statements of income and retained earnings of Maker and its Subsidiaries for such Fiscal Year, and consolidated and consolidating statements of changes in financial position of Maker and its subsidiaries for such Fiscal Year, all in reasonable detail and stating in comparative form the respective figures for the corresponding dates and period in the prior fiscal year or in the Pro Forma Financial Statements, as the case may be, all prepared in accordance with GAAP consistently applied and as to the consolidated statements accompanied by an opinion thereon acceptable to the Payee by Arthur Anderson & Co. or other independent accountants acceptable to the Payee; (ii) As soon as available and in any event within one hundred twenty (120) days after the end of Fiscal Year 2000, internally prepared and certified consolidated and consolidating balance sheets of Maker and its subsidiaries as of the end of such fiscal year, consolidated and consolidating statements of income and retained earnings of Maker and its subsidiaries for such fiscal year, and consolidated and consolidating statements of changes in financial position of Maker and its subsidiaries for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the corresponding dates and period in the prior fiscal year or in the Pro Forma Financial Statements, as the case may be, all prepared in accordance with GAAP consistently applied. (iii) As soon as available and in any event within twenty-five (25) days after the end of March 31, June 30, September 30 and December 31 of each Fiscal Years , consolidated and individual balance sheets of Maker and its Subsidiaries as of the end of the three month period then ended and the period to date then ended of the then current fiscal year, consolidated and individual statements of income and retained earnings of Maker and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such month, and consolidated and individual statements of changes in financial position of Maker and its Subsidiaries for the portion of the fiscal year ended with the last day of such month, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the previous fiscal year and with the Pro Forma Financial Statements and all prepared in accordance with GAAP consistently applied and certified, to the best of his knowledge, by the chief financial officer of Maker (subject to year-end adjustments); 9. INTEREST LIMITATIONS. Nothing herein contained nor any transaction related hereto shall be construed or shall operate either presently or prospectively to require Maker to pay interest at a rate greater than is now lawful in such case to contract for, but shall require payment of interest only to the interest paid in excess of the lawful rate shall be refunded to Maker. 10. SEVERABILITY. In the event that for any reason one or more of the provisions of this Note or their application to any person or circumstance shall be held to be invalid, illegal or unenforceable in any respect or to any extent, such provisions shall, to such extent, be held for naught as though not herein contained but shall nevertheless remain valid, legal Page 209 of 272 and enforceable in all such other respects and to such extent as may be permissible. In addition, any such invalidity, illegality or unenforceability shall not affect any other provisions of this Note, but this Note shall be construed as if such invalid, illegal or unenforceable provisions had never been contained herein. 11. SUCCESSORS AND ASSIGNS. This Note inures to the benefit of Payee, its successors and assigns, and is binding upon Maker, its successors and assigns, provided that any successor or assign of the Payee of this Note first executes a written undertaking agreeing to be bound by all of the provisions of the Intercreditor Agreement. The words "Payee" and "Maker" whenever used herein shall be deemed and construed to include such respective successors and assigns. 12. NOTICES. All notices required to be given to any of the parties hereunder shall be in writing and shall be deemed to have been sufficiently given for all purposes when given in accordance with the terms and conditions of the Purchase Agreement. 13. CAPTIONS. The captions or headings of the sections in this Note are for convenience only and shall not control or affect the meaning or construction of any of the terms or provisions of this Note. 14. GOVERNING LAW; AMENDMENT. This Note shall be governed by and construed in accordance with the laws of the State of New York. This Note may only be amended by an instrument in writing signed by both Maker and Payee. IN WITNESS WHEREOF, Maker, intending to be legally bound hereby, has duly executed this Note, under seal, on the date and year first above written. MAKER: HIGH FALLS BREWING COMPANY, LLC By: --------------------------------- Name: Samuel T. Hubbard, Jr. Title: President and Manager EX-10.11 12 l85770aex10-11.txt EXHIBIT 10-11 Page 210 of 272 EXHIBIT 10-11 ------------- MANAGEMENT SEPARATION AGREEMENT ------------------------------- This MANAGEMENT SEPARATION AGREEMENT (this "AGREEMENT") is made as of the 15th day of December, 2000 by and among between GENESEE CORPORATION, a New York corporation ("GENESEE"), THE GENESEE BREWING COMPANY, INC., a New York corporation (the "BREWERY" and, together with Genesee, the "COMPANY"), and SAMUEL T. HUBBARD, JR. (the "EMPLOYEE"). W I T N E S S E T H : WHEREAS, Employee has been employed by the Company pursuant to an Employment Agreement, effective as of June 18, 1999 (the "EMPLOYMENT AGREEMENT"); and WHEREAS, Employee and the Company wish to terminate such employment on the terms and conditions set forth below; NOW, THEREFORE, in consideration of the premises and of the mutual agreements set forth herein, the parties agree as follows: 1. DEFINED TERMS. All capitalized terms not otherwise defined herein shall have the same respective meanings as in the Employment Agreement. 2. RESIGNATIONS; PAYMENTS. (a) Effective as of the date hereof (the "EFFECTIVE DATE") Employee resigns as an executive employee of the Company and from any and all other positions, titles, duties, authorities and responsibilities arising out of, or relating to, his individual employment with the Company, except as may be set forth in a certain Management Agreement of even date herewith between the Brewery and Monroe Brewing Co., LLC a/k/a High Falls Brewing Company, LLC (the "Management Agreement"). (b) On the Effective Date, the Company shall pay to Employee, in a lump sum, two hundred twenty-five thousand dollars ($225,000). (c) Within ten (10) business days following Genesee's sale of substantially all of the assets of Ontario Foods, Inc. or of a majority of the outstanding stock of Ontario Foods, Inc. ("ONTARIO FOODS SALE"), the Company shall pay to Employee, in a lump sum, an additional two hundred twenty-five thousand dollars ($225,000), provided that from the Effective Date until the consummation of the Ontario Foods Sale, upon the request of Genesee, the Employee provides such reasonable assistance to Genesee as it may Page 211 of 272 request to consummate the Ontario Foods Sale. "Reasonable assistance" shall mean the following: (i) Acting as an adviser with respect to and assisting in negotiations with prospective purchasers of Ontario Foods; (ii) Analyzing purchase offers for Ontario Foods; (iii) Assisting in the preparation of materials promoting the sale of Ontario Foods; (iv) Advising and consulting with investment bankers and other professional advisors with respect to any proposed terms of sale for Ontario Foods; and (v) Provide executive oversight of Ontario Foods' operations. Except as otherwise agreed, these services shall be performed in Monroe and Ontario Counties, New York, shall be at the reasonable convenience and availability of Employee, shall generally not average more than eight (8) hours per week during Employee's normal working hours nor more than four hundred (400) hours per year in the aggregate, and shall not be required of Employee beyond April 30, 2002. If Ontario Foods' business (assets or stock) have not been sold by April 30, 2002, then the final $225,000 payment shall be reduced to $175,000 and shall be due and payable on or before May 10, 2002. (d) After the expiration of a certain Management Agreement of even date between itself and High Falls Brewing Company, LLC or any renewal thereof, the Company shall pay the additional amount of $7,500 per month to High Falls Brewing Company, LLC for Employee's services if requested by the Company. (e) The Company agrees to pay to the Employee on the Effective Date all sums due to Employee under Sections 5(d) of the Employment Agreement (including his prorated profit sharing bonus for the Company's fiscal year 2001), an itemized list of which is attached to this Agreement as EXHIBIT A. The payments due under this Section 2 shall be subject to deductions for any federal, state and local income and payroll taxes which the Company deems to be required under applicable law. (f) In consideration of the payments made, or to be made by the Company hereunder and the amendment and modification to the Employee's Stock Option Agreement set forth in Section 3 of this Agreement, the Employee waives any and all claims for any other compensation under the Employment Agreement and agrees that he shall have no further rights thereunder or to any other compensation of any kind from the Company. (g) Each of the Company and the Employee agrees that the other has performed in full its/his obligations under the Employment Agreement. (h) The Employee waives any claims under the Workers Adjustment and Retaining Act of 1988 as amended. Page 212 of 272 3. OPTIONS. Pursuant to Section 5(c) of the Employment Agreement, Genesee granted to the Employee options to purchase 62,222 shares of Class B common stock of Genesee (the "OPTIONS") which vested, or were to vest, upon the occurrence of certain events. Genesee and the Employee entered into a Stock Option Agreement dated June 18, 1999 (the "OPTION AGREEMENT") to evidence the Options. Notwithstanding anything in the Employment Agreement or the Option Agreement to the contrary: (a) all of the Options shall become fully vested as of the Effective Date; and (b) the exercise period for all of the Options shall continue after the Effective Date through and including the first anniversary of the Effective Date. At 5:00 p.m. on the first anniversary of the Effective Date, all previously unexercised Options held by the Employee shall automatically expire and be of no further force or effect. The foregoing shall be an amendment and modification to the Option Agreement. 4. CONFIRMATION AND ACKNOWLEDGEMENT OF CERTAIN EMPLOYMENT AGREEMENT PROVISIONS. (a) The Company agrees and confirms that: (i) the Employee's participation in Monroe Brewing Company, LLC ("MONROE") is with the Company's consent and is not a violation of Section 8(a) of the Employment Agreement; (ii) disclosures concerning the Brewery made by the Employee to Monroe were with the Company's consent and are not in violation of Section 8(b) of the Employment Agreement; and (iii) any solicitation of employees of the Brewery made by the Employee were with the consent of the Company and are not in violation of Section 8(c)of the Employment Agreement. (b) The Employee acknowledges and agrees that, except as specified in subsection 4(a) above, all provisions of Section 7 of the Employment Agreement are and shall remain in full force and effect. 5. RELEASE. (a) For purposes of this Agreement, (i) the "COMPANY" includes all of the current and former subsidiaries, parents and affiliates of Genesee and the Brewery and all of their respective current and former officers, directors, employees, agents and attorneys, and (ii) "EMPLOYEE " includes Employee and all of his heirs, executors, administrators, successors and assigns. (b) For and in consideration of the sum of TEN DOLLARS ($10.00) and the agreements of the Company contained in this Agreement, and other good and valuable consideration received from the Company hereunder, the receipt and sufficiency of which is acknowledged, Employee hereby releases and discharges the Company from all actions, Page 213 of 272 causes of action, obligations, liabilities, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, claims and demands whatsoever, in law or equity (collectively, "CLAIMS"), which Employee ever had, now has or hereafter can, shall or may have against Company for, upon, or by reason of any matter, cause or thing whatsoever from the beginning of the world to the date of this Agreement (the "RELEASE"), including any matter, cause or thing arising out of his employment by the Company pursuant to the Employment Agreement or otherwise or the termination of such employment, whether or not Employee now knows of such Claims; provided however, that the foregoing Release shall not apply to any Claims arising out of or based on this Agreement or any Claims for indemnification under the Company's Certificate of Incorporation, as amended, or By-Laws or under any Indemnification Agreement between Company and Employee or under any so-called Directors and Officers Liability Policy. The Release contemplated in this Section 4(b) covers any Equal Employment Opportunity claims Employee ever had, now has or hereafter can, shall or may have, including, but not limited to, any federal, state, local or administrative claims arising under the following: 1. Civil Rights Acts of 1866, 1870 and 1871; 2. Equal Pay Act of 1963; 3. Title VII of the Civil Rights Act of 1964, as amended; 4. The Civil Rights Act of 1968; 5. Rehabilitation Act of 1973; 6. Vietnam-Era Veterans' Readjustment Assistance Act of 1974; 7. Veteran's Reemployment Rights Act; 8. Immigration Reform and Control Act; 9. Americans with Disabilities Act of 1990; 10. Civil Rights Act of 199 1; 11. Employee Retirement Income Security Act of 1974; 12. The Family and Medical Leave Act of 1993; 13. The New York State Human Rights Law; 14. New York Civil Rights Law, Section 47 et 5gq. regarding rights of persons with disabilities; 15. New York Civil Rights Law, Article 4-C, Section 48 et seg. regarding persons with certain genetic disorders; 16. New York Labor Law Section 201-d regarding outside activities; 17. New York Civil Rights Law, Article 4, Section 40-c to 45; and 18. any applicable federal, state, or local anti-discrimination or equal employment opportunity statutes or regulations. (c) Without limiting the foregoing, it is understood and agreed that: (i) the Release is not limited by any territorial limitation of any kind and applies in all jurisdictions whatsoever; (ii) the full terms and conditions of the Release and the actual amount paid by Company in connection with this Agreement are not to be disclosed to anyone except Company's or Employee's respective attorneys, and are to be kept and will Page 214 of 272 remain confidential by Company and Employee except as otherwise required by law or by a court of competent jurisdiction; (iii) the Release may not be changed orally; and (iv) the Release extends to all Claims, whether presently known or unknown, whether presently existing or non-existing, except as otherwise provided herein. (d) Employee's execution of the Release shall not release, discharge or otherwise affect the payment or performance obligations of Company set forth in this Agreement. Employee shall not commence, maintain or participate in any action or proceeding against Company regarding any act or omission that precedes his execution of the Release, either on his own behalf or on behalf of any other person or class. (e) The Release is not made in connection with an exit incentive or other employee termination program offered to a group or class of employees. Employee is not entitled to any future employment with Company. Employee acknowledges that he has been advised that he has as much time as he needs to review the Release and has been advised to consult with an attorney before signing this Agreement. 6. ASSISTANCE IN LITIGATION. At all times hereafter, upon reasonable notice, Employee, at the Company's expense, shall furnish such information and proper assistance to the company as it may reasonably request in connection with any administrative, court or other legal proceeding in which the Company is, or may become a party (other than any litigation between Employee and the Company) 7. CONSENT TO JURISDICTION; SERVICE OF PROCESS. Each party irrevocably submits to the jurisdiction and venue of the federal and state courts sitting in Monroe County, New York, for the enforcement of the Agreement, and waives any objection it may have with respect to the jurisdiction of such courts or the inconvenience of such forums or venues. Service may be made by registered or certified mail or by personal delivery, in any case return receipt requested. Nothing herein shall be deemed to affect any right to serve any such demand, notice or process in any other manner permitted under applicable law. 8. ENTIRE AGREEMENT; AMENDMENTS; NO WAIVERS. This Agreement sets forth the entire understanding of the parties with respect to its subject matter and merges and supersedes all prior and contemporaneous understandings of the parties with respect to its subject matter. No provision of this Agreement may be waived or modified, in whole or in part, except by a writing signed by each of the parties. Failure of any party to enforce any provision of this Agreement shall not be construed as a waiver of its rights under such or any other provision. No waiver of any provision of this Agreement in any instance shall be deemed to be a waiver of the same or any other provision in any other instance. 9. COMMUNICATIONS. All notices, consents and other communications given under this Agreement shall be in writing and shall be deemed to have been duly given (a) when delivered by hand or by Federal Express or a similar overnight courier to, (b) five (5) days after being deposited in any United States post office enclosed in a postage prepaid registered or certified mail envelope addressed to, or (c) when successfully transmitted by Page 215 of 272 facsimile (with a confirming copy of such communication to be sent as provided in (a) or (b) above) to, the party for whom intended, at the address or facsimile number for such party set forth below, or to such other address or facsimile number as may be furnished by such party by notice in the manner provided herein; provided, however, that any notice of change of address or facsimile number shall be effective only upon receipt. If to Company: Genesee Corporation The Genesee Brewing Company, Inc. 445 St. Paul Street Rochester, New York 14605 with a copy to: Woods Oviatt Gilman LLP 700 Crossroads Building Two State Street Rochester, New York 14614 Attention: Harry P. Messina, Jr., Esq. Telecopier No.: (716) 454-3968 If to Employee: To the address set opposite his signature below 10. SUCCESSORS AND ASSIGNS. This Agreement shall be binding on, enforceable against and inure to the benefit of, the parties and their respective successors and permitted assigns, and nothing herein is intended to confer any right, remedy or benefit upon any other person. No party may assign its rights or delegate its obligations under this Agreement without the express written consent of the other parties; provided, however, that on the transfer of all or substantially all of the assets and business of the Company to a liquidating trust or similar entity for the benefit of its shareholders, the managers of said trust or entity shall be fully authorized to enforce this Agreement in the same manner and to the same extent as though such managers were the Company, without the need for any consent from Employee. 11. GOVERNING LAW. This Agreement shall in all respects be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and fully to be performed in such state, without giving effect to conflicts of law principles. Page 216 of 272 12. SEVERABILITY AND SAVINGS CLAUSE. If any provision of this Agreement is held to be invalid or unenforceable by any court or tribunal of competent jurisdiction, the remainder of this Agreement shall not be affected thereby, and such provision shall be carried out as nearly as possible according to its original terms and intent to eliminate such invalidity or unenforceability. In this regard, the parties agree that the provisions of Section 4 (incorporating by reference Section 7 of the Employment Agreement) including, without limitation, the scope of the territorial and time restrictions, are reasonable and necessary to protect and preserve Company's legitimate interests. If such provisions of Section 4 are held by a court of competent jurisdiction to be in any respect unreasonable, then such court may reduce the territory or time to which it pertains or otherwise modify such provisions to the extent necessary to render such provisions reasonable and enforceable. 13. COUNTERPARTS. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 14. CONSTRUCTION. Headings used in this Agreement are for convenience only and shall not be used in the interpretation of this Agreement. References to Sections are to the sections of this Agreement. As used herein, the singular includes the plural and the masculine, feminine and neuter gender each includes the others where the context so indicates. IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first set forth above. COMPANY: GENESEE CORPORATION By: /s/ Mark W. Leunig -------------------------------- Name: Mark W. Leunig Title: Vice President and Counsel THE GENESEE BREWING COMPANY, INC. By: /s/ Mark W. Leunig --------------------------------- Name: Mark W. Leunig Title: Vice President and Counsel /s/ Samuel T. Hubbard, Jr. EMPLOYEE: ----------------------------------- Name: S. Thomas Hubbard, Jr. Address: --------------------------- ----------------------------------- Page 217 of 272 STATE OF NEW YORK) COUNTY OF MONROE) ss.: On the 15th day of December in the year 2000 before me, the undersigned, a Notary Public in and for said State, personally appeared MARK W. LEUNIG personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument. ------------------------------------- Notary Public STATE OF NEW YORK) COUNTY OF MONROE) ss.: On the 15th day of December in the year 2000 before me, the undersigned, a Notary Public in and for said State, personally appeared S. THOMAS HUBBARD, JR. personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her capacity, and that by his/her signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument. ------------------------------------- Notary Public LIST OF EXHIBITS Exhibit A - Itemized List of Amounts Due Employee under Section 5(d) of the Employment Agreement EX-10.12 13 l85770aex10-12.txt EXHIBIT 10-12 Page 218 of 272 EXHIBIT 10-12 ------------- MANAGEMENT SEPARATION AGREEMENT ------------------------------- This MANAGEMENT SEPARATION AGREEMENT is made as of the 15th day of December, 2000 by and between GENESEE CORPORATION, a New York corporation (the "COMPANY") and the employee of the Company signatory hereto (the "EMPLOYEE"). W I T N E S S E T H : WHEREAS, Employee has been employed by the Company pursuant to an Employment Agreement, dated as of the date indicated beneath Employee's signature at the end of this Agreement (the "EMPLOYMENT AGREEMENT"); and WHEREAS, Employee and the Company wish to terminate such employment on the terms and conditions set forth below; NOW, THEREFORE, in consideration of the premises and of the mutual agreements set forth herein, the parties agree as follows: 1. DEFINED TERMS. All capitalized terms not otherwise defined herein shall have the same respective meanings as in the Employment Agreement. 2. RESIGNATION AND TERMINATION OF EMPLOYMENT. (a) Employee resigns as an executive employee of the Company, and the Company terminates Employee's employment without cause, effective as of the date hereof (the "EFFECTIVE DATE"). (b) The Company agrees to pay to Employee on the Effective Date, in accordance with the Employment Agreement, a lump sum equal to the Annual Base Salary amount indicated beneath the Employee's signature at the end of this Agreement. Employee and the Company agree that such amount constitutes a compromise settlement for the cancellation before the normal expiration date of the Employment Agreement. (c) The Company agrees to pay to the Employee on the Effective Date, in accordance with the Employment Agreement, all sums due to Employee under Section 4 of the Employment Agreement, an itemized list of which is attached to this Agreement as EXHIBIT A. Page 219 of 272 (d) In consideration of the payments made by the Company hereunder, the Employee waives all claims for compensation under the Employment Agreement, including any amounts under Sections 3, 4 and 7 thereof, and agrees that he shall have no further rights thereunder. (e) Each of the Company and the Employee agrees that the other has performed in full its/his obligations under the Employment Agreement. (f) The Employee waives any claims under the Workers Adjustment and Retaining Act of 1988 as amended. 3. OPTIONS. The Company and the Employee agree that the Employee holds and is vested in that number of options granted on September 2, 1999 to purchase shares of Class B common stock of the Company as are set forth at the end of this Agreement next to the Employee's signature. 4. CONFIRMATION AND WAIVER OF CERTAIN EMPLOYMENT AGREEMENT PROVISIONS. (a) The Company agrees that: (i) the Employee's participation in Monroe Brewing Company, LLC ("MONROE") is with the Company's consent and is not a violation of Section 8(a) of the Employment Agreement; (ii) disclosures concerning Genesee Brewing Company, Inc. made by the Employee to Monroe were with the Company's consent and are not in violation of Section 8(b) of the Employment Agreement; (iii) any solicitation of employees of Genesee Brewing Company, Inc. made by the Employee were with the consent of the Company and are not in violation of Section 8(c)of the Employment Agreement. (b) The Employee acknowledges and agrees that, except as specified in subsection 4(a) above, all provisions of Section 8 of the Employment Agreement are and shall remain in full force and effect. 5. RELEASES. (a) For purposes of this Separation Agreement, (i) "the Company" includes all of its current and former subsidiaries, parents and affiliates and all of its current and former officers, directors, employees, agents and attorneys, and (ii) "Employee " includes Employee and all of his heirs, executors, administrators, successors and assigns. (b) For and in consideration of the sum of TEN DOLLARS and the agreements of the Company contained in this Separation Agreement, and other good and Page 220 of 272 valuable consideration received from the Company hereunder, the receipt and sufficiency of which is acknowledged, Employee hereby releases and discharges the Company from all actions, causes of action, obligations, liabilities, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, claims and demands whatsoever, in law or equity (collectively, "CLAIMS"), which Employee ever had, now has or hereafter can, shall or may have against Company for, upon, or by reason of any matter, cause or thing whatsoever from the beginning of the world to the date of this Separation Agreement (the "RELEASE"), including any matter, cause or thing arising out of his employment by the Company pursuant to the Employment Agreement or otherwise or the termination of such employment, whether or not Employee now knows of such Claims; provided however, that the foregoing Release shall not apply to any Claims arising out of or based on this Separation Agreement or any Claims for indemnification under the Company's Certificate of Incorporation, as amended, or By-laws or under any Indemnification Agreement between Company and Employee or under any so-called Directors and Officers Liability Policy. The Release contemplated in this Section 4(b) covers any Equal Employment Opportunity claims Employee ever had, now has or hereafter can, shall or may have, including, but not limited to, any federal, state, local or administrative claims arising under the following: 1. Civil Rights Acts of 1866, 1870 and 1871; 2. Equal Pay Act of 1963; 3. Title VII of the Civil Rights Act of 1964, as amended; 4. The Civil Rights Act of 1968; 5. Rehabilitation Act of 1973; 6. Vietnam-Era Veterans' Readjustment Assistance Act of 1974; 7. Veteran's Reemployment Rights Act; 8. Immigration Reform and Control Act; 9. Americans with Disabilities Act of 1990; 10. Civil Rights Act of 199 1; 11. Employee Retirement Income Security Act of 1974; 12. The Family and Medical Leave Act of 1993; 13. The New York State Human Rights Law; 14. New York Civil Rights Law, Section 47 et 5gq. regarding rights of persons with disabilities; 15. New York Civil Rights Law, Article 4-C, Section 48 et seg. regarding persons with certain genetic disorders; 16. New York Labor Law Section 201-d regarding outside activities; 17. New York Civil Rights Law, Article 4, Section 40-c to 45; and 18. any applicable federal, state, or local anti-discrimination or equal employment opportunity statutes or regulations. (c) Without limiting the foregoing, it is understood and agreed that: (i) the Release is not limited by any territorial limitation of any kind and applies in all jurisdictions whatsoever; (ii) the full terms and conditions of the Release and the actual Page 221 of 272 amount paid by Company in connection with this Separation Agreement are not to be disclosed to anyone except Company's or Employee's respective attorneys, and are to be kept and will remain confidential by Company and Employee except as otherwise required by law or by a court of competent jurisdiction; (iii) the Release may not be changed orally; and (iv) the Release extends to all Claims, whether presently known or unknown, whether presently existing or non-existing, except as otherwise provided herein. (d) Employee's execution of the Release shall not release, discharge or otherwise affect the payment or performance obligations of Company set forth in this Separation Agreement. Employee shall not commence, maintain or participate in any action or proceeding against Company regarding any act or omission that precedes his execution of the Release, either on his own behalf or on behalf of any other person or class. (e) The Release is not made in connection with an exit incentive or other employee termination program offered to a group or class of employees. Employee is not entitled to any future employment with Company. Employee acknowledges that he has been advised that he has as much time as he needs to review the Release and has been advised to consult with an attorney before signing this Separation Agreement. 6. CONSENT TO JURISDICTION; SERVICE OF PROCESS. Each party irrevocably submits to the jurisdiction and venue of the federal and state courts sitting in Monroe County, New York, for the enforcement of the Agreement, and waives any objection it may have with respect to the jurisdiction of such courts or the inconvenience of such forums or venues. Service may be made by registered or certified mail or by personal delivery, in any case return receipt requested. Nothing herein shall be deemed to affect any right to serve any such demand, notice or process in any other manner permitted under applicable law. 7. ENTIRE AGREEMENT; AMENDMENTS; NO WAIVERS. This Separation Agreement sets forth the entire understanding of the parties with respect to its subject matter and merges and supersedes all prior and contemporaneous understandings of the parties with respect to its subject matter. No provision of this Separation Agreement may be waived or modified, in whole or in part, except by a writing signed by each of the parties. Failure of any party to enforce any provision of this Separation Agreement shall not be construed as a waiver of its rights under such or any other provision. No waiver of any provision of this Separation Agreement in any instance shall be deemed to be a waiver of the same or any other provision in any other instance. 8. COMMUNICATIONS. All notices, consents and other communications given under this Separation Agreement shall be in writing and shall be deemed to have been duly given (a) when delivered by hand or by Federal Express or a similar overnight courier to, (b) five days after being deposited in any United States post office enclosed in a postage prepaid registered or certified mail envelope addressed to, or (c) when successfully transmitted by facsimile (with a confirming copy of such communication to be sent as provided in (a) or (b) above) to, the party for whom intended, at the address or facsimile Page 222 of 272 number for such party set forth below, or to such other address or facsimile number as may be furnished by such party by notice in the manner provided herein; provided, however, that any notice of change of address or facsimile number shall be effective only upon receipt. If to Company: Genesee Corporation 445 St. Paul Street Rochester, New York 14605 with a copy to: Woods Oviatt Gilman, LLP 700 Crossroads Building Two State Street Rochester, New York 14614 Attention: Harry P. Messina, Jr., Esq. Telecopier No.: (716) 454-3968 If to Employee: To the address set opposite his signature below 9. SUCCESSORS AND ASSIGNS. This Separation Agreement shall be binding on, enforceable against and inure to the benefit of, the parties and their respective successors and permitted assigns, and nothing herein is intended to confer any right, remedy or benefit upon any other person. No party may assign its rights or delegate its obligations under this Separation Agreement without the express written consent of the other parties; provided, however, that on the transfer of all or substantially all of the assets and business of the Company to a liquidating trust or similar entity for the benefit of its shareholders, the managers of said trust or entity shall be fully authorized to enforce this Agreement in the same manner and to the same extent as though such managers were the Company, without the need for any consent from Employee. 10. GOVERNING LAW. This Separation Agreement shall in all respects be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and fully to be performed in such state, without giving effect to conflicts of law principles. 11. SEVERABILITY AND SAVINGS CLAUSE. If any provision of this Separation Agreement is held to be invalid or unenforceable by any court or tribunal of competent jurisdiction, the remainder of this Separation Agreement shall not be affected thereby, and such provision shall be carried out as nearly as possible according to its original terms and intent to eliminate such invalidity or unenforceability. In this regard, the parties agree that the provisions of Section 4 (incorporating by reference Section 8 of the Employment Page 223 of 272 Agreement) including, without limitation, the scope of the territorial and time restrictions, are reasonable and necessary to protect and preserve Company's legitimate interests. If such provisions of Section 4 are held by a court of competent jurisdiction to be in any respect unreasonable, then such court may reduce the territory or time to which it pertains or otherwise modify such provisions to the extent necessary to render such provisions reasonable and enforceable. 12. COUNTERPARTS. This Separation Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 13. CONSTRUCTION. Headings used in this Separation Agreement are for convenience only and shall not be used in the interpretation of this Separation Agreement. References to Sections are to the sections of this Separation Agreement. As used herein, the singular includes the plural and the masculine, feminine and neuter gender each includes the others where the context so indicates. IN WITNESS WHEREOF, the parties have duly executed this Separation Agreement as of the date first set forth above. Page 224 of 272 COMPANY: GENESEE CORPORATION By: /s/ Mark W. Leunig --------------------------------- Name: Mark Leunig Title: V.P. and Counsel EMPLOYEE: /s/ John B. Henderson ------------------------------------ Name: J. B. Henderson Date of Employment Agreement: 9/13/99 Address: 145 Brookside Drive Rochester, NY 14618 Annual Base Salary Amount: $150,000 Number of Option Shares Vested: 19,556 Exhibit A - Itemized List of Amounts Due Employee under Section 4 of the Employment Agreement STATE OF NEW YORK) COUNTY OF MONROE) ss.: On the 15th day of December in the year 2000 before me, the undersigned, a Notary Public in and for said State, personally appeared Mark W. Leunig, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument. --------------------------------- Notary Public STATE OF NEW YORK) COUNTY OF MONROE) ss.: On the 15th day of December in the year 2000 before me, the undersigned, a Notary Public in and for said State, personally appeared J.B. Henderson, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument. Page 225 of 272 --------------------------------- Notary Public EX-10.13 14 l85770aex10-13.txt EXHIBIT 10-13 Page 226 of 272 EXHIBIT 10-13 ------------- MANAGEMENT SEPARATION AGREEMENT ------------------------------- This MANAGEMENT SEPARATION AGREEMENT is made as of the 15th day of December, 2000 by and between GENESEE CORPORATION, a New York corporation (the "COMPANY") and the employee of the Company signatory hereto (the "EMPLOYEE"). W I T N E S S E T H : WHEREAS, Employee has been employed by the Company pursuant to an Employment Agreement, dated as of the date indicated beneath Employee's signature at the end of this Agreement (the "EMPLOYMENT AGREEMENT"); and WHEREAS, Employee and the Company wish to terminate such employment on the terms and conditions set forth below; NOW, THEREFORE, in consideration of the premises and of the mutual agreements set forth herein, the parties agree as follows: 1. DEFINED TERMS. All capitalized terms not otherwise defined herein shall have the same respective meanings as in the Employment Agreement. 2. RESIGNATION AND TERMINATION OF EMPLOYMENT. (a) Employee resigns as an executive employee of the Company, and the Company terminates Employee's employment without cause, effective as of the date hereof (the "EFFECTIVE DATE"). (b) The Company agrees to pay to Employee on the Effective Date, in accordance with the Employment Agreement, a lump sum equal to the Annual Base Salary amount indicated beneath the Employee's signature at the end of this Agreement. Employee and the Company agree that such amount constitutes a compromise settlement for the cancellation before the normal expiration date of the Employment Agreement. (c) The Company agrees to pay to the Employee on the Effective Date, in accordance with the Employment Agreement, all sums due to Employee under Section 4 of the Employment Agreement, an itemized list of which is attached to this Agreement as EXHIBIT A. (d) In consideration of the payments made by the Company hereunder, the Employee waives all claims for compensation under the Employment Agreement, Page 227 of 272 including any amounts under Sections 3, 4 and 7 thereof, and agrees that he shall have no further rights thereunder. (e) Each of the Company and the Employee agrees that the other has performed in full its/his obligations under the Employment Agreement. (f) The Employee waives any claims under the Workers Adjustment and Retaining Act of 1988 as amended. 3. OPTIONS. The Company and the Employee agree that the Employee holds and is vested in that number of options granted on September 2, 1999 to purchase shares of Class B common stock of the Company as are set forth at the end of this Agreement next to the Employee's signature. 4. CONFIRMATION AND WAIVER OF CERTAIN EMPLOYMENT AGREEMENT PROVISIONS. (a) The Company agrees that: (i) the Employee's participation in Monroe Brewing Company, LLC ("MONROE") is with the Company's consent and is not a violation of Section 8(a) of the Employment Agreement; (ii) disclosures concerning Genesee Brewing Company, Inc. made by the Employee to Monroe were with the Company's consent and are not in violation of Section 8(b) of the Employment Agreement; (iii) any solicitation of employees of Genesee Brewing Company, Inc. made by the Employee were with the consent of the Company and are not in violation of Section 8(c)of the Employment Agreement. (b) The Employee acknowledges and agrees that, except as specified in subsection 4(a) above, all provisions of Section 8 of the Employment Agreement are and shall remain in full force and effect. 5. RELEASES. (a) For purposes of this Separation Agreement, (i) "the Company" includes all of its current and former subsidiaries, parents and affiliates and all of its current and former officers, directors, employees, agents and attorneys, and (ii) "Employee " includes Employee and all of his heirs, executors, administrators, successors and assigns. (b) For and in consideration of the sum of TEN DOLLARS and the agreements of the Company contained in this Separation Agreement, and other good and valuable consideration received from the Company hereunder, the receipt and sufficiency of which is acknowledged, Employee hereby releases and discharges the Company from all Page 228 of 272 actions, causes of action, obligations, liabilities, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, claims and demands whatsoever, in law or equity (collectively, "CLAIMS"), which Employee ever had, now has or hereafter can, shall or may have against Company for, upon, or by reason of any matter, cause or thing whatsoever from the beginning of the world to the date of this Separation Agreement (the "RELEASE"), including any matter, cause or thing arising out of his employment by the Company pursuant to the Employment Agreement or otherwise or the termination of such employment, whether or not Employee now knows of such Claims; provided however, that the foregoing Release shall not apply to any Claims arising out of or based on this Separation Agreement or any Claims for indemnification under the Company's Certificate of Incorporation, as amended, or By-laws or under any Indemnification Agreement between Company and Employee or under any so-called Directors and Officers Liability Policy. The Release contemplated in this Section 4(b) covers any Equal Employment Opportunity claims Employee ever had, now has or hereafter can, shall or may have, including, but not limited to, any federal, state, local or administrative claims arising under the following: 1. Civil Rights Acts of 1866, 1870 and 1871; 2. Equal Pay Act of 1963; 3. Title VII of the Civil Rights Act of 1964, as amended; 4. The Civil Rights Act of 1968; 5. Rehabilitation Act of 1973; 6. Vietnam-Era Veterans' Readjustment Assistance Act of 1974; 7. Veteran's Reemployment Rights Act; 8. Immigration Reform and Control Act; 9. Americans with Disabilities Act of 1990; 10. Civil Rights Act of 199 1; 11. Employee Retirement Income Security Act of 1974; 12. The Family and Medical Leave Act of 1993; 13. The New York State Human Rights Law; 14. New York Civil Rights Law, Section 47 et 5gq. regarding rights of persons with disabilities; 15. New York Civil Rights Law, Article 4-C, Section 48 et seg. regarding persons with certain genetic disorders; 16. New York Labor Law Section 201-d regarding outside activities; 17. New York Civil Rights Law, Article 4, Section 40-c to 45; and 18. any applicable federal, state, or local anti-discrimination or equal employment opportunity statutes or regulations. (c) Without limiting the foregoing, it is understood and agreed that: (i) the Release is not limited by any territorial limitation of any kind and applies in all jurisdictions whatsoever; (ii) the full terms and conditions of the Release and the actual amount paid by Company in connection with this Separation Agreement are not to be disclosed to anyone except Company's or Employee's respective attorneys, and are to be Page 229 of 272 kept and will remain confidential by Company and Employee except as otherwise required by law or by a court of competent jurisdiction; (iii) the Release may not be changed orally; and (iv) the Release extends to all Claims, whether presently known or unknown, whether presently existing or non-existing, except as otherwise provided herein. (d) Employee's execution of the Release shall not release, discharge or otherwise affect the payment or performance obligations of Company set forth in this Separation Agreement. Employee shall not commence, maintain or participate in any action or proceeding against Company regarding any act or omission that precedes his execution of the Release, either on his own behalf or on behalf of any other person or class. (e) The Release is not made in connection with an exit incentive or other employee termination program offered to a group or class of employees. Employee is not entitled to any future employment with Company. Employee acknowledges that he has been advised that he has as much time as he needs to review the Release and has been advised to consult with an attorney before signing this Separation Agreement. 6. CONSENT TO JURISDICTION; SERVICE OF PROCESS. Each party irrevocably submits to the jurisdiction and venue of the federal and state courts sitting in Monroe County, New York, for the enforcement of the Agreement, and waives any objection it may have with respect to the jurisdiction of such courts or the inconvenience of such forums or venues. Service may be made by registered or certified mail or by personal delivery, in any case return receipt requested. Nothing herein shall be deemed to affect any right to serve any such demand, notice or process in any other manner permitted under applicable law. 7. ENTIRE AGREEMENT; AMENDMENTS; NO WAIVERS. This Separation Agreement sets forth the entire understanding of the parties with respect to its subject matter and merges and supersedes all prior and contemporaneous understandings of the parties with respect to its subject matter. No provision of this Separation Agreement may be waived or modified, in whole or in part, except by a writing signed by each of the parties. Failure of any party to enforce any provision of this Separation Agreement shall not be construed as a waiver of its rights under such or any other provision. No waiver of any provision of this Separation Agreement in any instance shall be deemed to be a waiver of the same or any other provision in any other instance. 8. COMMUNICATIONS. All notices, consents and other communications given under this Separation Agreement shall be in writing and shall be deemed to have been duly given (a) when delivered by hand or by Federal Express or a similar overnight courier to, (b) five days after being deposited in any United States post office enclosed in a postage prepaid registered or certified mail envelope addressed to, or (c) when successfully transmitted by facsimile (with a confirming copy of such communication to be sent as provided in (a) or (b) above) to, the party for whom intended, at the address or facsimile number for such party set forth below, or to such other address or facsimile number as may be furnished by such party by notice in the manner provided herein; provided, Page 230 of 272 however, that any notice of change of address or facsimile number shall be effective only upon receipt. If to Company: Genesee Corporation 445 St. Paul Street Rochester, New York 14605 with a copy to: Woods Oviatt Gilman, LLP 700 Crossroads Building Two State Street Rochester, New York 14614 Attention: Harry P. Messina, Jr., Esq. Telecopier No.: (716) 454-3968 Page 231 of 272 If to Employee: To the address set opposite his signature below 9. SUCCESSORS AND ASSIGNS. This Separation Agreement shall be binding on, enforceable against and inure to the benefit of, the parties and their respective successors and permitted assigns, and nothing herein is intended to confer any right, remedy or benefit upon any other person. No party may assign its rights or delegate its obligations under this Separation Agreement without the express written consent of the other parties; provided, however, that on the transfer of all or substantially all of the assets and business of the Company to a liquidating trust or similar entity for the benefit of its shareholders, the managers of said trust or entity shall be fully authorized to enforce this Agreement in the same manner and to the same extent as though such managers were the Company, without the need for any consent from Employee. 10. GOVERNING LAW. This Separation Agreement shall in all respects be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and fully to be performed in such state, without giving effect to conflicts of law principles. 11. SEVERABILITY AND SAVINGS CLAUSE. If any provision of this Separation Agreement is held to be invalid or unenforceable by any court or tribunal of competent jurisdiction, the remainder of this Separation Agreement shall not be affected thereby, and such provision shall be carried out as nearly as possible according to its original terms and intent to eliminate such invalidity or unenforceability. In this regard, the parties agree that the provisions of Section 4 (incorporating by reference Section 8 of the Employment Agreement) including, without limitation, the scope of the territorial and time restrictions, are reasonable and necessary to protect and preserve Company's legitimate interests. If such provisions of Section 4 are held by a court of competent jurisdiction to be in any respect unreasonable, then such court may reduce the territory or time to which it pertains or otherwise modify such provisions to the extent necessary to render such provisions reasonable and enforceable. 12. COUNTERPARTS. This Separation Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 13. CONSTRUCTION. Headings used in this Separation Agreement are for convenience only and shall not be used in the interpretation of this Separation Agreement. References to Sections are to the sections of this Separation Agreement. As used herein, the singular includes the plural and the masculine, feminine and neuter gender each includes the others where the context so indicates. IN WITNESS WHEREOF, the parties have duly executed this Separation Agreement as of the date first set forth above. Page 232 of 272 COMPANY: GENESEE CORPORATION By: /s/ Mark W. Leunig ----------------------------------- Name: Mark Leunig Title: V.P. and Counsel EMPLOYEE: /s/ Gary C. Geminn -------------------------------------- Name: G. C. Geminn Date of Employment Agreement: 9/2/99 Address: 8 Falling Brook Road Fairport, NY 14450 Annual Base Salary Amount: $130,000 Number of Option Shares Vested: 12,589 Exhibit A - Itemized List of Amounts Due Employee under Section 4 of the Employment Agreement STATE OF NEW YORK) COUNTY OF MONROE) ss.: On the 15th day of December in the year 2000 before me, the undersigned, a Notary Public in and for said State, personally appeared Mark W. Leunig, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument. ---------------------------------- Notary Public STATE OF NEW YORK) COUNTY OF MONROE) ss.: On the 15th day of December in the year 2000 before me, the undersigned, a Notary Public in and for said State, personally appeared G.C. Geminn, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument. ---------------------------------- Notary Public Page 233 of 272 EX-10.14 15 l85770aex10-14.txt EXHIBIT 10-14 Page 234 of 272 EXHIBIT 10-14 ------------- PORTFOLIO PURCHASE AGREEMENT ---------------------------- PORTFOLIO PURCHASE AGREEMENT, effective as of September 1, 2000 by and among CHEYENNE LEASING COMPANY, a New York joint venture ("Cheyenne"), GENESEE VENTURES, INC., a New York corporation ("Genesee Ventures"), TAYLOR-BOLANE ASSOCIATES, INC., a New York corporation ("Taylor-Bolane"), GENESEE CORPORATION, a New York corporation ("Genesee"), ICON CHEYENNE LLC, a Delaware limited liability company ("Purchaser") and each of the members of Purchaser as set forth on the signature page hereto, each a Delaware limited partnership (individually, a "Member" and, collectively, the "Members"). With respect to the particular Assets listed on the Schedule of Assets as being owned by it, each of Cheyenne and Genesee Ventures is sometimes individually referred to herein as the "Seller". Cheyenne, Genesee Ventures (in its capacity as a joint venture partner of Cheyenne and not as a Seller) and Taylor-Bolane are sometimes collectively referred to herein as the "Sale Parties". W I T N E S S E T H: WHEREAS, Seller desires to sell or cause the sale to Purchaser, and Purchaser desires to purchase from Seller, certain assets and interests pursuant to the terms of this Agreement; WHEREAS, Genesee Ventures and Taylor-Bolane are the joint venture partners of Cheyenne, and, in such capacities, are joining in this Agreement for the purpose of being directly obligated by the provisions of Articles 5, 6, 7, 11, 13 and 14 and Sections 3.5 and 3.6(a) hereof, as applicable; WHEREAS, Genesee is the parent corporation of Genesee Ventures and the owner of a majority or more of Cheyenne, and is joining this Agreement for the purpose of being directly obligated by the provisions of Articles 8, 11, 13 and 14 and Sections 3.5 and 3.6(a) hereof, as applicable; and WHEREAS, the Members are all of the members of Purchaser and are joining this Agreement for the purpose of being directly obligated by the provisions of Articles 10, 13 and 14 and Section 3.6(b) hereof, as applicable. NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein and other valuable consideration, and subject to the terms and conditions herein, the parties hereto agree as follows: Page 235 of 272 DEFINITIONS ----------- The parties agree that the following terms used in this Agreement shall have the following meanings: "Affiliate" means, when used with reference to a specific Person, (a) any Person that directly or indirectly through one or more intermediaries controls or is controlled by or is under common control with the specified Person, (b) any person that is a shareholder, officer, director or partner in, the specified Person or of which the specified Person is a shareholder, officer, director or partner, or (c) any Person that is the beneficial owner of, or controls, ten percent (10%) or more of any class of voting securities of, or any analogous equity interest in, the specified Person. "Agreement" means this Portfolio Purchase Agreement, as amended and in effect from time to time. "Aggregate Purchase Price" has the meaning set forth in Section 3.1 hereof. "Applicable Law" means any law, rule, regulation, order, judgment or decree issued or promulgated by any Governmental Authority. "Arrangement Fee" has the meaning set forth in Section 3.5 hereof. "Assets" means all of the following assets: (a) all of Seller's title to, interest in and rights under the Equipment; (b) all of Seller's title to, interest in and rights under the Leases; and (c) all of Seller's title to, interest in and rights under the related Lease Documents. "Assignment and Assumption Agreement" means an instrument in the form attached hereto as Exhibit B-1 or B-2, as applicable, or other form acceptable to Purchaser in its sole discretion. "Assumed Liabilities" has the meaning set forth in Section 2.2 hereof. "Bankruptcy Event" means (a) when a Person (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, (v) is the debtor in an involuntary case which is not dismissed within sixty (60) days of the commencement thereof, (vi) fails to pay its debts as such debts become due, or (vii) takes corporate, company or partnership action in furtherance of any of the foregoing; or (b) when a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (i) provides for relief against a Person in an involuntary case, (ii) appoints a Custodian of a Person for all or substantially all of its property, or (iii) orders the liquidation of a Person. Page 236 of 272 "Bankruptcy Law" means Title 11, United States Code or any similar federal or state law for the relief of debtors. "Bill of Sale" means an instrument in the form attached hereto as Exhibit A-1 or A-2, as applicable, or other form acceptable to Purchaser in its sole discretion. "Business Day" means any day on which banks may conduct business in New York, New York. "Certificate of Delivery and Acceptance" means the certificate of delivery and acceptance executed by a Lessee at the commencement of a Lease with respect to the Equipment which is subject to the Lease indicating that such Equipment has been accepted by the Lessee, and affirming that such Lease is in full force and effect. "Cheyenne" has the meaning set forth in the preamble hereof. "Cheyenne Obligors" has the meaning set forth in Section 14.1 hereof. "Claim" has the meaning set forth in Section 13.1 hereof. "Closing" means a closing at which Seller and Purchaser transfer and deliver all documents and instruments necessary to consummate the purchase and sale of all or a portion of the Assets having an aggregate Equipment Cost not less than the minimum amount established, from time to time, by Purchaser in its sole discretion. "Closing Date" means the date on which the parties hereto shall close the purchase and sale of all or a portion of the Assets. "Closing Schedule" has the meaning set forth in Section 4.2 hereof. "Consent and Amendment" means the consent and amendment executed by Seller, as borrower, Purchaser and Lender in connection with the assumption of the applicable Non-Recourse Debt, acknowledging such transaction and, if applicable, effecting certain amendments to the Loan Documents, all in the form attached hereto as Exhibit D-1 or D-2, as applicable, or in a form otherwise acceptable to Purchaser in its sole discretion. "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. "Default" shall mean any event which, but for the giving of notice, or the passage of time, or both, would constitute an event of default. "Document Sets" means the two (2) document sets retained by Seller and Purchaser, respectively, and containing copies of all Lease Documents and Loan Documents, which copies are consecutively numbered for identification purposes. "DOJ" shall mean the United States Department of Justice. "Effective Date" means the effective date as set forth in the preamble to this Agreement. "Equipment" means the equipment described in the Schedule of Assets. Page 237 of 272 "Equipment Cost" means the original cost of the Equipment, including any delivery and installation costs and any sales taxes and other similar "soft" costs. "FTC" shall mean the United States Federal Trade Commission. "GAAP" means United States Generally Accepted Accounting Principals consistently applied. "Genesee Ventures" has the meaning set forth in the preamble hereof. "Governmental Authority" means any federal, state or local governmental body, including any court, administrative board, general commission or arbitrator or otherwise. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976. "Indemnified Party" has the meaning set forth in Section 13.5 hereof. "Indemnifying Party" has the meaning set forth in Section 13.5 hereof. "Lease Documents" means, as applicable, originals, certified photostatic copies or copies of the Leases, Certificates of Delivery and Acceptance, guaranties, Remarketing Agreements, financing statements on Form UCC-1, opinions of counsel, corporate or other diligence documents, certificates of title, insurance certificates and/or letters of self-insurance, vendor documents, compliance certificates, landlord's estoppel certificates and any other present or future documents and instruments applicable to the transactions contemplated by the Lease, together with any and all modifications and amendments to the foregoing, all in form and substance reasonably acceptable to Purchaser. "Leases" means the leases described in the Schedule of Assets, including, to the extent applicable, an original (unless any such original is held by the original lessor thereunder, and then a certified copy) of each master lease, if any, and an original (unless any such original is held by a Lender as security for a Non-Recourse Debt, and then a certified copy) of each applicable Rental Schedule (but not other rental schedules), if any, but in any event an original (unless any such original is held by a Lender as security for a Non-Recourse Debt, and then a certified copy) of all documents and instruments of similar tenor which constitute chattel paper under the applicable Uniform Commercial Code, and any modifications and amendments to the foregoing. "Lender" means the lender under a Loan Document. "Lessee" means the lessee under a Lease. "Liens" means: (a) any encumbrance, mortgage, pledge, lien, charge or security interest of any kind upon any property or assets of the applicable Person, whether now owned or hereafter acquired, or upon the income or profits therefrom; Page 238 of 272 (b) any arrangement or agreement which prohibits the applicable Person from creating encumbrances, mortgages, pledges, liens, charges or security interests, or any arrangement or agreement subordinating the interest of the applicable Person to another Person; (c) the acquisition of, or the agreement to acquire, any property or asset upon conditional sale or subject to any other title retention agreement, device or arrangement (including a capitalized lease); or (d) the sale, assignment, pledge or transfer for security of any accounts, general intangibles or chattel paper of the applicable Person, with or without recourse. "Loan Documents" means, as applicable, all promissory notes, loan agreements, security agreements, financing statements on Form UCC-1, and other present or future documents and instruments evidencing or securing the Non-Recourse Debt, together with any and all modifications and amendments to the foregoing. "Material Adverse Effect" shall mean an effect on the specified Person which could materially and adversely affect the business, assets or condition, financial or otherwise, or the results of operations, of the specified Person or any subsidiary (on an individual basis) or the Person and its subsidiaries (on a consolidated basis), or the ability of the specified Person to meet its obligations under the Lease Documents, Loan Documents or Seller Documents (or similar instruments), as applicable, or the validity or enforceability of any of the foregoing. "Non-Recourse Debt" means the outstanding non-recourse debt of Seller secured by the Assets as set forth on the Schedule of Non-Recourse Debt. "Notice and Acknowledgment of Assignment" means the notice and acknowledgment of assignment executed by Seller, as lessor, Lessee, as lessee, Purchaser and Lender in connection with the assignment of the applicable Leases, acknowledging such transactions and confirming certain information for the benefit of Purchaser, all in the form attached hereto as Exhibit C-1, C-2 or C-3, as applicable, or in a form otherwise acceptable to Purchaser in its sole discretion. "Noticed Claims" has the meaning set forth in Section 13.3 hereof. "Obligors" has the meaning set forth in Section 14.1 hereof. "Permitted Liens" means Liens as expressly contemplated by the Lease Documents and the Lien of the applicable Lender. "Person" means an individual person, corporation, company, association, partnership, joint venture, trust, business trust, trustee, organization, business, or government or any governmental agency or political subdivision thereof. "Purchase Price" has the meaning set forth in Section 3.2 hereof. Page 239 of 272 "Purchaser" has the meaning set forth in the preamble hereof. "Rental Schedule" means the rental schedule, if any, executed by Lessee pursuant to a master lease, if any, all as further described on the Schedule of Assets. "Remarketing Agreements" has the meaning set forth in Section 5.6(g) hereof. "Sale Parties" has the meaning set forth in the preamble hereof. "Schedule of Assets" means the schedule attached hereto as Schedule 1, which sets forth a description of the Assets and the portion of the Aggregate Purchase Price allocable to each Lease and the Equipment covered thereunder and Lease Documents related thereto. "Schedule of Non-Recourse Debt" means the schedule attached hereto as Schedule 2, which sets forth a description of the Non-Recourse Debt and identifies the Loan Documents and the Lenders. "Seller" has the meaning set forth in the preamble hereof. "Seller Documents" means this Agreement, the Bill of Sale, the Assignment and Assumption Agreement, the Notice and Acknowledgment of Assignment, the Consent and Amendment, any other documents and instruments necessary to assign legal or equitable title to the Assets, financing statements on Form UCC-3 assigning any "protective" or "informational" filings against Lessees (unless such filings have been assigned to one or more Lenders), or, in the absence of such filings, financing statements on Form UCC-1 constituting protective or informational filings against such Lessees and naming any applicable Lender as assignee, if required, and any other document, instrument or agreement attached to any of the foregoing or otherwise related thereto, all in form and substance acceptable to Purchaser in its sole discretion. "Taylor-Bolane" has the meaning set forth in the preamble hereof. PURCHASE AND SALE OF ASSETS; ASSUMPTION OF CERTAIN LIABILITIES -------------------------------------------------------------- Purchase and Sale of Assets --------------------------- Subject to the terms and conditions hereof, Seller hereby agrees to sell, transfer, assign and deliver to Purchaser from time to time, and Purchaser hereby agrees to purchase, acquire and take assignment and delivery from Seller of, the Assets, free and clear of all Liens other than Permitted Liens. Assumption of Certain Liabilities --------------------------------- Subject to the terms and conditions hereof, Purchaser hereby agrees to assume from time to time only the liabilities and obligations of Seller under the Leases and related Lease Documents, and with respect to the Non-Recourse Debt (collectively, the "Assumed Liabilities"), in each case arising from and after the Closing Date with respect to the particular Assets to which the Assumed Liabilities relate. Page 240 of 272 AGGREGATE PURCHASE PRICE; ADJUSTMENT; PAYMENT --------------------------------------------- Aggregate Purchase Price ------------------------ The aggregate purchase price for the Assets shall be an amount equal to Fifteen Million Two Hundred Twenty-One Thousand Seven Hundred Seventy-One Dollars ($15,221,771), subject to adjustment as set forth in Section 3.3 hereof (the "Aggregate Purchase Price"). Allocation of Aggregate Purchase Price -------------------------------------- The Aggregate Purchase Price shall be allocated among the Assets as set forth in the Schedule of Assets. The portion of the Aggregate Purchase Price allocable to the Assets being purchased and sold at a Closing is sometimes referred to as the "Purchase Price". Adjustment of Purchase Price ---------------------------- The Purchase Price with respect to the Assets to be purchased at each Closing shall be adjusted by (a) subtracting therefrom an amount equal to the aggregate amount of all cash received under the applicable Leases, including payments of casualty or stipulated loss values, early termination values and other amounts received by Seller, on or after September 1, 2000 and (b) adding thereto interest at the rate of (i) ten percent (10%) per annum through December 1, 2000 and (ii) eight percent (8%) thereafter, in each case on the balance of the Purchase Price, as adjusted from time to time in accordance with this Section 3.3, outstanding from September 1, 2000 to the applicable Closing Date. Payment ------- At each Closing, Purchaser shall pay to Seller the Purchase Price by wire transfer of immediately available funds in US dollars to an account or accounts designated by Seller in writing. Arrangement Fee --------------- At each Closing, Cheyenne shall be responsible for the payment of an arrangement fee (the "Arrangement Fee") to Spinnaker Capital Corporation in an amount equal to the product of (a) Two Hundred Twenty-Five Thousand Dollars ($225,000) multiplied by (b) a fraction, the numerator of which shall be the Purchase Price of the Assets being purchased and sold at such Closing exclusive of any interest added thereto pursuant to Section 3.3 hereof, and the denominator of which shall be the Aggregate Purchase Price exclusive of any such interest. and The Sale Parties and Genesee jointly and severally agree to indemnify and hold Purchaser harmless from and against any and all Claims resulting or arising from any failure or breach by Cheyenne of its obligation under this Section 3.5. Taxes, Fees ----------- (a) Seller shall be liable for all fees and charges (exclusive of stamp taxes), if any, created by the filing and the recording of all financing statements on Form UCC-3 assigning any "protective" or "informational" filings against Lessees (unless such filings have been assigned to one or more Lenders), or in the absence of such filings, financing statements on Form UCC-1 constituting protective or informational filings against such Lessees and naming any applicable Lender as assignee. The Sale Parties and Genesee jointly and severally agree to indemnify and hold Purchaser harmless from and against any and all Claims resulting or arising from any failure or breach by Seller of its obligations under this Section 3.6(a). (b) Purchaser shall be liable for all (i) federal, state and local sales taxes created by or as a result of the transactions contemplated hereby, (ii) all stamp taxes, if any, created by the Page 241 of 272 filing and the recording of all documents and instruments reflecting Purchaser's interest in any of the Assets sold hereunder and (iii) all fees, charges and stamp taxes, if any, created by the filing and the recording of all documents and instruments naming Purchaser as debtor and naming a Lender as secured party. In the event that a taxing jurisdiction shall audit or otherwise question Seller's failure to pay any sales tax in connection with the transactions contemplated hereby, Purchaser agrees to provide Seller with any applicable resale exemption certificate or other evidence of its exemption from such tax. Purchaser and the Members jointly and severally agree to indemnify and hold the Sale Parties harmless from and against any and all Claims resulting or arising from any failure or breach by Purchaser of its obligations under this Section 3.6(b). CLOSING ------- In General ---------- Subject to the satisfaction or written waiver of the conditions set forth in Section 12, Purchaser and Seller shall close the purchase by Purchaser of the Assets in one or more tranches, with the first such tranche occurring on or about October 20, 2000 and any subsequent tranches each occurring on the later of such date or five (5) Business Days after Seller's delivery to Purchaser of each of the documents and instruments set forth and described in Section 4.2 hereof. Subject to the terms and conditions hereof, the parties hereto intend to be and remain obligated to consummate the transactions contemplated hereby and the parties intend that there shall be no termination or "upset" date or otherwise with respect to such obligations. Procedure --------- With respect to each proposed closing, Seller shall deliver to Purchaser at least five (5) Business Days prior to a proposed Closing Date: (a) a schedule (the "Closing Schedule") setting forth a description of the Assets to be sold to Purchaser at such Closing, the Equipment Cost of the Equipment included therein, which Equipment Cost shall not, in the aggregate, be less than the minimum amount established, from time to time, by Purchaser in its sole discretion, and the Purchase Price, calculated in accordance with Section 3 hereof; (b) each Lease Document and Loan Document relevant to the proposed transaction as collectively certified by Seller to be all of the Lease Documents and Loan Documents relevant to the proposed transaction and identical to the corresponding documents contained in the Document Sets at the relevant page numbers; (c) an original of each Seller Document relevant to the proposed transaction; and (d) such other documents and information as Purchaser may reasonably request. Closing Costs ------------- Except to the extent otherwise expressly set forth herein, each party hereto shall be liable for its own costs and expenses, including attorneys' fees, in connection with this Agreement and the transactions contemplated hereby. Page 242 of 272 REPRESENTATIONS AND WARRANTIES OF THE SALE PARTIES -------------------------------------------------- As of the date of this Agreement and as of each Closing Date, the Sale Parties jointly and severally represent and warrant to Purchaser as follows: Organization ------------ Cheyenne is a joint venture validly existing under the laws of the State of New York and is qualified to do business and in good standing as a foreign joint venture under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not result in a Material Adverse Effect. Cheyenne has full power, authority and legal right to (a) execute and deliver, and to perform and observe the provisions of this Agreement and each of the other Seller Documents to which Cheyenne is a party, (b) execute and deliver, and to perform and observe the provisions of each of the Lease Documents and Loan Documents, to which it is a party, (c) acquire, hold, and lease the Equipment and (d) carry out the transactions contemplated in this Agreement and each of the other Seller Documents to which it is a party. Authority --------- (a) The execution and delivery of this Agreement and each of the other Seller Documents to which Cheyenne is a party, and the consummation of each of the transactions contemplated hereby and thereby, have been duly and validly authorized by or on behalf of Cheyenne; and this Agreement and such other Seller Documents have been, or will be when executed, duly executed and delivered by Cheyenne and constitute the valid and legally binding obligations of Cheyenne, enforceable in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency or similar laws or general principles of equity affecting the enforcement of creditors' rights generally from time to time in effect. (b) The execution and delivery of this Agreement and each of the other Seller Documents to which Cheyenne is a party, the compliance with the provisions hereof and thereof, and the consummation of the transactions herein and therein contemplated have not and will not result in (i) a breach or violation of (A) any Applicable Law applicable to Cheyenne now in effect, (B) any provision of the constituent documents of Cheyenne, (C) any agreement or instrument to which Cheyenne is a party or by which it or any of its properties or assets is bound or affected, (ii) the acceleration of any obligation of Cheyenne, or (iii) the creation of any Lien upon the Equipment. Title to Assets --------------- (a) Immediately prior to the time of a Closing, Cheyenne will have good and marketable indefeasible title to, and shall be the sole owner of, the Assets listed on the applicable Closing Schedule as being owned by it, and there shall have been no other sale, assignment, encumbrance or pledge thereof by Cheyenne, except Permitted Liens, and immediately upon the transfer and assignment contemplated by this Agreement, Purchaser shall have good and marketable indefeasible title to, and will be the sole owner of, the Assets listed on the applicable Closing Schedule as being owned by Cheyenne, subject to Permitted Liens. (b) The information set forth in the Schedule of Assets, Schedule of Non-Recourse Debt and each Closing Schedule with respect to the Assets and the Non-Recourse Debt to be assigned by Cheyenne is true, correct and complete in all respects. Page 243 of 272 Litigation ---------- There are no actions, suits, proceedings or investigations at law or in equity pending or, to the reasonable knowledge of the Sale Parties, threatened, before any Governmental Authority against or affecting Cheyenne or any of its Affiliates which, if decided adversely, could have a Material Adverse Effect on such Person. Compliance With Law, Etc. ------------------------- Cheyenne is not (a) in violation of any term or provision of its constituent documents, or (b) in violation of or default under any term or provision of any agreement or instrument to which Cheyenne is a party or by which Cheyenne or any of its properties or assets is bound or affected, or (c) in violation of any judgment, order, writ, injunction, decree or demand of any court or Governmental Authority, or (d) in violation of any Applicable Law by which Cheyenne or any of its properties or assets is bound or affected. The execution, delivery and performance of this Agreement and each of the other Seller Documents, and the consummation of the transactions contemplated hereby and thereby will not violate or constitute a Default under the constituent documents of Cheyenne or any term or provision of any agreement or instrument to which Cheyenne is a party or by which Cheyenne or any of its properties or assets is bound or affected, and none of such agreements or instruments imposes or is made in contemplation of any obligation which is or will be inconsistent with any other obligation imposed upon Cheyenne under this Agreement or any of the other Seller Documents. Except for any filings and approvals required under the HSR Act, no approval by, authorization of, or filing with any Governmental Authority or any third party is necessary in connection with the execution and delivery of this Agreement or any of the other Seller Documents by Cheyenne. Leases and Loans ---------------- (a) Each of the Leases and the other Lease Documents to be assigned by Cheyenne at a Closing has been duly authorized, executed and delivered by Cheyenne and the Lessees, the Lessees have accepted the Equipment under such Leases, and the Leases and the other Lease Documents are and will, at the time of such Closing, be valid, binding and enforceable against the Lessees in accordance with their respective terms and in full force and effect. The representations and warranties made by the Lessees in such Lease Documents are true and correct on and as of the Closing Date as if made thereon (unless such representations and warranties specifically relate to an earlier date); the Lessees have not taken any action which might result in the creation of any Lien on the Equipment, except Permitted Liens; no change has occurred in the condition, financial or otherwise, of any Lessee which might have a Material Adverse Effect on such Lessee; Cheyenne has not breached any of its obligations under any the Lease Documents; all permits, licenses and certificates which are necessary to permit the use of the Equipment in accordance with the provisions of the Leases have been obtained and are in full force and effect; there has been no material damage or event of loss with respect to the Equipment nor is there any condemnation proceeding pending with respect thereto; no Default exists under any of such Leases or the other Lease Documents; each Lessee executed only one (1) original counterpart of each Lease, denominated as counterpart no. 1 or "Original"; no such Lease is a "consumer lease" as defined in Section 2A-103(1)(e) of the Uniform Commercial Code; and the Lessees under such Leases are responsible for the maintenance of the Equipment and such Leases require the Lessees to assume all risk of loss for such Equipment. (b) Each of the Loan Documents evidencing and securing the Non-Recourse Debt to be assumed from Cheyenne at a Closing has been duly authorized, executed and delivered by Cheyenne. The representations and warranties made by Cheyenne in such Loan Documents are Page 244 of 272 true and correct on and as of the Closing Date as if made thereon (unless such representations and warranties specifically relate to an earlier date); Cheyenne has not taken any action which might result in the creation of any Lien on the Equipment, except Permitted Liens; Cheyenne has not breached any of its obligations under any of such Loan Documents; and no Default exists under any of such Loan Documents. (c) Cheyenne has delivered to Purchaser on or before the applicable Closing Date, a true, correct and complete copy of the Lease Documents and Loan Documents to be assigned by it at a Closing. (d) The Lessees' obligations under the Leases to be assigned by Cheyenne are absolute and unconditional and are not subject to any reductions, abatements, set offs, defenses or counterclaims and, to the Sale Parties' knowledge, no such rights have been asserted or threatened with respect to such Leases. No payment under any of the Lease Documents to be assigned by Cheyenne has been prepaid. (e) Cheyenne has complied in connection with the transactions contemplated by the Lease Documents and Loan Documents to be assigned by it, and will continue to so comply as of the Closing Date, with all Applicable Laws, including, without limitation, usury, equal credit opportunity, truth-in-lending, disclosure, and recording laws. (f) Except as set forth on Schedule 5.6(f) attached hereto, which Schedule describes in reasonable detail all self-insurance arrangements approved by Cheyenne with respect to one or more Leases to be assigned by it, the Lessees under such Leases, and Cheyenne under the related Non-Recourse Debt, are required to maintain casualty insurance with respect to the Equipment; as of the Closing Date, all policies of insurance required by such Lease Documents and Loan Documents have been validly issued and remain in full force and effect; and Cheyenne has caused and will cause to be performed any and all acts required to assign its rights and interests to Purchaser, including, without limitation, notification of insurers, assignment of policies or interests therein and establishment of co-insured and joint loss payee rights in favor of Purchaser. (g) Except as set forth on Schedule 5.6(g) attached hereto, which Schedule identifies all remarketing agreements ("Remarketing Agreements") between Cheyenne and various third parties with respect to the Assets, all brokers and other persons having a claim for a commission, fee or like arrangement arising out of any Lease to be assigned by Cheyenne or the related Non-Recourse Debt have been fully paid and satisfied, and all such brokers or other Persons are duly licensed and authorized to refer such transactions to Cheyenne. (h) As of the Closing Date, none of the Lessees leasing Equipment under Leases to be assigned by Cheyenne is subject to any proceedings under any Bankruptcy Law. (i) The Leases to be assigned by Cheyenne and the related Non-Recourse Debt are United States dollar-denominated obligations. (j) Neither the Leases or the Remarketing Agreements to be assigned by Cheyenne nor the related Non-Recourse Debt requires the prior consent of or notification to the Lessees or the Lenders or contain any other restriction on the transfer, assignment or assumption, as applicable, of such Leases or Non-Recourse Debt (other than a consent or waiver of any such restriction that has been obtained prior to the Closing Date, and a copy of which has been provided to Purchaser prior to the Closing Date). Page 245 of 272 (k) No Lease to be assigned by Cheyenne is an obligation of any Governmental Authority. (l) The Lessees under the Leases to be assigned by Cheyenne, and the Lenders under the related Non-Recourse Debt have been notified of the assignment of such Leases to, and the assumption of such Non-Recourse Debt by, Purchaser and each such Lessee and Lender has executed a Notice and Acknowledgment of Assignment, a Consent and Amendment and/or one or more similar documents acceptable to Purchaser, in its sole discretion, as applicable, a copy of each of which has been provided to Purchaser prior to the Closing Date. (m) All of the Leases to be assigned by Cheyenne have been created in the ordinary course of business of Cheyenne or were acquired by Cheyenne in the ordinary course of its business. All such Leases are and have been reported on Cheyenne's tax returns as "true leases", and Cheyenne has not received any notice from the Internal Revenue Service challenging Cheyenne's treatment of any such Lease as a true lease. (n) Except as otherwise set forth on Schedule 5.6(n) attached hereto, which Schedule describes in reasonable detail all titling arrangements pursuant to which any motor vehicles included in the Assets listed on the Schedule of Assets as being owned by Cheyenne is titled other than in the name of Cheyenne, all titled motor vehicles included in the Assets are titled in the name of Cheyenne. (o) Except as otherwise set forth on Schedule 5.6(o) attached hereto, the end of Lease purchase options available to the Lessees under the Leases to be assigned by Cheyenne are at fair market value. Financial Statements -------------------- All financial statements of Cheyenne, any Affiliate of Cheyenne and any other Person furnished to Purchaser in connection herewith were prepared in accordance with GAAP (except as therein otherwise set forth), and fairly present the financial condition of the Persons covered thereby at the dates thereof and the results of their operations for the periods covered thereby (subject to year-end adjustments in the case of interim financial statements), and no such Person has any known contingent liabilities of any material amount which are not referred to in such financial statements or in the notes thereto. The assets of each such Person are set forth in such financial statements. Changes in Condition -------------------- Since the date of the most recently delivered financial statements referred to in Section 5.7 hereof, such Persons have not been subject to any Material Adverse Effect. Since such date, none of such Persons has entered into any material transaction outside of the ordinary course of business. Tax Returns ----------- Cheyenne and each of its Affiliates has filed all tax returns which are required to be filed, and, if applicable, each such Person has paid, or made adequate provision for the payment of, all taxes which have or may become due pursuant to such returns, to assessments received or as a result of any matters raised by audits or other causes known to such Person. The charges, accruals and reserves on the books of such Person in respect of any taxes or other governmental charges are adequate. Page 246 of 272 Solvency -------- (a) The fair salable value of the assets of Cheyenne exceeds, as of the date hereof, and will, immediately following each Closing and after giving effect to the application of the proceeds of such Closing, exceed the amount that will be required to be paid on or in respect of its existing debts and other liabilities (including contingent liabilities) as they mature. (b) The assets of Cheyenne do not, as of the date hereof, and will not, immediately following each Closing and after giving effect to the application of the proceeds of such Closing, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. (c) Cheyenne does not intend to, or believe that it will, incur debts beyond its ability to pay such debts as they mature taking into account the timing of and amounts of cash to be received by Cheyenne, and the timing of and amounts of cash to be payable on or in respect of indebtedness of Cheyenne. No Liability ------------ Cheyenne has no liabilities or obligations to any Person in connection with its acquisition and holding of the Assets listed on the Schedule of Assets as being owned by it other than obligations pursuant to the related Non-Recourse Debt. Disclosure ---------- Neither this Agreement or any other Seller Document nor any Lease Document or Loan Document contains any untrue statement of material fact or omits to state a material fact necessary in order to make the statements contained therein not misleading. There is no fact known to the Sale Parties which has or in the future may (so far as the Sale Parties can now foresee) have a Material Adverse Effect on Cheyenne. Incorporation by Reference -------------------------- The representations and warranties of Cheyenne contained in each of the Seller Documents, Lease Documents and Loan Documents are true and correct, and such representations and warranties are incorporated in this Agreement as though fully set forth herein. Brokers ------- Except for the Arrangement Fee payable by Cheyenne to Spinnaker Capital Corporation, no broker or any other Person has any claim for any commission fee or the like arising out of or in connection with the transactions contemplated hereby. Disclaimer ---------- EXCEPT AS SPECIFICALLY SET FORTH HEREIN AND IN THE SCHEDULES AND EXHIBITS HERETO, THE FOREGOING REPRESENTATIONS AND WARRANTIES ARE EXPRESSLY IN LIEU OF ANY OTHER EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES OF THE SALE PARTIES OF ANY KIND, INCLUDING, WITHOUT LIMITATION, THE SELECTION, QUALITY OR CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY, ITS SUITABILITY, ITS FITNESS FOR A PARTICULAR PURPOSE, THE OPERATION OR PERFORMANCE OF THE EQUIPMENT OR THE MAINTENANCE THEREOF OR PATENT INFRINGEMENT OR THE LIKE. Page 247 of 272 REPRESENTATIONS AND WARRANTIES OF GENESEE VENTURES -------------------------------------------------- As of the date of this Agreement and as of each Closing Date, Genesee Ventures further represents and warrants to Purchaser as follows: Organization ------------ Genesee Ventures is a corporation duly formed, validly existing and in good standing under the laws of the State of New York, and is qualified to do business and in good standing as a foreign corporation under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not result in a Material Adverse Effect. Genesee Ventures has full power, authority and legal right to (a) execute and deliver, and to perform and observe the provisions of this Agreement and each of the other Seller Documents to which it is a party, (b) execute and deliver, and to perform and observe the provisions of each of the Lease Documents and Loan Documents to which it is a party, (c) acquire, hold, and lease the Equipment, if applicable, and (d) carry out the transactions contemplated in this Agreement and each of the other Seller Documents to which it is a party. Authority --------- (a) The execution and delivery of this Agreement and each of the other Seller Documents to which Genesee Ventures is a party, and the consummation of each of the transactions contemplated hereby and thereby, have been duly and validly authorized by or on behalf of Genesee Ventures; and this Agreement and such other Seller Documents have been, or will be when executed, duly executed and delivered by Genesee Ventures and constitute the valid and legally binding obligations of Genesee Ventures, enforceable in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency or similar laws or general principles of equity affecting the enforcement of creditors' rights generally from time to time in effect. (b) The execution and delivery of this Agreement and each of the other Seller Documents to which Genesee Ventures is a party, the compliance with the provisions hereof and thereof, and the consummation of the transactions herein and therein contemplated have not and will not result in (i) a breach or violation of (A) any Applicable Law applicable to Genesee Ventures now in effect, (B) any provision of the constituent documents of Genesee Ventures, (c) any agreement or instrument to which Genesee Ventures is a party or by which it or any of its properties or assets is bound or affected, (ii) the acceleration of any obligation of Genesee Ventures, or (iii) the creation of any Lien upon the Equipment. Title to Assets --------------- (a) Immediately prior to the time of a Closing, Genesee Ventures will have good and marketable indefeasible title to, and shall be the sole owner of, the Assets listed on the applicable Closing Schedule as being owned by it, and there shall have been no other sale, assignment, encumbrance or pledge thereof by Genesee Ventures, except Permitted Liens, and immediately upon the transfer and assignment contemplated by this Agreement, Purchaser shall have good and marketable indefeasible title to, and will be the sole owner of, the Assets listed on the applicable Closing Schedule as being owned by Genesee Ventures, subject to Permitted Liens. (b) The information set forth in the Schedule of Assets, Schedule of Non-Recourse Debt and each Closing Schedule with respect to the Assets and Non-Recourse Debt to be assigned by Genesee Ventures is true, correct and complete in all respects. Page 248 of 272 Litigation ---------- There are no actions, suits, proceedings or investigations at law or in equity pending or, to the reasonable knowledge of Genesee Ventures, threatened, before any Governmental Authority against or affecting Genesee Ventures or any of its Affiliates which, if decided adversely, could have a Material Adverse Effect on such Person. Compliance With Law, Etc. ------------------------- Genesee Ventures is not (a) in violation of any term or provision of its constituent documents, or (b) in violation of or default under any term or provision of any agreement or instrument to which Genesee Ventures is a party or by which it or any of its properties or assets is bound or affected, or (c) in violation of any judgment, order, writ, injunction, decree or demand of any court or Governmental Authority, or (d) in violation of any Applicable Law by which Genesee Ventures or any of its properties or assets is bound or affected. The execution, delivery and performance of this Agreement and each of the other Seller Documents and the consummation of the transactions contemplated hereby and thereby will not violate or constitute a Default under the constituent documents or any term or provision of any agreement or instrument to which Genesee Ventures is a party or by which it or any of its properties or assets is bound or affected, and none of such agreements or instruments imposes or is made in contemplation of any obligation which is or will be inconsistent with any other obligation imposed upon Genesee Ventures under this Agreement or any of the other Seller Documents. Except for any filings and approvals required under the HSR Act, no approval by, authorization of, or filing with any Governmental Authority or any third party is necessary in connection with the execution and delivery of this Agreement or any of the other Seller Documents by Genesee Ventures. Leases and Loans ---------------- (a) Each of the Leases and the other Lease Documents to be assigned by Genesee Ventures at a Closing has been duly authorized, executed and delivered by Genesee Ventures and the Lessees, the Lessees have accepted the Equipment under such Leases, and the Leases and the other Lease Documents are and will, at the time of such Closing, be valid, binding and enforceable against the Lessees in accordance with their respective terms and in full force and effect. The representations and warranties made by the Lessees in such Lease Documents are true and correct on and as of the Closing Date as if made thereon (unless such representations and warranties specifically relate to an earlier date); the Lessees have not taken any action which might result in the creation of any Lien on the Equipment, except Permitted Liens; no change has occurred in the condition, financial or otherwise, of any Lessee which might have a Material Adverse Effect on such Lessee; Genesee Ventures has not breached any of its obligations under any the Lease Documents; all permits, licenses and certificates which are necessary to permit the use of the Equipment in accordance with the provisions of the Leases have been obtained and are in full force and effect; there has been no material damage or event of loss with respect to the Equipment nor is there any condemnation proceeding pending with respect thereto; no Default exists under any of such Leases or the other Lease Documents; each Lessee executed only one (1) original counterpart of each Lease, denominated as counterpart no. 1 or "Original"; no such Lease is a "consumer lease" as defined in Section 2A-103(1)(e) of the Uniform Commercial Code; and the Lessees under such Leases are responsible for the maintenance of the Equipment and such Leases require the Lessees to assume all risk of loss for such Equipment. (b) Each of the Loan Documents evidencing and securing the Non-Recourse Debt to be assumed from Genesee Ventures at a Closing has been duly authorized, executed and Page 249 of 272 delivered by Genesee Ventures. The representations and warranties made by Genesee Ventures in such Loan Documents are true and correct on and as of the Closing Date as if made thereon (unless such representations and warranties specifically relate to an earlier date); Genesee Ventures has not taken any action which might result in the creation of any Lien on the Equipment, except Permitted Liens; Genesee Ventures has not breached any of its obligations under any of such Loan Documents; and no Default exists under any of such Loan Documents. (c) Genesee Ventures has delivered to Purchaser on or before the applicable Closing Date, a true, correct and complete copy of the Lease Documents and Loan Documents to be assigned by and assumed from it at a Closing. (d) The Lessees' obligations under the Leases to be assigned by Genesee Ventures are absolute and unconditional and are not subject to any reductions, abatements, set offs, defenses or counterclaims and, to Genesee Ventures' knowledge, no such rights have been asserted or threatened with respect to such Leases. No payment under any of the Lease Documents to be assigned by Genesee Ventures has been prepaid. (e) Genesee Ventures has complied in connection with the transactions contemplated by the Lease Documents and Loan Documents to be assigned by it, and will continue to so comply as of the Closing Date, with all Applicable Laws, including, without limitation, usury, equal credit opportunity, truth-in-lending, disclosure, and recording laws. (f) Except as set forth on Schedule 6.6(f) attached hereto, which Schedule describes in reasonable detail all self-insurance arrangements approved by Genesee Ventures with respect to one or more Leases to be assigned by it, the Lessees under such Leases, and Genesee Ventures under the related Non-Recourse Debt, are required to maintain casualty insurance with respect to the Equipment; as of the Closing Date, all policies of insurance required by such Lease Documents and Loan Documents have been validly issued and remain in full force and effect; and Genesee Ventures has caused and will cause to be performed any and all acts required to assign its rights and interests to Purchaser, including, without limitation, notification of insurers, assignment of policies or interests therein and establishment of co-insured and joint loss payee rights in favor of Purchaser. (g) Except as set forth on Schedule 6.6(g) attached hereto, which Schedule identifies all Remarketing Agreements between Genesee Ventures and various third parties with respect to the Assets, all brokers and other persons having a claim for a commission, fee or like arrangement arising out of any Lease to be assigned by Genesee Ventures or the related Non-Recourse Debt have been fully paid and satisfied, and all such brokers or other Persons are duly licensed and authorized to refer such transactions to Genesee Ventures. (h) As of the Closing Date, none of the Lessees leasing Equipment under Leases to be assigned by Genesee Ventures is subject to any proceedings under any Bankruptcy Law. (i) The Leases to be assigned by Genesee Ventures and the related Non-Recourse Debt are United States dollar-denominated obligations. (j) Neither the Leases or the Remarketing Agreements to be assigned by Genesee Ventures nor the related Non-Recourse Debt requires the prior consent of or notification to the Lessees or the Lenders or contain any other restriction on the transfer, assignment or assumption, as applicable, of such Leases or Non-Recourse Debt (other than a consent or waiver of any such Page 250 of 272 restriction that has been obtained prior to the Closing Date, and a copy of which has been provided to Purchaser prior to the Closing Date). (k) No Lease to be assigned by Genesee Ventures is an obligation of any Governmental Authority. (l) The Lessees under the Leases to be assigned by Genesee Ventures, and the Lenders under the related Non-Recourse Debt have been notified of the assignment of such Leases to, and the assumption of such Non-Recourse Debt by, Purchaser and each such Lessee and Lender has executed a Notice and Acknowledgment of Assignment, a Consent and Amendment and/or one or more similar documents acceptable to Purchaser, in its sole discretion, as applicable, a copy of each of which has been provided to Purchaser prior to the Closing Date. (m) All of the Leases to be assigned by Genesee Ventures have been created in the ordinary course of business of Genesee Ventures or were acquired by Genesee Ventures in the ordinary course of its business. All such Leases are and have been reported on Genesee Ventures' tax returns as "true leases", and Genesee Ventures has not received any notice from the Internal Revenue Service challenging Genesee Ventures' `treatment of any such Lease as a true lease. (n) Except as otherwise set forth on Schedule 6.6(n) attached hereto, which Schedule describes in reasonable detail all titling arrangements pursuant to which any motor vehicles included in the Assets listed on the Schedule of Assets as being owned by Genesee Ventures is titled other than in the name of Genesee Ventures, all titled motor vehicles included in the Assets are titled in the name of Genesee Ventures. (o) Except as otherwise set forth on Schedule 6.6(o) attached hereto, the end of Lease purchase options available to the Lessees under the Leases to be assigned by Genesee Ventures are at fair market value. Financial Statements -------------------- All financial statements of Genesee Ventures, any Affiliate of Genesee Ventures and any other Person furnished to Purchaser in connection herewith were prepared in accordance with GAAP (except as therein otherwise set forth), and fairly present the financial condition of the Persons covered thereby at the dates thereof and the results of their operations for the periods covered thereby (subject to year-end adjustments in the case of interim financial statements), and no such Person has any known contingent liabilities of any material amount which are not referred to in such financial statements or in the notes thereto. The assets of each such Person are set forth in such financial statements. Changes in Condition -------------------- Since the date of the most recently delivered financial statements referred to in Section 6.7 hereof, such Persons have not been subject to any Material Adverse Effect. Since such date, none of such Persons has entered into any material transaction outside of the ordinary course of business. Tax Returns ----------- Genesee Ventures and each of its Affiliates has filed all tax returns which are required to be filed, and, if applicable, each such Person has paid, or made adequate provision for the payment of, all taxes which have or may become due pursuant to such returns, to assessments Page 251 of 272 received or as a result of any matters raised by audits or other causes known to such Person. The charges, accruals and reserves on the books of such Person in respect of any taxes or other governmental charges are adequate. Solvency. --------- (a) The fair salable value of the assets of Genesee Ventures exceeds, as of the date hereof, and will, immediately following each Closing and after giving effect to the application of the proceeds of such Closing, exceed the amount that will be required to be paid on or in respect of its existing debts and other liabilities (including contingent liabilities) as they mature. (b) The assets of Genesee Ventures do not, as of the date hereof, and will not, immediately following each Closing and after giving effect to the application of the proceeds of such Closing, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. (c) Genesee Ventures does not intend to, or believe that it will, incur debts beyond its ability to pay such debts as they mature taking into account the timing of and amounts of cash to be received by Genesee Ventures, and the timing of and amounts of cash to be payable on or in respect of indebtedness of Genesee Ventures. No Liability ------------ Genesee Ventures has no liabilities or obligations to any Person in connection with its acquisition and holding of the Assets listed on the Schedule of Assets as being owned by it other than obligations pursuant to the related Non-Recourse Debt. Disclosure ---------- Neither this Agreement or any other Seller Document nor any Lease Document or Loan Document contains any untrue statement of material fact or omits to state a material fact necessary in order to make the statements contained therein not misleading. There is no fact known to Genesee Ventures which has or in the future may (so far as Genesee Ventures can now foresee) have a Material Adverse Effect on Genesee Ventures. Incorporation by Reference -------------------------- The representations and warranties of Genesee Ventures contained in each of the Seller Documents, Lease Documents and Loan Documents are true and correct, and such representations and warranties are incorporated in this Agreement as though fully set forth herein. Brokers ------- Except for the Arrangement Fee payable by Cheyenne to Spinnaker Capital Corporation, no broker or any other Person has any claim for any commission fee or the like arising out of or in connection with the transactions contemplated hereby. Disclaimer ---------- EXCEPT AS SPECIFICALLY SET FORTH HEREIN AND IN THE SCHEDULES AND EXHIBITS HERETO, THE FOREGOING REPRESENTATIONS AND WARRANTIES ARE EXPRESSLY IN LIEU OF ANY OTHER EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES OF GENESEE VENTURES OF ANY KIND, INCLUDING, WITHOUT LIMITATION, THE SELECTION, QUALITY OR CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY, ITS SUITABILITY, ITS FITNESS FOR A Page 252 of 272 PARTICULAR PURPOSE, THE OPERATION OR PERFORMANCE OF THE EQUIPMENT OR THE MAINTENANCE THEREOF OR PATENT INFRINGEMENT OR THE LIKE. REPRESENTATIONS AND WARRANTIES OF TAYLOR-BOLANE ----------------------------------------------- As of the date of this Agreement and as of each Closing Date, Taylor-Bolane further represents and warrants to Purchaser as follows: Organization ------------ Taylor-Bolane is a corporation duly formed, validly existing and in good standing under the laws of the State of New York, and is qualified to do business and in good standing as a foreign corporation under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not result in a Material Adverse Effect. Taylor-Bolane has full power, authority and legal right to (a) execute and deliver, and to perform and observe the provisions of this Agreement and each of the other Seller Documents to which it is a party, (b) execute and deliver, and to perform and observe the provisions of each of the Lease Documents and Loan Documents to which it is a party, (c) acquire, hold, and lease the Equipment, if applicable, and (d) carry out the transactions contemplated in this Agreement and each of the other Seller Documents to which it is a party. Authority --------- (a) The execution and delivery of this Agreement and each of the other Seller Documents to which Taylor-Bolane is a party, and the consummation of each of the transactions contemplated hereby and thereby, have been duly and validly authorized by or on behalf of Taylor-Bolane; and this Agreement and such other Seller Documents have been, or will be when executed, duly executed and delivered by Taylor-Bolane and constitute the valid and legally binding obligations of Taylor-Bolane, enforceable in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency or similar laws or general principles of equity affecting the enforcement of creditors' rights generally from time to time in effect. (b) The execution and delivery of this Agreement and each of the other Seller Documents to which Taylor-Bolane is a party, the compliance with the provisions hereof and thereof, and the consummation of the transactions herein and therein contemplated have not and will not result in (i) a breach or violation of (A) any Applicable Law applicable to Taylor-Bolane now in effect, (B) any provision of the constituent documents of Taylor-Bolane, (c) any agreement or instrument to which Taylor-Bolane is a party or by which it or any of its properties or assets is bound or affected, (ii) the acceleration of any obligation of Taylor-Bolane, or (iii) the creation of any Lien upon the Equipment. Compliance With Law, Etc. ------------------------- Taylor-Bolane is not (a) in violation of any term or provision of its constituent documents or (b) in violation of or default under any term or provision of any agreement or instrument to which Taylor-Bolane is a party or by which it or any of its properties or assets is bound or affected, or (c) in violation of any judgment, order, writ, injunction, decree or demand of any court or Governmental Authority, or (d) in violation of any Applicable Law by which Taylor-Bolane or any of its properties or assets is bound or affected. The execution, delivery and performance of this Agreement and each of the other Seller Documents and the consummation of the transactions contemplated hereby and thereby will not violate or constitute a Default under Page 253 of 272 the constituent documents or any term or provision of any agreement or instrument to which Taylor-Bolane is a party or by which it or any of its properties or assets is bound or affected, and none of such agreements or instruments imposes or is made in contemplation of any obligation which is or will be inconsistent with any other obligation imposed upon Taylor-Bolane under this Agreement or any of the other Seller Documents. Except for any filings and approvals required under the HSR Act, no approval by, authorization of, or filing with any Governmental Authority or any third party is necessary in connection with the execution and delivery of this Agreement or any of the other Seller Documents by Taylor-Bolane. REPRESENTATIONS AND WARRANTIES OF GENESEE ----------------------------------------- As of the date of this Agreement and as of each Closing Date, Genesee represents and warrants to Purchaser as follows: Organization ------------ Genesee is a corporation duly formed, validly existing and in good standing under the laws of the State of New York, and is qualified to do business and in good standing as a foreign corporation under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not result in a Material Adverse Effect. Genesee has full power, authority and legal right to (a) execute and deliver, and to perform and observe the provisions of this Agreement and each of the other Seller Documents to which it is a party and (b) carry out the transactions contemplated in this Agreement and each of the other Seller Documents to which it is a party. Authority --------- (a) The execution and delivery of this Agreement and each of the other Seller Documents to which Genesee is a party, and the consummation of each of the transactions contemplated hereby and thereby, have been duly and validly authorized by or on behalf of Genesee; and this Agreement and such other Seller Documents have been, or will be when executed, duly executed and delivered by Genesee and constitute the valid and legally binding obligations of Genesee, enforceable in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency or similar laws or general principles of equity affecting the enforcement of creditors' rights generally from time to time in effect. (b) The execution and delivery of this Agreement and each of the other Seller Documents to which Genesee is a party, the compliance with the provisions hereof and thereof, and the consummation of the transactions herein and therein contemplated have not and will not result in (i) a breach or violation of (A) any Applicable Law applicable to Genesee now in effect, (B) any provision of the constituent documents of Genesee, (c) any agreement or instrument to which Genesee is a party or by which it or any of its properties or assets is bound or affected, (ii) the acceleration of any obligation of Genesee, or (iii) the creation of any Lien upon the Equipment. Compliance With Law, Etc. ------------------------- Genesee is not (a) in violation of any term or provision of its constituent documents or (b) in violation of or default under any term or provision of any agreement or instrument to which Genesee is a party or by which it or any of its properties or assets is bound or affected, or (c) in violation of any judgment, order, writ, injunction, decree or demand of any court or Governmental Authority, or (d) in violation of any Applicable Law by which Genesee or any of Page 254 of 272 its properties or assets is bound or affected. The execution, delivery and performance of this Agreement and each of the other Seller Documents and the consummation of the transactions contemplated hereby and thereby will not violate or constitute a Default under the constituent documents or any term or provision of any agreement or instrument to which Genesee is a party or by which it or any of its properties or assets is bound or affected, and none of such agreements or instruments imposes or is made in contemplation of any obligation which is or will be inconsistent with any other obligation imposed upon Genesee under this Agreement or any of the other Seller Documents. Except for any filings and approvals required under the HSR Act, no approval by, authorization of, or filing with any Governmental Authority or any third party is necessary in connection with the execution and delivery of this Agreement or any of the other Seller Documents by Genesee. REPRESENTATIONS AND WARRANTIES OF PURCHASER ------------------------------------------- Purchaser represents and warrants to Seller as of the date of this Agreement and as of each Closing Date as follows: Organization ------------ Purchaser is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware. It has full power, authority and legal right to execute and deliver, and to perform and observe the provisions of this Agreement and each of the other Seller Documents to which it is a party. Authority --------- (a) The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by Purchaser; and this Agreement has been duly executed and delivered by Purchaser and constitutes the valid and legally binding obligation of Purchaser, enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency or similar, laws or general principles of equity affecting the enforcement of creditors' rights generally from time to time in effect. (b) The execution and delivery of this Agreement, the compliance with the provisions hereof, and the consummation of the transactions herein contemplated have not and will not result in a breach or violation of (i) any Applicable Law applicable to Purchaser now in effect, (ii) any provision of the constituent documents of Purchaser, (iii) any agreement or instrument to which Purchaser is a party or by which it is bound, or (iv) the acceleration of any obligation of Purchaser. Litigation ---------- There are no actions, suits or proceedings or investigations at law or in equity, pending or, to the reasonable knowledge of Purchaser, threatened before Governmental Authority against or affecting Purchaser which, if decided adversely to Purchaser, could have a Material Adverse Effect on Purchaser. No Consent ---------- Except for any filings and approvals required under the HSR Act, no approval, consent or withholding of objection is required from any Governmental Authority with respect to the entering into or performance by Purchaser of this Agreement and the transactions contemplated hereby. Page 255 of 272 REPRESENTATIONS AND WARRANTIES OF THE MEMBERS --------------------------------------------- Each Member represents and warrants to Seller as of the date of this Agreement and as of each Closing Date as follows: Organization ------------ The Member is a limited partnership duly formed, validly existing and in good standing under the laws of the State of Delaware. It has full power, authority and legal right to execute and deliver, and to perform and observe the provisions of this Agreement and each of the other Seller Documents to which it is a party. Authority --------- (a) The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Member; and this Agreement has been duly executed and delivered by the Member and constitutes the valid and legally binding obligation of the Member, enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency or similar, laws or general principles of equity affecting the enforcement of creditors' rights generally from time to time in effect. (b) The execution and delivery of this Agreement, the compliance with the provisions hereof, and the consummation of the transactions herein contemplated have not and will not result in a breach or violation of (i) any Applicable Law applicable to the Member now in effect, (ii) any provision of the constituent documents of the Member, (iii) any agreement or instrument to which the Member is a party or by which it is bound, or (iv) the acceleration of any obligation of the Member. Litigation ---------- There are no actions, suits or proceedings or investigations at law or in equity, pending or, to the reasonable knowledge of the Member, threatened before Governmental Authority against or affecting the Member which, if decided adversely to the Member, could have a Material Adverse Effect on the Member. No Consent ---------- Except for any filings and approvals required under the HSR Act, no approval, consent or withholding of objection is required from any Governmental Authority with respect to the entering into or performance by the Member of this Agreement and the transactions contemplated hereby. COVENANTS PENDING CLOSING ------------------------- Portfolio Administration ------------------------ The Sale Parties and Genesee Ventures covenant and agree that from and after the date hereof, they shall consult with Purchaser with respect to all matters pertaining to the administration of the Assets, including any enforcement of rights and remedies under the Leases, and all matters relating to the rights and obligations of each Seller with respect to any applicable Lender. Furthermore, the Sale Parties shall not take any action or omit to take any action required to be taken with respect to any of the foregoing without obtaining the prior written approval of Purchaser. Page 256 of 272 Proceedings ----------- If and to the extent that there shall exist any action or proceeding before any Governmental Authority that shall seek or threaten to set aside, restrain, enjoin or prevent the Closing or the completion and consummation of the transactions contemplated hereby, including any injunction restraining the holding of the 2000 annual shareholders meeting of Genesee, then the Sale Parties and/or Genesee, as applicable, shall vigorously oppose any such proceeding and use their best efforts to have any such action or proceeding dismissed, terminated, stayed or otherwise so that the Closing may be completed and the transactions contemplated hereby can be consummated without any such interference. Antitrust Notification ---------------------- Purchaser and the Sale Parties shall cause to be filed with the FTC and the DOJ the notification and report forms required pursuant to the HSR Act with respect to the transactions contemplated hereby, together with a request for early termination of the waiting period thereunder. The parties agree with respect to such filings that they shall (a) after any request by the FTC or DOJ, promptly file any information or documents requested by the FTC or DOJ, (b) notify each other of any communications with the FTC or DOJ which relate to the transactions contemplated hereby, and (c) otherwise cooperate with respect to such filings. Purchaser shall pay the HSR Act filing fee. CONDITIONS PRECEDENT TO OBLIGATIONS FOR EACH CLOSING ---------------------------------------------------- Purchaser's Obligation ---------------------- The obligation of Purchaser to consummate a Closing hereunder shall be subject to the satisfaction at or prior to such Closing of each of the following conditions or the waiver by Purchaser of such condition(s): (a) Representations and Warranties ------------------------------ The representations and warranties of the Sale Parties, Genesee Ventures and Genesee contained in this Agreement, and of Seller contained in each of the Seller Documents, Lease Documents and Loan Documents to which it is a party, delivered in respect of a Closing, if applicable, shall be true and correct on and as of the Closing Date, as if such representations and warranties had been made on and as of the Closing Date, except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties shall be correct on and as of such earlier date). (b) Covenants and Agreements ------------------------ Each of the Sale Parties and Genesee Ventures shall have performed and complied with all of its obligations under this Agreement and each of the Seller Documents to which it is a party that are to be performed or complied with by it on or prior to the Closing Date. (c) Documents --------- Seller shall have delivered or caused to be delivered to Purchaser each of the documents and instruments set forth and described in Section 4.2 hereof, duly executed by Seller, and if applicable, the Lessee or the Lender, and each of the foregoing shall be satisfactory to Purchaser and its counsel in their sole discretion. Seller shall have delivered counterpart no. 1 or the "Original" (unless any such counterpart no. 1 or Original is held by a Lender as security for a Non-Recourse Debt, and then a certified copy) of each Lease to Purchaser. Page 257 of 272 (d) Filings and Titles ------------------ Seller shall have duly filed or recorded, as applicable, with all applicable Governmental Authorities, any Seller Documents, Lease Documents or Loan Documents to the extent filing or recording thereof shall be required or permitted thereby. Seller shall have filed financing statements on Form UCC-3 assigning any "protective" or "informational" filings against Lessees (unless such filings have been assigned to one or more Lenders), or, in the absence of such filings, financing statements on Form UCC-1 constituting protective or informational filings against such Lessees and naming any applicable Lender as assignee, if required. Except as set forth on Schedules 5.6(n) and 6.6(n), the titles to all titled motor vehicles included in the Assets described by the applicable Closing Schedule shall have been assigned by Seller to Purchaser. Seller and the third parties to the titling arrangements described in Schedules 5.6(n) and 6.6(n) shall have taken such action, including, without limitation, the written clarification and/or amendment of any agency relationship and the assignment of any beneficial interest and/or replacement or any trustee under any titling trust described therein, as Purchaser shall require in its sole discretion. (e) Authority; Incumbency --------------------- At the request of Purchaser, each of the Sale Parties and Genesee Ventures shall have delivered to Purchaser a resolution of its governing body authorizing the transactions contemplated by the Closing, together with an incumbency certificate regarding incumbency and authority of its officers in connection with the transactions contemplated by the Closing. (f) Approvals --------- All required licenses, approvals, consents and notifications necessary in respect of the execution and delivery of the Seller Documents, the modification of the Loan Documents on terms acceptable to Purchaser in its sole discretion and the transactions contemplated hereby, including, without limitation all notifications, reports and clearances required under the HSR Act, if any, shall have been obtained or made, and executed or certified copies thereof shall have been delivered to Purchaser. All time periods under the HSR Act shall have expired. (g) Proceedings; No Violation of Law -------------------------------- It shall not constitute a violation of law for Purchaser to consummate the Closing. (h) Opinion of Counsel ------------------ At the request of Purchaser, each of the Sale Parties, Genesee Ventures and Genesee shall have delivered to Purchaser an opinion of Nixon Peabody LLP in the form attached hereto as Exhibit E-1. (i) Releases -------- Seller shall or shall have caused to be filed all releases or termination statements with respect to any preexisting Liens on the Assets (other than those with respect to the Assumed Liabilities and Permitted Liens) and taken all such other actions as may be required to release and terminate such Liens that are consistent with the quality of title required hereby. (j) Defaults -------- Page 258 of 272 No breach or Default or event of default shall have occurred and be continuing under the Lease Documents or Loan Documents. (k) Insurance --------- Except with respect to any Lessee listed on Schedule 5.6(f) or 6.6(f) as having in place a self-insurance arrangement previously approved by Seller, Seller shall have instructed the Lessee to add Purchaser as an additional insured and loss payee (or, in the case of Lessees under Lease Documents relating to Equipment securing Non-Recourse Debt due and owing to HSBC as successor in interest to Republic National Bank of New York, as an additional insured only) on any and all insurance required for the benefit of lessor under the Lease Documents relating to the Equipment. (l) Certificate of Sale Parties, Genesee Ventures and Genesee --------------------------------------------------------- Purchaser shall have received certificates signed by a duly authorized officer of each of the Sale Parties, Genesee Ventures and Genesee, dated the Closing Date, certifying as to the fulfillment, on the Closing Date, of the conditions specified in Sections 12.1(a) and (b) hereof. (m) Aggregate Equipment Cost ------------------------ The Aggregate Equipment Cost of the Equipment to be purchased at the Closing shall not be less than the minimum amount established, from time to time, by Purchaser in its sole discretion. (n) Due Diligence ------------- Purchaser shall have received responses from Seller with respect to the open due diligence items set forth on Schedule 12.1(n) attached hereto applicable to the Assets to be purchased such Closing and/or the related Non-Recourse Debt, as applicable, and be satisfied with such responses in its sole discretion. (o) Remarketing Agreements ---------------------- All Remarketing Agreements with respect to the Assets described by the applicable Closing Schedule shall have been assigned by Seller to Purchaser. Seller's Obligation ------------------- The obligation of each Seller to consummate a Closing hereunder shall be subject to the satisfaction of the following conditions or the waiver by Seller of such condition(s): (a) Representations and Warranties ------------------------------ The representations and warranties of Purchaser contained in this Agreement and of Purchaser contained in each of the Seller Documents to which it is a party delivered in respect of a Closing, if applicable, shall be true and correct on and as of the Closing Date, as if such representations and warranties had been made on and as of the Closing Date, except to the extent Page 259 of 272 that such representations and warranties relate solely to an earlier date (in which case such representations and warranties shall be correct on and as of such earlier date). (b) Covenants and Agreements ------------------------ Purchaser shall have performed and complied with all of its obligations under this Agreement and each of the Seller Documents to which it is a party that are to be performed or complied with by it on or prior to the Closing Date. (c) Documents --------- Any and all documents delivered by Purchaser to Seller in connection with a Closing and the transactions contemplated by this Agreement shall be reasonably satisfactory in all respects to Seller and Seller's counsel. (d) Authority; Incumbency --------------------- Purchaser shall have delivered to Seller a resolution of its Board of Managers or members authorizing the transactions contemplated by the Closing, together with an incumbency certificate regarding the incumbency and authority of the officers of Purchaser in connection with the transactions contemplated by the Closing. (e) Approvals; No Violation of Law ------------------------------ All notifications, reports and clearances, if any, required under the HSR Act shall have been obtained or made, and executed or certified copies thereof shall have been delivered to Seller. All time periods under the HSR Act shall have expired. There shall be no order of any court restraining the holding of the 2000 shareholders meeting of Genesee or the Closing. It shall not constitute a violation of law for Seller to consummate the Closing. (f) Purchase Price; Acquisition Fee ------------------------------- Purchaser shall have paid to Seller the Purchase Price by wire transfer of immediately available funds to an account or accounts designated in writing by Seller. (g) Certificate of Purchaser ------------------------ Seller shall have received a certificate of Purchaser signed by a duly authorized officer of Purchaser, dated the Closing Date, certifying as to the fulfillment, on the Closing Date, of the conditions specified in Sections 12.2 (a) and (b) hereof. (h) Opinion of Counsel ------------------ At the request of Seller, Purchaser shall have delivered to each of the Sale Parties, Genesee Ventures and Genesee an opinion of Lou Cusano, General Counsel of Purchaser in the form attached hereto as Exhibit E-2. INDEMNIFICATION --------------- Sale Parties' and Genesee Indemnity ----------------------------------- (a) The Sale Parties jointly and severally hereby agree to indemnify and hold Purchaser and its members, managers, officers, employees, agents and attorneys, harmless from and against any and all claims, liabilities, losses, damages, costs and expenses, including, without Page 260 of 272 limitation, the reasonable fees and disbursements of counsel (collectively, "Claims" and, individually, a "Claim"), resulting or arising from any breaches or inaccuracies in any certification, representation or warranty made by Cheyenne in or pursuant to this Agreement or any of the other Seller Documents to which Cheyenne is a party or any failure or breach by Cheyenne of any covenant, obligation, or undertaking made by Cheyenne in this Agreement or any of the other Seller Documents to which Cheyenne is a party, except any such Claims resulting from Purchaser's gross negligence or willful misconduct. (b) Genesee Ventures hereby agrees to indemnify and hold Purchaser and its members, managers, officers, employees, agents and attorneys, harmless from and against any and all Claims, resulting or arising from any breaches or inaccuracies in any certification, representation or warranty made by Genesee Ventures in or pursuant to this Agreement or any of the other Seller Documents to which Genesee Ventures is a party or any failure or breach by Genesee Ventures of any covenant, obligation, or undertaking made by Genesee Ventures in this Agreement or any of the other Seller Documents to which Genesee Ventures is a party, except any such Claims resulting from Purchaser's gross negligence or willful misconduct. (c) Taylor-Bolane hereby agrees to indemnify and hold Purchaser and its members, managers, officers, employees, agents and attorneys, harmless from and against any and all Claims, resulting or arising from any breaches or inaccuracies in any certification, representation or warranty made by Taylor-Bolane in or pursuant to this Agreement or any of the other Seller Documents to which Taylor-Bolane is a party or any failure or breach by Taylor-Bolane of any covenant, obligation, or undertaking made by Taylor-Bolane in this Agreement or any of the other Seller Documents to which Taylor-Bolane is a party, except any such Claims resulting from Purchaser's gross negligence or willful misconduct. (d) Genesee hereby agrees to indemnify and hold Purchaser and its members, managers, officers, employees, agents and attorneys, harmless from and against any and all Claims, resulting or arising from any breaches or inaccuracies in any certification, representation or warranty made by Genesee, Cheyenne, Genesee Ventures and/or Taylor-Bolane in or pursuant to this Agreement or any of the other Seller Documents to which any such party is a party or any failure or breach by Genesee, Cheyenne, Genesee Ventures and/or Taylor-Bolane of any covenant, obligation, or undertaking made by it in this Agreement or any of the other Seller Documents to which any such party is a party, except any such Claims resulting from Purchaser's gross negligence or willful misconduct. Purchaser's and Members' Indemnity ---------------------------------- Purchaser and the Members jointly and severally hereby agree to indemnify and hold the Sale Parties and their respective partners, officers, employees, agents and attorneys, harmless from and against any and all Claims resulting or arising from any breaches or inaccuracies in any representation or warranty made by Purchaser and/or the Members in or pursuant to this Agreement or any of the other Seller Documents to which Purchaser and/or any of the Members is a party or any failure or breach by Purchaser and/or any of the Members of any covenant, obligation, or undertaking made by it in this Agreement or any of the other Seller Documents to which it is a party, except any such Claims resulting from the Sale Parties' gross negligence or willful misconduct. Limitations on Recourse and Indemnification ------------------------------------------- Page 261 of 272 (a) None of the Sale Parties, Genesee Ventures or Genesee, as applicable, shall have any liability to Purchaser for, or obligation to indemnify Purchaser with respect to, any breach of any representation or warranty of the Sale Parties or of Genesee Ventures set forth in Section 5.6 or Section 6.6 hereof, as applicable, with respect to a particular Lease or other Lease Document if Purchaser received a representation and warranty identical in substance to the breached representation or warranty from the Lessee thereunder in a Notice and Acknowledgment of Assignment and has recourse to the Lessee with respect thereto. (b) None of the Sale Parties, Genesee Ventures, Taylor-Bolane or Genesee shall have any obligation to indemnify Purchaser, and neither Purchaser nor any Member shall have any obligation to indemnify the Sale Parties, until the aggregate amount for which the Sale Parties, Genesee Ventures, Taylor-Bolane and Genesee or Purchaser and the Members, as applicable, would otherwise be obligated to indemnify Purchaser or the Sale Parties, as applicable, hereunder shall exceed an aggregate of Fifteen Thousand Dollars ($15,000), and then to the full extent (i.e. from the first Dollar) of all Claims. Furthermore, the aggregate amount of the Sale Parties', Genesee Ventures' and Taylor-Bolane's obligations to indemnify Purchaser pursuant to the terms of this Agreement shall not under any circumstances exceed the Aggregate Purchase Price. (c) The maximum aggregate amount of Genesee's obligation to indemnify Purchaser pursuant to the terms of this Agreement shall not under any circumstances exceed the Aggregate Purchase Price, and shall reduce one hundred twenty (120) days after the scheduled termination date of each Rental Schedule by an amount equal to the Purchase Price applicable to such Rental Schedule and the related Assets as set forth on the Schedule of Assets and the obligation of Genesee to indemnify Purchaser pursuant to the terms of this Agreement shall terminate on July 31, 2004 except solely with respect to Claims ("Noticed Claims") for which Purchaser shall have notified Genesee in writing of a claim for indemnification with respect thereto on or before such date. The obligation of Genesee to indemnify Purchaser pursuant to the terms of this Agreement shall terminate with respect to Noticed Claims when such obligations have been paid and/or performed in full. Survival of Representations and Warranties ------------------------------------------ The representations and warranties of the Sale Parties and Genesee Ventures set forth in Sections 5.3, 5.6, 6.3 and 6.6 hereof (and the indemnification obligations of the Sale Parties, Genesee Ventures and, subject to Section 13.3 hereof, Genesee under this Article 13 with respect thereto) shall survive for a period of six (6) months after the sale of the Equipment subject to the applicable Lease and thereafter shall terminate and be of no further force or effect, except as to matters for which Purchaser has given notice to the Sale Parties, Genesee Ventures and/or Genesee, as applicable, of its claim for indemnification prior thereto, which notice shall be given in the manner and in the form required by Section 13.5 hereof. All other representations and warranties of the parties contained in this Agreement and the attachments hereto (and the indemnification obligations of the parties under this Article 13 with respect thereto) shall survive each Closing and the consummation of the transactions contemplated hereby for a period corresponding to any applicable statute of limitations. Claims ------ (a) In the event that a party (the "Indemnified Party") desires to make a claim against another party hereto (the "Indemnifying Party") under this Section 13 in connection with any action, suit, proceeding or demand at any time instituted against or made upon the Indemnified Party for which the Indemnified Party may seek indemnification hereunder, the Indemnified Page 262 of 272 Party shall notify the Indemnifying Party of such Claim and of the Indemnified Party's claim of indemnification with respect thereto, provided that failure of the Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations under this Section 13 except to the extent, if at all, that the Indemnifying Party shall have been prejudiced thereby. Upon receipt of such notice from the Indemnified Party, the Indemnifying Party shall be entitled to participate in the defense of such Claim and shall be entitled to fully assume the defense of such Claim, and in the case of such an assumption upon written notice to the Indemnified Party of its intention to do so, the Indemnifying Party shall have the authority to negotiate, compromise and settle such Claim, provided that no such settlement shall impose on the Indemnified Party any cost, expense or liability which the Indemnifying Party is not indemnifying under this Section 13. The Indemnified Party shall retain the right to employ its own counsel and to participate in the defense of any Claim, the defense of which has been assumed by the Indemnifying Party pursuant hereto, but the Indemnified Party shall bear and shall be solely responsible for its own costs and expenses in connection with such participation, unless (i) the employment thereof has been specifically authorized by the Indemnifying Party, (ii) such Indemnified Party has been advised by counsel reasonably satisfactory to the Indemnifying Party that there may be one or more legal defenses available to it which are different from or additional to those available to the Indemnifying Party and in the reasonable judgment of such counsel it is advisable for such Indemnified Party to employ separate counsel, or (iii) the Indemnifying Party has failed to assume the defense of such action in accordance herewith and employ counsel reasonably satisfactory to the Indemnified Party. (b) In the event of any Claim under this Section 13, the Indemnified Party shall advise the Indemnifying Party in writing of the amount and circumstances surrounding such Claim. With respect to a liquidated Claim, if within forty-five (45) days after receiving written notice from the Indemnified Party, the Indemnifying Party has not contested such Claim in writing, the Indemnifying Party will pay the full amount thereof, or, in the case of the Members, their respective pro rata portions thereof, within thirty (30) days after the expiration of such period. MISCELLANEOUS ------------- Suretyship Waivers ------------------ (a) Each of Genesee Ventures, Taylor-Bolane and Genesee (collectively, the "Cheyenne Obligors") and the Members (together with the Cheyenne Obligors, the "Obligors") agrees that its indemnification obligations pursuant to Sections 3.5, 3.6 and 13 hereof, as applicable, are irrevocable, absolute, independent and unconditional, and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than payment in full of the Claims. In furtherance of the foregoing, and without limiting the generality thereof, each of the Obligors agrees as follows: (i) Purchaser or the Sale Parties, as applicable, may from time to time, without notice or demand and without affecting the validity or enforceability of this Agreement or giving rise to any limitation, impairment or discharge of such Obligor's liability hereunder, (A) renew, extend, accelerate or otherwise change the time, place, manner or terms of payment of the Claims, (B) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Claims or any agreement relating thereto and/or subordinate the payment of the same to the payment of any other obligations, (C) request and accept guaranties of the obligations with respect to the Claims and take and hold other security for the payment of the Claims, (D) release, exchange, compromise, subordinate or modify, with or without consideration, any other security for payment of the Claims, any guaranties of the obligations with respect to the Claims, or any other obligation of any Person with respect to the Claims, (E) enforce and apply any other security now Page 263 of 272 or hereafter held by or for the benefit of Purchaser or the Sale Parties, as applicable, in respect of the Claims and direct the order or manner of sale thereof, or exercise any other right or remedy that Purchaser or the Sale Parties, as applicable, may have against any such security, as Purchaser or the Sale Parties, as applicable, in its or their discretion may determine consistent with any applicable security agreement, including foreclosure on any such security pursuant to one or more judicial or non-judicial sales, whether or not every aspect of any such sale is commercially reasonable, and (F) exercise any other rights available to Purchaser or the Sale Parties, as applicable, under this Agreement, at law or in equity; and (ii) this Agreement and the obligations of such Obligor hereunder shall be valid and enforceable and shall not be subject to any limitation, impairment or discharge for any reason (other than payment in full of all Claims), including without limitation the occurrence of any of the following, whether or not the Obligors shall have had notice or knowledge of any of them: (A) any failure to assert or enforce or agreement not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy with respect to the Claims or any agreement relating thereto, or with respect to any guaranty of or other security for the payment of the Claims, (B) any waiver, amendment or modification of, or any consent to departure from, any of the terms or provisions (including without limitation provisions relating to events of default) of this Agreement, any of the other Seller Documents or any agreement or instrument executed pursuant thereto, or of any guaranty or other security for the payment of the Claims, (C) the Claims, or any agreement relating thereto, at any time being found to be illegal, invalid or unenforceable in any respect, (D) the application of payments received from any source to the payment of indebtedness other than the Claims, even though Purchaser or the Sale Parties, as applicable, might have elected to apply such payment to any part or all of the Claims, (E) any failure to perfect or continue perfection of a security interest in any other collateral which secures the payment of any of the Claims, (F) any defenses, set-offs or counterclaims which any of the Obligors may allege or assert against Purchaser or the Sale Parties, as applicable, in respect of the Claims, including but not limited to failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction and usury, and (G) any other act or thing or omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of any of the Obligors as an obligor in respect of the Claims. (b) Each of the Obligors hereby waives, for the benefit of Purchaser or the Sale Parties, as applicable: (i) any right to require Purchaser or the Sale Parties, as applicable, as a condition of payment or performance by such Obligor, to (A) proceed against any obligor, any guarantor of the obligations with respect to the Claims or any other Person, (B) proceed against or exhaust any other security held from any obligor, any guarantor of the obligations with respect to the Claims or any other Person, (C) proceed against or have resort to any balance of any deposit account or credit on the books of Purchaser or the Sale Parties, as applicable, in favor of any obligor or any other Person, or (D) pursue any other remedy in the power of Purchaser or the Sale Parties, as applicable, whatsoever; (ii) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of any obligor including, without limitation, any defense based on or arising out of the lack of validity or the unenforceability of the Claims or any agreement or instrument relating thereto or by reason of the cessation of the liability of any obligor from any cause other than payment in full of all Claims; (iii) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (iv) any defense based upon Purchaser's or the Sale Parties', as applicable, errors or omissions in the administration of the Claims, except behavior which amounts to bad faith; (v) (A) any legal or equitable discharge Page 264 of 272 of any of the Obligors' obligations hereunder, (B) the benefit of any statute of limitations affecting any of the Obligor's liability hereunder or the enforcement hereof, (C) any rights to set-offs, recoupments and counterclaims, and (D) promptness, diligence and any requirement that Purchaser or the Sale Parties, as applicable, protect, secure, perfect or insure any other security interest or Lien or any property subject thereto; (vi) notices, demands, presentments, protests, notices of protest, notices of dishonor and notices of any action or inaction, notices of default under this Agreement or any agreement or instrument related hereto, notices of any renewal, extension or modification of the Claims or any agreement related thereto, notices of any extension of credit to any Person and notices of any of the matters referred to in the preceding paragraph and any right to consent to any thereof; and (vii) to the fullest extent permitted by law, any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties. (c) Until all Claims shall have been paid in full, each of the Cheyenne Obligors and the Members shall withhold exercise respectively of (i) any claim, right or remedy, direct or indirect, that it now has or may hereafter have against the Sale Parties and/or any of the Cheyenne Obligors or Purchaser and/or any of the Members, as applicable, or any of its or their assets in connection with this Agreement or any of the other Seller Documents or the performance by it or them of its or their obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise and including without limitation (A) any right of subrogation, reimbursement or indemnification that such Cheyenne Obligor or Member, as applicable, now has or may hereafter have against the Sale Parties and/or any of the Cheyenne Obligors or Purchaser and/or any of the Members, as applicable, (B) any right to enforce, or to participate in, any claim, right or remedy that Purchaser or the Sale Parties, as applicable, now has or may hereafter have against the Sale Parties and/or any of the Cheyenne Obligors or Purchaser and/or any of the Members, as applicable, and (C) any benefit of, and any right to participate in, any other collateral or security now or hereafter held by Purchaser or the Sale Parties, as applicable, and (ii) any right of contribution such Cheyenne Obligor or Member, as applicable, may have against any guarantor of any of the Claims. Each of the Cheyenne Obligors and Members, as applicable, further agrees that, to the extent the waiver of its rights of subrogation, reimbursement, indemnification and contribution as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification it may have against the Sale Parties and/or any of the Cheyenne Obligors or Purchaser and/or any of the Members, as applicable, or against any other collateral or security, and any rights of contribution it may have against any such guarantor, shall be junior and subordinate to any rights Purchaser or the Sale Parties, as applicable, may have against the Sale Parties and/or any of the Cheyenne Obligors or Purchaser and/or any of the Members, as applicable, to all right, title and interest Purchaser or the Sale Parties, as applicable, may have in any such other collateral or security, and to any right Purchaser or the Sale Parties, as applicable, may have against any such guarantor. (d) Neither Purchaser nor the Sale Parties, as applicable, shall have any obligation to disclose or discuss with any Obligor, its assessment, or any Obligor's assessment, of the financial condition of any of the Sale Parties or Purchaser, as applicable. Each of the Obligors has adequate means to obtain information from the Sale Parties or Purchaser, as applicable, on a continuing basis concerning the financial condition of the Sale Parties or Purchaser, as applicable, and its ability to perform its obligations under this Agreement and the other Seller Documents, and each Obligor assumes the responsibility for being and keeping informed of the financial condition of the Sale Parties and Purchaser, as applicable, and of all circumstances Page 265 of 272 bearing upon the risk of nonpayment of the Claims. Each Obligor hereby waives and relinquishes any duty on the part of Purchaser or the Sale Parties, as applicable, to disclose any matter, fact or thing relating to the business, operations or condition of the Sale Parties or Purchaser, as applicable, now known or hereafter known by Purchaser or the Sale Parties, as applicable. Communications -------------- All notices, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered personally or if mailed by certified mail, return receipt requested, postage prepaid, or sent by written telecommunications, receipt confirmed, as follows, or as may be changed, from time to time, by a party hereto by written notice to the other parties given in accordance with this Section 14.2: If to Purchaser or the Members, to: ICON Cheyenne LLC c/o ICON Capital Corp. 599 Lexington Avenue New York, NY 10022 Attention: General Counsel Fax: (212) 418-4739 Telephone: (212) 418-4700 Page 266 of 272 With copies to: ICON Cheyenne LLC c/o ICON Capital Corp. Four Embarcadero Center, Suite 1810 San Francisco, CA 94111 Attention: President Fax: (415) 981-4299 Telephone: (415) 981-4266 (Note: Commencing April 1, 2001, the address to be used is 260 California, 7th Floor, San Francisco, CA 94111) and Nixon Peabody LLP 101 Federal Street Boston, MA 02110 Attention: Craig D. Mills Fax: (617) 345-1300 Telephone: (617) 345-1000 If to Cheyenne, to: Cheyenne Leasing Company 400 Andrews Street, Suite 307 Rochester, NY 14604 Attention: James F. Taylor Fax: (716) 263-2722 Telephone: (716) 546-3140 If to Genesee Ventures, to: Genesee Ventures, Inc. P.O. Box 762 Rochester, NY 14603 Attention: Andy Yeager Fax: (716) 546-5011 Telephone: (716) 263-9205 With a copy to: Genesee Corporation 455 St. Paul Street Rochester, NY 14605 Attention: Mark Leunig Fax: (716) 263-9444 Telephone: (716) 263-9440 If to Taylor-Bolane, to: Page 267 of 272 Taylor-Bolane Associates, Inc. 400 Andrews Street, Suite 307 Rochester, NY 14604 Attention: James Taylor Fax: (716) 263-2722 Telephone: (716) 263-2620 If to Genesee, to: Genesee Corporation 455 St. Paul Street Rochester, NY 14605 Attention: Mark Leunig Fax: (716) 263-9444 Telephone: (716) 263-9440 Entire Agreement and Amendment ------------------------------ This Agreement, together with the Schedules and exhibits attached hereto contains the entire understanding of the parties, supersedes all prior agreements and understandings relating to the subject matter hereof and shall not be amended except by a written instrument hereafter signed by all of the parties hereto. Governing Law ------------- THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY, EFFECT AND PERFORMANCE. Sections and Section Headings ----------------------------- All enumerated subdivisions of this Agreement are herein referred to as "section" or "subsection." The headings of sections and subsections are for reference only and shall not limit or control the meaning thereof. Successors and Assigns ---------------------- This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Neither this Agreement nor the obligations of any party hereunder shall be assignable or transferable by such party without the prior written consent of the other party hereto. This Section 14.6 is not intended, and shall not be construed, to prohibit or in any manner restrict or limit the right of Taylor-Bolane to transfer its joint venture interest in Cheyenne to an Affiliate of Genesee Ventures, which right is hereby acknowledged. Counterparts ------------ This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Page 268 of 272 Further Assurances ------------------ The parties hereto agree to execute and deliver, or to be caused to be executed and delivered, such further instruments or documents, including any filings or registrations, to cooperate with respect to any audits or other proceedings, including any actions necessary with respect to compliance with the HSR Act, and to take such other action as may be reasonably required to carry on the transactions contemplated herein. Confidentiality --------------- (a) Except as otherwise contemplated herein, no party hereto will, prior to the final Closing, make any disclosures (public or private) concerning the existence or contents of this Agreement or cause to be publicized in any manner whatsoever, by way of interviews, responses to questions or inquiries, press releases or otherwise, any aspect of the transaction described herein without prior written notice to and written approval of the other party, which approval will not be unreasonably withheld; provided, however, that this Section 14.9(a) shall not prevent any party from issuing any press release or making any public statement which such party determines to be required by law or by any self-regulating securities exchange (it being understood that the parties will consult with each other before issuing any such press release or making any such public statement). (b) From and after the final Closing, each of the Sale Parties and Genesee Ventures shall not, and shall cause its Affiliates, employees, advisors and agents to not, directly or indirectly, use any information concerning any of the Assets for any purpose not related to the transactions contemplated hereby without prior written notice to and written approval of Purchaser. [Remainder of Page Intentionally Left Blank] Page 269 of 272 IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have caused this Agreement to be duly executed and delivered by their respective duly authorized officers as an instrument under seal as of the date and year first above written. PURCHASER: ---------- ICON CHEYENNE LLC By: /s/ Paul B. Weiss Title: Authorized Signer CHEYENNE: --------- CHEYENNE LEASING COMPANY By its joint venture partners: GENESEE VENTURES, INC. By: /s/John B. Henderson Title: V. P. and Treasurer TAYLOR-BOLANE ASSOCIATES, INC. By: /s/ Diane M. Lee Title: Vice President GENESEE VENTURES: ----------------- GENESEE VENTURES, INC. By: /s/ John B. Henderson Title: V. P. and Treasurer TAYLOR BOLANE: -------------- TAYLOR-BOLANE ASSOCIATES, INC. By: /s/ Diane M. Lee Title: Vice President GENESEE CORPORATION: -------------------- Page 270 of 272 GENESEE CORPORATION By: /s/ John B. Henderson Title: Sr. V.P. and CFO MEMBERS: -------- ICON Cash Flow Partners, L.P. Seven By: ICON Capital Corp., its general partner By: /s/ Paul B. Weiss Its: President ICON Cash Flow Partners, L.P. Six By: ICON Capital Corp., its general partner By: /s/ Paul B. Weiss Its: President ICON Income Fund Eight A L.P. By: ICON Capital Corp., its general partner By: /s/ Paul B. Weiss Its: President ICON Income Fund Eight B L.P. By: ICON Capital Corp., its general partner By: /s/ Paul B. Weiss Its: President EX-99.2 16 l85770aex99-2.txt EXHIBIT 99-2 Page 271 of 272 EXHIBIT 99-2 ------------ FOR IMMEDIATE RELEASE CONTACT: Mark W. Leunig Director of Investor Relations (716) 263-9440 GENESEE CORPORATION ANNOUNCES ----------------------------- SALE OF EQUIPMENT LEASE PORTFOLIO TO ICON AND --------------------------------------------- END OF DISCUSSIONS WITH RALCORP TO SELL FOODS BUSINESS ------------------------------------------------------ ROCHESTER, NEW YORK, December 28, 2000 -- Genesee Corporation (NASDAQ/NMS: GENBB) announced today that the Corporation's equipment leasing subsidiary, Cheyenne Leasing Company, completed the sale of a significant portion of its equipment lease portfolio to ICON Cheyenne, LLC, a joint venture of four limited partnerships managed by ICON Capital Corp. of White Plains, New York. The Corporation received $12.3 million as its portion of the sale proceeds. The purchase price for three of the leases sold to ICON was paid into escrow pending satisfaction by Cheyenne Leasing Company of certain post-closing conditions. The Corporation expects that Cheyenne will satisfy these conditions and receive the escrowed funds within sixty days. The Corporation estimates that it will receive approximately $700,000 as its portion of the amount escrowed. Following the sale to ICON, Cheyenne Leasing Company will continue to own and manage 71 equipment leases in its portfolio that are due to mature during calendar 2001. These leases have an estimated book value to the Corporation of approximately $3.8 million. "The sale to ICON is a significant capstone for the Corporation's venture into equipment leasing," said Mark W. Leunig, the Corporation's Senior Vice President and Chief Administrative Officer. "Since its inception in 1986, Cheyenne Leasing Company entered into more than 460 leases representing total equipment value of more than $200 million," said Mr. Leunig. Page 272 of 272 The Corporation also announced that it has ended discussions with Ralcorp Holdings, Inc. to sell the Corporation's Foods Division. The Corporation had entered into a letter of intent with Ralcorp in August, 2000 but was unable to reach agreement on the terms of a definitive agreement. In furtherance of the Corporation's previously announced liquidation plan, the Corporation will continue to evaluate strategic alternatives for the Foods Division. NOTE: Statements made in this news release which are not historical, including statements regarding the timing and amount of the proceeds from the escrowed portion of the purchase price for the equipment lease portfolio, and the estimated book value of the remaining portion of the lease portfolio, are forward-looking statements. Such forward-looking statements are subject to a number of risks and uncertainties, and there can be no assurance that the expectations or results reflected in those statements will be realized or achieved. Such risks and uncertainties include, without limitation, the failure by Cheyenne Leasing Company to satisfy the conditions necessary to receive the escrowed amounts and the failure by the Corporation to realize the estimated book value of the remaining portion of the lease portfolio. Copies of Genesee Corporation news releases are available free of charge by calling PRNewswire's Company News On Call at 800-758-5804, Extension 352775, or on the Internet at http;//www.prnewswire.com/cno -----END PRIVACY-ENHANCED MESSAGE-----