-----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, L+hTdzXy2PnSFDF/dpvQn2Y9XO0scVXKz76pP7VbIroGawojYX+qLxV3zOdQvY00 ADyoG0az+FMx4mKNh0Zq2Q== 0000950144-98-010061.txt : 19980818 0000950144-98-010061.hdr.sgml : 19980818 ACCESSION NUMBER: 0000950144-98-010061 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980605 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980817 SROS: BSE SROS: CSE SROS: CSX SROS: NYSE SROS: PHLX SROS: PCX FILER: COMPANY DATA: COMPANY CONFORMED NAME: COCA COLA BOTTLING GROUP SOUTHWEST INC CENTRAL INDEX KEY: 0000811615 STANDARD INDUSTRIAL CLASSIFICATION: BOTTLED & CANNED SOFT DRINKS CARBONATED WATERS [2086] IRS NUMBER: 751494591 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 033-69274 FILM NUMBER: 98693139 BUSINESS ADDRESS: STREET 1: 2500 WINDY RIDGE PARKWAY CITY: ATLANTA STATE: GA ZIP: 30339 BUSINESS PHONE: 7709893000 MAIL ADDRESS: STREET 1: 2500 WINDY RIDGE PARKWAY CITY: ATLANTA STATE: GA ZIP: 30339 8-K 1 COCA COLA BOTTLING GROUP SOUTHWEST, INC. 1 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: JUNE 5, 1998 (DATE OF EARLIEST EVENT REPORTED) THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) NEVADA 33-69274 75-1494591 (STATE OF (COMMISSION FILE NO.) (IRS EMPLOYER INCORPORATION) IDENTIFICATION NO.) 2500 WINDY RIDGE PARKWAY, ATLANTA, GEORGIA 30339 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE) (770) 989-3000 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) 2 ITEM 1. CHANGES IN CONTROL OF REGISTRANT On June 5, 1998, Coca-Cola Enterprises Inc. ("CCE") became the holder of all of the issued and outstanding stock of The Coca-Cola Bottling Group (Southwest), Inc. (the "Company"). This was accomplished by a merger of a wholly owned subsidiary of CCE into the Company's parent corporation, followed by the merger of the Company's parent corporation into CCE. This resulted in the Company's becoming a wholly owned subsidiary of CCE. The total transaction value (purchase price and acquired debt) for the acquisition of the Company and for the Company's subsequent acquisition of the remaining stock of Texas Bottling Group, Inc. ("TBG") not already owned by the Company (described in Item 2, below) was approximately $1.1 billion. Shareholders of the Company received a combination of cash and common stock of CCE in exchange for their shares. The cash portion of the consideration was funded by CCE's issuance of commercial paper. The following were the shareholders of the Company's parent prior to the merger: CCBG Stock Management Limited Partnership Robert K. Hoffman Richard E. Hoffman Citicorp North America, Inc. The Prudential Insurance Company of America Pruco Life Insurance Company Coca-Cola Trust, K.C. Overend Capital, Ltd. Richard C. Ware II Robert W. Decherd ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On June 5, 1998, after the Company had become a wholly owned subsidiary of CCE, the Company completed a share exchange with TBG. The Company had previously owned 49% of the outstanding common stock of TBG. This transaction was part of the acquisition of both the Company and TBG by CCE. The purchase price for the acquisition by the Company of the remaining 51% ownership of TBG was approximately $167 million. Shareholders of TBG received common stock of CCE in exchange for their shares. 3 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements of Business Acquired Texas Bottling Group, Inc. and Subsidiary Financial Statements - for the years ended December 31, 1997, 1996 and 1995: Report of Independent Public Accountants Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Stockholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Texas Bottling Group, Inc. and Subsidiary Financial Statements - for the quarters ended March 31, 1998 and 1997: Consolidated Balance Sheets Consolidated Statement of Income Consolidated Statement of Cash Flows Notes to Consolidated Financial Statements (b) Pro Forma Financial Information: The Coca-Cola Bottling Group (Southwest), Inc. Pro Forma Combined Condensed Financial Information-for the quarter ended March 31, 1998 and for the year ended December 31, 1998 (unaudited): Introductory Information Pro Forma Combined Condensed Statement of Operations for the Quarter Ended March 31, 1998 Pro Forma Combined Condensed Statement of Operations for the Year Ended December 31, 1997 Pro Forma Combined Condensed Balance Sheet as of March 31, 1998 Notes to Unaudited Pro Forma Combined Condensed Financial Information (c) Exhibits 2.1 Agreement of Merger dated June 5, 1998, by and among Coca-Cola Enterprises Inc., Texa-Cola Acquisition Company and CCBG Corporation.* 2.2 Share Exchange Agreement dated June 5, 1998, by and among Coca-Cola Enterprises Inc., the Company and Texas Bottling Group, Inc.* - ------------------------ * An index of all exhibits to these Agreements are included in the Agreements immediately following the Agreements' Index of Defined Terms. The contents of the Disclosure Schedules to the Agreements are identified in the text, wherever reference is made to the Disclosure Schedules. Neither the exhibits nor the Disclosure Schedules are filed with this report, but a copy of any omitted exhibit or portion of the Disclosure Schedules will be furnished supplementally to the Commission upon its request. 4 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC. (Registrant) Date: August 17, 1998 /s/ Lowry F. Kline -------------------- Lowry F. Kline Executive Vice President, General Counsel and Secretary 5 INDEX TO FINANCIAL STATEMENTS
PAGE FINANCIAL STATEMENTS NUMBERS ---------------------------- ---------- Texas Bottling Group, Inc. and Subsidiary Financial Statements - for the years ended December 31, 1997, 1996 and 1995: Report of Independent Public Accountants........................................ F-1 Consolidated Balance Sheets..................................................... F-2 Consolidated Statements of Income............................................... F-4 Consolidated Statements of Stockholders' Equity................................. F-5 Consolidated Statements of Cash Flows........................................... F-6 Notes to Consolidated Financial Statements...................................... F-8 Texas Bottling Group, Inc. Financial Statements - for the quarters ended March 31, 1998 and 1997: Consolidated Balance Sheets..................................................... F-19 Consolidated Statement of Income................................................ F-21 Consolidated Statement of Cash Flows............................................ F-22 Notes to Consolidated Financial Statements...................................... F-23 The Coca-Cola Bottling Group (Southwest), Inc. Pro Forma Combined Condensed Financial Information - for the quarter ended March 31, 1998 and for the year ended December 31, 1997 (unaudited): Introductory Information........................................................ PF-1 Pro Forma Combined Condensed Statement of Operations for the Quarter Ended March 31, 1998............................................. PF-3 Pro Forma Combined Condensed Statement of Operations for the Year Ended December 31, 1997............................................. PF-4 Pro Forma Combined Condensed Balance Sheet as of March 31, 1998................. PF-5 Notes to Unaudited Pro Forma Combined Condensed Financial Information........... PF-6
6 FINANCIAL STATEMENTS Texas Bottling Group, Inc. and Subsidiary Financial Information for the years ended December 31, 1997, 1996 and 1995 7 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Texas Bottling Group, Inc.: We have audited the accompanying consolidated balance sheets of Texas Bottling Group, Inc. (a Nevada corporation) and subsidiary as of December 31, 1996 and 1997, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Texas Bottling Group, Inc. and subsidiary as of December 31, 1996 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Dallas, Texas, March 12, 1998 F-1 8 TEXAS BOTTLING GROUP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1996 AND 1997 (Amounts in Thousands, Except Share Data) ASSETS 1996 1997 ------ -------- -------- CURRENT ASSETS: Cash and cash equivalents $ 636 $ 475 Receivables- Trade accounts, net of allowance for doubtful accounts of $544 and $601 in 1996 and 1997 21,349 20,615 Other 3,280 3,097 -------- -------- Total receivables, net 24,629 23,712 Inventories 9,327 9,904 Prepaid expenses and other 1,498 1,840 Deferred tax asset 9,645 8,457 -------- -------- Total current assets 45,735 44,388 -------- -------- PROPERTY, PLANT, AND EQUIPMENT: Land 4,866 4,751 Buildings and improvements 20,819 20,429 Machinery and equipment 16,393 17,164 Vehicles 16,662 18,641 Vending equipment 27,215 33,578 Furniture and fixtures 5,500 6,034 -------- -------- 91,455 100,597 Less- Accumulated depreciation and amortization (50,312) (57,287) -------- -------- Property, plant, and equipment, net 41,143 43,310 -------- -------- OTHER ASSETS: Franchise rights, net of accumulated amortization of $36,140 and $39,783 in 1996 and 1997 109,362 105,718 Goodwill, net of accumulated amortization of $17,455 and $19,183 in 1996 and 1997, respectively 51,676 49,949 -------- -------- Franchise rights and goodwill 161,038 155,667 Deferred financing costs and other assets, net of accumulated amortization of $2,335 and $2,670 in 1996 and 1997 7,852 7,066 Deferred tax asset 355 - -------- -------- Total other assets 169,245 162,733 -------- -------- Total assets $256,123 $250,431 -------- -------- -------- --------
The accompanying notes are an integral part of these consolidated balance sheets. F-2 9 TEXAS BOTTLING GROUP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1996 AND 1997 (Amounts in Thousands, Except Share Data) LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1997 ------------------------------------ -------- -------- CURRENT LIABILITIES: Accounts payable $ 15,276 $ 15,612 Accrued payroll 793 845 Accrued insurance 3,342 2,557 Accrued interest 1,364 1,383 Contribution to employees' benefit plans 2,158 2,026 Current maturities of long-term debt 16,500 737 -------- -------- Total current liabilities 39,433 23,160 -------- -------- LONG-TERM DEBT, net of current maturities 203,000 214,867 OTHER LIABILITIES 3,864 3,005 DEFERRED TAX LIABILITY - 2,067 POSTRETIREMENT BENEFIT OBLIGATION 6,157 6,117 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock Class A, $2 par value; 1,100,249 shares authorized; 541,916 issued and outstanding as of December 31, 1996 and 1997 1,084 1,084 Common stock Class B, $2 par value; 228,357 shares authorized, issued and outstanding (convertible to 558,332 shares of Class A) as of December 31, 1996 and 1997 457 457 Additional paid-in capital 43,459 43,459 Retained deficit (41,331) (43,785) -------- -------- Total stockholders' equity 3,669 1,215 -------- -------- Total liabilities and stockholders' equity $256,123 $250,431 -------- -------- -------- --------
The accompanying notes are an integral part of these consolidated balance sheets. F-3 10 TEXAS BOTTLING GROUP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1995, 1996, AND 1997 (Amounts in Thousands) 1995 1996 1997 -------- -------- -------- NET REVENUES $215,095 $220,796 $217,508 COSTS AND EXPENSES: Cost of goods sold (exclusive of depreciation shown below) 117,233 119,336 116,258 Selling, general, and administrative 50,154 52,359 57,840 Depreciation and amortization 11,548 12,816 14,444 -------- -------- -------- Operating income 36,160 36,285 28,966 INTEREST: Interest on debt (20,250) (18,006) (17,797) Deferred financing cost (584) (572) (572) Interest income 372 208 65 -------- -------- -------- (20,462) (18,370) (18,304) OTHER INCOME, net 185 348 174 -------- -------- -------- Income before taxes and extraordinary item 15,883 18,263 10,836 INCOME TAX BENEFIT (PROVISION) 12,675 (2,971) (3,890) -------- -------- -------- Income before extraordinary item 28,558 15,292 6,946 EXTRAORDINARY ITEM, net of income tax benefit of $39 in 1995 (72) - - -------- -------- -------- Net income $ 28,486 $ 15,292 $ 6,946 -------- -------- -------- -------- -------- --------
The accompanying notes are an integral part of these consolidated statements. F-4 11 TEXAS BOTTLING GROUP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1995, 1996, AND 1997 (Amounts in Thousands) Common Stock Additional --------------------- Paid-In Retained Class A Class B Capital Deficit ------- ------- ----------- --------- BALANCE, December 31, 1994 1,084 457 43,459 (68,886) Net income - - - 28,486 Dividends paid - - - (7,823) ------ ---- ------- -------- BALANCE, December 31, 1995 1,084 457 43,459 (48,223) Net income - - - 15,292 Dividends paid - - - (8,400) ------ ---- ------- -------- BALANCE, December 31, 1996 1,084 457 43,459 (41,331) Net income - - - 6,946 Dividends paid - - - (9,400) ------ ---- ------- -------- BALANCE, December 31, 1997 $1,084 $457 $43,459 $(43,785) ------ ---- ------- -------- ------ ---- ------- --------
The accompanying notes are an integral part of these consolidated statements. F-5 12 TEXAS BOTTLING GROUP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1995, 1996, AND 1997 (Amounts in Thousands) 1995 1996 1997 --------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 28,486 $ 15,292 $ 6,946 Adjustments to reconcile net income to net cash provided by operating activities- Extraordinary item 111 - - Depreciation and amortization 11,548 12,816 14,444 Provision for bad debts 240 240 302 Deferred tax (benefit) provision (12,800) 2,800 3,610 Amortization of deferred financing costs 584 572 572 Deferred compensation 846 1,193 780 Change in assets and liabilities, excluding effects of extraordinary item: Receivables (5,477) (2,176) 615 Inventories (1,105) (1,143) (577) Prepaid expenses 174 (857) (342) Accounts payable 7,368 (1,625) 336 Accrued expenses (2,536) (2,105) (714) Contribution to employees' benefit plans 12 (146) (132) Other liabilities 318 125 (1,639) Postretirement benefit obligation 30 123 (40) Other 203 - 0 --------- -------- -------- Net cash provided by operating activities 28,002 25,109 24,161 --------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant, and equipment (9,802) (10,887) (10,530) Other noncurrent assets acquired - (3,050) (496) --------- -------- -------- Net cash used by investing activities (9,802) (13,937) (11,026) --------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings under line of credit - 4,000 12,604 Payments on long-term debt (7,500) (12,000) (16,500) Proceeds from issuance of long-term debt, net 113,844 - - Retirements of long-term debt (116,500) - - Purchase of interest rate cap (490) - - Payment of dividends (7,823) (8,400) (9,400) --------- -------- -------- Net cash used by financing activities (18,469) (16,400) (13,296) --------- -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (269) (5,228) (161) CASH AND CASH EQUIVALENTS, beginning of year 6,133 5,864 636 --------- -------- -------- CASH AND CASH EQUIVALENTS, end of year $ 5,864 $ 636 $ 475 --------- -------- -------- --------- -------- --------
The accompanying notes are an integral part of these consolidated statements. F-6 13 TEXAS BOTTLING GROUP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED FOR THE YEARS ENDED DECEMBER 31, 1995, 1996, AND 1997 (Amounts in Thousands) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: 1995 1996 1997 ------- ------- ------- Cash paid during the year for: Interest $22,276 $19,707 $17,739 Income taxes - - 385
The accompanying notes are an integral part of these consolidated statements. F-7 14 TEXAS BOTTLING GROUP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996 AND 1997 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Principles of Consolidation The consolidated financial statements include the accounts of Texas Bottling Group, Inc., a Nevada corporation (the "Company"), and its wholly owned subsidiary, Coca-Cola Bottling Company of the Southwest, a Nevada corporation ("San Antonio Coke"). The Company primarily bottles and distributes soft drinks in its franchise territories (food service operations are not material) in central and southern Texas, including the cities of San Antonio and Corpus Christi. All material intercompany balances and transactions have been eliminated in consolidation. Certain Risk Factors The Company is highly leveraged and will require substantial amounts of cash to fund scheduled payments of principal and interest on its outstanding debt and future capital expenditures. The Company's ability to service its debt in the future, maintain adequate working capital, and make required or planned capital expenditures will depend on its ability to generate sufficient cash from operations. Management is of the opinion that the Company will generate sufficient cash flow to meet its obligations or that alternative financing will be available. REVENUE RECOGNITION Revenue is recognized from bottling operations when the product is delivered. Vending operations recognize revenue when cash is collected. CASH AND CASH EQUIVALENTS The Company considers investments with original maturities of three months or less to be cash equivalents. INVENTORIES Inventories include the costs of materials and direct labor and manufacturing overhead, when applicable, and are valued at the lower of first-in, first-out cost or market, except for repair parts and supplies, which are valued at cost. Inventories as of December 31, 1996 and 1997, are summarized as follows (in thousands): 1996 1997 ------ ------ Raw materials $3,351 $3,597 Finished goods 4,940 4,852 Repair parts and supplies 1,036 1,455 ------ ------ $9,327 $9,904 ------ ------ ------ ------
F-8 15 PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment is stated at cost. Expenditures for maintenance and repairs are charged to expense when incurred. The cost of assets retired or sold, and the related amounts of accumulated depreciation are removed from the accounts, and any gain or loss is included in other income. Depreciation is determined using the straight-line method over the estimated useful lives of the assets as follows: Buildings and improvements 3 - 25 years Machinery and equipment 3 - 10 years Vehicles 3 - 10 years Vending equipment 2 - 10 years Furniture and fixtures 2 - 10 years RETURNABLE CAN TRAYS AND SHELLS Returnable can trays and shells are carried in other assets at amortized cost. The cost of can trays and shells in excess of deposit value is amortized on a straight-line basis over three years. FRANCHISE RIGHTS AND GOODWILL Franchise rights and goodwill represent the cost in excess of the fair value of tangible assets acquired. The Company views franchise rights and goodwill as a single intangible asset that is being amortized over a period of 40 years. The Company established separate values for franchise rights and for goodwill. The Company annually evaluates its carrying value and expected period of benefit of franchise rights and goodwill in relation to its expected future undiscounted cash flows. If the carrying value were determined to be in excess of expected future cash flows, franchise rights and goodwill would be reduced to fair market value. Expected future cash flows exceeded those amounts recorded in the consolidated financial statements. INCOME TAXES The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of existing differences between the financial reporting and tax reporting bases of assets and liabilities and operating loss and tax credit carryforwards for tax purposes. Valuation allowances are established, if necessary, to reduce the deferred tax asset to the amount that will more likely than not be realized. RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform with current year presentation. USE OF ESTIMATES Management uses estimates and assumptions in preparing financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were assumed in preparing the financial statements. F-9 16 NEW ACCOUNTING PRONOUNCEMENTS The Financial Accounting and Standards Board has issued Statement of Financial Accounting Standard (SFAS) No. 129, "Disclosure of Information About Capital Structure," SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information." These statements become effective during 1998 and are not expected to have a significant effect on the financial position of the Company. 2. DEBT: On March 11, 1998, the Company entered into a new credit agreement (the "1998 Senior Credit Facility") with a group of banks. The 1998 Senior Credit Facility provides the Company a revolving credit facility (the "1998 Revolver") under which the Company may borrow up to $230 million. As required by the 1998 Senior Credit Facility, the proceeds of the 1998 Revolver shall be used to refinance existing indebtedness or as allowed under the new credit agreement. The 1998 Revolver shall bear interest at a rate equal to either LIBOR plus 0.375% to 1.0% or the Alternate Base Rate, as defined. Interest rates and commitment fees on the 1998 Revolver are subject to change, depending on the ratio of total debt to earnings, as defined, at the end of each calendar quarter. Interest payments are payable quarterly or as defined on the 1998 Revolver. The Company must pay a commitment fee of 0.18% to 0.275% of the average daily unused committed amount of the 1998 Revolver. Additionally, the Company paid an underwriting fee equal to 0.5% of the entire amount of the 1998 Senior Credit Facility at closing. This fee was approximately $1.15 million and will be amortized over the life of the 1998 Bank Credit Agreement. Under the 1998 Senior Credit Facility, the group of banks received a first priority perfected security interest in all of the existing and future capital stock of the Coca-Cola Bottling Company of the Southwest and its subsidiaries for the 1998 Revolver. Upon the fourth consecutive fiscal quarterly determination of total debt to earnings, as defined, of not greater than 4.5 to 1, the Company may elect unsecured status. The 1998 Senior Credit Facility is subject to certain restrictive covenants that among other restrictions require maintenance of minimum ratios of debt to earnings, as defined, maintenance of earnings to fixed charges, as defined, and limitations of capital expenditures. The 1998 Bank Credit Agreement permits the payment of dividends and other distributions to shareholders so long as no default exists. In March 1998, the Company used proceeds from the 1998 Senior Credit Facility to repay amounts outstanding, as described below, related to the Variable Term Loan, the Revolver and other debt. Additionally, in March 1998, the Company initiated the repurchase of a portion of its 9% Senior Subordinated Notes. The Company intends to repurchase the remainder of the 9% Senior Subordinated Notes by December 1998. This will result in an after-tax loss that will be recorded as an extraordinary item in the financial results for the year ended December 31, 1998. The extraordinary charge will include all unamortized costs, including unamortized costs related to the 1995 interest rate cap agreement (Note 4), of approximately $1.1 million related to debt repaid during 1998 and any unamortized costs and premium paid on the early extinguishment of the 9% Senior Subordinated Notes. F-10 17 Long-term debt and related collateral consists of the following as of December 31, 1996 and 1997 (in thousands): December 31, -------------------- 1996 1997 -------- -------- 9% Senior Subordinated Notes - unsecured, due November 15, 2003; interest is payable semiannually on May 15 and November 15 $120,000 $120,000 Variable Term Loan - due in quarterly installments through March 31, 2003 95,500 79,000 Borrowings under revolving credit facility 4,000 8,000 Other - 8,604 -------- -------- Total debt 219,500 215,604 Less- Current maturities 16,500 737 -------- -------- Total long-term debt $203,000 $214,867 -------- -------- -------- --------
Principal payments for maturities of long-term debt, after giving effect to the 1998 Senior Credit Facility, for the next five years are as follows as of December 31, 1997 (in thousands): 1998 $ 737 1999 798 2000 866 2001 937 2002 528 Thereafter 211,738 -------- $215,604 -------- --------
VARIABLE TERM LOAN AND REVOLVER In April 1995, the Company entered into a loan agreement with Texas Commerce Bank National Association as agent for a syndicate of financial institutions. The agreement provided for a $115 million term loan (the "Variable Term Loan") and a $25 million revolving credit facility (the "Revolver"). The Variable Term Loan and Revolver were repaid in March 1998. As of December 31, 1997, $8 million was outstanding on the Revolver. Borrowings under the Variable Term Loan and Revolver (collectively, the "1995 Bank Credit Agreement") were used to replace the Company's 11% senior notes and to repurchase $5 million in principal amount of the Company's 9% Senior Subordinated Notes due 2003. A net extraordinary loss of $72,000 was recognized for the write-off of deferred financing costs and the gain associated with the repurchase of principal. Both the Variable Term Loan and Revolver calculated interest at the Company's option at either Alternate Base Rate (8.5% as of December 31, 1997) or Eurodollar Rate (5.9% as of December 31, 1997) plus 1.00%. A commitment fee of 0.25% was charged on the average daily unused portion of the Revolver. Interest rates on the 1995 Bank Credit Agreement were subject to change, depending on the ratio of total debt to cash flow, as defined, at the end of each calendar quarter. The interest rates was adjusted quarterly for Alternate Base Rate borrowings from a maximum of Alternate Base Rate plus .25% to a minimum of Alternate Base Rate and for Eurodollar borrowings from a maximum of Eurodollar Rate plus 1.50% to a minimum of Eurodollar Rate plus .50%, according to a grid of permitted debt to cash flow ratios. Interest on the 1995 Bank Credit Agreement was due on the last day of each calendar quarter for amounts F-11 18 borrowed at the Alternate Base Rate or at the end of each applicable interest period for amounts borrowed at the Eurodollar Rate. For interest periods exceeding three months, related interest expense was due on the last day of each calendar quarter. Borrowings under the 1995 Bank Credit Agreement were secured by pledges of the stock of San Antonio Coke. The Company's credit agreements contained several restrictive covenants, the most significant of which: required maintenance of minimum ratio of cash flow to interest expense and fixed charges, as defined; limited the ratio of debt to cash flow, as defined; and restricted the issuance of additional common stock. The 1995 Bank Credit Agreement did permit the payment of dividends and other distributions to shareholders as permitted by the indenture governing the 9% Notes due 2003, so long as no event of default existed. Interest expense was approximately $20,834,000, $18,578,000, and $18,369,000 in 1995, 1996, and 1997. 3. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS: The following methods and assumptions were used to value each class of financial instruments. CASH AND CASH EQUIVALENTS The carrying amount approximates fair value because of the short-term maturity of these instruments. LONG-TERM DEBT Management believes the Revolver is stated at fair value due to the short-term nature of this instrument. The Variable Term Loan is stated at fair value due to its variable interest rate. Management estimates that the fair value of its 9% Notes as of December 31, 1997, was approximately $128 million based on publicly quoted prices. 4. DISCLOSURES ABOUT DERIVATIVE FINANCIAL INSTRUMENTS: In connection with the 1995 Bank Credit Agreement, the Company entered into an interest rate cap agreement with a bank which caps the three-month LIBOR rate at 9% on a notional principal amount of $50 million for four years. The Company has no interest rate exposure under the agreement other than the initial purchase cost of $0.5 million. F-12 19 5. LEASES: Total lease expense for the years ended December 31, 1995, 1996, and 1997 was approximately $2,028,000, $1,583,000, and $1,485,000, respectively. Certain lease agreements contain renewal clauses at the original rates or purchase options at fair market value. Minimum future lease payments, relating principally to vehicles and data processing equipment, under noncancelable operating leases for the next five years, are (in thousands): 1998 $1,191 1999 1,070 2000 782 2001 603 2002 430 Thereafter 331 ------ Total $4,407 ------ ------
6. INCOME TAXES: The Company's net deferred tax asset and liability as of December 31, 1996 and 1997, are as follows (in thousands): 1996 1997 ------- ------- Deferred tax assets: Net operating loss carryforwards $55,020 $50,295 Postretirement benefit obligation 2,170 2,141 Deferred employee benefits 1,222 1,342 Other deferred tax assets 1,386 1,579 ------- ------- 59,798 55,357 Deferred tax liabilities: Tax over book depreciation and amortization 49,758 48,927 Other deferred tax liabilities 40 40 ------- ------- 49,798 48,967 ------- ------- Net deferred tax asset $10,000 $ 6,390 ------- ------- ------- -------
The Company had net operating loss carryforwards of approximately $157.2 million and $143.7 million at December 31, 1996 and 1997, respectively. These carryforwards will expire as follows: 2002 $ 10,400 2003 26,700 2004 23,700 2005 19,900 2006 19,900 2007 13,800 2008 20,400 2009 3,500 2010 5,400 -------- $143,700 -------- --------
F-13 20 The Company's benefit (provision) for income taxes, including the benefit from the extraordinary item, for the periods ended December 31, 1995, 1996, and 1997 is as follows (in thousands): 1995 1996 1997 ------ ------- ------- Current $ (125) $ (171) $ (280) Deferred 12,800 (2,800) (3,610) ------- ------- ------- Total benefit (provision) for income taxes $12,675 $(2,971) $(3,890) ------- ------- ------- ------- ------- -------
Reconciliation between the actual benefit (provision) for income taxes and income taxes computed by applying the federal statutory rate to income before taxes and extraordinary item is as follows (in thousands): 1995 1996 1997 ------- ------- ------- Income tax (provision) computed at the statutory rate $(5,559) $(6,392) $(3,793) Reduction in valuation allowance 18,523 3,652 - Amortization of goodwill (224) (224) (224) Other (65) (7) 127 ------- ------- ------- $12,675 $(2,971) $(3,890) ------- ------- ------- ------- ------- -------
7. COMMITMENTS, CONTINGENCIES, AND RELATED PARTIES: The Company paid $700,000 annually in 1995, 1996, and 1997 to The Coca-Cola Bottling Group (Southwest), Inc. ("CCB Group"), holder of the Company's Class A common stock, under a management agreement. The agreement is for a period of one year and is renewable automatically. The Company also had sales of approximately $4,468,000, $14,960,000, and $13,428,000 and purchases of approximately $1,657,000, $12,704,000, and $14,857,000 in 1995, 1996, and 1997, respectively with a subsidiary of CCB Group. An officer of the Company serves on the Board of Directors of Western Container Corporation ("Western"), a plastic bottle manufacturing cooperative. The Company had purchases of $14,477,000, $12,675,260, and $11,224,000 from Western in 1995, 1996, and 1997, respectively. The Company has a minimum purchase agreement with Western through 1998. The Company has met its purchase requirements in 1997 and expects to continue to meet these requirements in the future. On September 9, 1996, the Federal Trade Commission ("FTC") issued an order dismissing the complaint filed by the FTC in 1988 against San Antonio Coke, bringing to an end the FTC's efforts to force the divestiture of Dr Pepper licenses for San Antonio Coke for a ten-county area around and including San Antonio, Texas. The Company is self-insured for portions of its casualty insurance, product liability, and certain other business risks up to limits of between $25,000 and $250,000. Management provides for all material open claims plus an estimate for incurred but not reported claims related to these uninsured risks. In conjunction with certain insurance policies, the Company has established irrevocable and unconditional letters of credit, expiring March 22, 1998, August 1, 1998, and February 1, 1999, for $1,515,000, $350,000, and $200,000 in favor of two insurance companies. The letters of credit protect the insurance companies in case of nonperformance by San Antonio Coke. The letters of credit were not used as of December 31, 1997, and management does not expect to use the letters of credit through expiration. F-14 21 The Company also becomes involved in certain legal proceedings in the normal course of business. Management believes that the outcome of such litigation will not materially affect the Company's consolidated financial position or results of operations. 8. COMPENSATION AND BENEFIT PLANS: 401(k) PLAN Through June 30, 1996, San Antonio Coke had a voluntary 401(k) plan (the "San Antonio 401(k) Plan") available to substantially all full-time employees with over one year of service. Employees could deposit up to 15% of total compensation, tax deferred in the San Antonio 401(k) Plan on an annual basis. Through June 30, 1996, the San Antonio Coke contributions to the San Antonio 401(k) Plan were at the discretion of the Board of Directors and were limited to 50% of the employees' contributions up to 5% of total compensation. Effective June 30, 1996, the San Antonio 401(k) Plan merged with the CCB Group 401(k) plan (the "401(k) Plan"). The 401(k) Plan allows employees to contribute up to 15% of their annual compensation to the plan and provides for the Company to match contributions up to 100% of the employees' contributions up to 4% of total compensation. San Antonio Coke's contributions to the San Antonio 401(k) Plan and the 401(k) Plan in 1995, 1996, and 1997 included in the consolidated statements of income, were approximately $355,000, $588,000, and $841,000, respectively. PENSION PLAN Prior to January 1, 1997, San Antonio Coke had a defined benefit pension plan covering substantially all full-time employees with over one year of service. Effective December 31, 1996, the San Antonio Coke defined benefit plan merged with the CCB Group defined benefit plan. Benefits attributed to service as an employee of San Antonio Coke after December 31, 1996, will be determined by using the benefit formula of the CCB Group plan (which is 38% higher than the formula under the old San Antonio Coke plan), then added to the frozen benefit for 1996 and prior years to calculate the total benefit to be paid to the participant. Only the pension liability and the net periodic pension cost attributable to San Antonio Coke have been presented below. F-15 22 The following table sets forth the plan's funded status and amounts recognized in the Company's financial statements at December 31, 1996 and 1997 (in thousands): 1996 1997 -------- -------- Accumulated benefit obligation- Vested benefits $(10,690) $(10,950) Nonvested benefits (141) (388) -------- -------- (10,831) (11,338) Effect of projected future compensation levels (1,911) (1,607) -------- -------- Projected benefit obligation (12,742) (12,945) Plan assets at fair value 13,183 14,624 -------- -------- Plan assets in excess of projected benefit obligation 441 1,679 Unrecognized net gain being amortized (2,034) (3,619) Unrecognized prior service cost 325 297 Unrecognized net asset at January 1, 1987, being amortized over 17 years (275) (236) -------- -------- Pension liability $ (1,543) $ (1,879) -------- -------- -------- --------
Net periodic pension cost for 1995, 1996, and 1997 includes the following components (in thousands): 1995 1996 1997 ------ ------ ------ Service cost - benefits earned $ 358 $ 434 $ 631 Interest cost on projected benefit obligation 780 843 819 Actual return on plan assets (1,766) (1,547) (2,072) Net amortization and deferral 963 532 958 ------ ------ ------ Net periodic pension cost $ 335 $ 262 $ 336 ------ ------ ------ ------ ------ ------
The discount rate and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation was 7.25% and 5% in 1995, 1996 and 1997. The expected long-term rate of return on assets was 8.5% in 1995, 1996, and 1997. The plan assets consist primarily of money market investments, stocks, bonds, and an insurance company's general and growth equity accounts. POSTRETIREMENT BENEFIT OBLIGATION In addition to providing pension benefits, San Antonio Coke sponsors a postretirement healthcare plan that is limited to the following three groups: (1) participants in the plan as of January 1, 1992, (2) employees having 20 years of service as of January 1, 1992, or (3) employees who were at least age 55 with five years of service as of January 1, 1992. Active employees in groups 2 or 3 are only eligible to receive benefits if they retire on or after their normal retirement age. The plan pays stated percentages of most necessary medical expenses incurred after subtracting payments by Medicare where applicable and after a stated deductible has been met. The plan is contributory, and the Company does not fund this plan. F-16 23 The following table shows the components of the accrued postretirement healthcare cost liability as reflected on the consolidated balance sheet at December 31, 1996 and 1997 (in thousands): 1996 1997 ------ ------ Retirees $3,224 $3,306 Other active participants 1,040 1,067 Other fully eligible participants 144 148 Unrecognized actuarial gain 1,749 1,596 ------ ------ Accrued postretirement healthcare cost liability $6,157 $6,117 ------ ------ ------ ------
Net postretirement benefit cost included the following components in 1995, 1996, and 1997 (in thousands): 1995 1996 1997 ---- ---- ----- Service cost - benefits attributed to service during the period $ 69 $ 58 $ 49 Interest cost on accumulated postretirement benefit obligation 393 343 313 Amortization of unrecognized actuarial gain (44) (82) (153) ---- ---- ----- Total postretirement benefit cost $418 $319 $ 209 ---- ---- ----- ---- ---- -----
The weighted-average discount rate used in determining the accumulated postretirement benefit obligation was 7.25% in 1995, 1996, and 1997. For measurement purposes, a 10% annual rate of increase in the per capita cost of covered healthcare claims was assumed for 1997; the rate was assumed to ratably decrease 1% each year to 5% in 2003 and remain level thereafter. The effect of increasing the assumed healthcare cost trend rates by one percentage point in each year would increase the accumulated postretirement benefit obligation as of December 31, 1997, by $340,000 and the aggregate of the service and interest cost components of net postretirement healthcare cost for the 1997 fiscal year by $32,000. NONSTATUTORY STOCK OPTION/STOCK APPRECIATION RIGHTS PLAN The Company has a Nonstatutory Stock Option/Stock Appreciation Rights Plan (the "Stock Plan"). The Stock Plan allows the Company to grant stock options for Class A common stock to key officers and employees based on fair market value, as defined, at the date of grant. The Company issues a stock appreciation right corresponding to the excess of fair market value, as defined, over the option price for each specific stock option granted. In 1995, 1996, and 1997, no stock options or stock appreciation rights were issued by the Company. As of December 31, 1997, all outstanding stock appreciation rights (covering 11,160 shares) were vested at an option price of $40.90 per share and were exercisable. MANAGEMENT INCENTIVE PLAN Effective January 1, 1997, the Company amended its long-term management incentive agreements (the "old agreements") with certain of its key officers and managers in effect since January 1, 1994. The amendments shortened the length of the old agreements from five years to three years, eliminated cash flow goals for the fourth and fifth years, changed the basis of a lump-sum end payment from a five-year operating cash flow goal to a three-year operating cash flow goal, and provided a schedule for remaining payments under the plan. Expense for the old agreements included in the consolidated statements of income was $650,000 in 1995, $700,000 in 1996, and $700,000 in 1997. Effective January 1, 1997, the Company entered into new long-term management incentive agreements (the "new agreements") with certain of its key officers and managers. Under the new agreements, a lump- F-17 24 sum payment is made based upon the attainment of a cumulative, three-year operating cash flow goal for the combined operations of Southwest Coke and TBG. No expense for the new agreements is included in the consolidated statements of income for any year presented. OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS The Company does not provide any postretirement or postemployment benefits other than the plans discussed above and, therefore, no additional liability has been recorded. 9. MAJOR CUSTOMER: The Company had one major customer in 1995, 1996, and 1997, which accounted for approximately 28%, 24%, and 21% of net revenues. 10. ALLOWANCE FOR DOUBTFUL ACCOUNTS: As of December 31, 1995, 1996, and 1997 the balance for allowance for doubtful accounts was $515,000, $544,000, and $601,000, respectively. The activity for this account for the three years ended December 31, 1997, was as follows (in thousands): Balance at Write-offs, Balance Beginning Charged to Net of at End Year of Year Expense Recoveries of Year ---- --------- ---------- ----------- ------- 1995 $425 $240 $(150) $515 1996 515 240 (211) 544 1997 544 301 (244) 601
F-18 25 FINANCIAL STATEMENTS Texas Bottling Group, Inc. and Subsidiary Financial Information for the quarters ended March 31, 1998 and 1997 26 PART 1 FINANCIAL INFORMATION ITEMS 1: FINANCIAL STATEMENTS TEXAS BOTTLING GROUP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS - MARCH 31, 1998 AND DECEMBER 31, 1997 (Amounts in Thousands Except Share Data) ASSETS March 31, 1998 December 31, 1997 -------------- ----------------- CURRENT ASSETS: Cash and cash equivalents $ 1,277 $ 475 Receivables- Trade accounts, net of allowance for doubtful accounts of $453 as of March 31, 1998 and $601 as of December 31, 1997 20,210 20,615 Other 4,098 3,097 -------- -------- Total receivables, net 24,308 23,712 Inventories 10,197 9,904 Prepaid expenses and other 2,178 1,840 Deferred tax asset 5,653 8,457 -------- -------- Total current assets 43,613 44,388 -------- -------- PROPERTY PLANT & EQUIPMENT: Land 4,751 4,751 Buildings and improvements 20,439 20,429 Machinery and equipment 17,320 17,164 Vehicles 18,641 18,641 Vending equipment 35,518 33,578 Furniture and fixtures 6,116 6,034 -------- -------- 102,785 100,597 Less- Accumulated depreciation (59,376) (57,287) -------- -------- Property, plant, and equipment, net 43,409 43,310 -------- -------- OTHER ASSETS: Franchise rights, net of accumulated amortization of $40,694 as of March 31, 1998 and $39,783 as of December 31, 1997 104,807 105,718 Goodwill, net of accumulated amortization of $19,615 as of March 31, 1998 and $19,183 as of December 31, 1997 49,517 49,949 -------- -------- Franchise rights and goodwill 154,324 155,667 Deferred financing costs and other assets, net of accumulated amortization of $1,851 as of March 31, 1998 and $2,670 as of December 31, 1997 7,023 7,066 Deferred tax asset 1,434 - -------- -------- Total other assets 162,781 162,733 -------- -------- Total assets $249,803 $250,431 -------- -------- -------- --------
The accompanying notes are an integral part of these consolidated balance sheets. F-19 27 TEXAS BOTTLING GROUP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS - MARCH 31, 1998 AND DECEMBER 31, 1997 (Amounts in Thousands Except Share Data) LIABILITIES AND STOCKHOLDERS' EQUITY March 31, 1998 December 31, 1997 -------------- ----------------- CURRENT LIABILITIES: Accounts payable $ 11,774 $ 15,612 Accrued payroll 1,035 845 Accrued insurance 2,649 2,557 Accrued interest 3,674 1,383 Contribution to employees' benefit plans 2,146 2,026 Current maturities of long-term debt 752 737 -------- -------- Total current liabilities 22,030 23,160 -------- -------- LONG-TERM DEBT, net of current maturities 219,636 214,867 OTHER LIABILITIES 2,157 3,005 DEFERRED TAX LIABILITY - 2,067 POST RETIREMENT BENEFIT OBLIGATION 6,110 6,117 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock Class A, $2 par value; 1,100,249 shares authorized; 541,916 issued and outstanding as of March 31, 1998 and December 31, 1997 1,084 1,084 Common stock Class B, $2 par value; 228,357 shares authorized, issued and outstanding as of March 31, 1998 and December 31, 1997 (convertible to 558,332 shares of Class A) 457 457 Additional paid-in capital 43,459 43,459 Retained deficit (45,130) (43,785) -------- -------- Total stockholders' equity (130) 1,215 -------- -------- Total liabilities and stockholders' equity $249,803 $250,431 -------- -------- -------- --------
The accompanying notes are an integral part of these consolidated balance sheets. F-20 28 TEXAS BOTTLING GROUP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1998 AND 1997 (Amounts in Thousands) 1998 1997 ------- ------- NET REVENUES $52,662 $48,847 COSTS AND EXPENSES: Cost of goods sold (exclusive of depreciation 28,746 25,327 shown below) Selling, general and administrative 15,320 14,180 Depreciation and amortization 3,695 3,446 ------- ------- 47,761 42,953 ------- ------- Operating income 4,901 5,894 INTEREST: Interest on debt (4,499) (4,385) Deferred financing costs (145) (143) Interest income 11 23 ------- ------- (4,633) (4,505) ------- ------- OTHER INCOME, net -0- -0- ------- ------- Income before taxes and extraordinary item 268 1,393 PROVISION FOR INCOME TAXES (143) (537) ------- ------- Income before extraordinary item 125 856 ------- ------- EXTRAORDINARY LOSS, net of income tax benefit of $790 in 1998 (1,470) - ------- ------- Net income (loss) $(1,345) $ 856 ------- ------- ------- -------
The accompanying notes are an integral part of these consolidated statements. F-21 29 TEXAS BOTTLING GROUP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1998 AND 1997 (Amounts in Thousands) 1998 1997 --------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ (1,345) $ 856 Adjustments to reconcile net income to net cash provided by operating activities - Extraordinary item 2,260 - Depreciation and amortization 3,695 3,446 Deferred tax provision (benefit) (697) 486 Amortization of deferred financing costs 145 143 Deferred compensation 115 333 Change in assets and liabilities: Receivables (596) 1,930 Inventories (293) (873) Prepaid expenses (338) (421) Accounts payable (3,698) (861) Accrued expenses 2,383 2,404 Contribution to employees' benefit plans 5 119 Taxes payable 50 (125) Other liabilities (848) - Postretirement benefit obligation (7) (13) --------- ------- Net cash provided by operating activities 831 7,424 --------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant, and equipment (2,284) (4,704) Other noncurrent assets acquired (400) ( 590) --------- ------- Net cash used by investing activities (2,684) (5,294) --------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings under revolving credit facility - 5,500 Payments on long-term debt (179) (3,750) Proceeds from issuance of long-term debt, net 116,517 - Retirements of long-term debt (112,738) - Premium payments to repurchase debt (945) - --------- ------- Net cash provided by financing activities 2,655 1,750 --------- ------- NET INCREASE IN CASH AND CASH EQUIVALENTS 802 3,880 CASH AND CASH EQUIVALENTS, beginning of period 475 636 --------- ------- CASH AND CASH EQUIVALENTS, end of period $ 1,277 $ 4,516 --------- ------- --------- -------
The accompanying notes are an integral part of these consolidated statements. F-22 30 TEXAS BOTTLING GROUP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1998 (1) BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Texas Bottling Group, Inc., a Nevada corporation, ("TBG" or "the Company") and its wholly owned subsidiary have been prepared in accordance with generally accepted accounting principles for interim financial information and reflect, in the opinion of management, all adjustments, which are normal and recurring in nature, necessary for fair presentation of financial position, results of operations, and changes in cash flow at March 31, 1998 and for all periods presented. These interim financial statements do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the Company's audited financial statements included in Form 10-K for the year ended December 31, 1997. The results of operations for the period ended March 31, 1998 are not necessarily indicative of results to be expected for the entire year ending December 31, 1998. (2) INVENTORIES Inventories consist of the following (in thousands): Mar. 31, Dec. 31, 1998 1997 ------- ------- Raw materials $ 3,700 $3,597 Finished goods 4,553 4,852 Repair parts and supplies 1,944 1,455 ------- ------- $10,197 $9,904 ------- ------- ------- -------
(3) INCOME TAXES The Company's (benefit) provision for income taxes for the periods ended March 31, 1998 and 1997, is as follows (in thousands): 1998 1997 ----- ---- Current $ 50 $ 51 Deferred (697) 486 ----- ---- $(647) $537 ----- ---- ----- ----
F-23 31 (4) DEBT On March 11, 1998, the Company entered into a new credit agreement (the "1998 Bank Credit Agreement") with a group of banks. The 1998 Bank Credit Agreement provides the Company a revolving credit facility (the "1998 Revolver") under which the Company may borrow up to $230 million. As required by the 1998 Bank Credit Agreement, the proceeds of the 1998 Revolver shall be used to refinance existing indebtedness or as allowed under the new credit agreement. Interest rates and commitment fees on the 1998 Revolver are subject to change within a range, depending on the ratio of total debt to earnings, as defined, at the end of each calendar quarter. The 1998 Revolver shall bear interest at a rate equal to either LIBOR plus 0.375% to 1.0% or the Alternate Base Rate, as defined. Interest payments are payable quarterly or as defined on the 1998 Revolver. The Company must pay a commitment fee of 0.18% to 0.275% of the average daily unused committed amount of the 1998 Revolver. Additionally, the Company paid an underwriting fee equal to 0.5% of the entire amount of the 1998 Bank Credit Agreement at closing. This fee was approximately $1.15 million and will be amortized over the life of the 1998 Bank Credit Agreement. Under the 1998 Bank Credit Agreement, the group of banks received a first priority perfected security interest in all of the existing and future capital stock of Coca-Cola Bottling Company of the Southwest and its subsidiaries. Upon the fourth consecutive fiscal quarterly determination of total debt to earnings, as defined, of not greater than 4.5 to 1, the Company may elect to terminate the security interest in the stock. The 1998 Bank Credit Agreement is subject to certain restrictive covenants that among other restrictions require maintenance of minimum ratios of debt to earnings, as defined, maintenance of earnings to fixed charges, as defined, and limitations of capital expenditures. The 1998 Bank Credit Agreement permits the payment of dividends and other distributions to shareholders so long as no default exists. In March 1998, the Company used proceeds from the 1998 Bank Credit Agreement to repay amounts outstanding related to its existing credit facility with a group of banks and other debt, as well as purchases of its 9% Senior Subordinated Notes (the "9% Notes") on the open market. This resulted in an after-tax loss that was recorded as an extraordinary item in the financial results for the period ended March 31, 1998. The extraordinary charge included all remaining unamortized costs including the cost of an interest rate cap purchased in 1995 (approximately $1.1 million) associated with the existing credit facility and premiums paid in connection with the open market purchase of $21 million in face value of the 9% Notes, (approximately $.9 million) have been recorded net of income tax benefit as an extraordinary loss in 1998. (5) COMMITMENTS AND CONTINGENCIES The Company paid $175,000 for the periods ended March 31, 1998 and 1997 to The Coca-Cola Bottling Group (Southwest), Inc. ("CCBG"), holder of the Company's Class A common stock, under a management agreement. The agreement is for a period of one year and is renewable annually. The Company also had sales of approximately $2,905,000 and $3,003,000 and purchases of F-24 32 approximately $2,890,000 and $2,166,000 with a subsidiary of CCBG for the periods ended March 31, 1998 and 1997 respectively. An officer of the Company serves on the Board of Directors of Western Container Corporation, a plastic bottle manufacturing cooperative. The Company had purchases of $2,717,000 and $2,774,000 from Western Container for the periods ended March 31, 1998 and 1997. (6) SUBSEQUENT EVENT: On April 3, 1998 the Company, CCBG Corporation (parent of The Coca-Cola Bottling Group (Southwest), Inc.), and The Prudential Insurance Company of America entered into a letter of intent with Coca-Cola Enterprises Inc. whereby the Company would be acquired through a merger. The acquisition is pending execution of a definitive agreement and review of the premerger notification and reports filed with the Federal Trade Commission. F-25 33 PRO FORMA FINANCIAL STATEMENTS The Coca-Cola Bottling Group (Southwest), Inc. Pro Forma Combined Condensed Financial Information for the quarters ended March 31, 1998 and 1997 (unaudited) 34 THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC. INTRODUCTORY INFORMATION The following unaudited pro forma combined condensed financial information sets forth the combined results of operations and financial position of The Coca-Cola Bottling Group (Southwest), Inc. (the "Company") and Texas Bottling Group, Inc. ("TBG") assuming the Company purchased TBG based on the information set forth in the following Notes to Unaudited Pro Forma Combined Condensed Financial Information. Acquisition On June 5, 1998, Coca-Cola Enterprises Inc. ("CCE") became the holder of all of the issued and outstanding stock of the Company. This was accomplished by a merger of a wholly owned subsidiary of CCE into the Company's parent corporation, followed by the merger of the Company's parent corporation into CCE. Following this acquisition, the Company acquired 51% ownership of TBG making TBG a wholly owned subsidiary of the Company. The purchase price for the acquisition by the Company of the remaining 51% ownership of TBG was approximately $167 million. Shareholders of TBG received common stock of CCE in exchange for their shares. Prior to the acquisition, the Company owned shares of common stock of TBG representing 49% ownership in TBG. The Company previously accounted for its investment in TBG under the equity method. TBG, through its wholly owned subsidiary, Coca-Cola Bottling Company of the Southwest, primarily bottles and distributes soft drinks in its franchise territories in central and southern Texas, including the cities of San Antonio and Corpus Christi. The purchase method of accounting has been used for the Company's acquisition of TBG and, accordingly, the results of operations of TBG are included in the Company's consolidated statement of operations beginning with the date of acquisition. Management has determined any adjustments to the Company's historical basis of accounting to reflect CCE's purchase of the Company are not appropriate because of the existence of the Company's outstanding public debt. These pro forma financial statements are based on the historical financial information of the Company and TBG adjusted for the pro forma adjustments described in the attached notes to unaudited pro forma combined condensed financial information. The pro forma adjustments are based on preliminary estimates of the fair value of assets and liabilities of TBG, which may require further adjustment when additional information is obtained as of the acquisition date and during the one year period subsequent to acquisition. Any reallocation of the purchase price based on final valuations of assets and liabilities should not differ significantly from the original estimates and should not have a material impact on the pro forma financial statements. PF-1 35 THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC. INTRODUCTORY INFORMATION (CONTINUED) The following unaudited pro forma financial information should be read in conjunction with the Company's audited and unaudited financial statements, including the notes thereto, contained in: (i) The Coca-Cola Bottling Group (Southwest), Inc. Annual Report on Form 10-K for the year ended December 31, 1997 and (ii) The Coca-Cola Bottling Group (Southwest), Inc. Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1998. The unaudited pro forma combined condensed statements of operations for the quarter ended March 31, 1998 and for the year ended December 31, 1997 present the combined operating results of the Company and TBG as if the acquisition described above had occurred at the beginning of 1997. The unaudited pro forma combined condensed balance sheet as of March 31, 1998 presents the financial position of the Company and TBG as if the acquisition had occurred on March 31, 1998. The pro forma financial information is presented for illustrative purposes only as prepared under guidelines of the Securities and Exchange Commission and is not intended to be indicative of the operating results that would have occurred if the acquisition had been consummated in accordance with the assumptions set forth below, nor is it intended to be a forecast of future operating results or financial position. PF-2 36 THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC. PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1998 (UNAUDITED; IN THOUSANDS)
CCBG TEXAS BOTTLING PRO PRO SOUTHWEST GROUP FORMA FORMA (HISTORICAL) (HISTORICAL) ADJUSTMENTS COMBINED ------------- -------------- ------------- ------------ NET OPERATING REVENUES............................... $ 60,055 $ 52,662 $ (5,795) (A) $ 106,922 Cost of sales........................................ 29,627 28,746 (5,795) (A) 52,578 ---------- ---------- ---------- ---------- GROSS PROFIT......................................... 30,428 23,916 - 54,344 Selling, general, and administrative expenses........ 24,975 19,015 2,029 (B) 46,019 ---------- ---------- ---------- ---------- OPERATING INCOME (LOSS).............................. 5,453 4,901 (2,029) 8,325 Interest expense, net................................ 4,942 4,633 - 9,575 Equity in loss of unconsolidated subsidiary.......... 662 - (662) (C) - ---------- ---------- ---------- ---------- INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES...................................... (151) 268 (1,367) (1,250) Income tax expense (benefit)......................... (64) 143 (771) (D) 692 ---------- ---------- ---------- ---------- INCOME (LOSS) FROM CONTINUING OPERATIONS............. (87) 125 (596) (558) Loss from extraordinary item, net of income tax benefit........................................... (792) (1,470) - (2,262) ---------- ---------- ---------- ---------- NET LOSS............................................. $ (879) $ (1,345) $ (596) $ (2,820) ========== ========== ========== ==========
The Introductory Information contained on page PF-1 and the accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Information are an integral part of these statements. Pro forma combined information should not be construed to be forecasts of future operating results. PF-3 37 THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC. PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 (UNAUDITED; IN THOUSANDS)
CCBG TEXAS BOTTLING PRO PRO SOUTHWEST GROUP FORMA FORMA (HISTORICAL) (HISTORICAL) ADJUSTMENTS COMBINED -------------- ---------------- --------------- ------------- NET OPERATING REVENUES............................... $ 244,964 $ 217,508 $ (28,285)(A) $ 434,187 Cost of sales........................................ 126,429 116,258 (28,285)(A) 214,402 ---------- ---------- ---------- ---------- GROSS PROFIT......................................... 118,535 101,250 219,785 Selling, general, and administrative expenses........ 90,440 72,284 8,119 (B) 170,843 ---------- ---------- ---------- ---------- OPERATING INCOME (LOSS).............................. 28,095 28,966 (8,119) 48,942 Interest expense, net................................ 20,968 18,304 - 39,272 Other nonoperating income, net....................... - (174) - (174) Equity in earnings of unconsolidated subsidiary...... (3,379) - 3,379 (C) - ---------- ---------- ---------- ---------- INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES...................................... 10,506 10,836 (11,498) 9,844 Income tax expense (benefit)......................... 2,110 3,890 (3,085)(D) 2,915 ---------- ---------- ---------- ---------- INCOME (LOSS) FROM CONTINUING OPERATIONS ............ 8,396 6,946 (8,413) 6,929 Loss from discontinued operations, net of income tax benefit........................................... (869) - - (869) Loss on disposal of discontinued operations, net of income tax benefit................................ (939) - - (939) ---------- ---------- ---------- ---------- NET INCOME (LOSS).................................... $ 6,588 $ 6,946 $ (8,413) $ 5,121 ========== ========== ========== ==========
The Introductory Information contained on page PF-1 and the accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Information are an integral part of these statements. Pro forma combined information should not be construed to be forecasts of future operating results. PF-4 38 THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC. PRO FORMA COMBINED CONDENSED BALANCE SHEET MARCH 31, 1998 (UNAUDITED; IN THOUSANDS)
CCBG TEXAS BOTTLING PRO PRO SOUTHWEST GROUP FORMA FORMA (HISTORICAL) (HISTORICAL) ADJUSTMENTS COMBINED -------------- -------------- ------------- ----------- ASSETS CURRENT Cash and cash investments, at cost approximating market..... $ 3,448 $ 1,277 $ - $ 4,725 Trade accounts receivable, net.............................. 15,153 20,210 - 35,363 Inventories................................................. 10,826 10,197 - 21,023 Prepaid expenses and other assets........................... 10,885 6,276 - 17,161 Deferred tax asset.......................................... 1,260 5,653 - 6,913 ---------- ----------- ---------- ---------- Total Current Assets.................................... 41,572 43,613 - 85,185 PROPERTY, PLANT, AND EQUIPMENT, NET............................ 51,229 43,409 - 94,638 FRANCHISES AND OTHER NONCURRENT ASSETS, NET.................... 136,421 162,781 381,541 (F) 680,743 ---------- ----------- ---------- ---------- $ 229,222 $ 249,803 $ 381,541 $ 860,566 ========== =========== ========== ========== LIABILITIES AND SHARE-OWNERS' EQUITY CURRENT Accounts payable and accrued expenses....................... $ 28,675 $ 21,278 $ 13,075 (F) $ 63,028 Net liabilities of discontinued operations.................. 17 - - 17 Current portion of long-term debt........................... 1,309 752 - 2,061 ---------- ----------- ---------- ---------- Total Current Liabilities............................... 30,001 22,030 13,075 65,106 LONG-TERM DEBT, LESS CURRENT MATURITIES........................ 253,231 219,636 - 472,867 OTHER LONG-TERM LIABILITIES.................................... 8,908 8,267 200,963 (F) 218,138 SHARE-OWNERS' EQUITY Common stock................................................ 10 1,541 (1,541)(E) 10 Additional paid-in capital.................................. 26,223 43,459 123,914 (E) 193,596 Retained deficit............................................ (89,151) (45,130) 45,130 (E) (89,151) ---------- ----------- ---------- ---------- Total Share-Owners' Equity.............................. (62,918) (130) 167,503 104,455 ---------- ----------- ---------- ---------- $ 229,222 $ 249,803 $ 381,541 $ 860,566 ========== =========== ========== ==========
The Introductory Information contained on page PF-1 and the accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Information are an integral part of these statements. PF-5 39 THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC. NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION The historical information for each company reflected in the accompanying unaudited pro forma combined condensed financial statements have been determined using generally accepted accounting principles. The following notes describe the pro forma adjustments necessary to reflect the effects of the Company's acquisition of TBG. Actual adjustments to account for the acquisition under the purchase method are dependent upon the final valuations of the various assets and liabilities of TBG. NOTE A - Pro forma adjustment to "Net Operating Revenues" and "Cost of Sales" gives effect to the elimination of historical product sales between the Company and TBG. NOTE B - Pro forma adjustment to "Selling, general, and administrative expenses" reflects amortization of the assigned value of the rights of TBG to market, produce and distribute beverage products in their franchise territories over 40 years. NOTE C - Pro forma adjustment to "Equity in earnings of unconsolidated subsidiary" reflects the elimination of TBG's earnings recognized by the Company under the equity method of accounting prior to the acquisition. NOTE D - Pro forma adjustment to "Income tax expense (benefit)" reflects the income tax attributes of the foregoing adjustments and the effect on the consolidated tax provision after inclusion of TBG. NOTE E - Pro forma adjustments to eliminate TBG's equity accounts and reflect the increase in paid-in capital resulting from the parent company's contribution of its common stock. NOTE F - The purchase method of accounting for acquisitions requires that the assets and liabilities of the acquired companies be adjusted to their estimated fair values. The following are the pro forma adjustments which reflect management's best estimate of the fair values of the assets and liabilities of TBG as of March 31, 1998 using information currently available.
NET ASSETS ---------------------- Increase (Decrease) Amounts as reported by the acquired company.............................. $ (130) Fair value adjustments: Franchise and other noncurrent assets................................ 381,541 Current liabilities.................................................. (13,075) Deferred income taxes................................................ (200,963) ------------ $ 167,373 ============
PF-6 40 EXHIBIT INDEX
EXHIBIT NO. - ---------- 2.1 Agreement of Merger dated June 5, 1998, by and among Coca-Cola Enterprises Inc., Texa-Cola Acquisition Company and CCBG Corporation.* 2.2 Share Exchange Agreement dated June 5, 1998, by and among Coca-Cola Enterprises Inc., the Company and Texas Bottling Group, Inc.*
- -------- * An index of all exhibits to these Agreements are included in the Agreements immediately following the Agreements' Index of Defined Terms. The contents of the Disclosure Schedules to the Agreements are identified in the text, wherever reference is made to the Disclosure Schedules. Neither the exhibits nor the Disclosure Schedules are filed with this report, but a copy of any omitted exhibit or portion of the Disclosure Schedules will be furnished supplementally to the Commission upon its request. EX-2.1 2 AGREEMENT OF MERGER 1 EXHIBIT 2.1 Execution Copy AGREEMENT OF MERGER BY AND AMONG COCA-COLA ENTERPRISES INC. ("ENTERPRISES") AND TEXA-COLA ACQUISITION COMPANY ("SUB") AND CCBG CORPORATION ("CCBG") JUNE 5, 1998 2 TABLE OF CONTENTS
PAGE ----- ARTICLE I THE MERGER...............................................................................................1 1.01 The Merger......................................................................................1 (a) Generally..............................................................................1 (b) The Merger Consideration...............................................................1 (c) Tax-Free Reorganization................................................................2 (d) Amendment..............................................................................2 1.02 Conversion of Shares............................................................................3 (a) Conversion.............................................................................3 (c) Cash Election..........................................................................4 (d) Limitation on Cash Election............................................................4 (e) Treasury Shares Canceled...............................................................5 (f) Sub's Shares Converted.................................................................5 1.03 Estimated Merger Consideration; Deliveries......................................................5 (a) Computation............................................................................5 (b) Delivery...............................................................................5 1.04 Final Computation of Merger Consideration.......................................................5 (a) Closing Date Financial Statements......................................................5 (b) Review/Objection Procedure As To Closing Date Financial Statements and Certificate of Adjustments.........................................................6 (c) Payment of Non-disputed Amounts........................................................6 (d) Resolution of Open Items...............................................................7 (e) Payment Notice to the CCBG Shareholders by the Shareholders' Representative.........................................................................8 (f) Open Items Under TBG Agreement.........................................................8 1.05 Calculations. No Fractional Shares.............................................................8 1.06 The Surviving Corporation.......................................................................8 (a) Conversion of Shares...................................................................9 (b) The Sub Ceases to Exist................................................................9 (c) Articles of Incorporation..............................................................9 (d) Other..................................................................................9 1.07 Unregistered Shares.............................................................................9 ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE CCBG SHAREHOLDERS..................................................9
3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF CCBG CONCERNING CCBG AND SUBSIDIARIES....................................................................................9 3.01 Organization and Authorization..................................................................9 (a) Due Organization, Etc..................................................................9 (b) Power and Authority...................................................................10 (c) Non-contravention.....................................................................10 (d) Capitalization........................................................................11 (e) Subsidiaries..........................................................................11 (f) Articles, Bylaws and Minutes..........................................................12 (g) Officers and Directors................................................................13 3.02 Bottling Authorizations........................................................................13 (a) List..................................................................................13 (b) Territories of Other Bottler..........................................................13 (c) Transshipment.........................................................................13 3.03 Indebtedness...................................................................................13 3.04 Financial Matters..............................................................................14 (a) Financial Statements..................................................................14 (b) Other Liabilities.....................................................................14 (c) Accounts Receivable...................................................................14 (d) Swaps.................................................................................15 3.05 Absence of Certain Changes and Events..........................................................15 (a) Adverse Change........................................................................15 (b) Damage................................................................................15 (c) Distributions.........................................................................15 (d) Issuance..............................................................................15 (e) Guaranty..............................................................................16 (f) Merger................................................................................16 (g) Labor Dispute.........................................................................16 (h) Capital Expenditure...................................................................16 (i) Franchises............................................................................16 (j) Raises................................................................................16 (k) Accounting Changes....................................................................16 (l) Liens.................................................................................16 (m) Waivers...............................................................................16 (n) Dispositions..........................................................................17 (o) Transactions with Employees...........................................................17 (p) Write-downs...........................................................................17 (q) Material Transactions.................................................................17 3.06 Tax Matters....................................................................................17 (a) Definitions...........................................................................17 (b) Tax Representations and Warranties....................................................17 (c) Disclaimer as to NOLs.................................................................20
-ii- 4
(d)............................................................................................20 3.07 Real Property..................................................................................20 (a) Ownership.............................................................................20 (b) Status of Title.......................................................................21 (c) Restrictions Arising from Governmental Authorities....................................21 (d) Condition.............................................................................21 3.08 Personal Property..............................................................................21 (a) Title.................................................................................22 (b) Condition.............................................................................22 (c) Inventory.............................................................................22 3.09 Employee Benefit Plans.........................................................................22 (a) Definition............................................................................22 (b) List..................................................................................23 (c) Compliance............................................................................23 (d) Funding, Etc..........................................................................23 (e) Liabilities; Claims; Audits...........................................................23 (f) Multi-employer Plan...................................................................23 (g) Termination Rights....................................................................23 (h) Payments in Stock.....................................................................24 3.10 Labor Relations................................................................................24 (a) Status................................................................................24 (b) Plant Closing Issues..................................................................25 (c) Family and Medical Leave Act of 1993..................................................25 3.11 Employees......................................................................................25 3.12 Bank Accounts..................................................................................26 3.13 Environmental Matters..........................................................................26 (a) Status................................................................................26 (b) Definition............................................................................27 (c) Survival..............................................................................27 3.14 Insurance Policies.............................................................................27 (a) List..................................................................................27 (b) Status................................................................................27 3.15 Specified Contracts and Commitments............................................................28 (a) Specified Contracts...................................................................28 (b) Exceptions to Specified Contracts.....................................................29 3.16 Intellectual Property..........................................................................30 (a) Status................................................................................30 (b) Definition............................................................................30 3.17 Certain Violations of Law......................................................................31 (a) Investigations........................................................................31 (b) Generally.............................................................................31 (c) Certain Limitations...................................................................31 3.18 Litigation.....................................................................................31
-iii- 5
(a) List..................................................................................31 (b) Status................................................................................31 3.19 No Defaults....................................................................................32 (a) Enforceability........................................................................32 (b) Bankruptcy, Etc.......................................................................32 3.20 Major Suppliers and Customers..................................................................32 (a) List..................................................................................32 (b) Status................................................................................32 3.21 Required Governmental Licenses and Permits.....................................................33 3.22 Year 2000 Compliance...........................................................................33 3.23 No Untrue Statements...........................................................................33 3.24 Copies.........................................................................................33 3.25 Other..........................................................................................33 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYERS................................................................33 4.01 Organization and Authorization.................................................................34 (a) Due Organization......................................................................34 (b) Power and Authority...................................................................34 (c) Non-contravention.....................................................................34 4.02 Capital Stock..................................................................................35 (a) Enterprises...........................................................................35 (b) Sub...................................................................................35 (c) Enterprises Stock to be Issued in Merger..............................................35 4.03 Reports and Financial Statements...............................................................35 4.04 Absence of Certain Changes or Events...........................................................36 4.05 No Untrue Statements...........................................................................36 4.06 Other..........................................................................................36 ARTICLE V OTHER AGREEMENTS........................................................................................36 5.01 Continuing Operation of Business...............................................................36 (a) Conduct of Business...................................................................36 (b) Manner of Consent.....................................................................39 5.02 Expenses.......................................................................................39 5.03 Bottling Authorizations........................................................................39 5.04 Access.........................................................................................39 (a) Pre-Closing...........................................................................39 (b) After the Closing.....................................................................39 5.05 Other Offers...................................................................................39 5.06 Transfer Taxes.................................................................................40 5.07 Tax Attributes, Returns and Audits.............................................................40 (a) Tax Attributes........................................................................40
-iv- 6
(b) Filing of Returns.....................................................................40 (c) Control of Audits.....................................................................40 (d) Cooperation...........................................................................41 5.08 CCBG Shareholders' Approval....................................................................41 5.09 Pre-Closing Distribution of Certain Property...................................................41 5.10 Certain Payments to Employees..................................................................42 5.11 Employee Matters...............................................................................42 (a) Continued Employment..................................................................42 (b) Employee Benefit Plans................................................................42 (c) Severance Payments....................................................................42 (d) Group Insurance Plans.................................................................43 (e) Cafeteria Plans.......................................................................43 (f) 401(k) Plan...........................................................................43 (g) Retirement Plan.......................................................................43 (h) Bonus Plan............................................................................43 5.12 No Cancellation of Officer and Director Insurance..............................................44 5.13 Lease Payments.................................................................................44 5.14 Public Announcements...........................................................................44 5.15 Current Public Information.....................................................................44 5.16 Brokers........................................................................................44 5.17 Acquisition of TBG.............................................................................45 5.18 Consent as to Representation...................................................................45 5.19 Certain Obligations Under the Shareholders' Representative Agreement...........................45 ARTICLE VI CERTAIN POST-CLOSING MERGER CONSIDERATION ADJUSTMENTS...................................................45 6.01 Certain Definitions............................................................................45 6.02 Post-Closing Reduction of Merger Consideration.................................................47 (a) Certain CCBG and TBG Representations and Warranties and Other Matters...............................................................................47 (b) CCBG Shareholder Representations, Warranties and Covenants............................49 (c) Limitations...........................................................................49 6.03 Limitations on Reduction of Merger Consideration...............................................49 (a) Reduction of Losses...................................................................49 (b) Maximum Liability and Payment -- Section 6.02(a) Claims...............................50 (c) Maximum Liability and Payment -- Stock Claims.........................................50 (d) Limitation on Trustee Liability.......................................................50 6.04 Increase in Merger Consideration...............................................................51 6.05 Time Limitations for Assertion of Claims.......................................................51 (a) Survival..............................................................................51 (b) Post-Closing Acts or Omissions........................................................51 6.06 Procedure for Claims...........................................................................51 (a) Generally.............................................................................51
-v- 7
(b) To Whom Sent..........................................................................52 (c) Response by Recipient.................................................................52 (d) Payment Notice to the CCBG Shareholders by the Shareholders' Representative........................................................................52 6.07 Third Party Action.............................................................................52 6.08 Investigations.................................................................................53 6.09 Exclusive Remedy...............................................................................53 ARTICLE VII THE CLOSING.............................................................................................53 7.01 Time, Date and Place of Closing; Articles of Merger............................................53 7.02 Events Comprising the Closing..................................................................54 7.03 Conditions to Obligations of Buyers............................................................54 (a) Representations and Warranties........................................................54 (b) Compliance............................................................................54 (c) Governmental Actions..................................................................54 (d) Adverse Change........................................................................54 (e) Consents..............................................................................55 (f) Satisfactory Documents................................................................55 (g) Delivery of Shares....................................................................55 (h) Copies of Resolutions.................................................................55 (i) Opinion...............................................................................55 (j) Approvals.............................................................................55 (k) TBG Share Exchange....................................................................55 (l) Termination of Certain CCBG Agreements................................................55 7.04 Conditions to Obligations of CCBG..............................................................56 (a) Representations and Warranties........................................................56 (b) Compliance............................................................................56 (c) Governmental Action...................................................................56 (d) Approval of CCBG Shareholders.........................................................56 (e) Satisfactory Documents................................................................56 (f) Opinion of Counsel....................................................................56 (g) Approvals.............................................................................56 (h) TBG Share Exchange....................................................................56 (i) Copies of Resolutions.................................................................57 7.05 Deliveries by CCBG at the Closing..............................................................57 (a) Certificate...........................................................................57 (b) Articles of Merger....................................................................57 (c) Minute Books..........................................................................57 (d) Resignation...........................................................................57 (e) Other.................................................................................57 7.06 Deliveries by Buyers at the Closing............................................................57 (a) Certificates..........................................................................57
-vi- 8
(b) Articles of Merger....................................................................58 (c) Merger Consideration..................................................................58 (d) Other Documents.......................................................................58 ARTICLE VIII TERMINATION AND ABANDONMENT.............................................................................58 8.01 Termination and Abandonment....................................................................58 (a) Mutual Agreement......................................................................58 (b) CCBG..................................................................................58 (c) Enterprises...........................................................................58 (d) Governmental Authority................................................................58 8.02 Rights and Obligations Upon Termination........................................................59 8.03 Return of Confidential Information.............................................................59 ARTICLE IX MISCELLANEOUS PROVISIONS................................................................................59 9.01 Good Faith; Further Assurances.................................................................59 9.02 Notices........................................................................................59 9.03 Definition of Knowledge........................................................................61 (a) CCBG..................................................................................61 (b) Enterprises...........................................................................61 9.04 Assignment.....................................................................................61 9.05 Captions; Definitions..........................................................................62 9.06 Amendment; Waiver; Remedies Cumulative.........................................................62 9.07 No Third-Party Beneficiaries...................................................................62 9.08 Exhibits; Disclosure Schedules.................................................................63 9.09 Counterparts; Entire Agreement.................................................................63 9.10 Time of the Essence; Computation of Time.......................................................63 9.11 Severability...................................................................................63
-vii- 9 INDEX OF DEFINED TERMS
Page Defined Term Number ------------ ------ 1997 Financial Statements......................................................................................14 401(k) Plan....................................................................................................43 Accounts Receivable............................................................................................14 Agreement.......................................................................................................1 Applicable Law.................................................................................................10 Articles of Merger..............................................................................................1 Automated......................................................................................................41 Automated 401(k) Plan..........................................................................................43 Automated Employees............................................................................................42 Automated Transaction..........................................................................................42 Bottling Authorizations........................................................................................13 Business Day(s).................................................................................................4 Buyers..........................................................................................................1 Buyers' Documents..............................................................................................34 Buyers' Protected Parties......................................................................................45 Capital Leases.................................................................................................13 Cash Component..................................................................................................3 Cash Election...................................................................................................4 Cash Election Form..............................................................................................4 Cash Percentage.................................................................................................4 CCBG's Accountants' Post-Closing Deliveries.....................................................................6 CCBG's Accountants..............................................................................................5 CCBG............................................................................................................1 CCBG Adjusted Consolidated Working Capital......................................................................2 CCBG Certificate of Adjustments.................................................................................5 CCBG Closing Date Financial Statements..........................................................................5 CCBG Companies.................................................................................................46 CCBG Documents.................................................................................................10 CCBG Interest..................................................................................................11 CCBG Interests.................................................................................................11 CCBG Share......................................................................................................2 CCBG Shareholder................................................................................................2 CCBG Shareholders...............................................................................................2 CCBG Shareholders' Approval....................................................................................41 CCBG Shares.....................................................................................................2 Claim..........................................................................................................46 Claimant ......................................................................................................46
10
Claims.........................................................................................................46 Claims Escrow Amount............................................................................................3 Closing........................................................................................................53 Closing Adjustment Escrow Amount................................................................................3 Closing Date...................................................................................................53 Coke Southwest Interests.......................................................................................48 Competition Claims.............................................................................................46 Continuing CCBG Employees......................................................................................42 Dani...........................................................................................................11 Deductible.....................................................................................................50 Difference......................................................................................................6 Effect of Open Items............................................................................................6 Effective Time..................................................................................................1 Employee Benefit Plans.........................................................................................23 Employment Agreements...........................................................................................1 Enterprises.....................................................................................................1 Enterprises 10-K...............................................................................................35 Enterprises Common Stock........................................................................................4 Enterprises Financial Statements...............................................................................36 Enterprises SEC Reports........................................................................................35 Environmental Claims...........................................................................................46 Environmental Laws.............................................................................................27 Equitable Adjustment............................................................................................4 ERISA..........................................................................................................22 ERISA Affiliate................................................................................................23 Estimated Merger Consideration..................................................................................5 Estimated Merger Consideration Per Share........................................................................5 Exchange Act...................................................................................................35 Finally Resolved...............................................................................................46 Financial Statements...........................................................................................14 GAAP............................................................................................................2 Governmental Authority.........................................................................................10 Governmental Objection.........................................................................................58 Indebtedness For Borrowed Money................................................................................13 Intellectual Property..........................................................................................30 Interim Financial Statements...................................................................................14 IRC............................................................................................................17 Loss...........................................................................................................46 Losses.........................................................................................................46 Loyalty Payments................................................................................................1 Merger..........................................................................................................1 Merger Consideration............................................................................................2 Merger Consideration Per Share..................................................................................2
2 11
Nevada Act......................................................................................................1 NLRB...........................................................................................................24 Notional Value..................................................................................................4 Off-Site Environmental Matters.................................................................................27 Open Items......................................................................................................6 OSHA...........................................................................................................24 Per Share Percentage............................................................................................3 Permitted Lien.................................................................................................21 Prior Automated Employees......................................................................................43 Recipient of Claim.............................................................................................46 Remaining Estimated Merger Consideration........................................................................3 Required Statutory Approvals...................................................................................11 Retirement Plan................................................................................................43 Returns........................................................................................................17 SEC............................................................................................................35 Securities Act.................................................................................................35 Southwest......................................................................................................45 Specified Contracts............................................................................................29 Stock Claims...................................................................................................47 Stock Component.................................................................................................3 Stock Representations..........................................................................................47 Sub.............................................................................................................1 Sub Common Stock...............................................................................................35 Subsidiaries...................................................................................................11 Subsidiary.....................................................................................................11 Surviving Corporation...........................................................................................1 Surviving Tax Representations..................................................................................20 Tax Claims.....................................................................................................47 Tax Cut-Off Date...............................................................................................47 Taxes..........................................................................................................17 TBG.............................................................................................................2 TBG Agreement...................................................................................................2 TBG Companies..................................................................................................47 Third Party....................................................................................................47 Third Party Action.............................................................................................47 Third-Party Loans..............................................................................................29 to Buyers' knowledge...........................................................................................61 to CCBG's knowledge............................................................................................61 to its knowledge...............................................................................................61 Transmittal Letter.............................................................................................55 WARN Act ......................................................................................................25
3 12 INDEX OF EXHIBITS
Exhibit Page Description of Exhibit Designation Number - ---------------------- ----------- ------ Articles of Merger Exhibit A 1 Certain Deductions Exhibit B 1 CCBG's Adjusted Consolidated Working Capital Exhibit C 2 Cash Election Form Exhibit D 4 Shareholders' Representative and Exhibit E 4 Escrow Agreement Transmittal Letter Exhibit F 55 CCBG Lawyers' Opinion of Counsel Exhibit G 55 KC Trust's Lawyers' Opinion of Counsel Exhibit H 55 Buyers' Lawyers' Opinion of Counsel Exhibit I 56
13 AGREEMENT OF MERGER THIS AGREEMENT OF MERGER (this "Agreement") is executed and delivered as of June 5, 1998, by and among COCA-COLA ENTERPRISES INC., a Delaware corporation ("Enterprises"), TEXA-COLA ACQUISITION COMPANY, a Nevada corporation and a wholly-owned subsidiary of Enterprises (the "Sub") (Enterprises and the Sub are collectively the "Buyers"), and CCBG CORPORATION, a Nevada corporation ("CCBG"). IN CONSIDERATION of the representations, warranties, covenants and agreements contained herein, the receipt and legal sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: ARTICLE I THE MERGER 1.01 The Merger. (a) Generally. Subject to the terms and conditions herein set forth, at the Effective Time and in accordance with the Nevada General Corporation Law (the "Nevada Act"), the Sub shall merge with and into CCBG (the "Merger"), and CCBG shall be the surviving corporation in the Merger (hereinafter sometimes referred to as the "Surviving Corporation"). On the Closing Date, CCBG and the Sub shall execute and file with the Secretary of State of Nevada articles of merger in the form attached hereto as Exhibit A (the "Articles of Merger"). The "Effective Time" of the Merger shall be at the time and on the date the Articles of Merger are accepted for filing by the Secretary of State of Nevada. (b) The Merger Consideration. The merger consideration shall be FIVE HUNDRED SIXTY MILLION DOLLARS ($560,000,000) adjusted as follows: (i) minus, the payoff balance of principal (including the current maturities of (A) and (B) below and any prepayment premium of CCBG's 9% Senior Subordinated Notes Due 2003, but excluding accrued interest) at the Closing Date of (A) Indebtedness for Borrowed Money, (B) Capital Leases, and (C) obligations of CCBG under the employment agreements (the "Employment Agreements"), loyalty payments (the "Loyalty Payments") and office lease described on Exhibit B, with the amount 14 of such obligations being computed pursuant to that exhibit; (ii) plus or minus, as the case may be, 50% of the amount by which the sum of the consolidated working capital of CCBG and of the consolidated working capital of TBG at the Closing Date, as determined in accordance with generally accepted accounting principles applicable to the preparation of year-end statements ("GAAP") consistent with past practices (to the extent consistent with GAAP) or as otherwise provided in Exhibit C (the "CCBG Adjusted Consolidated Working Capital"), is more or less than $21,531,450; and (iii) plus, an amount equal to 49.2539864% of the aggregate "Exchange Consideration" (as defined in the TBG Agreement) of Texas Bottling Group, Inc., a Nevada corporation ("TBG"), pursuant to that certain Share Exchange Agreement of even date with this Agreement (the "TBG Agreement"). The foregoing amount, as adjusted after the Closing in accordance with Section 1.04 and Article VI, is the "Merger Consideration." The Merger Consideration divided by the aggregate number of CCBG Shares outstanding immediately prior to the Effective Time is the "Merger Consideration Per Share." "CCBG Shares" means shares of CCBG's $.01 par value Class A common stock and $.01 par value Class B common stock (each a "CCBG Share" and collectively the "CCBG Shares"). "CCBG Shareholder" means any holder of CCBG Shares, and "CCBG Shareholders" means all holders of CCBG Shares collectively. (c) Tax-Free Reorganization. The Buyers and CCBG intend that the Merger constitute a "reorganization" within the meaning of IRC section 368(a), and that this Agreement constitute a plan of reorganization thereunder. Neither the Buyers nor CCBG shall take any position inconsistent with such intentions. (d) Amendment. This Article I may be modified or amended in any manner at any time and from time to time prior to the Effective Time by the boards of directors of Buyers and CCBG in accordance with Section 9.06 without any action by the shareholders of the Buyers or CCBG; provided, however, that no modification or amendment may be made that: (i) after approval of this Agreement by the CCBG Shareholders, reduces or changes the form or composition of the consideration which the CCBG Shareholders shall be entitled to receive at the Effective Time, without the CCBG Shareholders' further approval, except to the extent specifically authorized by the CCBG Shareholders in connection with approving the execution, delivery and performance of this Agreement; 2 15 (ii) alters or changes any term or condition of this Agreement that would result in an adverse effect on the holders of any class or series of shares of the corporations party hereto, without the approval of such holders; or (iii) alters or changes any term of the articles of incorporation of the Surviving Corporation, without the approval of the shareholders of the Surviving Corporation. 1.02 Conversion of Shares. At the Effective Time, by virtue of the Merger and without any further action (except as provided pursuant to elections made in accordance with subsection (c)) on the part of Sub, CCBG or any CCBG Shareholder: (a) Conversion. Each CCBG Share issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive the following, subject to the terms of this Agreement, including, but not limited to, the deliveries contemplated by Section 7.03(g): (i) that number of shares of Enterprises Common Stock (valued at the Notional Value) equal in value to: (1) $1,492,540 (the "Closing Adjustment Escrow Amount") multiplied by (2) the percentage such CCBG Share represents of all of the CCBG Shares issued and outstanding immediately prior to the Effective Time (the "Per Share Percentage"), to be delivered to the Shareholders' Representative; (ii) that number of shares of Enterprises Common Stock (valued at the Notional Value) equal in value to: (1) $18,656,748 (the "Claims Escrow Amount") multiplied by (2) the Per Share Percentage, to be delivered to the Shareholders' Representative; (iii) to the extent cash has been designated in the Cash Election as provided in Section 1.02(c) by the holder of such share being converted, a cash amount equal to: (1) the Estimated Merger Consideration multiplied by the Per Share Percentage, multiplied by (2) the Cash Percentage of such holder (the "Cash Component"), to be delivered to the holder of the share being converted; (iv) that number of shares of Enterprises Common Stock (valued at the Notional Value) equal in value to: (1) the product of the Per Share Percentage multiplied by the Remaining Estimated Merger Consideration, to be delivered to the holder of the share being converted (the "Stock Component"). The "Remaining Estimated Merger Consideration" is (1) the Estimated Merger Consideration multiplied by the difference between such holder's Cash Percentage and 100%, less (2) the Claims Escrow Amount and less (3) the Closing Adjustment Escrow Amount; and 3 16 (v) additional shares of Enterprises Common Stock to reflect positive adjustments (if any) in the Merger Consideration under Section 1.04 and /or Article VI, to be delivered to the holder of the share being converted; all subject to the rights and obligations of the Shareholders' Representative as set forth in this Agreement and that certain agreement by and among Robert K. Hoffman (the "Shareholders' Representative"), the CCBG Shareholders and others in the form of Exhibit E (the "Shareholders' Representative Agreement"); and without limiting the foregoing, the office of the Shareholders' Representative, whose power and authority are set forth in this Agreement and the Shareholders' Representative Agreement, is established pursuant to this Agreement and the Merger as an integral part of the manner and basis of converting the CCBG Shares. (b) Notional Value; Adjustments. Each of the Closing Adjustment Escrow Amount and the Claims Escrow Amount shall consist of shares of $1.00 par value common stock of Enterprises (the "Enterprises Common Stock") having an agreed value of $34.50 per share (the "Notional Value"); provided, however, that in the event of any change after April 3, 1998 and prior to the Effective Time in the number of issued and outstanding shares of Enterprises Common Stock, through reorganization, recapitalization, stock split, dividends paid in stock, split-up, split-off, spin-off, combination or exchange of shares, or other fundamental change in the capital structure of Enterprises (the forgoing specifically intending to exclude, without limitation, stock repurchases or any dilution resulting from the issuance of additional shares other than an issuance ratably to all shareholders), an equitable adjustment (the "Equitable Adjustment") shall be made to the Notional Value. (c) Cash Election. Each CCBG Shareholder shall designate a percentage (not to exceed 80%) (the "Cash Percentage") of each of such holder's CCBG Shares that is to be converted into cash by designating such percentage of cash conversion in the election form in the form of Exhibit D (the "Cash Election Form"), delivered to Enterprises at least 1 Business Day prior to the Closing (the "Cash Election"). If a holder of CCBG Shares fails to make a Cash Election, no part of such holder's shares shall be converted into cash. A "Business Day" is a day other than a day on which banks in Atlanta, Georgia are required or authorized by law to close or a day on which trading on the New York Stock Exchange is closed. (d) Limitation on Cash Election. Notwithstanding the preceding or any other provision of this Agreement, in no event shall less than 90% of the aggregate Estimated Merger Consideration be in Enterprises Common Stock (valued at the Notional Value). If the aggregate cash elected to be received in the Cash Elections exceeds 10% of the aggregate Estimated Merger Consideration, then the Cash Elections shall be automatically amended to reduce the aggregate cash to be received (pro rata among each of the CCBG Shareholders electing greater than 10% cash) to equal 10% of the aggregate Estimated Merger Consideration. 4 17 (e) Treasury Shares Canceled. Each share of CCBG's capital stock held in CCBG's treasury as of the Effective Time shall, by reason of the Merger, be canceled without payment of any consideration therefor. (f) Sub's Shares Converted. Each outstanding share of the Sub's capital stock shall be converted into one share of the Class A Common Stock of the par value of $.01 per share of the Surviving Corporation. 1.03 Estimated Merger Consideration; Deliveries. (a) Computation. At or prior to the Closing Date, Enterprises and CCBG shall jointly compute Merger Consideration Per Share based upon a good faith estimate agreed upon by CCBG and Enterprises prior to the Closing, using the same principles described in Section 1.01(b) (the "Estimated Merger Consideration Per Share"), and the Estimated Merger Consideration Per Share shall be used in making the deliveries and payments at the Closing as contemplated by Section 7.06(c). The aggregate Estimated Merger Consideration Per Share for all CCBG Shares is the "Estimated Merger Consideration." (b) Delivery. At the Closing, or as soon as practicable thereafter with respect to shares of Enterprises Common Stock, Enterprises shall deliver and pay, to the Shareholders' Representative or to the CCBG Shareholders as specified in Section 1.02, that portion of the Estimated Merger Consideration that is payable to those CCBG Shareholders who have satisfied the conditions of Section 7.03(g) and, to the extent applicable to a CCBG Shareholder, Section 7.03(i). 1.04 Final Computation of Merger Consideration. (a) Closing Date Financial Statements. Within 90 days after the Closing Date, Arthur Andersen LLP ("CCBG's Accountants") shall prepare and deliver to Enterprises, at the CCBG Shareholders' expense: (i) Consolidated closing date financial statements of CCBG and the Subsidiaries as of the close of business on the Closing Date prepared in accordance with GAAP consistent with CCBG's practice with respect to its 1997 Financial Statements audited by CCBG's Accountants and accompanied by their unqualified report with respect thereto except that such report may be qualified to the extent acceptable to Buyers (the "CCBG Closing Date Financial Statements"); and (ii) A certificate of adjustments setting forth the computation of the CCBG Adjusted Consolidated Working Capital based on the CCBG Closing Date Financial Statements and otherwise in accordance with Section 1.01(b)(iii) and with such computation being set forth generally in the format attached to Exhibit C (the "CCBG Certificate of Adjustments"). 5 18 The CCBG Closing Date Financial Statements and the CCBG Certificate of Adjustments are collectively the "CCBG's Accountants' Post-Closing Deliveries." (b) Review/Objection Procedure As To Closing Date Financial Statements and Certificate of Adjustments. Within 45 days of Enterprises' receipt of CCBG's Accountants' Post-Closing Deliveries, Enterprises shall notify the Shareholders' Representative whether Enterprises agrees with them, or, if it does not agree, it shall state specifically the extent to which it disagrees and its reasons therefor. If the Shareholders' Representative and Enterprises are unable to agree on the CCBG's Accountants' Post-Closing Deliveries within 30 days of such notice, then all items other than those on which (and only to the extent of the dollar amount in dispute) they do not agree shall be conclusive and binding. To the extent Enterprises and the Shareholders' Representative do not agree on one or more items in (or excluded from) the CCBG's Accountants' Post-Closing Deliveries (and the Shareholders' Representative shall not be restricted from raising any issue in such context, even if inconsistent with a position taken by CCBG's Accountants), the nature and amount of such disputed items shall be the "Open Items", and their effect on the Merger Consideration as determined in Section 1.04(a) shall be the "Effect of Open Items". The Merger Consideration calculated by using only the binding items shall constitute the "Undisputed Redetermined Merger Consideration." The Open Items and the Effect of Open Items shall be resolved as provided in subsection (d) below. If Enterprises does not so notify the Shareholders' Representative of any disagreements within such 45-day period, then CCBG's Accountants' Post-Closing Deliveries as received by Enterprises shall be conclusive and binding. (c) Payment of Non-disputed Amounts. (i) Within 75 days of Enterprises' receipt of the CCBG's Accountants' Post-Closing Deliveries, Enterprises and the Shareholders' Representative: (A) shall then calculate the difference (the "Difference") between the Estimated Merger Consideration and the Undisputed Merger Consideration, which Difference shall be binding and conclusive; and (B) shall pay the Difference in accordance with subsection (ii) or subsection (iii) below, as applicable. Enterprises and the Shareholders' Representative will coordinate the foregoing process with the comparable process under the TBG Agreement to reflect the Merger Consideration component set forth in Section 1.01(b)(iii). (ii) If the Undisputed Redetermined Merger Consideration is greater than the Estimated Merger Consideration, then Enterprises shall deliver to each CCBG Shareholder a number of shares of Enterprises Common Stock (valued at the Notional Value) having a value equal to the Difference multiplied by such shareholder's 6 19 CCBG Interest. Enterprises shall deliver certificates representing such shares to the CCBG Shareholders within 10 Business Days after the calculation of the Difference. (iii) If the Undisputed Redetermined Merger Consideration is less than the Estimated Merger Consideration, then the CCBG Shareholders shall deliver to Enterprises a number of shares of Enterprises Common Stock (valued at the Notional Value) having a value equal to the Difference less the Effect of Open Items, with each CCBG Shareholder being liable for a percentage of such amount equal to his CCBG Interest. The CCBG Shareholders shall make such deliveries individually to Enterprises in accordance with subsection (e) below. (d) Resolution of Open Items. (i) All Open Items (including the Effect of Open Items) shall be decided in accordance with Exhibit C and the following procedures. The Shareholders' Representative shall select one accountant with expertise in such matters and Enterprises shall select one accountant with expertise in such matters, and the two so selected shall attempt to resolve the Open Items. Each party shall be responsible for the costs of any such accountant selected by such party and any other expenses it may incur. All amounts agreed upon by Enterprises and the Shareholders' Representative or by the accountants (if the parties are unable to agree) shall be conclusive and binding. If within 30 days of the selection of the two accountants, the accountants have not resolved all Open Items, then such items as have not been resolved shall be submitted to a third accountant selected by the Shareholders' Representative and Enterprises within 15 days after the expiration of the 30-day period. If Enterprises and the Shareholders' Representative cannot agree upon a third accountant within 15 days, then the accountant shall be selected by the first two accountants (who shall not select an accountant from CCBG's Accountants or Ernst & Young LLP). The third accountant shall render his decision on such remaining Open Items as promptly as practicable, but in no event more than 30 days after such accountant is selected. The CCBG Shareholders (considered as a single person) and Enterprises shall each bear one-half of the fees and expenses of the third accountant, whose decision shall be the final determination of the Open Items submitted to him and shall be conclusive and binding. If at any time before a decision is delivered by the accountants to the Shareholders' Representative and Enterprises pursuant to the foregoing dispute resolution procedures the Shareholders' Representative and Enterprises agree on the resolution of an Open Item (and the parties shall give the accountants prompt notice of any such agreement), then such resolution shall be conclusive and binding even though the accountants may have concluded otherwise and/or the Shareholders' Representative and Enterprises receive a notice of the decision from the accountants after the Shareholders' Representative and Enterprises have reached an agreement. (ii) As the Open Items are resolved as provided in clause (i) immediately preceding, then: 7 20 (A) To the extent that the resolution is that a payment is due Enterprises, then the CCBG Shareholders shall deliver to Enterprises a number of shares of Enterprises Common Stock (valued at the Notional Value) having a value equal to the amount of such payment, with each CCBG Shareholder being liable for a percentage equal to his CCBG Interest. (B) To the extent that the resolution is that a payment is due the CCBG Shareholders, then Enterprises shall deliver to each CCBG Shareholder a number of shares of Enterprises Common Stock (valued at the Notional Value) having a value equal to the amount of such payment times such CCBG's Shareholder's CCBG Interest. If clause "(A)" applies, then the procedures set forth in subsection (e) below apply. If clause "(B)" applies, then Enterprises shall deliver the appropriate number of shares of Enterprises Common Stock within 10 Business Days of the resolution. (e) Payment Notice to the CCBG Shareholders by the Shareholders' Representative. Whenever an aspect of the determinations pursuant to this Section 1.04 becomes binding and conclusive, the Shareholders' Representative shall promptly notify each CCBG Shareholder of the amount of any payment required to be made by the CCBG Shareholders pursuant to this Section 1.04 and that portion for which each CCBG Shareholder is liable. Each payment from the CCBG Shareholders is due to Enterprises no later than 10 Business Days from the date on which the foregoing notice to the CCBG Shareholders is given by the Shareholders' Representative; provided, however, that payments may be deferred until the earlier to occur of (1) the total payments of the CCBG Shareholders being at least $100,000 or (2) the next calendar quarter end at least 10 Business Days after an Open Item becomes conclusive and binding. (f) Open Items Under TBG Agreement. To the extent that Open Items under the TBG Agreement involve matters other than the CCBG Adjusted Consolidated Working Capital and are not taken into account in payments to or by the CCBG Shareholders, then the CCBG Shareholders shall be paid, or shall pay, 49.2539864% of such amounts at the same time that the TBG Shareholders are paid, or pay, 50.7460136% of such amounts under the TBG Agreement. 1.05 Calculations. No Fractional Shares. The calculations in this Article I shall be made (1) aggregating all of the shares of each holder of CCBG Shares being converted in the Merger and (2) based on numbers carried out to 8 decimal places, but the final amount of payments to each holder shall be rounded down to the nearest whole penny, and any payment of shares shall be rounded down to the nearest whole share, as appropriate. No cash will be included in the CCBG Closing Adjustment Escrow Fund or the Claims Escrow Fund. 1.06 The Surviving Corporation. At the Effective Time: 8 21 (a) Conversion of Shares. The Sub shall merge with and into CCBG and the CCBG Shares shall be converted as described in Section 1.02(a). (b) The Sub Ceases to Exist. The separate existence of the Sub shall cease, and the Surviving Corporation shall continue its corporate existence under the laws of the State of Nevada as a wholly owned subsidiary of Enterprises. (c) Articles of Incorporation. The articles of incorporation of the Surviving Corporation immediately prior to the Effective Time, except as may be amended by the Articles of Merger, shall be the articles of incorporation of the Surviving Corporation. (d) Other. The Merger shall otherwise have the effect provided under the applicable laws of the State of Nevada. 1.07 Unregistered Shares. The shares of Enterprises Common Stock to be issued pursuant to this Article I shall not be registered under applicable federal and state securities laws and shall be issued with a legend noting restrictions on transfer imposed under Applicable Law. Buyers have no obligation at any time to effect any such registration. ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE CCBG SHAREHOLDERS The representations and warranties of each CCBG Shareholder, and the respective rights and obligations of each CCBG Shareholder in the event of a breach of such representations and warranties, are set forth in such shareholder's Transmittal Letter. ARTICLE III REPRESENTATIONS AND WARRANTIES OF CCBG CONCERNING CCBG AND SUBSIDIARIES CCBG hereby represents and warrants to Buyers as follows as of the date of this Agreement and as of the Closing Date, with full knowledge that such representations and warranties being true at those times are a material consideration and inducement to the execution of this Agreement by Buyers and the consummation of the transactions contemplated hereunder and that if they are breached, such breach may (1) as specifically provided in Section 7.03, relieve the Buyers of their obligation to effect the Merger, and (2) as specifically provided in Article VI, form the basis for a post-Closing reduction to the Merger Consideration: 3.01 Organization and Authorization. Except as set forth in Disclosure Schedule 3.01: (a) Due Organization, Etc. CCBG is a corporation duly organized, validly existing and in good standing under the corporation laws of the State of Nevada. CCBG has all requisite corporate power and authority to carry on and conduct its business as it is now being conducted and to own or lease its properties and assets. CCBG is duly qualified and in 9 22 good standing in every jurisdiction in which the conduct of its business or the ownership of its properties and assets requires CCBG to be so qualified; and neither the property owned or operated by CCBG nor the nature of the business conducted by it makes qualification necessary under Applicable Law in any other jurisdiction. (b) Power and Authority. CCBG has the full corporate power to execute, deliver and perform this Agreement and all other agreements, documents and certificates executed and delivered by CCBG hereby (collectively, the "CCBG Documents"), subject to the Required Statutory Approvals. The execution, delivery and performance of this Agreement and each CCBG Document by CCBG has been duly authorized by the board of directors of CCBG, and, except for the approval of the CCBG Shareholders, no other corporate action on the part of CCBG is necessary to approve and authorize the execution, delivery and performance of this Agreement and the CCBG Documents. Each of the CCBG Documents has been duly and validly executed and delivered by CCBG and constitutes the valid and binding agreement of CCBG, enforceable against CCBG in accordance with its terms. (c) Non-contravention. The execution, delivery and performance of each CCBG Document by CCBG and the consummation by CCBG and the CCBG Shareholders of the transactions contemplated hereby and thereby will not: (i) violate or conflict with any provision of the articles of incorporation or bylaws of CCBG or any Subsidiary; (ii) breach, violate or constitute an event of default (or an event which with the lapse of time or the giving of notice or both would constitute an event of default) under, or give rise to any right of termination, cancellation, modification or acceleration under, any note, bond, indenture, mortgage, security agreement, lease, franchise or any other material agreement, instrument or obligation to which CCBG or any Subsidiary is a party, or by which CCBG or any Subsidiary or any of their respective properties or assets is bound (excluding for purposes of all of the foregoing items of this clause (ii) the Bottling Authorizations), or result in the creation of any lien, claim or encumbrance or other right of any third party of any kind whatsoever upon the properties or assets of CCBG or any Subsidiary pursuant to the terms of any such instrument or obligation, which breach, violation, or event of default would result in a material adverse effect on CCBG and its Subsidiaries taken as a whole; (iii) violate or conflict with any law, statute, ordinance, code, rule, regulation, judgment, order, writ, injunction, decree or other decision of any federal, state, city, county, parish or foreign court or governmental or regulatory body, agency or authority ("Governmental Authority") applicable to CCBG or any Subsidiary or by which any of their respective properties or assets may be bound ("Applicable Law"), where such violations or conflicts, individually or in the aggregate, may reasonably be expected to result in Losses to the Buyers greater than $100,000; or 10 23 (iv) require, on the part of CCBG or any Subsidiary, any filing or registration with, or permit, license, exemption, consent, authorization or approval of, or the giving of any notice to any Governmental Authority, except for (1) the premerger notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (2) any required actions under federal securities laws and any applicable state securities and blue sky laws in connection with the Merger, and (3) the filing of the Articles of Merger with the Secretary of State of Nevada and any other required state filings (the foregoing (1) through (3) being referred to as the "Required Statutory Approvals"). (d) Capitalization. The authorized capital stock of CCBG consists solely of 126,279 shares of $.01 par value Class A Common Stock, 26,279 shares of $.01 par value Class B Common Stock and 25,000 shares of $.01 par value Preferred Stock, of which 76,200 shares of Class A Common Stock and 19,964 shares of Class B Common Stock are issued and outstanding. Disclosure Schedule 3.01 lists the CCBG Shareholders of record and their percentage interests (such interest, as adjusted pursuant to Section 9.04, being individually a "CCBG Interest" and collectively the "CCBG Interests"). It also lists those agreements known to CCBG that impose a lien, claim or encumbrance upon any CCBG Shares or that restrict or limit the ability of any CCBG Shareholder to vote or transfer his CCBG Shares or any interest in them or otherwise to take the actions contemplated by this Agreement. No shares of Preferred Stock are issued and outstanding. All of the issued and outstanding shares of CCBG capital stock are validly issued, fully paid and non-assessable. CCBG does not have outstanding, nor is it bound by, any subscriptions, options, warrants, calls, commitments or agreements to issue any additional shares of capital stock or any other equity security, including any right of conversion or exchange under any outstanding security or other instrument or agreement. All issuances, transfers, purchases or redemptions of the capital stock of CCBG have complied with all applicable agreements and all Applicable Laws, and all Taxes thereon have been paid. No present or former holder of any capital stock of CCBG or any Subsidiary or any corporation which has been merged into CCBG or any Subsidiary has any legally cognizable claim against CCBG or such Subsidiary based upon any issuance, sale, purchase, redemption or involvement in any transfer of any capital stock by CCBG or any Subsidiary or any corporation which has been merged into CCBG or any Subsidiary. There are no outstanding obligations of CCBG or any Subsidiary to repurchase, redeem or otherwise acquire any outstanding shares of capital stock of CCBG or any Subsidiary. (e) Subsidiaries. Disclosure Schedule 3.01 lists: (1) every entity (excluding TBG and the Dani Group, Inc. ("Dani")) in which CCBG owns 50 percent or more of the outstanding equity, directly or indirectly, or has the power to vote or direct the voting of sufficient securities to elect a majority of the board of directors or similar governing body or otherwise has the power to direct the business and policies of such entity (each such entity other than TBG and Dani, a "Subsidiary" and collectively the "Subsidiaries"), (2) the jurisdiction of its incorporation, (3) each state of the United States in which it is required to qualify as a foreign 11 24 corporation, and (4) the number of shares authorized and outstanding. Except as set forth in Disclosure Schedule 3.01: (i) each of the Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of its respective jurisdiction of incorporation, (ii) each of the Subsidiaries has the full corporate power and authority to carry on and conduct its business as it is now being conducted and to own or lease its properties and assets, (iii) each of the Subsidiaries is duly qualified in every state of the United States in which the conduct of its business or the ownership of its properties requires it to be so qualified, (iv) all outstanding shares of capital stock of each Subsidiary are owned by CCBG or another Subsidiary, free and clear of any liens, restrictions, claims, equities, charges, options, rights of first refusal or other encumbrances, with no defects of title whatsoever except applicable restrictions under federal and state securities laws, (v) all of the issued and outstanding shares of each Subsidiary are validly issued, fully paid and non-assessable, (vi) there are no outstanding subscriptions, options, warrants, rights, calls, contracts, voting trusts, proxies or other commitments, understandings, restrictions or arrangements relating to the issuance, sale, voting, transfer, ownership or other rights with respect to any shares of capital stock of any Subsidiary, including any right of conversion or exchange under any outstanding security, instrument or agreement, (vii) CCBG or another Subsidiary has the full power, right and authority to vote all of the outstanding shares of the capital stock of each Subsidiary owned by CCBG or another Subsidiary, and (viii) neither CCBG nor any Subsidiary holding the stock of another Subsidiary is a party to or bound by any agreement affecting or relating to its right to transfer the outstanding shares of any Subsidiary. (f) Articles, Bylaws and Minutes. Copies of the organizational documents and bylaws of CCBG and each Subsidiary previously made available to Buyers are the complete, true and correct organizational documents and bylaws of CCBG and each Subsidiary in effect as of the date hereof. The minutes of directors' and shareholders' meetings and the stock books of CCBG and, with respect to each Subsidiary, from the date of its becoming a Subsidiary of CCBG, that have previously been delivered or otherwise made available to 12 25 Buyers are the accurate records of directors' and shareholders' meetings, actions taken by written consent, and stock issuances through the date hereof and reflect all transactions required by Applicable Law to be contained in such records. To CCBG's knowledge, nothing has been removed from them in order to avoid disclosing information to Buyers. (g) Officers and Directors. All current officers and directors of CCBG and each Subsidiary are listed in Disclosure Schedule 3.01. 3.02 Bottling Authorizations. (a) List. Disclosure Schedule 3.02 sets forth a complete and accurate list of all persons or entities that have granted CCBG or a Subsidiary franchise agreements, either oral or written ("Bottling Authorizations") under which CCBG or a Subsidiary conducts its soft drink business (excluding post-mix), including a list of all brands covered by such agreements. (b) Territories of Other Bottler. All Bottling Authorizations giving CCBG or a Subsidiary the temporary right to sell soft drinks and other non-alcoholic beverage products within the territory of another bottler are specifically identified on Disclosure Schedule 3.02. (c) Transshipment. To CCBG's knowledge, no event has occurred which would give rise to any liability of CCBG or any Subsidiary for transshipment across Bottling Authorizations territorial lines, and neither CCBG nor any Subsidiary has sufficient grounds for any such claim against any other bottler. Disclosure Schedule 3.02 lists all transshipment claims against or by CCBG or any Subsidiary which have been asserted since December 31, 1997. 3.03 Indebtedness. Disclosure Schedule 3.03 lists all (1) financing facilities and other arrangements for Indebtedness For Borrowed Money, (2) indebtedness of CCBG and each Subsidiary by way of lease-purchase arrangements and capital leases as determined in accordance with GAAP, each such capital lease being specifically identified in Disclosure Schedule 3.03 ("Capital Leases"), (3) guarantees and other undertakings of CCBG and each Subsidiary on which others rely in extending credit other than endorsements of negotiable instruments in the ordinary course of business, and (4) all security interests with respect to personal property owned by CCBG and any Subsidiary. Except as set forth in Disclosure Schedule 3.03, no loan payable by CCBG or any Subsidiary provides for any prepayment penalty or premium. As used in this Agreement, "Indebtedness For Borrowed Money" means all obligations of CCBG and each Subsidiary evidenced by bonds, debentures, notes or similar instruments or for the deferred purchase price of property. 13 26 3.04 Financial Matters. (a) Financial Statements. CCBG has previously delivered to Buyers true and correct copies of (1) the consolidated balance sheets of CCBG and Subsidiaries as of December 31, 1997, 1996 and 1995 and the consolidated statements of operations, consolidated statements of stockholders' equity and consolidated statements of cash flows for the fiscal years then ended, including the notes thereto (collectively the "Financial Statements"; and the most recent of which are referred to as the "1997 Financial Statements"), and (2) the interim consolidated balance sheet of CCBG and Subsidiaries as of March 31, 1998 and the consolidated statements of operations, consolidated statements of stockholders' equity and consolidated statements of cash flows for the three months then ended (the "Interim Financial Statements"). Except as set forth in this Agreement, in Disclosure Schedule 3.04 or in such Financial Statements and Interim Financial Statements: (1) the Financial Statements and Interim Financial Statements present fairly, in all material respects, the financial position of CCBG and its Subsidiaries as of their respective dates and the related results of operations and cash flows for the respective periods, and (2) the Financial Statements have been prepared in accordance with GAAP applied consistently. All representations as to the Interim Financial Statements are subject to the basis of presentation described in Note (1) to the Interim Financial Statements and to the fact that valuations, procedures and accounting estimates used in the Interim Financial Statements while consistent with past practices of CCBG do not necessarily conform to those used in the Financial Statements. Notwithstanding the foregoing, to the extent that a specific representation or warranty in this Article III is applicable to any act, omission, fact or circumstance covered by this Section 3.04(a), then the specific representation or warranty shall qualify this Section 3.04(a). (b) Other Liabilities. Except as (and to the extent) specifically reflected in the Financial Statements or the Interim Financial Statements, or incurred in the ordinary course of business since March 31, 1998 or as disclosed in Disclosure Schedule 3.04, neither CCBG nor any Subsidiary has any material liability (whether known or unknown and whether accrued, absolute, contingent or otherwise). Notwithstanding the foregoing, to the extent that a specific representation or warranty in this Article III is applicable to any act, omission, fact or circumstance covered by this Section 3.04(b), then the specific representation or warranty shall qualify this Section 3.04(b). (c) Accounts Receivable. Except as set forth in Schedule 3.04, the accounts receivable ("Accounts Receivable") reflected in the Financial Statements or the Interim Financial Statements, or existing on the date hereof or the Closing Date: are or will be valid and existing; and represent or will represent monies due for goods sold and delivered and services rendered in the ordinary course of business. Unless paid prior to the Closing Date, the Accounts Receivable (1) are, or will be as of the Closing Date, current and collectible net of the respective reserves shown on the 1997 Financial Statements, the Interim Financial Statements or the accounting records of CCBG as of the Closing Date (which reserves are adequate and calculated 14 27 consistently with past practice and, in the case of the reserve as of the Closing Date, will not be materially greater than the reserve in the 1997 Financial Statements), and (2) will not as of the Closing Date have materially and adversely changed in terms of aging since December 31, 1997 or March 31, 1998. Subject to such reserves, each of the Accounts Receivable either has been or will be collected in full, without any set-off, within 90 days after the date on which it first becomes due and payable. There is no valid claim or right of set-off, other than returns in the ordinary course of business, in excess of $5,000 individually or $25,000 in the aggregate, asserted by any obligor under an Account Receivable relating to the amount or validity of any of such Accounts Receivable. Neither CCBG nor any Subsidiary has any liability pertaining to any previous factoring of any of its accounts receivable. The foregoing representations and warranties in this subsection (c) are made solely in relation to whether the condition in Section 7.03(a) has been met, and are not intended to affect in any way the Closing Date Financial Statements. (d) Swaps. Disclosure Schedule 3.04 lists all interest rate, commodity or foreign currency exchange, swap, collar, cap or similar outstanding agreements entered into by CCBG or a Subsidiary pursuant to which CCBG or a Subsidiary has hedged its interest rate, foreign currency or commodity exposure. 3.05 Absence of Certain Changes and Events. Except as set forth in Disclosure Schedule 3.05 or as contemplated by Sections 5.09 and 5.10 of this Agreement, since March 31, 1998, there has not been: (a) Adverse Change. Any material adverse change in the working capital, assets, liabilities or financial condition of CCBG or any Subsidiary; (b) Damage. Any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the properties, assets, business or financial condition of CCBG or any Subsidiary; (c) Distributions. Any declaration, setting aside or payment of any dividend or other distribution of assets in respect of the capital stock of CCBG or any Subsidiary or any direct or indirect redemption, purchase or other acquisition of any such stock, or any sales or other transfers of assets for less than fair market value to any shareholder of CCBG or any Subsidiary; (d) Issuance. Any issuance or sale, or agreement to issue or sell, by CCBG or any Subsidiary of any stock or other equity securities, or any options, warrants, subscriptions, calls or other rights or commitments with respect to the issuance of capital stock or obligations convertible into other equity securities of CCBG or any Subsidiary; 15 28 (e) Guaranty. Any guaranty of any kind whatsoever by CCBG or any Subsidiary for an amount in excess of $10,000 other than endorsements of negotiable instruments in the ordinary course of business; (f) Merger. Any merger, consolidation or share exchange or agreement to merge, consolidate or exchange shares with any other corporation (or any transaction having a similar effect) involving CCBG or any Subsidiary, or any acquisition of, or agreement to acquire, any business or a significant portion of a business, of any other person or entity to which CCBG or any Subsidiary is or was a party, except that, effective April 1, 1998, Southwest Coca-Cola Bottling Company, Inc. was merged into The Coca-Cola Bottling Group (Southwest), Inc.; (g) Labor Dispute. Any material labor dispute involving CCBG or any Subsidiary; (h) Capital Expenditure. Any capital expenditure in excess of $25,000 per item, or any new commitment for additions to property, plant or equipment in excess of $25,000 per item, in each case except as may be provided in the budget for CCBG or the applicable Subsidiary and except in the case of an expenditure or commitment necessitated by a loss which is covered by insurance (subject to deductibles); (i) Franchises. Except in the ordinary course of business, any sale or granting to any party or parties of any license, franchise, option or other right of any nature whatsoever to sell, distribute, or otherwise deal in or with products, merchandise or services of CCBG or any Subsidiary; (j) Raises. Except for increases and bonuses based on term of service or regular promotion of employees, any granting of a salary increase to, or authorization or payment of bonuses or material increases in other benefits payable or to become payable under any bonus, insurance or other benefit plans to, employees, officers, directors or retirees of CCBG or any Subsidiary; (k) Accounting Changes. Any change in any method of accounting or accounting practice or principle used by CCBG or any Subsidiary; (l) Liens. Any asset of CCBG or any Subsidiary permitted by CCBG or such Subsidiary to be subject to any mortgage, lien, security interest, restriction or charge of any kind other than Permitted Liens; (m) Waivers. Any waiver by CCBG or any Subsidiary of any material claim or right except write-downs and write-offs of receivables and inventory in the ordinary course of business; 16 29 (n) Dispositions. Any sale, transfer or other disposition by CCBG or any Subsidiary of any of its assets, except in the ordinary course of business and except for such involving real property required to be disclosed in Section 3.07; (o) Transactions with Employees. Any amount paid, loaned or advanced by CCBG or any Subsidiary or asset transferred or leased to any employee by CCBG or any Subsidiary, except for normal compensation involving salary, wages and benefits and advances for work-related expenses; (p) Write-downs. Any write-down in value of any inventory of CCBG or any Subsidiary other than in the ordinary course of business, or any write-off as uncollectible of any notes or accounts receivable other than in the ordinary course of business; or (q) Material Transactions. Any material commitment or transaction entered into by CCBG or any Subsidiary other than in the ordinary course of business. 3.06 Tax Matters. (a) Definitions. For purposes of this Agreement: (i) "Taxes" means all taxes, assessments, charges, duties, fees, levies or other governmental charges, including federal, state, city, county, parish, foreign or other income, franchise, capital stock, real property, personal property, tangible, withholding, FICA (or similar), unemployment compensation, disability, welfare, stamp, occupation, environmental (including taxes under ss.59A of the Internal Revenue Code of 1986, as amended (the "IRC"), transfer, sales, soft drink, use, excise, gross receipts, alternative or add-on-minimum, estimated and all other taxes of any kind for which CCBG or any Subsidiary may have any liability to any Governmental Authority (including interest, penalties or additions associated therewith), whether disputed or not, and including any transferee or secondary liability in respect of any tax (whether imposed by law, contractual agreement or otherwise) and any liability in respect of any tax as a result of being a member of any affiliated, consolidated, combined, unitary or similar group; and (ii) "Returns" means all returns, declarations, reports, statements and other documents required to be filed in respect of Taxes, and any claims for refunds of Taxes, including any amendments or supplements to any of the foregoing. (b) Tax Representations and Warranties. Except as disclosed in Disclosure Schedule 3.06: (i) all Returns of CCBG or a Subsidiary, including estimated returns and reports of every kind with respect to Taxes, which are due to have been filed 17 30 in accordance with Applicable Law, have been duly filed, and all such Returns are correct and complete in all respects; no such Return contains any position which is or would be subject to penalties under IRC section 6662 (or any corresponding provision of state, local or foreign Tax law); (ii) there are currently no extensions of time in effect with respect to the dates on which any Returns of CCBG or a Subsidiary were or are due to be filed; (iii) all deficiencies asserted as a result of any examination of any Return have been paid in full, accrued on the books of CCBG or a Subsidiary, as a current tax liability, or finally settled; (iv) since December 31, 1992 no claims have been asserted and, to the knowledge of CCBG, no proposals or deficiencies for any Taxes are being asserted, proposed or threatened, and no audit or investigation of any Return is currently being conducted, is pending or, to CCBG's knowledge, threatened, against CCBG or a Subsidiary; (v) since December 31, 1992, there have been no adjustments proposed by taxing authorities in connection with any Return of CCBG or a Subsidiary; (vi) there are no outstanding waivers or agreements by CCBG or any Subsidiary for the extension of time for the assessment of any Taxes or deficiency thereof, nor are there any waivers of the statute of limitations in respect of Taxes for which CCBG or any Subsidiary may have any liability or any requests for rulings, outstanding subpoenas or requests for information, notice of proposed reassessment of any property owned or leased by CCBG or any Subsidiary or any other matter pending between CCBG or any Subsidiary and any taxing authority; (vii) there are no liens for Taxes upon any property or assets of CCBG or any Subsidiary except liens for current Taxes not yet due, nor are there any liens which are pending, or to CCBG's knowledge, threatened; (viii) there are no outstanding rulings issued since December 31, 1992 of, or outstanding requests for rulings with, any Taxing authority addressed to CCBG or a Subsidiary that are binding on CCBG or a Subsidiary; (ix) no assets of CCBG or any Subsidiary or of any "related person," as that term is defined in IRC section 144(a)(3) (or section 103(b)(6)(C) of the Internal Revenue Code of 1954, as amended (the "1954 IRC")), whether owned or leased pursuant to a Capital Lease, have been financed by private activity bonds within the meaning of IRC section 141 (or industrial development bonds within the meaning of 1954 IRC section 103(b)), and none of CCBG, any Subsidiary or any related person is a 18 31 "principal user," as that term is used in the context of IRC section 144(a) (or 1954 IRC section 103(b)), of any building which has been so financed; (x) neither CCBG nor any Subsidiary has made any payment which constitutes an "excess parachute payment" within the meaning of IRC section 280G or any similar provision of state or local law; (xi) neither CCBG nor any Subsidiary is a party to or bound by (or prior to Closing, except as contemplated by this Agreement, will become a party to or bound by) any tax indemnity, tax sharing or tax allocation agreement or arrangement; (xii) except for the group of which CCBG is presently a member, CCBG has not, within the last five years, been a member of an affiliated group of corporations, within the meaning of IRC section 1504, other than as a common parent corporation, and no Subsidiary has, within the last five years, been a member of an affiliated group of corporations, within the meaning of IRC section 1504, except where CCBG was the common parent corporation of such affiliated group; (xiii) neither CCBG nor any Subsidiary is a party to any joint venture, partnership, or other arrangement or contract which could be treated as a partnership for federal income tax purposes which is not evident in copies of the Returns and the supporting work papers of CCBG and its Subsidiaries made available to Enterprises; (xiv) each asset with respect to which CCBG or a Subsidiary claims depreciation, amortization or similar expense for Tax purposes is owned for Tax purposes by CCBG or such Subsidiary; (xv) neither CCBG nor any Subsidiary has executed any closing agreement pursuant to IRC section 7121 or any predecessor provision thereof, or any similar provision of state or local law; (xvi) no claim has been made since December 31, 1992 by any authority in a jurisdiction where CCBG or a Subsidiary does not file Returns that such corporation is or may be subject to taxation by that jurisdiction; (xvii) neither CCBG nor any Subsidiary has, since December 31, 1992, agreed to any adjustments pursuant to IRC section 481(a) or any similar provision of state or local law by reason of a change in accounting method, and no application requesting permission for any change in accounting method by CCBG or any Subsidiary is pending with any taxing authority; 19 32 (xviii) neither CCBG nor any Subsidiary has been a United States real property holding corporation (as defined in IRC section 897(c)(2)) during the applicable period specified in IRC section 897(c)(1)(A)(ii); (xix) copies of all federal and state income tax returns and franchise tax returns of CCBG or any Subsidiary (where such Subsidiary is required to file a separate return) for the last three years have been delivered to Enterprises. Additionally, any audit report issued by any federal, state, or local taxing authority for taxable years ended in 1990 and subsequent has been delivered or otherwise made available to Enterprises; (xx) all material elections with respect to Taxes which are not evident in copies of the Returns and the supporting work papers of CCBG and its Subsidiaries made available to Enterprises as of the date hereof are set forth in the Disclosure Schedule; after the date hereof, no election with respect to Taxes will be made without the written consent of Enterprises; and (xxi) except as set forth in Disclosure Schedule 3.06 since December 31, 1992: (1) neither CCBG nor any Subsidiary has filed a consent pursuant to IRC section 341(f) and (2) neither CCBG nor any Subsidiary has filed, or may be deemed to have filed, any election under IRC section 338. (c) Disclaimer as to NOLs. Notwithstanding the foregoing subsections, no representation or warranty is made as to the amount and/or utilization of net operating losses, tax credits (including minimum tax credits) or other tax attributes of CCBG or any of its Subsidiaries. (d) Survival. The representations and warranties in subsections (viii), (ix), (x), (xi), (xiii), (xiv) and (xvii) of Section 3.06(a) shall survive the Closing as provided in Article VI (the "Surviving Tax Representations"). 3.07 Real Property. Disclosure Schedule 3.07 contains a complete list (and copies of the legal descriptions have been made available to the Buyers) of all real property: (1) which is owned by CCBG or any Subsidiary, (2) which is leased by CCBG or any Subsidiary as lessee or lessor, or (3) as to which CCBG or a Subsidiary has either an option to purchase, sell or lease, or is obligated to purchase, sell or lease. With respect to such real property: (a) Ownership. All real property which was reflected in the 1997 Financial Statements is listed in Disclosure Schedule 3.07, and except as set forth in the Disclosure Schedule, no ownership interest in any real property has been acquired or disposed of by CCBG or a Subsidiary since December 31, 1997. 20 33 (b) Status of Title. Except as set forth in Disclosure Schedule 3.07(b), all real property owned by CCBG or any Subsidiary is owned in fee simple, free and clear of any liens, encumbrances or restrictions whatsoever, except for: (i) rights of lessors or lessees under the terms of leases which have been disclosed to Buyers; (ii) liens for Taxes not yet due and payable; (iii) rights-of-way, building use restrictions, exceptions, variances, reservations or limitations of any nature whatsoever of public record; (iv) liens reflected in the Financial Statements; (v) liens imposed by Applicable Law and incurred in the ordinary course of business for obligations not yet due and payable to laborers, materialmen and the like; (vi) zoning or other restrictions, variances, covenants, rights-of-way, encumbrances, easements and other minor irregularities of title, none of which, individually or in the aggregate, interferes in any material respect with the current use or occupancy of any of the real property by CCBG or a Subsidiary, has a material adverse effect on the value thereof, or would impair in any material respect the ability of CCBG or a Subsidiary to sell such property for its current use; and (vii) with respect to items of personal property, unperfected purchase money security interests existing in the ordinary course of business without the execution of a security agreement (each of the foregoing being a "Permitted Lien"). (c) Restrictions Arising from Governmental Authorities. Except as set forth in Disclosure Schedule 3.07, no real property owned or leased and used by CCBG or a Subsidiary is subject to any decree or order (or, to CCBG's knowledge, any threatened or proposed order) to be sold or taken by any Governmental Authority. (d) Condition. Except as set forth in Disclosure Schedule 3.07, all plants and structures owned or leased and used by CCBG or a Subsidiary, including, without limitation, parking areas, loading docks and roofs, are, to CCBG's knowledge, in operating condition with no defects that materially interfere with the current use of such property. 3.08 Personal Property. Disclosure Schedule 3.08 contains a complete list of (1) all equipment leased by CCBG or a Subsidiary to others for which lease payments exceed 21 34 $100,000 per year (but excluding Capital Leases disclosed pursuant to Section 3.03) or which CCBG or a Subsidiary has an option either to purchase, sell or lease, or is obligated to purchase, sell or lease for a cost individually in excess of $100,000. CCBG has made its fixed asset lists available to Enterprises. With respect to such personal property and except as set forth in Disclosure Schedule 3.08: (a) Title. CCBG or a Subsidiary has good and valid title to all of its tangible personal property reflected in the 1997 Financial Statements or acquired since December 31, 1997 (except, in both cases, as disposed of in the ordinary course of business), free and clear of any liens, encumbrances, restrictions, claims, charges, security interests, easements or other encumbrances of any nature whatsoever, except for Permitted Liens. (b) Condition. All tangible personal property of the type normally subject to depreciation owned or leased and used by CCBG or a Subsidiary (other than inventory) is, to CCBG's knowledge, in operating condition with no defects that materially interfere with the current use of such property. (c) Inventory. All inventory owned by CCBG or a Subsidiary is merchantable and of a quality usable and salable in the ordinary course of business, and the quantity of each type of inventory (whether raw materials, work-in-process or finished product), is not excessive, but reasonable, adequate and appropriate. No product included in inventory, whether owned by CCBG or a Subsidiary or out in the trade, is materially out-of-date by applicable franchisor standards. No previously sold inventory is subject to returns materially in excess of that experienced by CCBG or a Subsidiary during the 1997 fiscal year. All of the inventories of CCBG and any Subsidiary included in the Financial Statements and Interim Financial Statements are valued for the purposes thereof at the lower of cost or market. The foregoing representations and warranties in this subsection (c) are made solely in relation to whether the condition in Section 7.03(a) has been met and are not intended to affect in any way the Closing Date Financial Statements. No food ingredient, finished article of food, food packaging or food labeling included in the inventories of CCBG or a Subsidiary is adulterated or misbranded within the meaning of the federal Food, Drug and Cosmetic Act. To CCBG's knowledge, there is no pending investigation or regulatory action by the federal Food and Drug Administration affecting any inventories of CCBG or a Subsidiary. 3.09 Employee Benefit Plans. Except as set forth in Disclosure Schedule 3.09: (a) Definition. This Section 3.09 relates to each employment, collective bargaining or consulting contract or deferred compensation, profit-sharing, pension, bonus, stock option, stock purchase or other fringe benefit or compensation contract, commitment, arrangement or plan (whether written or oral), including each welfare plan (as defined in section 3(1) of the Employment Retirement Income Security Act of 1974, as amended ("ERISA")), which CCBG or any Subsidiary has established or maintained or in which CCBG or any Subsidiary participates or, since December 31, 1992, has participated, or under which CCBG or any Subsidiary, since December 31, 1992, has had an obligation to make contributions or to pay benefits for the benefit of persons who are, were or will become in accordance with the terms 22 35 of the plan active employees, former employees, retirees, directors or independent contractors (or their dependents, spouses or beneficiaries) of CCBG or a Subsidiary or their respective predecessors in interest or any employer which would constitute an ERISA Affiliate (collectively, the "Employee Benefit Plans"). For purposes of this Agreement, the term "ERISA Affiliate" includes all employers (whether or not incorporated) which by reason of common control are treated together with CCBG or a Subsidiary as a single employer within the meaning of IRC section 414. (b) List. Disclosure Schedule 3.09 lists each Employee Benefit Plan which is currently in effect or as to which CCBG or any Subsidiary has any ongoing material liability or material obligation. (c) Compliance. CCBG and each Subsidiary have complied in all material respects since December 31, 1992 with their respective obligations with respect to all Employee Benefit Plans. Each Employee Benefit Plan has been maintained since December 31, 1992 in all material respects with all Applicable Laws. (d) Funding, Etc. All contributions, premium payments and other expenses required under each Employee Benefit Plan or with respect thereto due on or before the Closing Date will be paid or accrued by CCBG or a Subsidiary. No Employee Benefit Plan is funded by insurance subject to retroactive premium adjustments. (e) Liabilities; Claims; Audits. Neither CCBG nor a Subsidiary has incurred and no facts exist that could reasonably result in any liability, Tax or penalty of any nature whatsoever, whether known or unknown, to any person or entity for failure to comply with Applicable Law or the plan documents, nor any duty or obligation to indemnify or hold any other person or entity harmless for any liability with respect to any Employee Benefit Plan. Neither CCBG nor a Subsidiary has received any notice of any, and to CCBG's knowledge there is no, proposed or actual audit investigation by any Governmental Authority with respect to any Employee Benefit Plan. (f) Multi-employer Plan. Neither CCBG nor a Subsidiary nor any of their respective predecessors in interest nor any ERISA Affiliate has ever contributed to any multi-employer plan, as defined in section 3(37) of ERISA, to which CCBG or a Subsidiary has any continuing obligation whatsoever, and neither CCBG nor any Subsidiary nor any of their respective predecessors in interest nor any ERISA Affiliate has incurred or reasonably expects to incur any "withdrawal liability" (as defined under section 4201 et seq. of ERISA). (g) Termination Rights. CCBG and each Subsidiary have the right under the terms of each Employee Benefit Plan and under Applicable Law to terminate such plan at any time exclusively by action of CCBG or such Subsidiary and complying with Applicable Law. 23 36 (h) Payments in Stock. No Employee Benefit Plan requires that any payments be made in the form of stock or other securities in CCBG or any Subsidiary. Neither this provision nor any other provision of this Agreement requires written disclosure of payroll practices (such as overtime, jury duty and the like) or such fringe benefits as service and participation awards, free beverages at the work site, expense accounts, newspaper, magazine, newsletter and journal subscriptions, or uniforms. 3.10 Labor Relations. (a) Status. Except as disclosed in Disclosure Schedule 3.10, since December 31, 1992: (i) Neither CCBG nor any of its Subsidiaries is subject to a collective bargaining agreement, and CCBG and each Subsidiary are in compliance in all material respects with all Applicable Laws respecting employment and employment practices (including Executive Order 11246) and the Fair Labor Standards Act, and neither CCBG nor any Subsidiary has engaged in any unfair labor practice within the meaning of Section 8 of the National Labor Relations Act or has fully remedied any official finding of any such practice; (ii) No breach of contract and/or denial of fair representation claim has been filed or is pending against CCBG, any Subsidiary and/or, to CCBG's knowledge, any labor organization representing its respective employees; no claim for unpaid wages or overtime or for child labor or for record keeping violations has been filed or is or was pending under the Fair Labor Standards Act, Davis-Bacon Act, Walsh- Healey Act or Service Contract Act or any other Applicable Law; no citation has been issued by the Occupational Safety and Health Administration ("OSHA") against CCBG or any Subsidiary; no notice of contest or OSHA administrative enforcement proceeding involving CCBG or any Subsidiary has been filed or is pending; no workers' compensation retaliation claim has been filed or is pending against CCBG or any Subsidiary; and no citation of CCBG or any Subsidiary has occurred and no enforcement proceeding has been initiated or is pending under federal immigration law. (iii) There is no unfair labor practice, charge or complaint or any other matter against or involving CCBG or any Subsidiary or any other labor organization representing the employees of CCBG or any Subsidiary pending or threatened of which CCBG or any Subsidiary has received written notice before the National Labor Relations Board ("NLRB") or any court of law, and, to CCBG's knowledge, the employees of CCBG or any Subsidiary have not been and are not represented by a labor organization which was either NLRB certified or voluntarily recognized; 24 37 (iv) There is no organized labor strike, organized slowdown or organized stoppage actually pending or, to CCBG's knowledge, threatened against CCBG or any Subsidiary, and, to CCBG's knowledge, there is no organized handbilling, organized picketing or organized work stoppage (sympathetic or otherwise) involving the employees of CCBG or any Subsidiary which has occurred or is in progress; (v) No certification question or organizational drive has been filed with the NLRB of which CCBG has received written notice respecting the employees of CCBG or any Subsidiary; (vi) No arbitration proceeding arising out of or under any collective bargaining agreement is or has been pending or, to CCBG's knowledge, threatened against CCBG or any Subsidiary; and, to CCBG's knowledge, no basis for any such claim for arbitration exists; (vii) No agreement, arbitration or court decision or governmental order which is binding on CCBG or any Subsidiary in any way expressly limits or restricts CCBG or any Subsidiary from relocating or closing any of its respective operations, excluding Worker Adjustment and Retraining Notification Act ("WARN Act") and other generally applicable plant closing laws to the extent the WARN Act and such laws pertain to the acts or omissions of the Buyers after the Closing; and (viii) There are no charges, official investigations, administrative proceedings or formal complaints of discrimination (including discrimination based upon sex, age, race, religion, national origin, sexual preference, disability, veteran status or claims under family or medical leave statutes) pending or, to CCBG's knowledge, threatened against CCBG or any Subsidiary before the Equal Employment Opportunity Commission or any federal, state or local agency or court; and there have been no audits of the equal employment opportunity practices of CCBG or any Subsidiary by any governmental entity. (b) Plant Closing Issues. Neither CCBG nor any Subsidiary has, within the last 90 days, terminated the employment of or laid off any employees which would constitute a "plant closing" or "mass layoff" (within the meaning of the WARN Act). (c) Family and Medical Leave Act of 1993. Disclosure Schedule 3.10 lists all employees of CCBG and its Subsidiaries who are on leave pursuant to the Family and Medical Leave Act of 1993, each such employee's position, and the date such leave is scheduled to expire. 3.11 Employees. Disclosure Schedule 3.11 contains the complete list of annual salary, bonus and commission arrangements (if applicable) and date of last raise of all employees of CCBG and each Subsidiary who earn $50,000 or more each year from salary, bonus and commission arrangements with CCBG and its Subsidiaries. 25 38 3.12 Bank Accounts. Disclosure Schedule 3.12 lists each bank or financial institution in which CCBG or any Subsidiary has an account or safe deposit box (giving the address and account numbers) and the names of the persons authorized to draw thereon or to have access thereto. 3.13 Environmental Matters. (a) Status. Except as disclosed in Disclosure Schedule 3.13, since December 31, 1992: (i) CCBG and each Subsidiary (1) have obtained all material permits, licenses and other authorizations and filed all material notices which are required to be obtained or filed by them for the operation of their respective businesses under applicable Environmental Laws; (2) have been and are in compliance in all material respects with all terms and conditions of such required permits, licenses and authorizations; and (3) have been and are in compliance in all material respects with all other applicable limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in any Environmental Laws; (ii) There are no ongoing, or, to CCBG's knowledge, threatened, governmental investigations of CCBG or any Subsidiary pursuant to the Environmental Laws; (iii) Neither CCBG nor any Subsidiary is liable for or has assumed responsibility for the monitoring, investigation or cleanup of any environmental contamination; (iv) Neither CCBG nor any Subsidiary has been identified as a potentially responsible party at, or received a request for information pursuant to any Environmental Laws related to, any contaminated or previously contaminated site; (v) Neither CCBG nor any Subsidiary has been requested to indemnify another party or contribute towards the monitoring, investigation or cleanup costs of any contaminated or previously contaminated site; (vi) There are no underground storage tanks, above-ground storage tanks, or material surface impoundments, landfills, polychlorinated biphenyls and/or friable asbestos not currently encapsulated on, under or within the real property owned or leased by CCBG or any Subsidiary; and (vii) There are no past or current events, conditions, circumstances, activities, practices, incidents, actions or plans which have materially 26 39 interfered with or prevent current compliance by CCBG or any Subsidiary with Environmental Laws in all material respects. (b) Definition. As used in this Agreement, "Environmental Laws" means any current Applicable Law, as well as any plan, order, decree, judgment, injunction, notice or demand letter issued, entered, promulgated or approved thereunder, relating to (1) the emission of pollutants or hazardous substances into the air, (2) the discharge of pollutants into the waters, (3) the disposal of hazardous waste, (4) the release and/or threatened release of hazardous substances into the environment, or (5) the manufacture, processing, distribution, presence (including, without limitation, any right-to-know laws in the context of the foregoing), use, handling, treatment, storage, transportation or disposal of any chemical, substance, material or waste that has been listed as toxic or hazardous by the Environmental Protection Agency or by any equivalent state or local agency or bureau, (6) the protection of the environment, and/or (7) the protection of public health and safety in the context of the foregoing matters. (c) Survival. The representations and warranties in Section 3.13(a) shall survive the Closing but only with respect to activities or operations conducted upon, or conditions existing at, sites other than properties operated and/or owned by CCBG and its Subsidiaries (the "Off-Site Environmental Matters"). 3.14 Insurance Policies. (a) List. Disclosure Schedule 3.14 lists all insurance policies in force (except as listed in Disclosure Schedule 3.09) that either (1) names CCBG or any Subsidiary as an insured or beneficiary or as a loss payable payee or (2) for which CCBG or any Subsidiary has paid or is obligated to pay all or part of the premiums. (b) Status. Except as set forth in Disclosure Schedule 3.14, since December 31, 1992: (i) neither CCBG nor any Subsidiary has received notice (excluding notice of a premium increase or contract expiration date) of any pending or threatened termination or retroactive premium increase with respect thereto; (ii) CCBG and each Subsidiary is in compliance in all material respects with all conditions contained therein, the non-compliance with which could result in termination of insurance coverage or increased premiums for prior or future periods; and (iii) there exists no material claim under current insurance that has not been properly filed by CCBG or any Subsidiary. 27 40 3.15 Specified Contracts and Commitments. (a) Specified Contracts. Disclosure Schedule 3.15 lists each written or oral contract to which either CCBG or any of its Subsidiaries is a party or is bound or to which they or any of their assets are subject (and each and every amendment, modification or supplement to any of them) that is described by any of the following: (i) individually exceeds $100,000 (treating each purchase order as a separate agreement and excluding agreements not required to be listed pursuant to clause (iii) below); (ii) for any matter not in the ordinary course of business; (iii) any marketing agreement or understanding including any chain marketing agreement, calendar marketing agreement, or promotional discount letter, special arrangements, whether providing for discounts, incentive awards or otherwise, which is not materially consistent with practices since December 31, 1997; (iv) restricting the right of either CCBG or any Subsidiary to compete, whether by restricting territories, customers or otherwise, in any line of business or territory; (v) requiring either CCBG or any Subsidiary to purchase its requirements for any goods or services from any one or more parties; (vi) providing for payments based on results; (vii) with any officer, director or shareholder of CCBG or a Subsidiary, with any spouse, child, sibling or parent of any such person, or with any company or other organization in which any of the foregoing has, to CCBG's knowledge, a material direct or indirect financial interest, excluding investments in public companies and employment contracts disclosed in any Disclosure Schedule; (viii) relating to participation in a cooperative, partnership or joint venture; (ix) imposing confidentiality requirements on CCBG or its Subsidiaries, excluding those in computer software agreements generally available to the public and those prohibiting disclosure of agreement terms; (x) consignments or "sale or return" arrangements; 28 41 (xi) for political contributions or for charitable contributions involving a commitment to make contributions for more than one year or involving more than $2,500 per recipient; (xii) granting a power of attorney (other than those to represent CCBG and/or its Subsidiaries before the IRS); (xiii) outstanding loans, loan commitments, factoring or credit line agreements (excluding credit extended in the ordinary course of business to purchasers of inventory) to any person ("Third-Party Loans") or any subordination agreement executed by CCBG or a Subsidiary relating to any of the Third-Party Loans; (xiv) relating to the distribution of products; (xv) relating to capital expenditures in excess of $25,000 per contract; (xvi) guarantees, other than guarantees listed in Disclosure Schedule 3.03 and other than endorsements in the ordinary course of business; or (xvii) all contracts with canning cooperatives (excluding ordinary course purchase orders) not otherwise disclosed. (b) Exceptions to Specified Contracts. All contracts disclosed or to be disclosed on Disclosure Schedule 3.15 are referred to as "Specified Contracts." Disclosure Schedule 3.15 describes all oral Specified Contracts required to be disclosed in Disclosure Schedule 3.15. Notwithstanding the foregoing, Disclosure Schedule 3.15 does not need to list (and the phrase "Specified Contracts" does not include) Bottling Authorizations, leases (including Capital Leases), Indebtedness for Borrowed Money, insurance policies disclosed (or not required to be disclosed) pursuant to this Agreement or employee-related matters disclosed (or not required to be disclosed) pursuant to this Agreement, and contracts, agreements or other arrangements involving or relating to: (1) sales of soft drink products pursuant to ordinary purchase orders; (2) arrangements with respect to on-location cold drink equipment; or (3) purchases of raw materials and packaging materials in the ordinary course of business for the production of soft drinks necessary for the continued operation of the business of CCBG or any of its Subsidiaries (including providing a reasonable inventory of finished products, raw materials and packaging materials). 29 42 3.16 Intellectual Property. (a) Status. Except as set forth in Disclosure Schedule 3.16: (i) CCBG and its Subsidiaries own or have the right to use pursuant to license, sublicense, agreement, or permission all Intellectual Property necessary for the operation of the business of CCBG and its Subsidiaries as presently conducted. (ii) None of CCBG and its Subsidiaries has interfered with, infringed upon, misappropriated, or otherwise violated any Intellectual Property rights of third parties, and none of CCBG and its Subsidiaries has received any charge, complaint, claim, demand, or notice alleging any such interference, infringement, misappropriation, or violation (including any claim that any of CCBG and its Subsidiaries must license or refrain from using any Intellectual Property rights of any third party). (iii) To CCBG's knowledge, no third party has interfered with, infringed upon, misappropriated, or otherwise come into conflict with any Intellectual Property rights of any of CCBG and its Subsidiaries. (b) Definition. "Intellectual Property" means (1) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions, and reexaminations thereof, (2) all trademarks, service marks, trade dress, logos, trade names, and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (3) all works containing or displaying a statutory copyright notice and all applications, registrations, and renewals in connection therewith, (4) all mask works and all applications, registrations, and renewals in connection therewith, (5) all trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals), (6) all computer software (including data and related documentation), (7) all other proprietary rights, and (8) all copies and tangible embodiments thereof (in whatever form or medium). 30 43 3.17 Certain Violations of Law. (a) Investigations. No grand jury or other state or federal investigation is pending or, to CCBG's knowledge, threatened against CCBG or its Subsidiaries. (b) Generally. Except as disclosed in Disclosure Schedule 3.17, since December 31, 1992, neither CCBG nor any Subsidiary is, nor has it been (by virtue of any action, omission to act, contract to which it is a party, or any occurrence or state of facts whatsoever), in violation of any Applicable Law, which violation would result in a liability of CCBG or a Subsidiary in excess of $50,000. (c) Certain Limitations. Nothing in the foregoing requires any disclosure with respect to compliance with Applicable Law relating to Taxes or any other matter covered by Section 3.06, compliance with Applicable Law relating to employee matters or any other matter covered by Section 3.10, compliance with Environmental Laws or any other matter covered by Section 3.13, or compliance with Applicable Law relating to any other matter covered by a section of this Article III, it being acknowledged and agreed that all representations and warranties with respect to matters described in this subsection are specifically excluded from the representations and warranties in this Section 3.17. 3.18 Litigation. (a) List. Disclosure Schedule 3.18 lists all litigation, claims, suits, actions, arbitrations, investigations or administrative or other proceedings pending or, to CCBG's knowledge, threatened against CCBG or any Subsidiary or involving any of their respective properties or businesses which involves (1) a stated claim that is not covered by insurance (excluding claims not likely to exceed any applicable deductible), (2) workers' compensation claims either more than $5,000 or expected to exceed $5,000, or (3) a claim as to which insurers have denied liability or are defending the matter under a reservation of rights. (b) Status. Except as stated in Disclosure Schedule 3.18: (i) none of the matters listed in Disclosure Schedule 3.18 (singly or in the aggregate) will result in a material adverse effect on the business or financial condition of CCBG or any Subsidiary, (ii) there are no unsatisfied judgments no longer subject to appeal, orders, injunctions, decrees, stipulations or awards (whether rendered by a court, administrative agency, or by arbitration, pursuant to a grievance or other procedure) against CCBG or any Subsidiary, and 31 44 (iii) no present or former officer or director of CCBG or any Subsidiary has any claim for indemnification from CCBG or any Subsidiary related to any act or omission by such present or former officer or director. 3.19 No Defaults. Except as otherwise disclosed in this Agreement or in the Disclosure Schedule to this Agreement: (a) Enforceability. All contracts and agreements required to be referred to in any schedule delivered hereunder are enforceable in all material respects in accordance with their terms in a manner that obtains for, or imposes upon, the parties the primary benefits and obligations of such agreements. Neither CCBG nor any Subsidiary has received (1) notice that it is in default in connection with any such contract or agreement or (2) any notice of cancellation or termination in connection therewith; and (b) Bankruptcy, Etc. To CCBG's knowledge, (1) there are no pending or threatened bankruptcy, insolvency, or similar proceedings with respect to any party to such agreements, and (2) no event has occurred which (whether with or without notice, lapse of time or the happening or occurrence of any other event) would constitute a default, violation or failure to comply thereunder by either CCBG or any Subsidiary or any other party thereto. 3.20 Major Suppliers and Customers. (a) List. Excluding relationships under Bottling Authorizations, Disclosure Schedule 3.20 lists each of the 10 largest (by dollar volume) suppliers of goods or services to, and each of the 10 largest (by dollar volume) customers of, CCBG and its Subsidiaries (determined on a consolidated basis) during the 12-month period ended December 31, 1997, together with, in each case, the amount paid or billed during such period. (b) Status. Except as set forth in Disclosure Schedule 3.20: (i) to CCBG's knowledge, no notice or other communication (written or oral) has been received since April 3, 1998 from any of the suppliers or customers listed in Disclosure Schedule 3.20 terminating or reducing in any material respect, or expressly stating an intention to terminate or reduce in any material respect, or otherwise reflecting a material adverse change in, the business relationship between such customer or supplier, on the one hand, and CCBG or a Subsidiary on the other; and (ii) none of the officers or directors of CCBG or a Subsidiary or spouse, child, parent or sibling of any such officer or director, or any company or other organization in which any officer or director of CCBG or a Subsidiary or spouse, child, parent or sibling of any such officer or director has a direct or indirect financial interest, has any material financial interest in any supplier or customer of CCBG or a Subsidiary, 32 45 excluding the ownership of less than five percent (5%) of the shares of a publicly-held corporation engaged in business with CCBG or any Subsidiary. 3.21 Required Governmental Licenses and Permits. CCBG and each Subsidiary have (and Disclosure Schedule 3.21 lists) all material licenses, permits or other authorizations of Governmental Authorities necessary to produce and sell their respective products and to conduct their respective businesses; provided, however, that the foregoing shall not require disclosure of state and local business or similar licenses required of businesses generally; and provided, further, that nothing in the foregoing requires any disclosure with respect to such licenses, permits or other authorizations required by Environmental Laws or any other matter covered by Section 3.13 above, or compliance with Applicable Law or any other matter covered by Section 3.17 above, it being acknowledged and agreed that all representations and warranties with respect to matters described in this proviso are specifically excluded from the representations and warranties in this Section 3.21. 3.22 Year 2000 Compliance. CCBG has delivered to Enterprises copies of all reports prepared by or for CCBG and/or any Subsidiary relating to Year 2000 compliance. 3.23 No Untrue Statements. To CCBG's knowledge, no representation or warranty by CCBG in this Agreement (including the Disclosure Schedules) contains any untrue statement of a material fact, or omits to state a material fact, necessary to make the representations and warranties of CCBG herein (giving full effect to any dollar, time or other limitation specified in, and only with respect to the subject matter contained in, such representations and warranties) not materially misleading. The foregoing does not impose any obligation to disclose the implications of disclosed facts. 3.24 Copies. True and correct copies of all documents listed in the Disclosure Schedules (other than Bottling Authorizations) have been delivered or made available by CCBG to the Buyers. 3.25 Other. No representation or warranty is made by CCBG except as expressly set forth in this Article III. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYERS Buyers, jointly and severally, hereby represent and warrant to CCBG and the CCBG Shareholders as follows, with full knowledge that such representations and warranties are a material consideration and inducement to the execution of this Agreement by CCBG and the CCBG Shareholders and the consummation of the transactions contemplated hereunder: 33 46 4.01 Organization and Authorization. (a) Due Organization. Each of Enterprises and Sub is a corporation duly organized, validly existing and in good standing under the Corporation laws of their respective states of incorporation, being Delaware in the case of Enterprises and Nevada in the case of Sub, and has all requisite corporate power and authority to carry on and conduct its business as it is now being conducted and to own or lease its properties and assets. (b) Power and Authority. Each of Enterprises and Sub has the full corporate power and authority to execute, deliver and perform this Agreement and all other agreements, documents and certificates contemplated or required of it hereby (collectively, the "Buyers' Documents"), subject to the Required Statutory Approvals. The execution, delivery and performance by the Buyers of each of Buyers' Documents have been duly approved by the respective boards of directors of the Buyers and no other corporate action on the part of the Buyers is necessary to approve and authorize the execution, delivery and performance of this Agreement and the Buyers' Documents. Each of Buyers' Documents has been duly and validly executed and delivered by the Buyers party thereto and constitutes the valid and binding agreement of such Buyer, enforceable against such Buyer in accordance with its terms. (c) Non-contravention. The execution, delivery and performance of each of Buyers' Documents by the Buyers and the consummation by the Buyers of the transactions contemplated hereby and thereby will not (i) violate or conflict with any provision of the articles of incorporation or bylaws of either of the Buyers; (ii) breach, violate or constitute an event of default (or an event which with the lapse of time or the giving of notice or both would constitute an event of default) under, or give rise to any right of termination, cancellation, modification or acceleration under, any note, bond, indenture, mortgage, security agreement, lease, franchise or other material agreement, instrument or obligation to which either of the Buyers is a party, or by which either of the Buyers or any of their respective properties or assets is bound, or result in the creation of any lien, claim or encumbrance or other right of any third party of any kind whatsoever upon the properties or assets of the Buyers pursuant to the terms of any such instrument or obligation, which breach, violation, or event of default would result in a material adverse effect on either of the Buyers; (iii) violate or conflict with any Applicable Law applicable to Buyers, where such violations or conflicts, viewed individually or in the aggregate, may reasonably be expected to result in Losses to the CCBG Shareholders greater than $1.5 million; or 34 47 (iv) require, on the part of either of the Buyers, any filing or registration with, or permit, license, exemption, consent, authorization or approval of, or the giving of any notice to, any Governmental Authority, except for the Required Statutory Approvals. 4.02 Capital Stock. (a) Enterprises. The authorized capital stock of Enterprises consists of 1,000,000,000 shares of Enterprises Common Stock of the par value of $1.00 per share, and 100,000,000 shares of preferred stock. As of April 3, 1998, 444,248,170 shares of Enterprises Common Stock were issued and outstanding, all of which issued and outstanding shares are validly issued, fully paid and non-assessable. As of April 3, 1998 there were no shares of preferred stock issued and outstanding. (b) Sub. The authorized capital stock of the Sub consists of 1,000 shares of common stock of par value $1.00 each ("Sub Common Stock"). As of the date of this Agreement, 100 shares of Sub Common Stock were issued and outstanding. All of the issued and outstanding shares of Sub Common Stock are validly issued, fully paid and non-assessable. (c) Enterprises Stock to be Issued in Merger. The Enterprises Common Stock to be issued to the CCBG Shareholders in the Merger will be at the Effective Time duly authorized, validly issued, fully paid and non-assessable and free of preemptive rights, and will not be subject to any lien, charge, claim, encumbrance, restriction or adverse right or interest whatsoever, except applicable restrictions under federal and state securities laws, and except that those shares that are to be deposited with the Shareholders' Representative pursuant to Article I or the Shareholders' Representative Agreement shall be subject to the terms of the Shareholders' Representative Agreement. 4.03 Reports and Financial Statements. Since November 21, 1986, Enterprises has filed with the Securities and Exchange Commission ("SEC") all material forms, statements, reports and documents (including all exhibits, amendments and supplements thereto) required to be filed by it under the Securities Act of 1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Trust Indenture Act of 1939, as amended, and the respective rules and regulations thereunder, all of which complied in all material respects with all applicable requirements of the appropriate acts and the rules and regulations thereunder. Enterprises has previously delivered to CCBG copies of (1) its Annual Reports on Form 10-K for the fiscal years ended December 31, 1995, December 31, 1996 and December 31, 1997 (the "Enterprises 10-K"), together with a copy of the annual reports to stockholders for each such year, and (2) its Proxy Statement for the annual meeting of stockholders held April 17, 1998 (collectively, the "Enterprises SEC Reports"). As of their respective dates, the Enterprises SEC Reports did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 35 48 Each of the audited consolidated financial statements and unaudited interim consolidated financial statements, including any related notes and schedules, of Enterprises included in or incorporated by reference in such reports (the "Enterprises Financial Statements") have been prepared in accordance with GAAP applied on a consistent basis (except as may be indicated therein or in the notes thereto) and fairly present the financial position of Enterprises and its subsidiaries as of the dates thereof and the results of their operations and changes in financial position for the periods then ended, subject, in the case of the unaudited interim financial statements, to normal year-end and audit adjustments and any other adjustments described therein. 4.04 Absence of Certain Changes or Events. Except as set forth in the Enterprises 10-K or the other Enterprises SEC Reports, from December 31, 1997 through the date hereof: (a) there has not been any material adverse change in the business, operations, properties, assets, liabilities, condition (financial or other), results of operations or prospects of Enterprises and its subsidiaries, taken as a whole, and (b) Enterprises has not made any declaration, setting aside or payment of any dividend or other distribution with respect to any of Enterprises' capital stock, except for regular quarterly cash dividends. 4.05 No Untrue Statements. To the knowledge of the Buyers, no representation or warranty by the Buyers in this Agreement or the schedules to this Agreement contains any untrue statement of a material fact, or omits to state a material fact, necessary to make the representations and warranties of the Buyers herein or therein (giving full effect to any dollar, time or other limitation specified in, and only with respect to the subject matter contained in, such representations and warranties) not materially misleading. The foregoing does not impose any obligation to disclose the implications of disclosed facts. 4.06 Other. No representation or warranty is made by Enterprises except as expressly set forth in this Article IV. ARTICLE V OTHER AGREEMENTS 5.01 Continuing Operation of Business. (a) Conduct of Business. CCBG covenants and agrees that CCBG and each Subsidiary will each do or refrain from, as the case may be, the following, on and after the date of this Agreement and until the Closing hereunder (except as contemplated by Section 5.09 below or upon the prior written consent of Enterprises): (i) Carry on its business in the ordinary and regular course and not engage in any material transaction or material activity or enter into any material agreement or make any material commitment except in the ordinary and regular course of business; 36 49 (ii) Carry on its business in all material respects in the same manner as currently conducted, and not institute or commit to institute any material new methods of manufacture, purchase, sale, lease, management or operations; (iii) Not change or amend its articles of incorporation or bylaws (except as necessary to consummate the transactions contemplated by this Agreement) or appoint or elect any person or director or officer who is not serving as such on the date hereof; (iv) Not declare, pay or set aside or pay any dividend (except for scheduled dividends paid in cash) or other distribution of assets in respect of its capital stock except for (1) distributions from the Subsidiaries to CCBG, (2) distributions to the CCBG Shareholders of certain assets of CCBG in accordance with Section 5.09, or (3) those permitted by this Agreement; (v) Not issue, sell, grant options, warrants or rights to purchase or subscribe to, or enter into any arrangement or contract with respect to the issuance, sale, purchase or redemption of, any of its capital stock or any securities or obligations convertible into or exchangeable for any shares of its capital stock, or otherwise make changes in its capital structure; (vi) Not organize any subsidiary, acquire any capital stock or other equity securities of any other corporation, or acquire any equity or ownership interest in any business, and not merge with (except as contemplated by this Agreement), liquidate into or otherwise combine with any other business, person or entity; (vii) Preserve its corporate existence, and use its reasonable commercial efforts to preserve in all material respects its business organization and its relationships with suppliers, customers and others having business relations with it; (viii) Not incur any material Indebtedness For Borrowed Money, or make drawings under any line of credit other than in the ordinary course of business, not guarantee any material obligation (other than endorsements of negotiable instruments in the ordinary course of business), and not permit or suffer any of its assets to be subjected to any mortgage, pledge, lien, security interest, encumbrance, restriction or charge of any kind, except for Permitted Liens or endorsements of negotiable instruments in the ordinary course of business; (ix) Not grant or announce any increase in the compensation of or benefits to (including, without limitation, deferred compensation) its officers, directors, or employees, or retirees, whether now or hereafter payable, except customary increases and bonuses based on policies currently in effect and the regular promotion of employees and as otherwise provided in this Agreement; 37 50 (x) Not make any capital expenditure and not make any new commitment for additions to property, plant or equipment in excess of $25,000 per item, in each instance except as may be provided in the budget for CCBG or the applicable Subsidiary and except in the case of an expenditure or commitment necessitated by a loss which is covered by insurance (subject to deductibles); (xi) Not enter into material marketing commitments with significant soft drink franchisors or customers, except for marketing agreements which are materially consistent with current practice; (xii) Use reasonable commercial efforts to keep available the services of all employees (Buyers acknowledging that some employees have terminated their employment and others, including certain management, will probably terminate their employment) and not enter into any collective bargaining or other labor agreements or commit to hire or terminate any employee except for cause or otherwise in the ordinary course of business; (xiii) Not dispose of any asset having a value in excess of $50,000, except in the ordinary course of business and except for the transfer of property described in Section 5.09 or which is currently for sale; (xiv) Not issue substitute stock certificates to replace certificates which have been lost, misplaced, mutilated, destroyed, stolen or are otherwise irretrievable, unless an adequate bond or indemnity agreement has been duly executed and delivered to the issuer; (xv) Not make any change in any method of accounting or accounting principle or practice used by it; (xvi) Not defer beyond the Closing Date any capital expenditures which, in accordance with the current budget and the normal practice of CCBG or a Subsidiary, would have been made prior to the Closing Date, and not defer any expenditures to fund benefit plans which, in accordance with the normal practice of CCBG or a Subsidiary, would have been made prior to the Closing Date; (xvii) Not enter into any commitment with third parties under which CCBG or a Subsidiary is obligated to purchase raw materials or inventory except in the ordinary course of business consistent with prior practice; and (xviii) Not enter into any material leases (whether as lessor or lessee) of real or personal property except in connection with the businesses being conveyed pursuant to Section 5.09. 38 51 (b) Manner of Consent. Any consent of Enterprises shall be in writing, and shall not be unreasonably withheld or delayed. 5.02 Expenses. Except as otherwise specifically provided in this Agreement, the Buyers, CCBG and the CCBG Shareholders shall each pay all costs and expenses incurred by such party or on such party's behalf in connection with this Agreement and the transactions contemplated hereby (including those of investment bankers or other investment advisors); provided, however, that CCBG may pay the CCBG Shareholders' expenses so long as such payment is properly accounted for in the CCBG Adjusted Consolidated Working Capital. 5.03 Bottling Authorizations. At the request of Enterprises, CCBG and each Subsidiary will authorize the issuers of soft drink franchises it holds to discuss such franchises and related agreements with Enterprises and its representatives (including without limitation the status of such franchises and related agreements) and will also authorize such franchisors to provide Enterprises with copies of such franchises and related agreements. 5.04 Access. (a) Pre-Closing. For the purpose of conducting, at Enterprises' expense, a financial, business, environmental, and legal due diligence review of CCBG and the Subsidiaries and their respective operations, CCBG shall: (1) provide Enterprises with such information as Enterprises may from time to time reasonably request with respect to CCBG and the Subsidiaries; (2) provide Enterprises and its authorized representatives access during regular business hours and upon reasonable prior notice to the facilities, books, records, officers and employees of CCBG and the Subsidiaries, as Enterprises may from time to time reasonably request; and (3) permit Enterprises to make such investigation thereof as Enterprises may reasonably request. All such information which Enterprises receives which is treated as confidential information by CCBG or a Subsidiary shall be held by the Buyers in confidence, shall not be disclosed to third parties (except as required by Applicable Law) and shall not be used by Buyers except for purposes of evaluating the Merger. (b) After the Closing. Enterprises will cause CCBG upon reasonable prior notice to provide the Shareholders' Representative with reasonable access to CCBG's books and records relating to periods ending on or before the Closing Date and CCBG's personnel in connection with the exercise of the rights of the Shareholders' Representative and the CCBG Shareholders under this Agreement or any agreement executed and delivered in connection with this Agreement. 5.05 Other Offers. So long as this Agreement shall not have been terminated, CCBG shall not solicit or entertain any offer for, or sell or agree to sell, or participate in any business combination with respect to, any CCBG Shares or any shares of any Subsidiary, or any of the material assets of CCBG or any Subsidiary, except as contemplated by this Agreement and except sales of inventory in the usual and ordinary course of business. 39 52 5.06 Transfer Taxes. Each of the parties will use their reasonable, good faith efforts legally to minimize any sales, use and/or transfer Taxes associated with the transactions contemplated in this Agreement. All such Taxes will be the sole responsibility of the CCBG Shareholders. 5.07 Tax Attributes, Returns and Audits. (a) Tax Attributes. The following information with respect to CCBG and any Subsidiary has been, or prior to the Closing will be, made available to Enterprises, to the extent available in CCBG's Dallas offices (but no representation or warranty is made regarding the accuracy thereof): (1) the basis of assets, (2) the current and accumulated earnings and profits, (3) the amount of any net operating loss, net capital loss, unused investment credit or other credit, and excess charitable contributions, (4) the amount of any deferred gain or loss arising out of any intercompany transaction, and (5) all items of income or gain reported for financial accounting purposes in any pre-Closing period that is required to be included in taxable income for any post-Closing period (in accordance with Statement of Financial Accounting Standards 109). (b) Filing of Returns. The Shareholders' Representative shall be responsible, at the CCBG Shareholders' expense, for preparing and filing, or causing CCBG's Accountants to prepare and file, all Returns for the taxable periods ending on or before the Closing Date. In preparing such Returns, the Shareholders' Representative (or such accounting firm, as the case may be) shall not, without Enterprises' prior consent, deviate from the manner in which any item of income or expense of CCBG or any Subsidiary was reported in the prior period, except as required by changes in Applicable Law. Without the prior consent of Enterprises or except as required by the preceding sentence, the Shareholders' Representative shall not propose on or in any such Returns to make any election to take any action or position which might have an adverse impact on CCBG or any consolidated group of which it is considered a part for tax purposes with respect to any period ending after the Closing Date. Such Returns shall be submitted to Enterprises for review at least 15 Business Days before the earlier of the filing or due date for any such Returns. Enterprises shall cause an appropriate officer of CCBG or a Subsidiary or the legal successor thereof to sign such Returns (which officer may, by appointment by Enterprises and at Enterprises' direction, be a former officer of CCBG). Enterprises shall be responsible for filing or causing CCBG to file all Returns for taxable periods ending subsequent to the Closing Date. (c) Control of Audits. Notwithstanding Section 6.07, the Shareholders' Representative shall, at the expense of the CCBG Shareholders, control and conduct any audit of, and settle any matter relating to, liability for Taxes, refunds or adjustments related to the Taxes of CCBG and each Subsidiary for all taxable periods ending on or before the Closing Date; provided, however, that, without Enterprises' consent (which shall not be unreasonably withheld or delayed), (1) any matter in connection with any tax return of CCBG or any Subsidiary which could affect CCBG's or any Subsidiary's liabilities, refunds or adjustments 40 53 for any period following the Closing Date shall not be changed or adjusted; and (2) the Shareholders' Representative will not consent to or acquiesce to any action which would increase the liabilities of CCBG or any Subsidiary for Taxes in excess of the amount accrued as current liabilities for Taxes in the CCBG Adjusted Consolidated Working Capital. (d) Cooperation. Enterprises and the Shareholders' Representative shall, upon reasonable notice, provide each other with the right to have access to, and to copy and use, any records or information that may be relevant in connection with the preparation of any Tax returns, or any audit or other examination by any authority or any judicial or administrative proceeding relating to liability for Taxes. Enterprises and the Shareholders' Representative shall provide each other with such additional cooperation and assistance in matters related to Taxes as may be reasonably requested. Without limiting the foregoing, promptly after the Closing the Shareholders' Representative shall cause to be delivered to Enterprises copies of all federal and state income Tax Returns of CCBG and its Subsidiaries for taxable periods ending on December 31, 1986 through and including December 31, 1994. The party requesting access or assistance hereunder shall reimburse the other party for reasonable out-of-pocket expenses incurred by it in providing such access or assistance. Any position taken by Enterprises on a Tax return with respect to an item for which the CCBG Shareholders bear economic responsibility under the provisions of this Agreement shall be defended by Enterprises in good faith. 5.08 CCBG Shareholders' Approval. This Agreement and the transactions contemplated hereby will be submitted to the CCBG Shareholders for their approval. Subject to the fiduciary duties of the Board of Directors of CCBG under Applicable Law, CCBG shall use its best efforts to obtain CCBG Shareholder approval and adoption of this Agreement and the transactions contemplated hereby (the "CCBG Shareholders' Approval"). 5.09 Pre-Closing Distribution of Certain Property. Prior to the Closing, CCBG shall be permitted to effect the transfer of (i) all of the assets and liabilities of Automated & Customs Food Services division ("Automated"), (ii) the stock, or assets and liabilities of, Dani, (iii) the lease of the offices at 1999 Bryan Street, Dallas, Texas, and (iv) any other assets listed in Disclosure Schedule 5.09, to such persons and entities and for such consideration (if any) as CCBG or any Subsidiary determines and any cash Taxes paid or to be incurred by CCBG or any Subsidiary arising from such actions as reasonably estimated by CCBG's Accountants at the Closing shall be treated as an obligation of CCBG and reflected in the CCBG Adjusted Consolidated Working Capital. In the event of any such transfer, the CCBG Shareholders shall indemnify and hold Buyers harmless from and against any and all (i) liabilities of CCBG under the office lease for periods arising on or after the date of such transfer other than the rent that Enterprises is obligated to pay pursuant to Section 5.13 or (ii) claims against Automated or Dani. The Buyers' loss for which the Buyers are indemnified pursuant to the foregoing clause (ii) shall be reduced by insurance recoveries or for other reductions reflected in the Merger Consideration as finally determined. 41 54 5.10 Certain Payments to Employees. Promptly after the Closing, Enterprises shall cause CCBG to make payments to employees in the amounts specified in Exhibit B. 5.11 Employee Matters. (a) Continued Employment. Enterprises acknowledges and agrees that it shall cause CCBG and its Subsidiaries to continue to employ their respective employees immediately after the Closing subject to compliance with Enterprises' written policies distributed to employees (the "Continuing CCBG Employees"), but the foregoing does not give any person the right to be employed or restrict in any way CCBG's and/or its Subsidiaries' and/or Enterprises' right to terminate any person's employment after the Closing; provided, however, that the foregoing does not apply to (and the term "Continuing CCBG Employees" does not include) the employees listed in Disclosure Schedule 5.11(a) (the "Automated Employees"), who will not be employed by CCBG and/or its Subsidiaries after the Closing and who are currently expected to be offered employment by the purchaser of the Automated assets in connection with the transfer contemplated by Section 5.09 (the "Automated Transaction"). (b) Employee Benefit Plans. Except as specifically provided in this Section 5.11: (i) nothing in this Agreement obligates Enterprises to cause CCBG and/or its Subsidiaries to continue any existing Employee Benefit Plan for the Continuing CCBG Employees; and (ii) without limiting the foregoing, CCBG and/or its Subsidiaries may amend or terminate any existing plan subject to applicable law and the plan terms. If Enterprises offers Continuing CCBG Employees participation in an Enterprises plan in lieu of (or in addition to) an Employee Benefit Plan maintained by CCBG or any of its Subsidiaries, then Enterprises will give such employees credit for years of service with CCBG or any of its Subsidiaries or any predecessor in interest for purposes of participation, vesting and eligibility for early retirement benefits, but not necessarily for purposes of accrual of benefits. (c) Severance Payments. Enterprises agrees that it will cause CCBG and/or its Subsidiaries to make payments in accordance with the severance policy in a lump sum amount to each Continuing CCBG Employee terminated after the Closing pursuant to the following formula: Four days pay for each year of service (the daily rate is calculated by dividing 260 into the employee's salary) Four days pay for each year over age 40 Five days pay for each $10,000 of base pay Receipt of a separation package is contingent upon the terminated employee signing a release and waiver of liability for his or her termination. Also, separation packages will not be made available to employees terminated for fraud, misconduct, or other acts of bad faith. 42 55 Such payments shall not be reduced or otherwise affected by the fact that any otherwise eligible person obtains employment with another person during the period in which severance payments are being made. Upon the termination of employment of any of the Continuing CCBG Employees entitled to such severance payments, CCBG shall inform such terminated employees of their rights to such severance payments. (d) Group Insurance Plans. Effective July 1, 1998, the several insurance and self-insured programs that currently provide health, dental, vision, life, accidental death and dismemberment, short-term disability and long-term disability and business travel insurance covering employees of CCBG and its Subsidiaries will cease to cover the Automated Employees and those persons who were formerly employed by CCBG and any of its Subsidiaries or predecessors in interest with respect to the business conducted by the assets involved in the Automated Transaction (the "Prior Automated Employees"). (e) Cafeteria Plans. Contemporaneously with the Closing, Automated will adopt a plan covering the Automated Employees substantially identical to the CCBG (Southwest) Flexible Compensation Plan . (f) 401(k) Plan. Contemporaneously with the Closing, CCBG shall authorize Automated to adopt and Automated shall adopt The Coca-Cola Bottling Group (Southwest), Inc. and Affiliates 401(k) Plan (the "401(k) Plan") in connection with the Automated Transaction with respect to the Automated Employees and the Prior Automated Employees. As soon as practicable after the Closing, Automated shall adopt a substantially identical 401(k) plan covering the Automated Employees and Prior Automated Employees (the "Automated 401(k) Plan"), and Enterprises and CCBG shall cause the account balances of the Automated Employees and Prior Automated Employees to be transferred to the Automated 401(k) Plan. (g) Retirement Plan. Effective as of the Closing, CCBG shall amend The Coca-Cola Bottling Group (Southwest), Inc. and Affiliates Retirement Plan (the "Retirement Plan") to provide (i) that the accrued benefits of the Automated Employees and Prior Automated Employees as of the Closing will become fully vested and nonforfeitable and (ii) that the Automated Employees and Prior Automated Employees will be entitled, at their option, to elect to have their accrued benefits as of the Closing paid in a lump sum distribution as soon as practicable following the Closing. (h) Bonus Plan. Enterprises will cause CCBG to make payments under the Company-wide "Annual Performance Incentive" bonus plan described in Disclosure Schedule 5.11(h) to be made in such amount accrued on CCBG's books at the Closing Date, and such payments relating to periods through the Closing Date shall be taken into account in determining the adjustment to the Merger Consideration pursuant to Section 1.04. 43 56 5.12 No Cancellation of Officer and Director Insurance. Enterprises will not, and it shall cause each of its current and future subsidiaries and affiliates not to, cancel any insurance providing coverage to CCBG and its Subsidiaries for officers' and directors' acts and omissions in such capacity. 5.13 Lease Payments. Enterprises will pay when due all payments as to that certain lease listed on Disclosure Schedule 3.07 for offices located at 1999 Bryan Street, Dallas, Texas (including, without limitation, utility, operating expenses and additional parking space). 5.14 Public Announcements. No public announcement shall be made with regard to the transactions contemplated by this Agreement without the prior consent of CCBG and the Buyers; provided, however, that either CCBG or the Buyers may make such disclosure if it is required to do so by Applicable Law. CCBG and the CCBG Shareholders, on the one hand, and the Buyers, on the other, agree that they will not make any disclosures about the contents of this Agreement or cause the contents hereof to be publicized in any manner whatsoever by way of interviews, responses to questions or inquiries, press releases or otherwise, or otherwise disclose any aspect of the transactions provided for hereunder, without prior notice to and approval of the other party, except for disclosure to the employees as coordinated with CCBG and the Buyers and otherwise to employees, attorneys, accountants and advisors to the parties having a need to know, to the CCBG Shareholders, and except as may otherwise be required by Applicable Law; provided, further, that if either party determines that it is required by Applicable Law or its prior disclosure practices to make any such disclosure, then it will notify the other party prior to making such disclosure in order to permit the other party to obtain an appropriate protective order. CCBG and the Buyers will in all events discuss any public announcements or disclosures concerning the transactions contemplated by this Agreement with the other party prior to making such announcements or disclosures. 5.15 Current Public Information. At all times after the Effective Time, Enterprises shall file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations promulgated thereunder, and will take such further action as any holder of Enterprises Common Stock issued in the Merger may reasonably request, all to the extent required from time to time to enable such holder to sell Enterprises Common Stock without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act. Upon the request of any holder of Enterprises Common Stock issued in the Merger, Enterprises shall deliver to such holder a written statement as to whether it has complied with such reporting requirements. 5.16 Brokers. CCBG and the CCBG Shareholders hereby represent and warrant for the benefit of Buyers that all negotiations relative to this Agreement and the transactions described herein have been conducted by CCBG and the CCBG Shareholders directly with Buyers, without the assistance or intervention on behalf of CCBG or the CCBG Shareholders by any other person which would give rise to any valid claim against Buyers, CCBG or the CCBG Shareholders for a finder's fee, brokerage commission, investment adviser's fee or other like payment, except for any fees and expenses due Overend & Company, Inc., which shall be paid by the CCBG Shareholders. Any brokerage fees and expenses owed or paid 44 57 by CCBG in its capacity as a TBG Shareholder pursuant to the TBG Agreement shall be reimbursed to CCBG by the CCBG Shareholders. 5.17 Acquisition of TBG. Enterprises and CCBG each agrees to use its best efforts to consummate the closing of the transactions described in the TBG Agreement as soon as possible after the Closing hereunder. 5.18 Consent as to Representation. Enterprises and Sub each acknowledge that the law firm of Sutherland, Asbill & Brennan LLP is expected, after the Merger, to represent the CCBG Shareholders and the Shareholders' Representative in connection with this Agreement and agrees that it shall be entitled to represent the CCBG Shareholders and the Shareholders' Representative in any disputes that arise concerning this Agreement or any other agreement to be delivered pursuant to this agreement and waives any conflict of interest that may result from its representing CCBG under this Agreement or otherwise. 5.19 Certain Obligations Under the Shareholders' Representative Agreement. Enterprises acknowledges and agrees to its obligations set forth in Sections 4.4 and 4.6 of the Shareholders' Representative Agreement as binding on it even though it is not a party to such agreement. ARTICLE VI CERTAIN POST-CLOSING MERGER CONSIDERATION ADJUSTMENTS To provide for a return of some or all of the Merger Consideration to Enterprises under certain circumstances, and to provide for the payment of increased Merger Consideration to the CCBG Shareholders under other circumstances, based upon breaches of certain representations and warranties and non-compliance with certain covenants and as otherwise provided in this Article VI or under Article VI of the TBG Agreement, the parties agree to the following limitations and procedures for a post-Closing Merger Consideration adjustment, which shall be in addition to and not in lieu of the post-Closing adjustments provided for in Section 1.04 of this Agreement. Each of the CCBG Shareholders acknowledges that it is obligated to make the payments to Enterprises contained herein on the basis of the interests set forth in Section 6.02(a)(ii) without regard to whether such obligation arises either (a) solely with respect to an act or omission by, or a fact or circumstance involving, either CCBG and its Subsidiaries and their predecessors in interest or TBG and its subsidiary and their predecessors in interest or (b) on a relative basis different from the percentages set forth in Section 6.02(a)(ii). The CCBG Shareholders have no liability whatsoever for breaches by The Coca-Cola Bottling Group (Southwest), Inc. ("Southwest") under the TBG Agreement. 6.01 Certain Definitions. For the purposes of this Article VI, the following definitions apply: "Buyers' Protected Parties" means the Sub, Enterprises, the Surviving Corporation, and their affiliated companies (including TBG), and any successors or assigns thereto. 45 58 "CCBG Companies" means CCBG and every other entity (excluding TBG) in which CCBG owns 50 percent or more of the outstanding equity, directly or indirectly, or the power to vote or direct the voting of sufficient securities to elect a majority of the board of directors or similar governing body or otherwise has the power to direct the business and policies of such entity. "Claim" or "Claims" means, as the context may require, a claim or claims for Losses asserted under this Article VI or under Article VI of the TBG Agreement. "Claimant" means the person or entity asserting a Claim. "Competition Claims" means a violation by any of the CCBG Companies, by any of the TBG Companies, or by any predecessor in interest, employee or agent of any of them with pricing authority or power to bind any of the CCBG Companies or any of the TBG Companies or by any predecessor in interest (by virtue of any action, omission to act, contract to which it is a party, or any occurrence or state of facts whatsoever) of any Applicable Law relating to any Antitrust Laws. As used herein, "Antitrust Laws" means the United States antitrust laws sometimes referred to as the Sherman Act, the Clayton Act, the Robinson Patman Act, the Lanham Act, the Federal Trade Commission Act, and the rules and regulations promulgated thereunder, and applicable state antitrust and unfair trade laws, rules and regulations. "Environmental Claims" means a Claim asserted based upon a breach of the Off- Site Environmental Matters in Section 3.13 of this Agreement and Section 3.13 of the TBG Agreement (but for purposes of this Article VI only, disregarding any time, materiality or knowledge qualifiers in such sections and assuming that such representations and warranties were made as of the Closing Date). "Finally Resolved" means that the amount due to the Claimant has been finally determined under the provisions of Section 6.06 or by the decision of a court of competent jurisdiction from which there is no further appeal. "Loss" or "Losses" means losses, liabilities, damages, costs (including required (but not permissive) indemnification expenses to officers, directors, employees and agents of Buyers' Protected Parties and court costs) and expenses (including the reasonable fees and expenses of attorneys and accountants relating to Claims based on Third Party Actions). "Recipient of Claim" means (1) the Shareholders' Representative, if the Claim is asserted under Section 6.02(a), (2) the CCBG Shareholder against whom the Claim is asserted, if the Claim is asserted under Section 6.02(b), and (3) Enterprises, if the Claim is asserted under Section 6.04. 46 59 "Stock Claims" means a Claim asserted by reason of a breach of a Stock Representation. "Stock Representations" means the several representations and warranties of the CCBG Shareholders in the Transmittal Letters. "TBG Companies" means TBG and its subsidiary. "Tax Claims" means a Claim asserted under Section 6.02(a)(i) (B) or (C). "Tax Cut-Off Date" means the Closing Date, with respect to the TBG Companies, and the date on which the closing occurs under the CCBG Agreement with respect to the CCBG Companies. "Third Party" means a person or entity other than the parties to this Agreement and/or the TBG Agreement and their affiliates. "Third Party Action" means a proceeding, demand or controversy (1) in which an asserted Loss arises from a Claim by a Third Party and (2) which is the basis for a Claim. The Tax matters dealt with specifically in Section 5.07(b) shall not be subject to Section 6.07. 6.02 Post-Closing Reduction of Merger Consideration. (a) Certain CCBG and TBG Representations and Warranties and Other Matters. Subject to the limitations contained herein: (i) the Merger Consideration shall be reduced by any Losses actually suffered or incurred by any of Buyers' Protected Parties arising out of or with respect to: (A) Environmental Claims and Competition Claims; (B) Taxes attributable to the period ending with the Tax Cut-Off Date, even if not the close of a taxable period, and for all prior taxable periods of any CCBG Companies and of any TBG Companies (whether shown on 47 60 the Returns therefor or resulting from subsequent audit or adjustment) to the extent not paid prior to Closing or accrued as a current liability for Taxes in the CCBG's Adjusted Consolidated Working Capital as final and binding on the parties and to the extent such Taxes are actually paid. In determining the amount of Taxes actually paid for the purposes of this Section: (1) The taxpayer may only apply allowable net operating losses and income tax credits (including, without limitation, allowable minimum tax credits) of CCBG or any Subsidiary or TBG or its subsidiary, which are also attributable to a taxable period or a portion of a taxable period that has ended prior to or on the Tax Cut-Off Date; and (2) Tax deductions attributable to the Loyalty Payments and payments under the Employment Agreements shall not be taken into account in any period ending on or before the Tax Cut-Off Date. (C) Taxes attributable to any period ending after the Tax Cut-Off Date (whether shown on the Returns therefor or resulting from subsequent audit or adjustment), whether such Taxes are paid in cash or satisfied by the application of allowable income tax credits or net operating losses of Enterprises or one of its subsidiaries (other than those of any of the CCBG Companies or of any of the TBG Companies relating to periods ending on or before the Tax Cut-Off Date), so long as such Taxes result from a breach of the Surviving Tax Representations. (D) Any indemnification of any present or former officer or director of any CCBG Companies by any CCBG Companies, or of any TBG Companies by any TBG Companies, related to any act or omission prior to the Closing Date by such present or former officer or director required by its bylaws or applicable law; and (ii) the Merger Consideration otherwise payable to each CCBG Shareholder shall be reduced by the following percentage of such Loss (the "Coke Southwest Interests"): 48 61
Name Percentage ---- ----------- Hoffman Family Partnership 49.3947% R.K. Hoffman 26.6212% Richard E. Hoffman 1.9758% Citicorp 1.2479% Prudential 14.4098% Pruco 0.4451% Coca-Cola Trust K-C 3.3058% Overend Capital 2.1536% Ware 0.1861% Decherd 0.2600% ---------- TOTAL 100.000000%
or as such shall be adjusted pursuant to Section 9.04. (b) CCBG Shareholder Representations, Warranties and Covenants. Subject to the limitations contained herein, the Merger Consideration otherwise payable to any individual CCBG Shareholder shall be reduced by the amount of any Losses actually suffered or incurred by any of Buyers' Protected Parties arising out of or with respect to any breach or inaccuracy of the Stock Representations of such CCBG Shareholder and any breach or non-compliance by such CCBG Shareholder with respect to any covenant or agreement made by such CCBG Shareholder in the Transmittal Letter. (c) Limitations. Except as provided in Section 6.03(a), no CCBG Shareholder shall have any rights whatsoever against CCBG, TBG or the Surviving Corporation, by way of subrogation or otherwise, for contribution or indemnity or any other payment whatsoever for any reduction to the Merger Consideration that may occur under this Article VI. 6.03 Limitations on Reduction of Merger Consideration. (a) Reduction of Losses. The amount of Losses suffered by Buyers' Protected Parties shall be reduced by the amount, if any, of the recovery (reduced by the cash Taxes actually payable with respect to such recovery and any reasonable expenses actually incurred in obtaining such recovery) Buyers' Protected Parties shall have received with respect thereto from any other person or entity (including any insurance recovery and the present value of any income tax benefit). If such a recovery is received by any of Buyers' Protected Parties after it receives a payment or other credit under this Agreement with respect to Losses, then a refund equal in aggregate amount of the recovery, net of cash Taxes actually payable and expenses actually incurred, shall be made promptly to the CCBG Shareholders in accordance with their Coke Southwest Interests. 49 62 (b) Maximum Liability and Payment -- Section 6.02(a) Claims. The maximum liability of each of the CCBG Shareholders for Section 6.02(a) Claims, and the manner of payment, shall be as follows: (i) In no event shall the liability of each CCBG Shareholder for all Section 6.02(a) Claims, after the application of any applicable Deductible, exceed $25,000,000 in the aggregate multiplied by such CCBG Shareholder's Coke Southwest Interest. (ii) The maximum liability of each CCBG Shareholder for Competition Claims is $5,000,000 multiplied by such CCBG Shareholder's Coke Southwest Interest, after the Deductible has been met. (iii) With respect only to Competition Claims and Environmental Claims: a Claimant is not entitled to a recovery under this Agreement until, and then only to the extent that either (as applicable) (A) the aggregate of all Losses Finally Resolved with respect to Competition Claims exceeds $5,000,000 or (B) the aggregate of all Losses Finally Resolved with respect to Environmental Claims exceed $5,000,000 (in case of each of "(A)" and "(B)", the "Deductible"). (iv) Whenever a Section 6.02(a) Claim has been Finally Resolved, the Shareholders' Representative shall promptly notify each CCBG Shareholder of the amount of the Loss and that portion for which each CCBG Shareholder is liable. Each payment from the CCBG Shareholders is due to Enterprises no later than 10 Business Days from the date on which such notice was given to them by the Shareholders' Representative. (c) Maximum Liability and Payment -- Stock Claims. The maximum liability of the CCBG Shareholders for Stock Claims, and the manner of payment, shall be as follows: (i) the maximum liability of any CCBG Shareholder for any Losses for Stock Claims shall be the aggregate amount of the Merger Consideration received by such CCBG Shareholder. (ii) Within 10 Business Days after a Stock Claim has been Finally Resolved, such CCBG Shareholder shall pay to Enterprises the full amount of such Claim. (d) Limitation on Trustee Liability. No person in his capacity as a trustee shall have any liability for any breach of any representation, warranty, covenant or agreement in this Agreement personally; provided, however, that the foregoing shall not limit the 50 63 liability of a trustee arising by reason of the fact that he, she or it is a CCBG Shareholder in a non-representative capacity. 6.04 Increase in Merger Consideration. The Merger Consideration shall be increased by the amount of any Losses suffered or incurred by the CCBG Shareholders as a result of or with respect to any breach of any representation, warranty, covenant or agreement by the Buyers contained in this Agreement or any other agreement or instrument executed and delivered by Buyers in connection with the transactions contemplated herein. Such increase shall be paid by Enterprises to the CCBG Shareholders in accordance with their respective CCBG Interests in Enterprises Common Stock (valued at the Notional Value). In no event shall the Buyers' aggregate liability for Losses hereunder and under the TBG Agreement exceed $25,000,000 (but not with respect to the payment of the merger consideration pursuant to Section 1.03 or Section 1.04 or claims that may exist under applicable securities laws). 6.05 Time Limitations for Assertion of Claims. (a) Survival. Only the Stock Claims, Tax Claims, Environmental Claims and Competition Claims shall survive the Closing, as follows: (i) Stock Claims will survive the Closing indefinitely; (ii) Tax Claims will survive the Closing for the longest applicable statute of limitations, plus 90 days, it being specifically understood that a Tax Claim may be made prior to the Claimant's having made actual payment, as contemplated under Section 6.02(a)(i)(B) or Section 6.02(a)(i)(C); and (iii) Environmental and Competition Claims shall survive the Closing for 18 months. (b) Post-Closing Acts or Omissions. There shall be no reduction of the Merger Consideration for Losses accruing after the Closing Date which arise from Claims made with respect to acts or omissions occurring after the Closing Date even though those acts or omissions are consistent with, or a continuation of, those preceding the Closing Date; provided, however, that nothing in the foregoing sentence shall in any way limit the ability of the Buyers to achieve a reduction of the Merger Consideration for Losses accruing from Claims made with respect to such pre-Closing acts or omissions. 6.06 Procedure for Claims. (a) Generally. Claimants must assert Claims as promptly as practicable and no later than the expiration of the applicable period provided in Section 6.05(a). Each Claim must be in writing and set forth in reasonable detail the basis for the Claim and the Section of this Agreement under which the Claim arises. 51 64 (b) To Whom Sent. Notice of a Claim pursuant to Section 6.02(a) for a reduction in the Merger Consideration shall be sent to the Shareholders' Representative. For Claims against one or more individual CCBG Shareholders pursuant to Section 6.02(b), the Notice of a Claim shall be sent to the individual CCBG Shareholder(s). Notice of a Claim by one or more CCBG Shareholders for an increase of the Merger Consideration shall be sent to Enterprises. (c) Response by Recipient. The Recipient of a Claim shall, within 30 days after receipt of the Claim, give notice to the Claimant either that he accepts the Claim or objects to the Claim. If no notice is given within such period, it shall be conclusively presumed that the Recipient of Claim has accepted the Claim. If the Recipient of Claim timely objects to the Claim, the Claimant and the Recipient of Claim shall negotiate in good faith to determine the amount, if any, of the Loss. If no resolution of the Claim has occurred within 90 days after the receipt of the Claim by the Recipient of Claim, then either party may institute proceedings in a court of competent jurisdiction to resolve the Claim. (d) Payment Notice to the CCBG Shareholders by the Shareholders' Representative. Whenever a Loss becomes Finally Resolved, the Shareholders' Representative shall promptly notify each CCBG Shareholder of the amount of any payment required to be made by the CCBG Shareholders pursuant to this Article VI and that portion for which each CCBG Shareholder is liable. Each payment from the CCBG Shareholders is due to Enterprises no later than 10 Business Days from the date on which the foregoing notice to the CCBG Shareholders is given by the Shareholders' Representative; provided, however, that payments may be deferred until the earlier to occur of (1) the total payments being at least $100,000 and (2) the next calendar quarter end at least 10 Business Days after an Open Item becomes conclusive and binding. 6.07 Third Party Action. When a Claim involves a Third Party Action, the Recipient of Claim shall have the option to prosecute or defend, at its expense, the Third Party Action, unless the potential liability of the Claimant in the Third Party Action exceeds the maximum liability of the Recipient of Claim established under Section 6.03 or Section 6.04. If the Recipient of Claim does not or cannot elect this option, the Claimant shall diligently prosecute or defend such claim as if it were paying any Losses arising from the Claim, but the Claimant shall not settle such Claim without the consent of the Recipient of Claim, which shall not be unreasonably withheld or delayed. If the Recipient of Claim has undertaken to prosecute or defend the Third Party Action, as permitted herein, then (1) the Claimant may participate, at its own expense, in any and all proceedings related to the Third Party Action and shall be entitled to receive copies of all notices and pleadings or other submissions in any judicial or regulatory proceeding, (2) there shall be no settlement of the Third Party Action without the consent of the Claimant (which shall not be unreasonably withheld or delayed), and (3) if the Claim is fully satisfied, the Recipient of Claim shall be subrogated to all rights and remedies of the Claimant. If the Recipient of Claim submits to the Claimant a bona fide settlement offer from the Third Party Claimant (which settlement offer shall include as an unconditional term of it the release by 52 65 such Third Party of the Claimant from all liability in respect of such Claim) and the Claimant refuses to consent to such settlement, then thereafter the Recipient of Claim's liability to the Claimant under this Article VI with respect to such Third Party Action shall not exceed the settlement amount included in said bona fide settlement offer, and the Claimant shall either assume the defense of such Third Party Action or pay the Recipient of Claim's attorney's fees and other out-of-pocket costs incurred thereafter in continuing the defense of such Third Party Action. All parties to this Agreement shall cooperate in the defense and prosecution of Third Party Actions and shall furnish such records, information and testimony, and shall attend such conferences, discovery proceedings, hearings, trials and appeals, as may be reasonably requested in connection therewith. 6.08 Investigations. No investigation or other examination of CCBG or the Subsidiaries by the Buyers or of the Buyers by CCBG shall affect the survival of any representations, warranties or covenants contained herein. 6.09 Exclusive Remedy. If the Closing occurs, then the remedies provided in this Article VI constitute the sole and exclusive remedies for recoveries against another party for breaches or failures to comply with or non-fulfillment of the representations, warranties, covenants and agreements in this Agreement or in the exhibits, schedules and other attachments to this Agreement or in any agreement, instrument or document executed and delivered by a party pursuant to this Agreement and for the matters specifically listed in this Article VI; provided, however, that nothing in this Agreement shall limit the right of a party to sue at law or in equity, without following the procedures set forth in Section 6.06 of this Agreement: (1) to enforce the performance of the procedures of this Article VI or any other covenant or agreement in this Agreement or of any contract, document or other instrument executed and delivered pursuant to this Agreement by any remedy available to it at law or in equity; (2) to recover damages suffered by the failure of a party to pay expenses required to be paid related to the transactions contemplated by this Agreement; or (3) to recover for common law fraud. ARTICLE VII THE CLOSING 7.01 Time, Date and Place of Closing; Articles of Merger. The payments and deliveries contemplated by this Agreement to be made at the Closing shall be made at the offices of Sutherland, Asbill & Brennan LLP, 999 Peachtree Street, Atlanta, Georgia, at 11:00 a.m., local time, on June 5, 1998, or, if later, one Business Day after all the conditions to Closing have been satisfied or such other date and location as may be mutually agreeable, and immediately thereafter the Articles of Merger to be executed and delivered pursuant to Section 7.05(b) and Section 7.06(b) shall be filed with the Secretary of State of Nevada. The date on which the last of such payments, deliveries and filings occurs is the "Closing Date," and the events comprising such payments, deliveries and filings are collectively the "Closing." 53 66 7.02 Events Comprising the Closing. The Closing shall not be deemed to have occurred unless and until the payments, deliveries and filings contemplated by Section 7.01 have been made, and none of these items shall have been deemed to be paid, delivered or filed unless and until all of them have been paid, delivered or filed. 7.03 Conditions to Obligations of Buyers. The obligations of Buyers to make the deliveries and payments under this Article VII are subject to the fulfillment prior to or at the Closing Date of each of the following conditions, any one or more of which may be waived by Enterprises: (a) Representations and Warranties. The representations and warranties of the CCBG Shareholders contained in the Transmittal Letters and of CCBG contained in Article III hereof shall be true as of the date when made and again as of the Closing Date as if made on such date (except for changes permitted or contemplated by this Agreement and disregarding any time, materiality or knowledge qualifiers) and the Buyers shall not be aware of any Competition Claims as of the Closing Date, or, to the extent they are not true or Buyers are aware of such Competition Claims, the Buyers' aggregate Losses from such breach(es) and from such Competition Claims of which Buyers are aware would not reasonably be expected to exceed $1 million. In making the estimation of expected Losses, the otherwise applicable Deductibles shall not be considered. (b) Compliance. The CCBG Shareholders and CCBG shall have performed and complied in all material respects with all agreements and conditions required by this Agreement to be performed or complied with by them prior to or at the Closing Date. (c) Governmental Actions. No Governmental Authority shall have instituted any action, suit or proceeding, or given notice of its intent to do so, that has not subsequently been withdrawn, dismissed with prejudice or otherwise eliminated, which in the reasonable opinion of Enterprises and its counsel has or is likely to have a material and adverse effect on the transactions contemplated by this Agreement. (d) Adverse Change. Neither CCBG nor any of the Subsidiaries has suffered any material adverse change in its respective business, prospects, financial condition, working capital, assets, liabilities (absolute, secured, contingent or otherwise), reserves or operations; provided, however, that a material adverse change shall not be deemed to have occurred by reason of (1) the seasonal nature of the business, (2) a change in the business or assets of CCBG after the date of this Agreement either contemplated by this Agreement or its Exhibits and Schedules or relating solely to market conditions beyond the control of CCBG, or (3) damage or destruction to the property or assets that is reasonably insured and can be replaced or restored without long-term disruption of the business of CCBG or the Subsidiaries taken as a whole. 54 67 (e) Consents. Buyers shall have received (1) commitments from Dr Pepper Company that it will consent to the Merger and will enter into its standard form production, sale and distribution agreements for such soft drink products with the Surviving Corporation or Enterprises, including any special provisions which Enterprises has in its other agreements with it in other territories, and (2) any other consents required as a result of the Merger, the failure to obtain would have a material adverse effect on CCBG and its Subsidiaries taken as a whole. (f) Satisfactory Documents. All agreements, certificates, opinions and other documents delivered by CCBG or the CCBG Shareholders to Buyers hereunder, the form of which is not prescribed in this Agreement or an exhibit hereto, shall be in form and substance reasonably satisfactory to Enterprises. (g) Delivery of Shares. Each holder of a certificate or certificates representing CCBG Shares shall have (1) surrendered such certificate(s) to Enterprises, and (2) delivered to Enterprises (A) an executed Transmittal Letter in the form of Exhibit F (the "Transmittal Letter") and (B) such other documents as may be necessary to establish an exemption from registration for the Enterprises Common Stock under the Securities Act and any applicable state blue sky laws. (h) Copies of Resolutions. CCBG shall have delivered certified copies of the resolutions of the CCBG Board of Directors and the CCBG Shareholders authorizing the consummation of the transactions herein contemplated. (i) Opinion. CCBG and its Subsidiaries shall have delivered an opinion of counsel, dated the Closing Date, in the form of Exhibit G, and each CCBG Shareholder who is acting as a trustee or in any other fiduciary capacity (other than under the Uniform Gift to Minors Act or a successor statute) shall have delivered an opinion from such Shareholder's counsel, dated the Closing Date, in the form of Exhibit H. (j) Approvals. All governmental approvals regarding the proposed transaction shall have been obtained and all waiting periods shall have expired [without further requests for information]. (k) TBG Share Exchange. The TBG Agreement shall have been executed by each party to the TBG Agreement except Enterprises and all conditions precedent to such parties' obligations to consummate such agreement (except the Closing hereunder) shall have been fulfilled or waived, it being acknowledged that the Closing hereunder is a condition precedent to the consummation of the TBG Agreement. (l) Termination of Certain CCBG Agreements. The agreements listed in Disclosure Schedule 7.03(l) shall have been terminated. 55 68 7.04 Conditions to Obligations of CCBG. The obligations of CCBG to make the deliveries under this Article VII and to close this transaction are subject to the fulfillment prior to or at the Closing Date of each of the following conditions, any one or more of which may be waived by CCBG: (a) Representations and Warranties. The representations and warranties of Buyers contained in Article IV shall be true as of the date when made and as of the Closing Date as if made on such date or, to the extent they are not true, the CCBG Shareholders' aggregate Losses from such breach(es) would not reasonably be expected to exceed $1 million. (b) Compliance. Buyers shall have performed and complied in all material respects with all agreements and conditions required by this Agreement to be performed or complied with by them prior to or at the Closing Date. (c) Governmental Action. No Governmental Authority shall have instituted any action, suit or proceeding, or given notice of its intent to do so, that has not subsequently been withdrawn, dismissed with prejudice or otherwise eliminated, which in the reasonable opinion of CCBG and its counsel has or is likely to have a material and adverse effect on the transactions contemplated by this Agreement. (d) Approval of CCBG Shareholders. The execution, delivery and performance of this Agreement (including the payments contemplated by this Agreement) and the Merger shall have been approved by all of the CCBG Shareholders. (e) Satisfactory Documents. All agreements, certificates, opinions and other documents delivered by Buyers to CCBG hereunder, the form of which is not prescribed in this Agreement or an exhibit hereto, shall be in form and substance reasonably satisfactory to CCBG. (f) Opinion of Counsel. Buyers shall have delivered an opinion of counsel dated the Closing Date, in the form of Exhibit I. (g) Approvals. All governmental approvals regarding the proposed transaction shall have been obtained and all waiting periods shall have expired without further requests for information. (h) TBG Share Exchange. The TBG Agreement shall have been executed by Enterprises and all conditions precedent to its obligations to consummate such agreement (except the Closing hereunder and the "Upstream Merger" as defined thereunder) shall have been fulfilled or waived, it being acknowledged that the Closing hereunder and the Upstream Merger conditions precedent to the consummation of the TBG Agreement. 56 69 (i) Copies of Resolutions. Buyers shall have delivered certified copies of the resolutions of the respective Board of Directors of the Buyers and of the sole shareholder of Sub authorizing the consummation of the transactions herein contemplated. 7.05 Deliveries by CCBG at the Closing. CCBG shall deliver the following at the Closing: (a) Certificate. A certificate dated the Closing Date executed by a Co- Chairman and the Secretary of CCBG certifying to the best of CCBG's knowledge that (1) solely for purposes of the Buyers determining whether the Closing conditions in Section 7.03 have been met, the representations and warranties of CCBG hereunder are true and correct on the Closing Date as if made on and as of such date except for changes contemplated by this Agreement or permitted by this Agreement or if not, to what extent they are not and that there are no Competition Claims or if there are, the extent to which there are such Competition Claims, (2) the CCBG Shareholders and CCBG have performed and complied with all agreements and covenants required by this Agreement to be performed or complied with by them prior to or at the Closing or if not in what respects they have not, (3) the applicable conditions precedent to the obligations of CCBG hereunder have been fulfilled or waived or if not in what respects they are not, and (4) the Shareholders' Representative Agreement has been signed by each CCBG Shareholder. (b) Articles of Merger. The Articles of Merger, executed by CCBG. (c) Minute Books. The minute books, stock books and corporate seal of CCBG and each Subsidiary. (d) Resignation. The resignation, dated as of the Closing Date, of each director and officer of CCBG and each Subsidiary, as such, but not as an employee. (e) Other. Such other documents, certificates and opinions as the Buyers may reasonably and timely request to document or to consummate more effectively the transactions contemplated by this Agreement or to evidence the compliance by CCBG, the CCBG Shareholders or any Subsidiary with any condition or obligation in this Agreement. 7.06 Deliveries by Buyers at the Closing. The Buyers shall deliver the following at the Closing: (a) Certificates. A certificate dated the Closing Date executed by the Chairman, President or Vice President and the Secretary or Assistant Secretary of each of the Buyers certifying to the best of Enterprises' knowledge that (1) the representations and warranties of each of the Buyers hereunder are true and correct on the Closing Date as if made on and as of such date or if not, to what extent they are not, (2) each of the Buyers has performed and complied with all agreements, covenants and conditions required by this Agreement to be 57 70 performed or complied with by Buyers prior to or at the Closing or if not in what respects they have not, and (3) the applicable conditions precedent to the obligations of Buyers hereunder have been fulfilled or waived or if not in what respects they are not. (b) Articles of Merger. The Articles of Merger, executed by the Sub. (c) Merger Consideration. The Estimated Merger Consideration, delivered in accordance with Section 1.03 (b). (d) Other Documents. Such other documents, certificates and opinions as CCBG may reasonably and timely request to document or to consummate more effectively the transactions contemplated by this Agreement or to evidence the compliance by the Buyers with any condition or obligation in the Agreement. ARTICLE VIII TERMINATION AND ABANDONMENT 8.01 Termination and Abandonment. This Agreement may be terminated at any time and the Merger abandoned at any time prior to the Closing without liability of any party to any other party, except as provided in Section 8.02 below, under the following circumstances: (a) Mutual Agreement. The mutual written agreement of CCBG, pursuant to a resolution approved by its board of directors, and Enterprises. (b) CCBG. By the board of directors of CCBG if the Closing has not occurred before July 15, 1998 because all conditions to CCBG's obligations have not been satisfied or waived or because Buyers have not made all required deliveries, unless the Closing has not occurred solely because of a Governmental Objection. (c) Enterprises. By Enterprises if the Closing has not occurred before July 15, 1998 because all conditions to Buyers' obligations have not been satisfied or waived or because CCBG has not made all required deliveries, unless the Closing has not occurred solely because of a Governmental Objection. (d) Governmental Authority. Either CCBG or Enterprises may terminate by written notice to the other if any action or proceeding shall have been instituted before any Governmental Authority or, to the knowledge of the party giving such notice, shall have been threatened formally in writing by any Governmental Authority with requisite jurisdiction, to restrain or prohibit the transactions contemplated by this Agreement or to subject one or more of the parties or their directors or their officers to liability on the grounds that it or they have breached any law or regulation or otherwise acted improperly in connection with such transactions (a "Governmental Objection"), and such action or proceeding shall not have been 58 71 dismissed or otherwise eliminated or such written threat shall not have been withdrawn or rescinded or otherwise eliminated before July 15, 1998. 8.02 Rights and Obligations Upon Termination. Upon the termination of this Agreement, no party shall have any further obligation to the other, except that (1) unless terminated by mutual agreement or pursuant to Section 8.01(d), no termination of this Agreement under any provision of this Article VIII shall prejudice any claim a party may have under this Agreement that arises prior to the effective date of such termination, and (2) termination of this Agreement shall not terminate or otherwise affect the rights and obligations set forth in Section 5.02 and Section 5.14 of this Agreement (which shall survive termination as independent obligations). 8.03 Return of Confidential Information. If this Agreement is terminated and abandoned as provided in this Article VIII, each party will, at the request of the other, return all documents, work papers and other material of the requesting party, including all copies thereof, relating to the transactions contemplated by this Agreement, whether so obtained before or after the execution of this Agreement, to the party furnishing the same, and all information received by any party to this Agreement with respect to the business of any other party shall not at any time be used for the advantage of, or disclosed to third parties by, such party to the detriment of the party furnishing such information except as may be required by law; provided, however, that this shall not apply to any document, work paper, material, or any other information which is a matter published in any publication for public distribution or filed as public information with any Governmental Authority or is otherwise in the public domain. ARTICLE IX MISCELLANEOUS PROVISIONS 9.01 Good Faith; Further Assurances. The parties to this Agreement shall in good faith undertake to perform their obligations under this Agreement, to satisfy all conditions, and to cause the transactions contemplated by this Agreement to be carried out promptly in accordance with the terms of this Agreement. Upon the execution of this Agreement and thereafter, the parties hereto shall do such things as may be reasonably requested by the other parties hereto in order more effectively to consummate or document the transactions contemplated by this Agreement. 9.02 Notices. All notices, communications and deliveries under this Agreement: (1) shall be made in writing, signed by the party making the same; (2) shall specify the Section of this Agreement pursuant to which it is given; (3) shall either be delivered in person or by telecopier or a nationally recognized next business day delivery service for next business day delivery; (4) shall be deemed given (x) if delivered in person, on the date delivered, (y) if sent by telecopier, on the date transmitted (if the party, or its employee or agent, giving the notice has no reason to believe that the transmission was not made or received); or (z) if sent by a nationally recognized next business day delivery service for next business day delivery (with cost 59 72 prepaid), on the first Business Day after so sent; and (5) shall be deemed received (x) if delivered in person, on the date of personal delivery, (y) if telecopied, on the first Business Day after transmitted (if the party giving the notice, or its employee or agent, has no reason to believe that the transmission was not made or received), or (z) if sent by a nationally recognized next business day delivery service for next business day delivery, on the first Business Day after so sent. Such notice shall not be effective unless copies are provided contemporaneously as specified below, but neither the manner nor the time of giving notice to those to whom copies are to be given shall control the date notice is given or received. The addresses and requirements for copies are as follows: To Buyers: Mr. John R. Alm Executive Vice President and Chief Financial Officer Coca-Cola Enterprises Inc. 2500 Windy Ridge Parkway Atlanta, Georgia 30339 with a copy to: Mr. E. Liston Bishop III Miller & Martin 1000 Volunteer Building 832 Georgia Avenue Chattanooga, Tennessee 37402-2289 * * * * * * * To CCBG (prior to Closing): Suite 3300 1999 Bryan Street Dallas, Texas 75201 Attn: Mr. Robert K. Hoffman To the Shareholders' Representative or to the CCBG Shareholders, in care of the Shareholders' Representative: Mr. Robert K. Hoffman Suite 3300 1999 Bryan Street Dallas, Texas 75201 60 73 To individual CCBG Shareholders, at the addresses stated in their respective Transmittal Letters. in either case with a copy to: Mr. Thomas B. Hyman, Jr. Sutherland, Asbill & Brennan LLP 999 Peachtree Street Atlanta, Georgia 30309 and Mr. George D. Overend Overend & Company, Inc. Suite 200 -- Building B 2900 Paces Ferry Road, NW Atlanta, Georgia 30339 or to such representative or to such other address as the parties hereto may furnish to the other parties in writing. If notice is given pursuant to this Section 9.02 of a permitted successor or assign of a party to this Agreement, then notice shall be given as set forth above to such successor or assign of such party. 9.03 Definition of Knowledge. For the purposes of this Agreement: (a) CCBG. The phrases "to CCBG's knowledge" or "to its knowledge" and variations of them when used with respect to CCBG shall refer to all matters actually known to any of Edmund M. Hoffman, Robert K. Hoffman, Charles F. Stephenson, E. T. Summers III and Stephanie L. Ertel or which any of them had any reason to know. (b) Enterprises. The phrases "to Buyers' knowledge" and variations thereof when used with respect to Buyers shall refer to all matters actually known to any of John R. Alm, G. David Van Houten, Jr. and Cornel R. Pike or which any of them had reason to know. 9.04 Assignment. This Agreement is binding upon the parties hereto, and their respective legal representatives, heirs, successors and assigns, and inures to the benefit of the parties and their respective legal representatives, heirs, legatees, devisees, beneficiaries and other permitted successors and assigns (and to or for the benefit of no other person whatsoever). No assignment or transfer of rights and obligations hereunder shall be made except with the prior written consent of the parties hereto, except that Enterprises need not obtain CCBG's or CCBG Shareholders' consent to Enterprises' assignment of rights and delegation of obligations under this Agreement to an affiliated corporation of Enterprises (which, for purposes of this Agreement, shall be limited to any of Enterprises' direct wholly-owned subsidiaries) that 61 74 expressly assumes such liabilities and obligations and except that a CCBG Shareholder need not obtain any other party's consent to any transfer or assignment of rights and obligations under this Agreement, in whole or in part, upon the death of a CCBG Shareholder or upon distributions from a non-individual CCBG Shareholder to the heirs, legatees or devisees of a deceased CCBG Shareholder or to such other distributees (who take subject to the representations, warranties, covenants and agreements of this Agreement). In the event of a successor to a CCBG Shareholder, his CCBG Interest as reflected in Disclosure Schedule 3.01 shall be allocated among his successors as certified to the parties and to the Shareholders' Representative by an appropriate party. Without limiting the foregoing or any other provision of this Agreement or the agreements to be delivered pursuant to it (and thus acknowledging that the failure or refusal to accomplish the following does not affect the foregoing), the CCBG Shareholders shall undertake in good faith to have any heir, legatee, devisee, beneficiary, personal representative or other successor or assign of a deceased or incapacitated CCBG Shareholder ratify and confirm the agreements and obligations of such CCBG Shareholder (including the authority of the Shareholders' Representative) under this Agreement and under the other agreements to be delivered pursuant to this Agreement (including the Shareholders' Representative Agreement). Enterprises shall remain liable for the prompt payment and performance of all the assigned, transferred or assumed obligations under this Agreement, which obligation shall be a primary obligation for full and prompt payment and performance rather than a secondary guaranty of collection. 9.05 Captions; Definitions. The titles or captions of articles, sections and subsections contained in this Agreement are inserted only as a matter of convenience and for reference and in no way define, limit, extend or describe the scope of this Agreement or the intent of any provision hereof and shall not be considered in the interpretation or construction of this Agreement in any proceeding. The parties agree to all definitions in the statement of parties to this Agreement. Without limiting the foregoing, the captions in the Disclosure Schedules and the descriptive language in such captions to them do not alter, expand or otherwise affect the scope of the representations and warranties in this Agreement. 9.06 Amendment; Waiver; Remedies Cumulative. This Agreement may not be altered or amended except in writing signed by Buyers, CCBG (until the Closing) and the Shareholders' Representative, subject to the proviso of Section 1.01(d). The failure of any party hereto at any time to require performance of any provisions hereof shall in no manner affect the right to enforce the same. No waiver by any party hereto of any condition, or of the breach of any term, provision, warranty, representation, agreement or covenant contained in this Agreement, whether by conduct or otherwise, in any one or more instances shall be deemed or construed as a further or continuing waiver of any such condition or breach or a waiver of any other condition or of the breach of any other term, provision, warranty, representation, agreement or covenant herein contained. 9.07 No Third-Party Beneficiaries. With the exception of the parties to this Agreement and the CCBG Shareholders and each of their legal representatives, heirs, and permitted successors and assigns, there shall exist no right of any person to claim a beneficial interest in this Agreement or any rights arising by virtue of this Agreement. 62 75 9.08 Exhibits; Disclosure Schedules. All exhibits and Disclosure Schedules to this Agreement are hereby incorporated into this Agreement and hereby are made a part of this Agreement as if set out in full in the first place that reference is made thereto. 9.09 Counterparts; Entire Agreement. This Agreement may be executed by each party upon a separate copy, and in such case one counterpart of this Agreement shall consist of enough of such copies to reflect the signatures of all of the parties to this Agreement. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement or the terms of this Agreement to produce or account for more than one of such counterparts. One or more execution pages may be detached from one copy of this Agreement and attached to another copy in order to form one or more counterparts. This Agreement shall become effective when one or more counterparts have been executed by the Buyers and CCBG and delivered to such parties. This Agreement together with all schedules and exhibits hereto and all other agreements and undertakings provided for hereunder shall constitute the entire agreement of the parties and supersedes any and all prior agreements, oral or written, with respect to the subject matter contained herein. There are no other agreements, representations, warranties or other understandings between the parties in connection with this transaction which are not set forth in this Agreement or the schedules and exhibits hereto. 9.10 Time of the Essence; Computation of Time. Time is of the essence of each and every provision of this Agreement. If the last day for the exercise of any privilege or the discharge of any duty under this Agreement shall fall upon a Saturday, Sunday or any public or legal holiday, whether federal or of a state in which the party having such privilege or duty resides or has its principal place of business, then the party having such privilege or duty shall have until 5:00 p.m. local time on the next succeeding regular Business Day to exercise such privilege or to discharge such duty. 9.11 Severability. Any determination by any court of competent jurisdiction of the invalidity of any provision of this Agreement that is not essential to accomplishing its purposes shall not affect the validity of any other provision of this Agreement, which shall remain in full force and effect and which shall be construed as valid under Applicable Law. 63 76 DULY EXECUTED by the parties hereto, under seal, as of the date first above written. COCA-COLA ENTERPRISES INC. By:/s/ Lowry F. Kline ---------------------------------------------------- Lowry F. Kline, Executive Vice President and General Counsel TEXA-COLA ACQUISITION COMPANY By:/s/ Lowry F. Kline --------------------------------------------------- Lowry F. Kline, Executive Vice President and General Counsel CCBG CORPORATION By:/s/ Robert K. Hoffman --------------------------------------------------- Robert K. Hoffman, President 64 EX-2.2 3 SHARE EXCHANGE AGREEMENT 1 EXHIBIT 2.2 SHARE EXCHANGE AGREEMENT by and among COCA-COLA ENTERPRISES INC. ("Enterprises") and THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC. ("Southwest") and TEXAS BOTTLING GROUP, INC. ("TBG") June 5, 1998 2 TABLE OF CONTENTS
PAGE ARTICLE I EXCHANGE OF THE SHARES 1 1.01 The Exchange 1 (a) Generally 1 (b) The Exchange Consideration 1 (c) Tax-Free Reorganization 2 (d) Amendment 2 1.02 Conversion of Shares 3 (a) Conversion 4 (b) Notional Value; Adjustments 4 (c) Treasury Shares Canceled 4 (d) Shares Owned by Southwest 4 1.03 Estimated Exchange Consideration; Deliveries 4 (a) Computation 4 (b) Delivery 4 1.04 Final Computation of Exchange Consideration 5 (a) Closing Date Financial Statements 5 (b) Review/Objection Procedure As To Closing Date Financial Statements and Certificate of Adjustments 5 (c) Payment of Non-disputed Amounts 6 (d) Resolution of Open Items 6 (e) Payment Notice to the TBG Shareholders by the Shareholders' Representative 7 (f) Open Items Under CCBG Agreement 8 (g) Calculations. No Fractional Shares 8 1.05 Unregistered Shares 8 ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE TBG SHAREHOLDERS 8 ARTICLE III REPRESENTATIONS AND WARRANTIES OF TBG CONCERNING TBG AND ITS SUBSIDIARY 8 3.01 Organization and Authorization 9 (a) Due Organization, Etc 9 (b) Power and Authority 9 (c) Non-contravention 9 (d) Capitalization 10 (e) Subsidiaries 11 (f) Articles, Bylaws and Minutes 12 (g) Officers and Directors 12 3.02 Bottling Authorizations 12 (a) List 12 (b) Territories of Other Bottler 12 (c) Transshipment 12 3.03 Indebtedness 12 3.04 Financial Matters 13 (a) Financial Statements 13 (b) Other Liabilities 13 (c) Accounts Receivable 13 (d) Swaps 14 3.05 Absence of Certain Changes and Events 14 (a) Adverse Change 14 (b) Damage 14 (c) Distributions 14
3 (d) Issuance 14 (e) Guaranty 15 (f) Merger 15 (g) Labor Dispute 15 (h) Capital Expenditure 15 (i) Franchises 15 (j) Raises 15 (k) Accounting Changes 15 (l) Liens 15 (m) Waivers 15 (n) Dispositions 15 (o) Transactions with Employees 15 (p) Write-downs 16 (q) Material Transactions 16 3.06 Tax Matters 16 (a) Definitions. 16 (b) Tax Representations and Warranties. 16 (c) Disclaimer as to NOLs 19 (d) Survival 19 3.07 Real Property 19 (a) Ownership 19 (b) Status of Title 19 (c) Restrictions Arising from Governmental Authorities 20 (d) Condition 20 3.08 Personal Property 20 (a) Title 21 (b) Condition 21 (c) Inventory 21 3.09 Employee Benefit Plans 21 (a) Definition 21 (b) List 22 (c) Compliance 22 (d) Funding, Etc 22 (e) Liabilities; Claims; Audits 22 (f) Multi-employer Plan 22 (g) Termination Rights 22 (h) Payments in Stock 22 3.10 Labor Relations 23 (a) Status 23 (b) Plant Closing Issues 24 (c) Family and Medical Leave Act of 1993 24 3.11 Employees 24 3.12 Bank Accounts 25 3.13 Environmental Matters 25 (a) Status 26 (b) Definition 26 (c) Survival 26 3.14 Insurance Policies 26 (a) List 26 (b) Status 26 3.15 Specified Contracts and Commitments 26 (a) Specified Contracts 27 (b) Exceptions to Specified Contracts 27 3.16 Intellectual Property 28 (a) Status 28 (b) Definition 29
4 3.17 Certain Violations of Law 29 (a) Investigations 29 (b) Generally 29 (c) Certain Limitations 29 3.18 Litigation 30 (a) List 30 (b) Status 30 3.19 No Defaults 30 (a) Enforceability 30 (b) Bankruptcy, Etc 30 3.20 Major Suppliers and Customers 31 (a) List 31 (b) Status 31 3.21 Required Governmental Licenses and Permits 31 3.22 Year 2000 Compliance 31 3.23 No Untrue Statements 32 3.24 Copies 32 3.25 Other 32 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYERS 32 4.01 Organization and Authorization 32 (a) Due Organization 32 (b) Power and Authority 32 (c) Non-contravention 32 4.02 Capital Stock 33 (a) Enterprises 33 (b) Enterprises Stock to be Issued in Exchange 33 4.03 Reports and Financial Statements 34 4.04 Absence of Certain Changes or Events 34 4.05 No Untrue Statements 34 4.06 Other 34 ARTICLE VOTHER AGREEMENTS 35 5.01 Continuing Operation of Business 37 (a) Conduct of Business 37 (b) Manner of Consent 37 5.02 Expenses 37 5.03 Bottling Authorizations 37 5.04 Access 37 (a) Pre-Closing 37 (b) After the Closing 38 5.05 Other Offers 38 5.06 Transfer Taxes 38 5.07 Tax Attributes, Returns and Audits. 38 (a) Tax Attributes 38 (b) Filing of Returns 38 (c) Control of Audits 39 (d) Cooperation 39 5.08 TBG Shareholders' Approval 39 5.09 Certain Obligations Under the Shareholders' Representative Agreement 40 5.10 Certain Payments to Employees 40 5.11 Employee Matters 40 (a) Continued Employment 40 (b) Employee Benefit Plans 40 (c) Severance Payments 40 (d) Bonus Plan 41 5.12 No Cancellation of Officer and Director Insurance 41
5 5.13 Public Announcements 41 5.14 Current Public Information 41 5.15 Brokers 42 5.16 Consent as to Representation 42 ARTICLE VI CERTAIN POST-CLOSING EXCHANGE CONSIDERATION ADJUSTMENTS 42 6.01 Certain Definitions 42 6.02 Post-Closing Reduction of Exchange Consideration 43 (a) Certain CCBG and TBG Representations and Warranties and Other Matters 43 (b) TBG Shareholder Representations, Warranties and Covenants 43 (c) No Subrogation, Etc. 44 6.03 Limitations on Reduction of Exchange Consideration 44 (a) Reduction of Losses 44 (b) Maximum Liability and Payment -- Stock Claims 44 6.04 Increase in Exchange Consideration 44 6.05 Time Limitations for Assertion of Claims 44 (a) Survival 44 (b) Post-Closing Acts or Omissions 45 6.06 Procedure for Claims 45 (a) Generally 45 (b) To Whom Sent 45 (c) Response by Recipient 45 (d) Payment Notice to the TBG Shareholders by the Shareholders' Representative 45 6.07 Third Party Action 46 6.08 Investigations 46 6.09 Exclusive Remedy 46 ARTICLE VII THE CLOSING 47 7.01 Time, Date and Place of Closing; Articles of Exchange 47 7.02 Events Comprising the Closing 47 7.03 Conditions to Obligations of Buyers 47 (a) Representations and Warranties 47 (b) Compliance 47 (c) Governmental Actions 47 (d) Adverse Change 48 (e) Consents 48 (f) Satisfactory Documents 48 (g) Delivery of Shares 48 (h) Copies of Resolutions 48 (i) Opinion 48 (j) Approvals 49 (k) CCBG Merger 49 (m) Termination of Certain TBG Agreements. 49 7.04 Conditions to Obligations of TBG 49 (a) Representations and Warranties 49 (b) Compliance 49 (c) Governmental Action 49 (d) Approval of TBG Shareholders 49 (e) Satisfactory Documents 49 (f) Opinion of Counsel 49 (g) Approvals 50 (h) CCBG Merger. 50 (i) Copies of Resolutions. 50 7.05 Deliveries by TBG at the Closing 50 (a) Certificate 50
6 (b) Articles of Exchange 50 (c) Minute Books 50 (d) Resignation 50 (e) Other 50 7.06 Deliveries by Enterprises at the Closing 50 (a) Certificates 50 (b) Articles of Exchange 51 (c) Exchange Consideration 51 (d) Other Documents 51 ARTICLE VIII TERMINATION AND ABANDONMENT 51 8.01 Termination and Abandonment 51 (a) Mutual Agreement 51 (b) TBG 51 (c) Enterprises 51 (d) Governmental Authority 52 8.02 Rights and Obligations Upon Termination 52 8.03 Return of Confidential Information 52 ARTICLE IX MISCELLANEOUS PROVISIONS 52 9.01 Good Faith; Further Assurances 52 9.02 Notices 52 9.03 Definition of Knowledge 54 (a) TBG 54 (b) Enterprises 54 9.04 Assignment 54 9.05 Captions; Definitions 55 9.06 Amendment; Waiver; Remedies Cumulative 55 9.07 No Third-Party Beneficiaries 55 9.08 Exhibits; Disclosure Schedules 55 9.09 Counterparts; Entire Agreement 55 9.10 Time of the Essence; Computation of Time 56 9.11 Severability 56
7 SHARE EXCHANGE AGREEMENT 1 THIS SHARE EXCHANGE AGREEMENT (this "Agreement") is executed and delivered as of June 5, 1998, by and among COCA-COLA ENTERPRISES INC., a Delaware corporation ("Enterprises"), THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC., a Nevada corporation which will, at the Closing Date, be a wholly owned subsidiary of Enterprises (Southwest") (Enterprises and Southwest are collectively the "Buyers"), and TEXAS BOTTLING GROUP, INC., a Nevada corporation ("TBG"). IN CONSIDERATION of the representations, warranties, covenants and agreements contained herein, the receipt and legal sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: ARTICLE I EXCHANGE OF THE SHARES 1.1 The Exchange (a) Generally. Subject to the terms and conditions herein set forth, at the Effective Time and in accordance with the Nevada General Corporation Law (the "Nevada Act"), Southwest shall acquire all of the shares of capital stock of TBG issued and outstanding immediately prior to the Effective Time, excluding such shares already owned by Southwest as of such time (the "TBG Exchange Shares"), in exchange (the "Exchange") for Buyer's delivery of the Exchange Consideration in accordance with the terms of this Agreement to the holders of TBG Exchange Shares immediately prior to the Effective Time. On the Closing Date, TBG and Southwest shall execute and file with the Secretary of State of Nevada articles of exchange in the form of Exhibit A (the "Articles of Exchange"). The "Effective Time" of the Exchange shall be at the time and on the date the Articles of Exchange are accepted for filing by the Secretary of State of Nevada; provided, however, that in any event the Effective Time shall be subsequent to the effective time of the merger (the "Upstream Merger") of CCBG Corporation, a Nevada corporation ("CCBG"), with and into Enterprises in accordance with Applicable Law. (b) The Exchange Consideration. The exchange consideration shall be: (i) FIVE HUNDRED SIXTY MILLION DOLLARS ($560,000,000); (ii) minus, the payoff balance of principal (including the current maturities of (A) and (B) below and any prepayment premium of TBG's 9% Senior Subordinated Notes Due 2003, but excluding accrued interest) at the Closing Date of (A) Indebtedness for Borrowed Money, (B) Capital Leases, and 8 (C) obligations of TBG under the 2 loyalty payments (the "Loyalty Payments") described on Exhibit B, with the amount of such obligations being computed pursuant to that exhibit; and (iii) plus or minus, as the case may be, 50% of the amount by which the sum of the consolidated working capital of CCBG and of the consolidated working capital of TBG at the Closing Date, as determined in accordance with generally accepted accounting principles applicable to the preparation of year-end statements ("GAAP") consistent with past practices (to the extent consistent with GAAP) or as otherwise provided in Exhibit C (the "TBG Adjusted Consolidated Working Capital"), is more or less than $21,531,450. The foregoing amount, as adjusted after the Closing in accordance with Section 1.04 and Article VI, is the "Exchange Consideration." The Exchange Consideration divided by the aggregate number of TBG Shares outstanding immediately prior to the Effective Time is the "Exchange Consideration Per Share." "TBG Shares" means shares of TBG's $2.00 par value Class A common stock $2.00 par value Class B common stock (each a "TBG Share" and collectively the "TBG Shares"). "TBG Shareholder" means any holder of TBG Exchange Shares, and "TBG Shareholders" means all holders of TBG Exchange Shares collectively. (c) Tax-Free Reorganization. The Buyers and TBG intend that the Exchange constitute a "reorganization" within the meaning of IRC section 368(a), and that this Agreement constitute a plan of reorganization thereunder. Neither the Buyers nor TBG shall take any position inconsistent with such intentions. (d) Amendment. This Article I may be modified or amended in any manner at any time and from time to time prior to the Effective Time by the boards of directors of Buyers and TBG in accordance with Section 9.06 without any action by the shareholders of the Buyers or TBG; provided, however, that no modification or amendment may be made that: (i) after approval of this Agreement by the TBG Shareholders (and Southwest, in its capacity as a holder of TBG Shares), reduces or changes the form or composition of the consideration which the TBG Shareholders shall be entitled to receive at the Effective Time, without the further approval of the TBG Shareholders (and Southwest, in its capacity as a holder of TBG Shares), except to the extent specifically authorized by the TBG Shareholders (and Southwest, in its capacity as a holder of TBG Shares) in connection with approving the execution, delivery and performance of this Agreement; (ii) alters or changes any term or condition of this Agreement that would result in an adverse effect on the holders of any class or series of shares of the corporations party hereto, without the approval of such holders; or 9 (iii) alters or changes any term of the 3 articles of incorporation of Southwest, without the approval of the shareholders of Southwest or TBG. 1.2 Conversion of Shares. At the Effective Time, by virtue of the Exchange and without any further action on the part of Southwest, TBG or any TBG Shareholder: (a) Conversion. The parties acknowledge and agree that, for purposes of converting each TBG Exchange Share pursuant to the Exchange, each outstanding share of Class B common stock of TBG shall be deemed to be converted into 2.455 outstanding shares of Class A common stock of TBG. Each TBG Exchange Share issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive the following, subject to the terms of this Agreement, including, but not limited to, the adjustments to the Merger Consideration pursuant to Section 1.04 and Article VI and the deliveries contemplated by Section 7.03(g): (i) that number of shares of Enterprises Common Stock (valued at the Notional Value) equal in value to: (1) $507,460 (the "Closing Adjustment Escrow Amount") multiplied by (2) the percentage such TBG Exchange Share represents of all of the TBG Exchange Shares issued and outstanding immediately prior to the Effective Time, to be delivered to the Shareholders' Representative; (ii) that number of shares of Enterprises Common Stock (valued at the Notional Value) equal in value to: (1) $6,343,252 (the "Claims Escrow Amount") multiplied by (2) the percentage such TBG Exchange Share represents of all of the TBG Exchange Shares issued and outstanding immediately prior to the Effective Time to be delivered to the Shareholders' Representative; (iii) that number of shares of Enterprises Common Stock (valued at the Notional Value) equal in value to: (1) the percentage such TBG Exchange Share represents of all of the TBG Shares issued and outstanding immediately prior to the Effective Time (the "Per Share Percentage"), multiplied by (2) the Remaining Estimated Exchange Consideration, to be delivered to the holder of the share being converted. The "Remaining Estimated Exchange Consideration" is (1) the Estimated Exchange Consideration less (2) the Claims Escrow Amount and less (3) the Closing Adjustment Escrow Amount. (iv) additional shares of Enterprises Common Stock to reflect positive adjustments (if any) to the Exchange Consideration under Section 1.04 and/or Article VI, to be delivered to the holder of the share being converted, all subject to the rights and obligations of the Shareholders' Representative as set forth in this Agreement and that certain agreement by and among Robert K. Hoffman (the "Shareholders' Representative"), the TBG Shareholders and others in the form of Exhibit D (the "Shareholders' Representative Agreement"); and 10 without limiting the foregoing, the office of the Shareholders' 4 Representative, whose power and authority are set forth in this Agreement and the Shareholders' Representative Agreement, is established pursuant to this Agreement and the Exchange as an integral part of the manner and basis of converting the TBG Exchange Shares. (b) Notional Value; Adjustments. Each of the Closing Adjustment Escrow Amount and the Claims Escrow Amount shall consist of shares of $1.00 par value common stock of Enterprises (the "Enterprises Common Stock") having an agreed value of $34.50 per share (the "Notional Value"); provided, however, that in the event of any change after April 3, 1998 and prior to the Effective Time in the number of issued and outstanding shares of Enterprises Common Stock, through, reorganization, recapitalization, stock split, dividends paid in stock, split-up, split-off, spin-off, or other fundamental change in the capital structure of Enterprises (the forgoing specifically intending to exclude, without limitation, stock repurchases or any dilution resulting from the issuance of additional shares other than an issuance ratably to all shareholders), an equitable adjustment (the "Equitable Adjustment") shall be made to the Notional Value. (c) Treasury Shares Canceled. Each share of TBG's capital stock held in TBG's treasury as of the Effective Time shall, by reason of the Exchange, be canceled without payment of any consideration therefor. (d) Shares Owned by Southwest. Each share of TBG's capital stock held of record by Southwest as of the Effective Time shall continue to represent a share of the capital stock of TBG. 1.3 Estimated Exchange Consideration; Deliveries. (a) Computation. At or prior to the Closing Date, Enterprises and the Shareholders' Representative shall jointly compute Exchange Consideration Per Share based upon a good faith estimate agreed upon by TBG and Enterprises prior to the Closing, using the same principles described in Section 1.01(b) (the "Estimated Exchange Consideration Per Share"), and the Estimated Exchange Consideration Per Share shall be used in making the deliveries and payments at the Closing as contemplated by Section 7.06(c). The aggregate Estimated Exchange Consideration Per Share for all TBG Shares is the "Estimated Exchange Consideration." (b) Delivery. At the Closing, or as soon as practicable thereafter with respect to shares of Enterprises Common Stock, Enterprises shall deliver and pay, to the Shareholders' Representative or to the TBG Shareholders as specified in Section 1.02, that portion of the Estimated Exchange Consideration that is payable to those TBG Shareholders who have satisfied the conditions of Section 7.03(g). 11 1.4 Final Computation of Exchange Consideration. 5 (a) Closing Date Financial Statements. Within 90 days after the Closing Date, Arthur Andersen LLP ("TBG's Accountants") shall prepare and deliver to Enterprises, at the TBG Shareholders' expense: (i) Consolidated closing date financial statements of TBG and its Subsidiary as of the close of business on the Closing Date prepared in accordance with GAAP consistent with TBG's practice with respect to its 1997 Financial Statements audited by TBG's Accountants and accompanied by their unqualified report with respect thereto except that such report may be qualified to the extent acceptable to Buyers (the ATBG Closing Date Financial Statements"); and (ii) A certificate of adjustments setting forth the computation of the TBG Adjusted Consolidated Working Capital based on the TBG Closing Date Financial Statements and otherwise in accordance with Section 1.01(b)(iii) and with such computation being set forth generally in the format attached to Exhibit C (the ATBG Certificate of Adjustments"). The TBG Closing Date Financial Statements and the TBG Certificate of Adjustments are collectively the ATBG's Accountants' Post- Closing Deliveries." (b) Review/Objection Procedure As To Closing Date Financial Statements and Certificate of Adjustments. Within 45 days of Enterprises' receipt of TBG's Accountants' Post-Closing Deliveries, Enterprises shall notify the Shareholders' Representative whether Enterprises agrees with them, or, if it does not agree, it shall state specifically the extent to which it disagrees and its reasons therefor. If the Shareholders' Representative and Enterprises are unable to agree on the TBG's Accountants' Post-Closing Deliveries within 30 days of such notice, then all items other than those on which (and only to the extent of the dollar amount in dispute) they do not agree shall be conclusive and binding. To the extent Enterprises and the Shareholders' Representative do not agree on one or more items in (or excluded from) the TBG's Accountants' Post-Closing Deliveries (and the Shareholders' Representative shall not be restricted from raising any issue in such context, even if inconsistent with a position taken by TBG's Accountants), the nature and amount of such disputed items shall be the "Open Items", and their effect on the Exchange Consideration as determined in Section 1.04(a) shall be the "Effect of Open Items". The Merger Consideration calculated using only the binding items shall constitute the AUndisputed Redetermined Merger Consideration." The Open Items and the Effect of Open Items shall be resolved as provided in subsection (d) below. If Enterprises does not so notify the Shareholders' Representative of any disagreements within such 45-day period, then TBG's Accountants' Post-Closing Deliveries as received by Enterprises shall be conclusive and binding. 12 (c) Payment of Non-disputed Amounts. 6 (i) Within 75 days of Enterprises' receipt of the TBG's Accountants' Post-Closing Deliveries, Enterprises and the Shareholders' Representative: (A) shall then calculate the difference (the "Difference") between the Estimated Exchange Consideration and the Undisputed Exchange Consideration, which Difference shall be binding and conclusive; and (B) shall pay the Difference in accordance with subsection (ii) or subsection (iii) below, as applicable. Enterprises and the Shareholders' Representative will coordinate the foregoing process with the comparable process under the CCBG Agreement to reflect the Exchange Consideration component set forth in Section 1.01(b)(iii). (ii) If the Undisputed Redetermined Exchange Consideration is greater than the Estimated Exchange Consideration, then Enterprises shall deliver to each TBG Shareholder a number of shares of Enterprises Common Stock (valued at the Notional Value) having a value equal to the Difference multiplied by such shareholder's TBG Interest. Enterprises shall deliver certificates representing such shares to the TBG Shareholders within 10 Business Days after the calculation of the Difference. A ABusiness Day" is a day other than a day on which banks in Atlanta, Georgia are required or authorized by law to close or a day on which trading on the New York Stock Exchange is closed. (iii) If the Undisputed Redetermined Exchange Consideration is less than the Estimated Exchange Consideration, then the TBG Shareholders shall deliver to Enterprises a number of shares of Enterprises Common Stock (valued at the Notional Value) having a value equal to the Difference less the Effect of Open Items, with each TBG Shareholder being liable for a percentage of such amount equal to his TBG Interest. The TBG Shareholders shall make such deliveries individually to Enterprises in accordance with subsection (e) below. (d) Resolution of Open Items. (i) All Open Items (including the Effect of Open Items) shall be decided in accordance with Exhibit C and the following procedures. The Shareholders' Representative shall select one accountant with expertise in such matters and Enterprises shall select one accountant with expertise in such matters, and the two so selected shall attempt to resolve the Open Items. Each party shall be responsible for the costs of any such accountant selected by such party and any other expenses it may incur. All amounts agreed upon by Enterprises and the Shareholders' Representative or by the accountants (if the parties are unable to agree) shall be conclusive and binding. If within 13 30 days of the selection of the two accountants, the 7 accountants have not resolved all Open Items, then such items as have not been resolved shall be submitted to a third accountant selected by the Shareholders' Representative and Enterprises within 15 days after the expiration of the 30-day period. If Enterprises and the Shareholders' Representative cannot agree upon a third accountant within 15 days, then the accountant shall be selected by the first two accountants (who shall not select an accountant from TBG's Accountants or Ernst & Young LLP). The third accountant shall render his decision on such remaining Open Items as promptly as practicable, but in no event more than 30 days after such accountant is selected. The TBG Shareholders (considered as a single person) and Enterprises shall each bear one-half of the fees and expenses of the third accountant, whose decision shall be the final determination of the Open Items submitted to him and shall be conclusive and binding. If at any time before a decision is delivered by the accountants to the Shareholders' Representative and Enterprises pursuant to the foregoing dispute resolution procedures the Shareholders' Representative and Enterprises agree on the resolution of an Open Item (and the parties shall give the accountants prompt notice of any such agreement), then such resolution shall be conclusive and binding even though the accountants may have concluded otherwise and/or the Shareholders' Representative and Enterprises receive a notice of the decision from the accountants after the Shareholders' Representative and Enterprises have reached an agreement. (ii) As the Open Items are resolved as provided in clause (i) immediately preceding, then: (A) To the extent that the resolution is that a payment is due Enterprises, then the TBG Shareholders shall deliver to Enterprises a number of shares of Enterprises Common Stock (valued at the Notional Value) having a value equal to the amount of such payment, with each TBG Shareholder being liable for a percentage equal to his TBG Interest. (B) To the extent that the resolution is that a payment is due the TBG Shareholders, then Enterprises shall deliver to each TBG Shareholder a number of shares of Enterprises Common Stock (valued at the Notional Value) having a value equal to the amount of such payment times such TBG's Shareholder's TBG Interest. If clause "(A)" applies, then the procedures set forth in subsection (e) below apply. If clause "(B)" applies, then Enterprises shall deliver the appropriate number of shares of Enterprises Common Stock within 10 Business Days of the resolution. (e) Payment Notice to the TBG Shareholders by the Shareholders' Representative. Whenever an aspect of the determinations pursuant to this Section 1.04 becomes binding and conclusive, the Shareholders' Representative shall promptly notify each TBG Shareholder of the amount of any payment required 14 to be made by the TBG Shareholders pursuant to this Section 1.04 8 and that portion for which each TBG Shareholder is liable. Each payment from the TBG Shareholders is due to Enterprises no later than 10 Business Days from the date on which the foregoing notice to the TBG Shareholders is given by the Shareholders' Representative; provided, however, that payments may be deferred until the earlier to occur of (1) the total payments of the TBG Shareholders being at least $100,000 or (2) the next calendar quarter end at least 10 Business Days after an Open Item becomes conclusive and binding. (f) Open Items Under CCBG Agreement. To the extent that Open Items under the CCBG Agreement involve matters other than the CCBG Adjusted Consolidated Working Capital and are not taken into account in payments to or by the TBG Shareholders, then the TBG Shareholders shall be paid, or shall pay, 50.7460136% of such amounts at the same time that the CCBG Shareholders are paid, or pay, 49.2539864% of such amounts under the CCBG Agreement. (g) Calculations. No Fractional Shares. The calculations in this Article I shall be made (1) aggregating all of the shares of each holder of TBG Exchange Shares and (2) based on numbers carried out to 8 decimal places, but the final amount of payments to each holder shall be rounded down to the nearest whole penny, and any payment of shares shall be rounded down to the nearest whole share. 1.5 Unregistered Shares. The shares of Enterprises Common Stock to be issued pursuant to this Article I shall not be registered under applicable federal and state securities laws, and shall be issued with a legend noting restrictions on transfer imposed under Applicable Law. Buyers have no obligation at any time to effect any such registration. ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE TBG SHAREHOLDERS The representations and warranties of each TBG Shareholder, and the respective rights and obligations of each TBG Shareholder in the event of a breach of such representations and warranties, are set forth in such shareholder's Transmittal Letter. ARTICLE III REPRESENTATIONS AND WARRANTIES OF TBG CONCERNING TBG AND ITS SUBSIDIARY TBG hereby represents and warrants to Buyers as follows as of the date of this Agreement and as of the Closing Date, with full knowledge that such representations and warranties being true at those times are a material consideration and inducement to the execution of this Agreement by Buyers and the consummation of the transactions contemplated hereunder and that if they are breached, such breach may (1) as specifically provided in Section 7.03, relieve the Buyers of their obligation to effect the 15 Exchange, and (2) as specifically provided in Article VI, form 9 the basis for a post-Closing reduction to the Exchange Consideration: 3.1 Organization and Authorization. Except as set forth in Disclosure Schedule 3.01: (a) Due Organization, Etc. TBG is a corporation duly organized, validly existing and in good standing under the corporation laws of the State of Nevada. TBG has all requisite corporate power and authority to carry on and conduct its business as it is now being conducted and to own or lease its properties and assets. TBG is duly qualified and in good standing in every jurisdiction in which the conduct of its business or the ownership of its properties and assets requires TBG to be so qualified; and neither the property owned or operated by TBG nor the nature of the business conducted by it makes qualification necessary under Applicable Law in any other jurisdiction. (b) Power and Authority. TBG has the full corporate power to execute, deliver and perform this Agreement and all other agreements, documents and certificates executed and delivered by TBG hereby (collectively, the "TBG Documents"), subject to the Required Statutory Approvals. The execution, delivery and performance of this Agreement and each TBG Document by TBG has been duly authorized by the board of directors of TBG, and, except for the approval of the TBG Shareholders (and Southwest, in its capacity as a holder of TBG Shares), no other corporate action on the part of TBG is necessary to approve and authorize the execution, delivery and performance of this Agreement and the TBG Documents. Each of the TBG Documents has been duly and validly executed and delivered by TBG and constitutes the valid and binding agreement of TBG, enforceable against TBG in accordance with its terms. (c) Non-contravention. The execution, delivery and performance of each TBG Document by TBG and the consummation by TBG and the TBG Shareholders of the transactions contemplated hereby and thereby will not: (i) violate or conflict with any provision of the articles of incorporation or bylaws of TBG or its Subsidiary; (ii) breach, violate or constitute an event of default (or an event which with the lapse of time or the giving of notice or both would constitute an event of default) under, or give rise to any right of termination, cancellation, modification or acceleration under, any note, bond, indenture, mortgage, security agreement, lease, franchise or any other material agreement, instrument or obligation to which TBG or its Subsidiary is a party, or by which TBG or its Subsidiary or any of their respective properties or assets is bound (excluding for purposes of all of the foregoing items of this clause (ii) the Bottling Authorizations), or result in the creation of any lien, claim or encumbrance or other right of any third party of any kind whatsoever upon the properties or assets of 16 TBG or its Subsidiary pursuant to the terms of any such 10 instrument or obligation, which breach, violation, or event of default would result in a material adverse effect on TBG and its Subsidiaries taken as a whole; (iii) violate or conflict with any law, statute, ordinance, code, rule, regulation, judgment, order, writ, injunction, decree or other decision of any federal, state, city, county, parish or foreign court or governmental or regulatory body, agency or authority ("Governmental Authority") applicable to TBG or its Subsidiary or by which any of their respective properties or assets may be bound ("Applicable Law"), where such violations or conflicts, individually or in the aggregate, may reasonably be expected to result in Losses to the Buyers greater than $100,000; or (iv) require, on the part of TBG or its Subsidiary, any filing or registration with, or permit, license, exemption, consent, authorization or approval of, or the giving of any notice to any Governmental Authority, except for (1) the premerger notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (2) any required actions under federal securities laws and any applicable state securities and blue sky laws in connection with the Exchange, and (3) the filing of the Articles of Exchange with the Secretary of State of Nevada and any other required state filings (the foregoing (1) through (3) being referred to as the "Required Statutory Approvals"). (d) Capitalization. The authorized capital stock of TBG consists solely of 1,100,249 shares of $2.00 par value Class A Common Stock and 228,357 shares of $2.00 par value Class B Common Stock, of which 541,916 shares of Class A Common Stock and 228,357 shares of Class B Common Stock are issued and outstanding. Disclosure Schedule 3.01 lists the TBG Shareholders of record and their percentage interests (such interest, as adjusted pursuant to Section 9.04, being individually a "TBG Interest" and collectively the "TBG Interests"). It also lists those agreements known to TBG that impose a lien, claim or encumbrance upon any TBG Shares or that restrict or limit the ability of any TBG Shareholder to vote or transfer his TBG Shares or any interest in them or otherwise to take the actions contemplated by this Agreement. All of the issued and outstanding shares of TBG capital stock are validly issued, fully paid and non-assessable. TBG does not have outstanding, nor is it bound by, any subscriptions, options, warrants, calls, commitments or agreements to issue any additional shares of capital stock or any other equity security, including any right of conversion or exchange under any outstanding security or other instrument or agreement. All issuances, transfers, purchases or redemptions of the capital stock of TBG have complied with all applicable agreements and all Applicable Laws, and all Taxes thereon have been paid. No present or former holder of any capital stock of TBG or its Subsidiary or any corporation which has been merged into TBG or its Subsidiary has any legally cognizable claim against TBG or such Subsidiary based upon any 17 issuance, sale, purchase, redemption or involvement in any 11 transfer of any capital stock by TBG or its Subsidiary or any corporation which has been merged into TBG or its Subsidiary. There are no outstanding obligations of TBG or its Subsidiary to repurchase, redeem or otherwise acquire any outstanding shares of capital stock of TBG or its Subsidiary. (e) Subsidiaries. Disclosure Schedule 3.01 lists: (1) every entity in which TBG owns 50 percent or more of the outstanding equity, directly or indirectly, or has the power to vote or direct the voting of sufficient securities to elect a majority of the board of directors or similar governing body or otherwise has the power to direct the business and policies of such entity (a "Subsidiary") (2) the jurisdiction of its incorporation, (3) each state of the United States in which it is required to qualify as a foreign corporation, and (4) the number of shares authorized and outstanding. Except as set forth in Disclosure Schedule 3.01: (i) the Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of its respective jurisdiction of incorporation, (ii) the Subsidiary has the full corporate power and authority to carry on and conduct its business as it is now being conducted and to own or lease its properties and assets, (iii) the Subsidiary is duly qualified in every state of the United States in which the conduct of its business or the ownership of its properties requires it to be so qualified, (iv) all outstanding shares of capital stock of the Subsidiary are owned by TBG free and clear of any liens, restrictions, claims, equities, charges, options, rights of first refusal or other encumbrances, with no defects of title whatsoever except applicable restrictions under federal and state securities laws, (v) all of the issued and outstanding shares of each Subsidiary are validly issued, fully paid and non-assessable, (vi) there are no outstanding subscriptions, options, warrants, rights, calls, contracts, voting trusts, proxies or other commitments, understandings, restrictions or arrangements relating to the issuance, sale, voting, transfer, ownership or other rights with respect to any shares of capital stock of any Subsidiary, including any right of conversion or exchange under any outstanding security, instrument or agreement, (vii) TBG or its Subsidiary has the full power, right and authority to vote all of the outstanding shares of the capital stock of the Subsidiary owned by TBG, and 18 (viii) TBG is not a party to or bound 12 by any agreement affecting or relating to its right to transfer the outstanding shares of any Subsidiary. (f) Articles, Bylaws and Minutes. Copies of the organizational documents and bylaws of TBG and its Subsidiary previously made available to Buyers are the complete, true and correct organizational documents and bylaws of TBG and its Subsidiary in effect as of the date hereof. The minutes of directors' and shareholders' meetings and the stock books of TBG and, with respect to its Subsidiary, from the date of its becoming a Subsidiary of TBG, that have previously been delivered or otherwise made available to Buyers are the accurate records of directors' and shareholders' meetings, actions taken by written consent, and stock issuances through the date hereof and reflect all transactions required by Applicable Law to be contained in such records. To TBG's knowledge, nothing has been removed from them in order to avoid disclosing information to Buyers. (g) Officers and Directors. All current officers and directors of TBG and its Subsidiary are listed in Disclosure Schedule 3.01. 3.02 Bottling Authorizations. (a) List. Disclosure Schedule 3.02 sets forth a complete and accurate list of all persons or entities that have granted TBG or its Subsidiary franchise agreements, either oral or written ("Bottling Authorizations") under which TBG or its Subsidiary conducts its soft drink business (excluding post-mix), including a list of all brands covered by such agreements. (b) Territories of Other Bottler. All Bottling Authorizations giving TBG or its Subsidiary the temporary right to sell soft drinks and other non-alcoholic beverage products within the territory of another bottler are specifically identified on Disclosure Schedule 3.02. (c) Transshipment. To TBG's knowledge, no event has occurred which would give rise to any liability of TBG or its Subsidiary for transshipment across Bottling Authorizations territorial lines, and neither TBG nor its Subsidiary has sufficient grounds for any such claim against any other bottler. Disclosure Schedule 3.02 lists all transshipment claims against or by TBG or its Subsidiary which have been asserted since December 31, 1997. 3.03 Indebtedness. Disclosure Schedule 3.03 lists all (1) financing facilities other arrangements for Indebtedness For Borrowed Money, (2) indebtedness of TBG and its Subsidiary by way of lease-purchase arrangements and capital leases as determined in accordance with GAAP, each such capital lease being specifically identified in Disclosure Schedule 3.03 ("Capital Leases"), (3) guarantees and other undertakings of TBG and its Subsidiary on which others rely in extending credit other than endorsements of negotiable instruments in the ordinary course of business, and (4) all security interests with respect to personal property owned by TBG and its Subsidiary. Except as set forth in Disclosure Schedule 3.03, no loan payable by TBG or its Subsidiary provides for any prepayment penalty or premium. As 19 used in this Agreement, "Indebtedness For Borrowed Money" means 13 all obligations of TBG and its Subsidiary evidenced by bonds, debentures, notes or similar instruments or for the deferred purchase price of property. 3.04 Financial Matters. (a) Financial Statements. TBG has previously delivered to Buyers true and correct copies of (1) the consolidated balance sheets of TBG and its Subsidiary as of December 31, 1997, 1996 and 1995 and the consolidated statements of operations, consolidated statements of stockholders' equity and consolidated statements of cash flows for the fiscal years then ended, including the notes thereto (collectively the "Financial Statements"; and the most recent of which are referred to as the "1997 Financial Statements"), and (2) the interim consolidated balance sheet of TBG and its Subsidiary as of March 31, 1998 and the consolidated statements of operations, consolidated statements of stockholders' equity and consolidated statements of cash flows for the three months then ended (the "Interim Financial Statements"). Except as set forth in this Agreement, in Disclosure Schedule 3.04 or in such Financial Statements and Interim Financial Statements: (1) the Financial Statements and Interim Financial Statements present fairly, in all material respects, the financial position of TBG and its Subsidiary as of their respective dates and the related results of operations and cash flows for the respective periods, and (2) the Financial Statements have been prepared in accordance with GAAP applied consistently. All representations as to the Interim Financial Statements are subject to the basis of presentation described in Note (1) to the Interim Financial Statements and to the fact that valuations, procedures and accounting estimates used in the Interim Financial Statements while consistent with past practices of TBG do not necessarily conform to those used in the Financial Statements. Notwithstanding the foregoing, to the extent that a specific representation or warranty in this Article III is applicable to any act, omission, fact or circumstance covered by this Section 3.04(a), then the specific representation or warranty shall qualify this Section 3.04(a). (b) Other Liabilities. Except as (and to the extent) specifically reflected in the Financial Statements or the Interim Financial Statements, or incurred in the ordinary course of business since March 31, 1998 or as disclosed in Disclosure Schedule 3.04, neither TBG nor its Subsidiary has any material liability (whether known or unknown and whether accrued, absolute, contingent or otherwise). Notwithstanding the foregoing, to the extent that a specific representation or warranty in this Article III is applicable to any act, omission, fact or circumstance covered by this Section 3.04(b), then the specific representation or warranty shall qualify this Section 3.04(b). (c) Accounts Receivable. Except as set forth in Schedule 3.04, the accounts receivable ("Accounts Receivable") reflected in the Financial Statements or the Interim Financial Statements, or existing on the date hereof or the Closing Date: are or will be valid and existing; and represent or will 20 represent monies due for goods sold and delivered and services 14 rendered in the ordinary course of business. Unless paid prior to the Closing Date, the Accounts Receivable (1) are, or will be as of the Closing Date, current and collectible net of the respective reserves shown on the 1997 Financial Statements, the Interim Financial Statements or the accounting records of TBG as of the Closing Date (which reserves are adequate and calculated consistently with past practice and, in the case of the reserve as of the Closing Date, will not be materially greater than the reserve in the 1997 Financial Statements), and (2) will not as of the Closing Date have materially and adversely changed in terms of aging since December 31, 1997 or March 31, 1998. Subject to such reserves, each of the Accounts Receivable either has been or will be collected in full, without any set-off, within 90 days after the date on which it first becomes due and payable. There is no valid claim or right of set-off, other than returns in the ordinary course of business, in excess of $5,000 individually or $25,000 in the aggregate, asserted by any obligor under an Account Receivable relating to the amount or validity of any of such Accounts Receivable. Neither TBG nor its Subsidiary has any liability pertaining to any previous factoring of any of its accounts receivable. The foregoing representations and warranties in this subsection (c) are made solely in relation to whether the condition in Section 7.03(a) has been met, and are not intended to affect in any way the Closing Date Financial Statements. (d) Swaps. Disclosure Schedule 3.04 lists all interest rate, commodity or foreign currency exchange, swap, collar, cap or similar outstanding agreements entered into by TBG or its Subsidiary pursuant to which TBG or its Subsidiary has hedged its interest rate, foreign currency or commodity exposure. 3.05 Absence of Certain Changes and Events. Except as set forth in Disclosure Schedule 3.05 or as contemplated by Sections 5.09 and 5.10 of this Agreement, since March 31, 1998, there has not been: (a) Adverse Change. Any material adverse change in the working capital, assets, liabilities or financial condition of TBG or its Subsidiary; (b) Damage. Any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the properties, assets, business or financial condition of TBG or its Subsidiary; (c) Distributions. Any declaration, setting aside or payment of any dividend or other distribution of assets in respect of the capital stock of TBG or its Subsidiary or any direct or indirect redemption, purchase or other acquisition of any such stock, or any sales or other transfers of assets for less than fair market value to any TBG Shareholder; (d) Issuance. Any issuance or sale, or agreement to issue or sell, by TBG or its Subsidiary of any stock or other equity securities, or any options, warrants, subscriptions, calls or other rights or commitments with respect to the issuance of capital stock or obligations convertible into other equity securities of TBG or its Subsidiary; 21 (e) Guaranty. Any guaranty of any kind 15 whatsoever by TBG or its Subsidiary for an amount in excess of $10,000 other than endorsements of negotiable instruments in the ordinary course of business; (f) Merger. Any merger, consolidation or share exchange or agreement to merge, consolidate or exchange shares with any other corporation (or any transaction having a similar effect) involving TBG or its Subsidiary, or any acquisition of, or agreement to acquire, any business or a significant portion of a business, of any other person or entity to which TBG or its Subsidiary is or was a party; (g) Labor Dispute. Any material labor dispute involving TBG or its Subsidiary; (h) Capital Expenditure. Any capital expenditure in excess of $25,000 per item, or any new commitment for additions to property, plant or equipment in excess of $25,000 per item, in each case except as may be provided in the budget for TBG or its Subsidiary and except in the case of an expenditure or commitment necessitated by a loss which is covered by insurance (subject to deductibles); (i) Franchises. Except in the ordinary course of business, any sale or granting to any party or parties of any license, franchise, option or other right of any nature whatsoever to sell, distribute, or otherwise deal in or with products, merchandise or services of TBG or its Subsidiary; (j) Raises. Except for increases and bonuses based on term of service or regular promotion of employees, any granting of a salary increase to, or authorization or payment of bonuses or material increases in other benefits payable or to become payable under any bonus, insurance or other benefit plans to, employees, officers, directors or retirees of TBG or its Subsidiary; (k) Accounting Changes. Any change in any method of accounting or accounting practice or principle used by TBG or its Subsidiary; (l) Liens. Any asset of TBG or its Subsidiary permitted by TBG or such Subsidiary to be subject to any mortgage, lien, security interest, restriction or charge of any kind other than Permitted Liens; (m) Waivers. Any waiver by TBG or its Subsidiary of any material claim or right except write-downs and write-offs of receivables and inventory in the ordinary course of business; (n) Dispositions. Any sale, transfer or other disposition by TBG or its Subsidiary of any of its assets, except in the ordinary course of business and except for such involving real property required to be disclosed in Section 3.07; (o) Transactions with Employees. Any amount paid, loaned or advanced by TBG or its Subsidiary or asset transferred or leased to any employee by TBG or its Subsidiary, except for normal compensation involving salary, wages and 22 benefits and advances for work-related expenses; 16 (p) Write-downs. Any write-down in value of any inventory of TBG or its Subsidiary other than in the ordinary course of business, or any write-off as uncollectible of any notes or accounts receivable other than in the ordinary course of business; or (q) Material Transactions. Any material commitment or transaction entered into by TBG or its Subsidiary other than in the ordinary course of business. 3.06 Tax Matters. (a) Definitions. For purposes of this Agreement: (i) "Taxes" means all taxes, assessments, charges, duties, fees, levies or other governmental charges, including federal, state, city, county, parish, foreign or other income, franchise, capital stock, real property, personal property, tangible, withholding, FICA (or similar), unemployment compensation, disability, welfare, stamp, occupation, environmental (including taxes under Section 59A of the Internal Revenue Code of 1986, as amended (the "IRC"), transfer, sales, soft drink, use, excise, gross receipts, alternative or add-on-minimum, estimated and all other taxes of any kind for which TBG or its Subsidiary may have any liability to any Governmental Authority (including interest, penalties or additions associated therewith), whether disputed or not, and including any transferee or secondary liability in respect of any tax (whether imposed by law, contractual agreement or otherwise) and any liability in respect of any tax as a result of being a member of any affiliated, consolidated, combined, unitary or similar group; and (ii) "Returns" means all returns, declarations, reports, statements and other documents required to be filed in respect of Taxes, and any claims for refunds of Taxes, including any amendments or supplements to any of the foregoing. (b) Tax Representations and Warranties. Except as disclosed in Disclosure Schedule 3.06: (i) all Returns of TBG or its Subsidiary, including estimated returns and reports of every kind with respect to Taxes, which are due to have been filed in accordance with Applicable Law, have been duly filed, and all such Returns are correct and complete in all respects; no such Return contains any position which is or would be subject to penalties under IRC section 6662 (or any corresponding provision of state, local or foreign Tax law); 23 (ii) there are currently no extensions 17 of time in effect with respect to the dates on which any Returns of TBG or its Subsidiary were or are due to be filed; (iii) all deficiencies asserted as a result of any examination of any Return have been paid in full, accrued on the books of TBG or its Subsidiary as a current tax liability, or finally settled; (iv) since December 31, 1992, no claims have been asserted and, to the knowledge of TBG, no proposals or deficiencies for any Taxes are being asserted, proposed or threatened, and no audit or investigation of any Return is currently being conducted, is pending or, to TBG's knowledge, threatened, against TBG or its Subsidiary; (v) since December 31, 1992, there have been no adjustments proposed by taxing authorities in connection with any Return of TBG or its Subsidiary; (vi) there are no outstanding waivers or agreements by TBG or its Subsidiary for the extension of time for the assessment of any Taxes or deficiency thereof, nor are there any waivers of the statute of limitations in respect of Taxes for which TBG or its Subsidiary may have any liability or any requests for rulings, outstanding subpoenas or requests for information, notice of proposed reassessment of any property owned or leased by TBG or its Subsidiary or any other matter pending between TBG or its Subsidiary and any taxing authority; (vii) there are no liens for Taxes upon any property or assets of TBG or its Subsidiary except liens for current Taxes not yet due, nor are there any liens which are pending, or to TBG's knowledge, threatened; (viii) there are no outstanding rulings issued since December 31, 1992 of, or outstanding requests for rulings with, any Taxing authority addressed to TBG or its Subsidiary that are binding on TBG or its Subsidiary; (ix) no assets of TBG or its Subsidiary or of any "related person," as that term is defined in IRC section 144(a)(3) (or section 103(b)(6)(C) of the Internal Revenue Code of 1954, as amended (the "1954 IRC")), whether owned or leased pursuant to a Capital Lease, have been financed by private activity bonds within the meaning of IRC section 141 (or industrial development bonds within the meaning of 1954 IRC section 103(b)), and none of TBG, its Subsidiary or any related person is a "principal user," as that term is used in the context of IRC section 144(a) (or 1954 IRC section 103(b)), of any building which has been so financed; 24 (x) neither TBG nor its Subsidiary has 18 made any payment which constitutes an "excess parachute payment" within the meaning of IRC section 280G or any similar provision of state or local law; (xi) neither TBG nor its Subsidiary is a party to or bound by (or prior to Closing, except as contemplated by this Agreement, will become a party to or bound by) any tax indemnity, tax sharing or tax allocation agreement or arrangement; (xii) except for the group of which TBG is presently a member, TBG has not, within the last five years, been a member of an affiliated group of corporations, within the meaning of IRC section 1504, other than as a common parent corporation, and no Subsidiary has, within the last five years, been a member of an affiliated group of corporations, within the meaning of IRC section 1504, except where TBG was the common parent corporation of such affiliated group; (xiii) neither TBG nor its Subsidiary is a party to any joint venture, partnership, or other arrangement or contract which could be treated as a partnership for federal income tax purposes which is not evident in copies of the Returns and the supporting work papers of TBG and its Subsidiaries made available to Enterprises; (xiv) each asset with respect to which TBG or its Subsidiary claims depreciation, amortization or similar expense for Tax purposes is owned for Tax purposes by TBG or such Subsidiary; (xv) neither TBG nor its Subsidiary has executed any closing agreement pursuant to IRC section 7121 or any predecessor provision thereof, or any similar provision of state or local law; (xvi) no claim has been made since December 31, 1992 by any authority in a jurisdiction where TBG or its Subsidiary does not file Returns that such corporation is or may be subject to taxation by that jurisdiction; (xvii) neither TBG nor its Subsidiary has, since December 31, 1992, agreed to any adjustments pursuant to IRC section 481(a) or any similar provision of state or local law by reason of a change in accounting method, and no application requesting permission for any change in accounting method by TBG or its Subsidiary is pending with any taxing authority; (xviii) neither TBG nor its Subsidiary has been a United States real property holding corporation (as defined in IRC section 897(c)(2)) during the applicable period specified in IRC section 897(c)(1)(A)(ii); 25 (xix) copies of all federal and state 19 income tax returns and franchise tax returns of TBG or its Subsidiary (where such Subsidiary is required to file a separate return) for the last three years have been delivered to Enterprises. Additionally, any audit report issued by any federal, state, or local taxing authority for taxable years ended in 1990 and subsequent has been delivered or otherwise made available to Enterprises; (xx) all material elections with respect to Taxes which are not evident in copies of the Returns and the supporting work papers of TBG and its Subsidiaries made available to Enterprises as of the date hereof are set forth in the Disclosure Schedule; after the date hereof, no election with respect to Taxes will be made without the written consent of Enterprises; and (xxi) except as set forth in Disclosure Schedule 3.06 since December 31, 1992: (1) neither TBG nor its Subsidiary has filed a consent pursuant to IRC section 341(f) and (2) neither TBG nor its Subsidiary has filed, or may be deemed to have filed, any election under IRC section 338. (c) Disclaimer as to NOLs. Notwithstanding the foregoing subsections, no representation or warranty is made as to the amount and/or utilization of net operating losses, tax credits (including minimum tax credits) or other tax attributes of TBG or its Subsidiary. (d) Survival. The representations and warranties in subsections (viii), (ix), (x), (xi), (xiii), (xiv) and (xvii) of Section 3.06(a) shall survive the Closing as provided in Article VI (the "Surviving Tax Representations"). 3.07 Real Property. Disclosure Schedule 3.07 contains a complete list (and copies of the legal descriptions have been made available to the Buyers) of all real property: (1) which is owned by TBG or its Subsidiary, (2) which is leased by TBG or its Subsidiary as lessee or lessor, or (3) as to which TBG or its Subsidiary has either an option to purchase, sell or lease, or is obligated to purchase, sell or lease. With respect to such real property: (a) Ownership. All real property which was reflected in the 1997 Financial Statements is listed in Disclosure Schedule 3.07, and except as set forth in the Disclosure Schedule, no ownership interest in any real property has been acquired or disposed of by TBG or its Subsidiary since December 31, 1997. (b) Status of Title. Except as set forth in Disclosure Schedule 3.07(b), all real property owned by TBG or its Subsidiary is owned in fee simple, free and clear of any liens, encumbrances or restrictions whatsoever, except for: 26 (i) rights of lessors or lessees under 20 the terms of leases which have been disclosed to Buyers; (ii) liens for Taxes not yet due and payable; (iii) rights-of-way, building use restrictions, exceptions, variances, reservations or limitations of any nature whatsoever of public record; (iv) liens reflected in the Financial Statements; (v) liens imposed by Applicable Law and incurred in the ordinary course of business for obligations not yet due and payable to laborers, materialmen and the like; (vi) zoning or other restrictions, variances, covenants, rights-of-way, encumbrances, easements and other minor irregularities of title, none of which, individually or in the aggregate, interferes in any material respect with the current use or occupancy of any of the real property by TBG or its Subsidiary, has a material adverse effect on the value thereof, or would impair in any material respect the ability of TBG or its Subsidiary to sell such property for its current use; and (vii) with respect to items of personal property, unperfected purchase money security interests existing in the ordinary course of business without the execution of a security agreement (each of the foregoing being a "Permitted Lien"). (c) Restrictions Arising from Governmental Authorities. Except as set forth in Disclosure Schedule 3.07, no real property owned or leased and used by TBG or its Subsidiary is subject to any decree or order (or, to TBG's knowledge, any threatened or proposed order) to be sold or taken by any Governmental Authority. (d) Condition. Except as set forth in Disclosure Schedule 3.07, all plants and structures owned or leased and used by TBG or its Subsidiary, including, without limitation, parking areas, loading docks and roofs, are, to TBG's knowledge, in operating condition with no defects that materially interfere with the current use of such property. 3.08 Personal Property. Disclosure Schedule 3.08 contains a complete list of (1) all equipment leased by TBG or its Subsidiary to others for which lease payments exceed $100,000 per year (but excluding Capital Leases disclosed pursuant to Section 3.03) or which TBG or its Subsidiary has an option either to purchase, sell or lease, or is obligated to purchase, sell or lease for a cost individually in excess of $100,000. TBG has made its fixed asset lists available to Enterprises. With respect to such personal property and except as set forth in Disclosure Schedule 3.08: 27 (a) Title. TBG or its Subsidiary has good and 21 valid title to all of its tangible personal property reflected in the 1997 Financial Statements or acquired since December 31, 1997 (except, in both cases, as disposed of in the ordinary course of business), free and clear of any liens, encumbrances, restrictions, claims, charges, security interests, easements or other encumbrances of any nature whatsoever, except for Permitted Liens. (b) Condition. All tangible personal property of the type normally subject to depreciation owned or leased and used by TBG or its Subsidiary (other than inventory) is, to TBG's knowledge, in operating condition with no defects that materially interfere with the current use of such property. (c) Inventory. All inventory owned by TBG or its Subsidiary is merchantable and of a quality usable and salable in the ordinary course of business, and the quantity of each type of inventory (whether raw materials, work-in-process or finished product), is not excessive, but reasonable, adequate and appropriate. No product included in inventory, whether owned by TBG or its Subsidiary or out in the trade, is materially out-of- date by applicable franchisor standards. No previously sold inventory is subject to returns materially in excess of that experienced by TBG or its Subsidiary during the 1997 fiscal year. All of the inventories of TBG and any Subsidiary included in the Financial Statements and Interim Financial Statements are valued for the purposes thereof at the lower of cost or market. The foregoing representations and warranties in this subsection (c) are made solely in relation to whether the condition in Section 7.03(a) has been met and are not intended to affect in any way the Closing Date Financial Statements. No food ingredient, finished article of food, food packaging or food labeling included in the inventories of TBG or its Subsidiary is adulterated or misbranded within the meaning of the federal Food, Drug and Cosmetic Act. To TBG's knowledge, there is no pending investigation or regulatory action by the federal Food and Drug Administration affecting any inventories of TBG or its Subsidiary. 3.09 Employee Benefit Plans. Except as set forth in Disclosure Schedule 3.09: (a) Definition. This Section 3.09 relates to each employment, collective bargaining or consulting contract or deferred compensation, profit-sharing, pension, bonus, stock option, stock purchase or other fringe benefit or compensation contract, commitment, arrangement or plan (whether written or oral), including each welfare plan (as defined in section 3(1) of the Employment Retirement Income Security Act of 1974, as amended ("ERISA")), which TBG or its Subsidiary has established or maintained or in which TBG or its Subsidiary participates or, since December 31, 1992, has participated, or under which TBG or its Subsidiary, since December 31, 1992, has had an obligation to make contributions or to pay benefits for the benefit of persons who are, were or will become in accordance with the terms of the plan active employees, former employees, retirees, directors or independent contractors (or their dependents, spouses or beneficiaries) of TBG or its Subsidiary or their respective predecessors in interest or any employer which would constitute 28 an ERISA Affiliate (collectively, the "Employee Benefit Plans"). 22 For purposes of this Agreement, the term "ERISA Affiliate" includes all employers (whether or not incorporated) which by reason of common control are treated together with TBG or its Subsidiary as a single employer within the meaning of IRC section 414. (b) List. Disclosure Schedule 3.09 lists each Employee Benefit Plan which is currently in effect or as to which TBG or its Subsidiary has any ongoing material liability or material obligation. (c) Compliance. TBG and its Subsidiary have complied in all material respects since December 31, 1992 with their respective obligations with respect to all Employee Benefit Plans. Each Employee Benefit Plan has been maintained since December 31, 1992 in all material respects with all Applicable Laws. (d) Funding, Etc. All contributions, premium payments and other expenses required under each Employee Benefit Plan or with respect thereto due on or before the Closing Date will be paid or accrued by TBG or its Subsidiary. No Employee Benefit Plan is funded by insurance subject to retroactive premium adjustments. (e) Liabilities; Claims; Audits. Neither TBG nor a Subsidiary has incurred and no facts exist that could reasonably result in any liability, Tax or penalty of any nature whatsoever, whether known or unknown, to any person or entity for failure to comply with Applicable Law or the plan documents, nor any duty or obligation to indemnify or hold any other person or entity harmless for any liability with respect to any Employee Benefit Plan. Neither TBG nor a Subsidiary has received any notice of any, and to TBG's knowledge there is no, proposed or actual audit investigation by any Governmental Authority with respect to any Employee Benefit Plan. (f) Multi-employer Plan. Neither TBG nor a Subsidiary nor any of their respective predecessors in interest nor any ERISA Affiliate has ever contributed to any multi- employer plan, as defined in section 3(37) of ERISA, to which TBG or its Subsidiary has any continuing obligation whatsoever, and neither TBG nor its Subsidiary nor any of their respective predecessors in interest nor any ERISA Affiliate has incurred or reasonably expects to incur any "withdrawal liability" (as defined under section 4201 et seq. of ERISA). (g) Termination Rights. TBG and its Subsidiary have the right under the terms of each Employee Benefit Plan and under Applicable Law to terminate such plan at any time exclusively by action of TBG or its Subsidiary and complying with Applicable Law. (h) Payments in Stock. No Employee Benefit Plan requires that any payments be made in the form of stock or other securities in TBG or its Subsidiary. 29 Neither this provision nor any other provision of this Agreement 23 requires written disclosure of payroll practices (such as overtime, jury duty and the like) or such fringe benefits as service and participation awards, free beverages at the work site, expense accounts, newspaper, magazine, newsletter and journal subscriptions, or uniforms. 3.10 Labor Relations. (a) Status. Except as disclosed in Disclosure Schedule 3.10, since December 31, 1992: (i) Neither TBG nor its Subsidiary is subject to a collective bargaining agreement, and TBG and its Subsidiary are in compliance in all material respects with all Applicable Laws respecting employment and employment practices (including Executive Order 11246) and the Fair Labor Standards Act, and neither TBG nor its Subsidiary has engaged in any unfair labor practice within the meaning of Section 8 of the National Labor Relations Act or has fully remedied any official finding of any such practice; (ii) No breach of contract and/or denial of fair representation claim has been filed or is pending against TBG, its Subsidiary and/or, to TBG's knowledge, any labor organization representing its respective employees; no claim for unpaid wages or overtime or for child labor or for record keeping violations has been filed or is or was pending under the Fair Labor Standards Act, Davis-Bacon Act, Walsh- Healey Act or Service Contract Act or any other Applicable Law; no citation has been issued by the Occupational Safety and Health Administration ("OSHA") against TBG or its Subsidiary; no notice of contest or OSHA administrative enforcement proceeding involving TBG or its Subsidiary has been filed or is pending; no workers' compensation retaliation claim has been filed or is pending against TBG or its Subsidiary; and no citation of TBG or its Subsidiary has occurred and no enforcement proceeding has been initiated or is pending under federal immigration law. (iii) There is no unfair labor practice, charge or complaint or any other matter against or involving TBG or its Subsidiary or any other labor organization representing the employees of TBG or its Subsidiary pending or threatened of which TBG or its Subsidiary has received written notice before the National Labor Relations Board ("NLRB") or any court of law, and, to TBG's knowledge, the employees of TBG or its Subsidiary have not been and are not represented by a labor organization which was either NLRB certified or voluntarily recognized; (iv) There is no organized labor strike, organized slowdown or organized stoppage actually pending or, to TBG's knowledge, threatened against TBG or its Subsidiary, and, to TBG's knowledge, there is no organized handbilling, organized picketing 30 or organized work stoppage (sympathetic or otherwise) 24 involving the employees of TBG or its Subsidiary which has occurred or is in progress; (v) No certification question or organizational drive has been filed with the NLRB of which TBG has received written notice respecting the employees of TBG or its Subsidiary; (vi) No arbitration proceeding arising out of or under any collective bargaining agreement is or has been pending or, to TBG's knowledge, threatened against TBG or its Subsidiary; and, to TBG's knowledge, no basis for any such claim for arbitration exists; (vii) No agreement, arbitration or court decision or governmental order which is binding on TBG or its Subsidiary in any way expressly limits or restricts TBG or its Subsidiary from relocating or closing any of its respective operations, excluding Worker Adjustment and Retraining Notification Act ("WARN Act") and other generally applicable plant closing laws to the extent the WARN Act and such laws pertain to the acts or omissions of the Buyers after the Closing; and (viii) There are no charges, official investigations, administrative proceedings or formal complaints of discrimination (including discrimination based upon sex, age, race, religion, national origin, sexual preference, disability, veteran status or claims under family or medical leave statutes) pending or, to TBG's knowledge, threatened against TBG or its Subsidiary before the Equal Employment Opportunity Commission or any federal, state or local agency or court; and there have been no audits of the equal employment opportunity practices of TBG or its Subsidiary by any governmental entity. (b) Plant Closing Issues. Neither TBG nor its Subsidiary has, within the last 90 days, terminated the employment of or laid off any employees which would constitute a "plant closing" or "mass layoff" (within the meaning of the WARN Act). (c) Family and Medical Leave Act of 1993. Disclosure Schedule 3.10 lists all employees of TBG and its Subsidiary who are on leave pursuant to the Family and Medical Leave Act of 1993, each such employee's position, and the date such leave is scheduled to expire. 3.11 Employees. Disclosure Schedule 3.11 contains the complete list of annual salary, bonus and commission arrangements (if applicable) and date of last raise of all employees of TBG and its Subsidiary who earn $50,000 or more each year from salary, bonus and commission arrangements with TBG and its Subsidiary. 31 3.12 Bank Accounts. Disclosure Schedule 3.12 25 lists each bank or financial institution in which TBG or its Subsidiary has an account or safe deposit box (giving the address and account numbers) and the names of the persons authorized to draw thereon or to have access thereto. 3.13 Environmental Matters. (a) Status. Except as disclosed in Disclosure Schedule 3.13, since December 31, 1992: (i) TBG and its Subsidiary (1) have obtained all material permits, licenses and other authorizations and filed all material notices which are required to be obtained or filed by them for the operation of their respective businesses under applicable Environmental Laws; (2) have been and are in compliance in all material respects with all terms and conditions of such required permits, licenses and authorizations; and (3) have been and are in compliance in all material respects with all other applicable limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in any Environmental Laws; (ii) There are no ongoing, or, to TBG's knowledge, threatened, governmental investigations of TBG or its Subsidiary pursuant to the Environmental Laws; (iii) Neither TBG nor its Subsidiary is liable for or has assumed responsibility for the monitoring, investigation or cleanup of any environmental contamination; (iv) Neither TBG nor its Subsidiary has been identified as a potentially responsible party at, or received a request for information pursuant to any Environmental Laws related to, any contaminated or previously contaminated site; (v) Neither TBG nor its Subsidiary has been requested to indemnify another party or contribute towards the monitoring, investigation or cleanup costs of any contaminated or previously contaminated site; (vi) There are no underground storage tanks, above-ground storage tanks, or material surface impoundments, landfills, polychlorinated biphenyls and/or friable asbestos not currently encapsulated on, under or within the real property owned or leased by TBG or its Subsidiary; and (vii) There are no past or current events, conditions, circumstances, activities, practices, incidents, actions or plans which have materially interfered with or prevent current compliance by TBG or its Subsidiary with Environmental Laws in all material respects. 32 (b) Definition. As used in this Agreement, 26 "Environmental Laws" means any current Applicable Law, as well as any plan, order, decree, judgment, injunction, notice or demand letter issued, entered, promulgated or approved thereunder, relating to (1) the emission of pollutants or hazardous substances into the air, (2) the discharge of pollutants into the waters, (3) the disposal of hazardous waste, (4) the release and/or threatened release of hazardous substances into the environment, or (5) the manufacture, processing, distribution, presence (including, without limitation, any right-to-know laws in the context of the foregoing), use, handling, treatment, storage, transportation or disposal of any chemical, substance, material or waste that has been listed as toxic or hazardous by the Environmental Protection Agency or by any equivalent state or local agency or bureau, (6) the protection of the environment, and/or (7) the protection of public health and safety in the context of the foregoing matters. (c) Survival. The representations and warranties in Section 3.13(a) shall survive the Closing but only with respect to activities or operations conducted upon, or conditions existing at, sites other than properties operated and/or owned by TBG and its Subsidiary (the "Off-Site Environmental Matters"). 3.14 Insurance Policies. (a List. Disclosure Schedule 3.14 lists all insurance policies in force (except as listed in Disclosure Schedule 3.09) that either (1) names TBG or its Subsidiary as an insured or beneficiary or as a loss payable payee or (2) for which TBG or its Subsidiary has paid or is obligated to pay all or part of the premiums. (b Status. Except as set forth in Disclosure Schedule 3.14, since December 31, 1992: (i) neither TBG nor its Subsidiary has received notice (excluding notice of a premium increase or contract expiration date) of any pending or threatened termination or retroactive premium increase with respect thereto; (ii) TBG and its Subsidiary is in compliance in all material respects with all conditions contained therein, the non-compliance with which could result in termination of insurance coverage or increased premiums for prior or future periods; and (iii) there exists no material claim under current insurance that has not been properly filed by TBG or its Subsidiary. 3.15 Specified Contracts and Commitments. (a) Specified Contracts. Disclosure Schedule 3.15 lists each written or oral contract to which either TBG or its Subsidiary is a party or is bound or to which they or any of their assets are subject (and each and every amendment, modification or supplement to any of them) that is described by any of the following: 33 (i) individually exceeds $100,000 27 (treating each purchase order as a separate agreement and excluding agreements not required to be listed pursuant to clause (iii) below); (ii) for any matter not in the ordinary course of business; (iii) any marketing agreement or understanding including any chain marketing agreement, calendar marketing agreement, or promotional discount letter, special arrangements, whether providing for discounts, incentive awards or otherwise, which is not materially consistent with practices since December 31, 1997; (iv) restricting the right of either TBG or its Subsidiary to compete, whether by restricting territories, customers or otherwise, in any line of business or territory; (v) requiring either TBG or its Subsidiary to purchase its requirements for any goods or services from any one or more parties; (vi) providing for payments based on results; (vii) with any officer, director or shareholder of TBG or its Subsidiary, with any spouse, child, sibling or parent of any such person, or with any company or other organization in which any of the foregoing has, to TBG's knowledge, a material direct or indirect financial interest, excluding investments in public companies and employment contracts disclosed in any Disclosure Schedule; (viii) relating to participation in a cooperative, partnership or joint venture; (ix) imposing confidentiality requirements on TBG and its Subsidiary, excluding those in computer software agreements generally available to the public and those prohibiting disclosure of agreement terms; (x) consignments or "sale or return" arrangements; (xi) for political contributions or for charitable contributions involving a commitment to make contributions for more than one year or involving more than $2,500 per recipient; (xii) granting a power of attorney (other than those to represent TBG and/or its Subsidiary before the IRS); 34 (xiii) outstanding loans, loan 28 commitments, factoring or credit line agreements (excluding credit extended in the ordinary course of business to purchasers of inventory) to any person ("Third-Party Loans") or any subordination agreement executed by TBG or its Subsidiary relating to any of the Third-Party Loans; (xiv) relating to the distribution of products; (xv) relating to capital expenditures in excess of $25,000 per contract; (xvi) guarantees, other than guarantees listed in Disclosure Schedule 3.03 and other than endorsements in the ordinary course of business; or (xvii) all contracts with canning cooperatives (excluding ordinary course purchase orders) not otherwise disclosed. (b) Exceptions to Specified Contracts. All contracts disclosed or to be disclosed on Disclosure Schedule 3.15 are referred to as "Specified Contracts." Disclosure Schedule 3.15 describes all oral Specified Contracts required to be disclosed in Disclosure Schedule 3.15. Notwithstanding the foregoing, Disclosure Schedule 3.15 does not need to list (and the phrase "Specified Contracts" does not include) Bottling Authorizations, leases (including Capital Leases), Indebtedness for Borrowed Money, insurance policies disclosed (or not required to be disclosed) pursuant to this Agreement or employee-related matters disclosed (or not required to be disclosed) pursuant to this Agreement, and contracts, agreements or other arrangements involving or relating to: (1) sales of soft drink products pursuant to ordinary purchase orders; (2) arrangements with respect to on-location cold drink equipment; or (3) purchases of raw materials and packaging materials in the ordinary course of business for the production of soft drinks necessary for the continued operation of the business of TBG or its Subsidiary (including providing a reasonable inventory of finished products, raw materials and packaging materials). 3.16 Intellectual Property. (a) Status. Except as set forth in Disclosure Schedule 3.16: (i) TBG and its Subsidiary own or have the right to use pursuant to license, sublicense, agreement, or permission all Intellectual Property necessary for the operation of the business of TBG and its Subsidiary as presently conducted. (ii) Neither TBG nor its Subsidiary has interfered with, infringed upon, misappropriated, or otherwise violated any Intellectual Property rights of third parties, and neither TBG nor its Subsidiary has received any charge, complaint, claim, demand, or notice alleging any such interference, infringement, 35 misappropriation, or violation (including any claim 29 that TBG or its Subsidiary must license or refrain from using any Intellectual Property rights of any third party). To TBG's knowledge, no third party has interfered with, infringed upon, misappropriated, or otherwise come into conflict with any Intellectual Property rights of TBG or its Subsidiary. (b) Definition. "Intellectual Property" means (1) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations-in- part, revisions, extensions, and reexaminations thereof, (2) all trademarks, service marks, trade dress, logos, trade names, and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (3) all works containing or displaying a statutory copyright notice and all applications, registrations, and renewals in connection therewith, (4) all mask works and all applications, registrations, and renewals in connection therewith, (5) all trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals), (6) all computer software (including data and related documentation), (7) all other proprietary rights, and (8) all copies and tangible embodiments thereof (in whatever form or medium). 3.17 Certain Violations of Law. (a) Investigations. No grand jury or other state or federal investigation is pending or, to TBG's knowledge, threatened against TBG or its Subsidiary. (b) Generally. Except as disclosed in Disclosure Schedule 3.17, since December 31, 1992, neither TBG nor its Subsidiary is, nor has it been (by virtue of any action, omission to act, contract to which it is a party, or any occurrence or state of facts whatsoever), in violation of any Applicable Law, which violation would result in a liability of TBG or its Subsidiary in excess of $50,000. (c) Certain Limitations. Nothing in the foregoing requires disclosure in Disclosure Schedule 3.17 with respect to compliance with Applicable Law relating to Taxes or any other matter covered by Section 3.06, compliance with Applicable Law relating to employee matters or any other matter covered by Section 3.10, compliance with Environmental Laws or any other matter covered by Section 3.13, or compliance with Applicable Law relating to any other matter covered by a section of this Article III, it being acknowledged and agreed that all representations and warranties with respect to matters described in this subsection are specifically excluded from the representations and warranties in this Section 3.17. 36 3.18 Litigation. 30 (a) List. Disclosure Schedule 3.18 lists all litigation, claims, suits, actions, arbitrations, investigations or administrative or other proceedings pending or, to TBG's knowledge, threatened against TBG or its Subsidiary or involving any of their respective properties or businesses which involves (1) a stated claim that is not covered by insurance (excluding claims not likely to exceed any applicable deductible), (2) workers' compensation claims either more than $5,000 or expected to exceed $5,000, or (3) a claim as to which insurers have denied liability or are defending the matter under a reservation of rights. (b) Status. Except as stated in Disclosure Schedule 3.18: (i) none of the matters listed in Disclosure Schedule 3.18 (singly or in the aggregate) will result in a material adverse effect on the business or financial condition of TBG or its Subsidiary, (ii) there are no unsatisfied judgments no longer subject to appeal, orders, injunctions, decrees, stipulations or awards (whether rendered by a court, administrative agency, or by arbitration, pursuant to a grievance or other procedure) against TBG or its Subsidiary, and (iii) no present or former officer or director of TBG or its Subsidiary has any claim for indemnification from TBG or its Subsidiary related to any act or omission by such present or former officer or director. 3.19 No Defaults. Except as otherwise disclosed in this Agreement or in the Disclosure Schedule to this Agreement: (a) Enforceability. All contracts and agreements required to be referred to in any schedule delivered hereunder are enforceable in all material respects in accordance with their terms in a manner that obtains for, or imposes upon, the parties the primary benefits and obligations of such agreements. Neither TBG nor its Subsidiary has received (1) notice that it is in default in connection with any such contract or agreement or (2) any notice of cancellation or termination in connection therewith; and (b) Bankruptcy, Etc. To TBG's knowledge, (1) there are no pending or threatened bankruptcy, insolvency, or similar proceedings with respect to any party to such agreements, and (2) no event has occurred which (whether with or without notice, lapse of time or the happening or occurrence of any other event) would constitute a default, violation or failure to comply thereunder by either TBG or its Subsidiary or any other party thereto. 37 3.20 Major Suppliers and Customers. 31 (a) List. Excluding relationships under Bottling Authorizations, Disclosure Schedule 3.20 lists each of the 10 largest (by dollar volume) suppliers of goods or services to, and each of the 10 largest (by dollar volume) customers of, TBG and its Subsidiary (determined on a consolidated basis) during the 12-month period ended December 31, 1997, together with, in each case, the amount paid or billed during such period. (b) Status. Except as set forth in Disclosure Schedule 3.20: (i) to TBG's knowledge, no notice or other communication (written or oral) has been received since April 3, 1998 from any of the suppliers or customers listed in Disclosure Schedule 3.20 terminating or reducing in any material respect, or expressly stating an intention to terminate or reduce in any material respect, or otherwise reflecting a material adverse change in, the business relationship between such customer or supplier, on the one hand, and TBG or its Subsidiary on the other; and (ii) none of the officers or directors of TBG or its Subsidiary or spouse, child, parent or sibling of any such officer or director, or any company or other organization in which any officer or director of TBG or its Subsidiary or spouse, child, parent or sibling of any such officer or director has a direct or indirect financial interest, has any material financial interest in any supplier or customer of TBG or its Subsidiary, excluding the ownership of less than five percent (5%) of the shares of a publicly-held corporation engaged in business with TBG or its Subsidiary. 3.21 Required Governmental Licenses and Permits. TBG and its Subsidiary have (and Disclosure Schedule 3.21 lists) all material licenses, permits or other authorizations of Governmental Authorities necessary to produce and sell their respective products and to conduct their respective businesses; provided, however, that the foregoing shall not require disclosure of state and local business or similar licenses required of businesses generally; and provided, further, that nothing in the foregoing requires disclosure in Disclosure Schedule 3.21 with respect to such licenses, permits or other authorizations required by Environmental Laws or any other matter covered by Section 3.13 above, or compliance with Applicable Law or any other matter covered by Section 3.17 above, it being acknowledged and agreed that all representations and warranties with respect to matters described in this proviso are specifically excluded from the representations and warranties in this Section 3.21. 3.22 Year 2000 Compliance. TBG has delivered to Enterprises copies of all reports prepared by or for TBG and/or its Subsidiary relating to Year 2000 compliance. 38 3.23 No Untrue Statements. To TBG's knowledge, no 32 representation or warranty by TBG in this Agreement (including the Disclosure Schedules) contains any untrue statement of a material fact, or omits to state a material fact, necessary to make the representations and warranties of TBG herein (giving full effect to any dollar, time or other limitation specified in, and only with respect to the subject matter contained in, such representations and warranties) not materially misleading. The foregoing does not impose any obligation to disclose the implications of disclosed facts. 3.24 Copies. True and correct copies of all documents listed in the Disclosure Schedules (other than Bottling Authorizations) have been delivered or made available by TBG to the Buyers. 3.25 Other. No representation or warranty is made by TBG except as expressly set forth in this Article III. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYERS Buyers, jointly and severally, hereby represent and warrant to TBG and the TBG Shareholders as follows, with full knowledge that such representations and warranties are a material consideration and inducement to the execution of this Agreement by TBG and the TBG Shareholders and the consummation of the transactions contemplated hereunder: 4.01 Organization and Authorization. (a) Due Organization. Enterprises is a corporation duly organized, validly existing and in good standing under the Corporation laws of Delaware, and has all requisite corporate power and authority to carry on and conduct its business as it is now being conducted and to own or lease its properties and assets. (b) Power and Authority. Each of Enterprises and Southwest has the full corporate power and authority to execute, deliver and perform this Agreement and all other agreements, documents and certificates contemplated or required of it hereby (collectively, the "Buyers' Documents"), subject to the Required Statutory Approvals. The execution, delivery and performance by the Buyers of each of Buyers' Documents have been, or will by the Closing be, duly approved by the respective boards of directors of the Buyers and the shareholders of Southwest, and no other corporate action on the part of the Buyers is necessary to approve and authorize the execution, delivery and performance of this Agreement and the Buyers' Documents. Each of Buyers' Documents has been duly and validly executed and delivered by the Buyers party thereto and constitutes the valid and binding agreement of such Buyer, enforceable against such Buyer in accordance with its terms. (c) Non-contravention. The execution, delivery and performance of each of Buyers' Documents by the Buyers and the consummation by the Buyers of the transactions contemplated hereby and thereby will not 39 (i) violate or conflict with any 33 provision of the articles of incorporation or bylaws of Enterprises; (ii) breach, violate or constitute an event of default (or an event which with the lapse of time or the giving of notice or both would constitute an event of default) under, or give rise to any right of termination, cancellation, modification or acceleration under, any note, bond, indenture, mortgage, security agreement, lease, franchise or other material agreement, instrument or obligation to which Enterprises is a party, or by which Enterprises or any of its respective properties or assets is bound, or result in the creation of any lien, claim or encumbrance or other right of any third party of any kind whatsoever upon the properties or assets of Enterprises pursuant to the terms of any such instrument or obligation, which breach, violation, or event of default would result in a material adverse effect on Enterprises; (iii) violate or conflict with any Applicable Law applicable to Enterprises, where such violations or conflicts, viewed individually or in the aggregate, may reasonably be expected to result in Losses to the TBG Shareholders greater than $1.5 million; or (iv) require, on the part of Enterprises, any filing or registration with, or permit, license, exemption, consent, authorization or approval of, or the giving of any notice to, any Governmental Authority, except for the Required Statutory Approvals. 4.02 Capital Stock. (a) Enterprises. The authorized capital stock of Enterprises consists of 1,000,000,000 shares of Enterprises Common Stock of the par value of $1.00 per share, and 100,000,000 shares of preferred stock. As of April 3, 1998, 444,248,170 shares of Enterprises Common Stock were issued and outstanding, all of which issued and outstanding shares are validly issued, fully paid and non-assessable. As of April 3, 1998 there were no shares of preferred stock issued and outstanding. (b) Enterprises Stock to be Issued in Exchange. The Enterprises Common Stock to be issued to the TBG Shareholders in the Exchange will be at the Effective Time duly authorized, validly issued, fully paid and non-assessable and free of preemptive rights, and will not be subject to any lien, charge, claim, encumbrance, restriction or adverse right or interest whatsoever, except applicable restrictions under federal and state securities laws, and except that those shares that are to be deposited with the Shareholders' Representative pursuant to Article I shall be subject to the terms of the Shareholders' Representative Agreement. 40 4.03 Reports and Financial Statements. Since November 34 21, 1986, Enterprises has filed with the Securities and Exchange Commission ("SEC") all material forms, statements, reports and documents (including all exhibits, amendments and supplements thereto) required to be filed by it under the Securities Act of 1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Trust Indenture Act of 1939, as amended, and the respective rules and regulations thereunder, all of which complied in all material respects with all applicable requirements of the appropriate acts and the rules and regulations thereunder. Enterprises has previously delivered to TBG copies of (1) its Annual Reports on Form 10-K for the fiscal years ended December 31, 1995, December 31, 1996 and December 31, 1997 (the "Enterprises 10-K"), together with a copy of the annual reports to stockholders for each such year, and (2) its Proxy Statement for the annual meeting of stockholders held April 17, 1998 (collectively, the "Enterprises SEC Reports"). As of their respective dates, the Enterprises SEC Reports did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Each of the audited consolidated financial statements and unaudited interim consolidated financial statements, including any related notes and schedules, of Enterprises included in or incorporated by reference in such reports (the "Enterprises Financial Statements") have been prepared in accordance with GAAP applied on a consistent basis (except as may be indicated therein or in the notes thereto) and fairly present the financial position of Enterprises and its subsidiaries as of the dates thereof and the results of their operations and changes in financial position for the periods then ended, subject, in the case of the unaudited interim financial statements, to normal year-end and audit adjustments and any other adjustments described therein. 4.04 Absence of Certain Changes or Events. Except as set forth in the Enterprises 10-K or the other Enterprises SEC Reports, from December 31, 1997 through the date hereof: (a) there has not been any material adverse change in the business, operations, properties, assets, liabilities, condition (financial or other), results of operations or prospects of Enterprises and its subsidiaries, taken as a whole, and (b) Enterprises has not made any declaration, setting aside or payment of any dividend or other distribution with respect to any of Enterprises' capital stock, except for regular quarterly cash dividends. 4.05 No Untrue Statements. To the knowledge of the Buyers, no representation or warranty by the Buyers in this Agreement or the schedules to this Agreement contains any untrue statement of a material fact, or omits to state a material fact, necessary to make the representations and warranties of the Buyers herein or therein (giving full effect to any dollar, time or other limitation specified in, and only with respect to the subject matter contained in, such representations and warranties) not materially misleading. The foregoing does not impose any obligation to disclose the implications of disclosed facts. 4.06 Other. No representation or warranty is made by Buyers except as expressly set forth in this Article IV. 41 ARTICLE V 35 OTHER AGREEMENTS 5.01 Continuing Operation of Business. (a) Conduct of Business. TBG covenants and agrees that TBG and its Subsidiary will each do or refrain from, as the case may be, the following, on and after the date of this Agreement and until the Closing hereunder (except as contemplated by Section 5.09 below or upon the prior written consent of Enterprises): (i) Carry on its business in the ordinary and regular course and not engage in any material transaction or material activity or enter into any material agreement or make any material commitment except in the ordinary and regular course of business; (ii) Carry on its business in all material respects in the same manner as currently conducted, and not institute or commit to institute any material new methods of manufacture, purchase, sale, lease, management or operations; (iii) Not change or amend its articles of incorporation or bylaws (except as necessary to consummate the transactions contemplated by this Agreement) or appoint or elect any person or director or officer who is not serving as such on the date hereof; (iv) Not declare, pay or set aside or pay any dividend (except for scheduled dividends paid in cash) or other distribution of assets in respect of its capital stock except for (1) distributions from the Subsidiary to TBG, or (2) those permitted by this Agreement; (v) Not issue, sell, grant options, warrants or rights to purchase or subscribe to, or enter into any arrangement or contract with respect to the issuance, sale, purchase or redemption of, any of its capital stock or any securities or obligations convertible into or exchangeable for any shares of its capital stock, or otherwise make changes in its capital structure; (vi) Not organize any subsidiary, acquire any capital stock or other equity securities of any other corporation, or acquire any equity or ownership interest in any business, and not merge with (except as contemplated by this Agreement), liquidate into or otherwise combine with any other business, person or entity; (vii) Preserve its corporate existence, and use its reasonable commercial efforts to preserve in all material respects its business organization and its relationships with suppliers, customers and others having business relations with it; 42 (viii) Not incur any material 36 Indebtedness For Borrowed Money, or make drawings under any line of credit other than in the ordinary course of business, not guarantee any material obligation (other than endorsements of negotiable instruments in the ordinary course of business), and not permit or suffer any of its assets to be subjected to any mortgage, pledge, lien, security interest, encumbrance, restriction or charge of any kind, except for Permitted Liens or endorsements of negotiable instruments in the ordinary course of business; (ix) Not grant or announce any increase in the compensation of or benefits to (including, without limitation, deferred compensation) its officers, directors, or employees, or retirees, whether now or hereafter payable, except customary increases and bonuses based on policies currently in effect and the regular promotion of employees and as otherwise provided in this Agreement; (x) Not make any capital expenditure and not make any new commitment for additions to property, plant or equipment in excess of $25,000 per item, in each instance except as may be provided in the budget for TBG or its Subsidiary and except in the case of an expenditure or commitment necessitated by a loss which is covered by insurance (subject to deductibles); (xi) Not enter into material marketing commitments with significant soft drink franchisors or customers, except for marketing agreements which are materially consistent with current practice; (xii) Use reasonable commercial efforts to keep available the services of all employees (Buyers acknowledging that some employees have terminated their employment and others, including certain management, will probably terminate their employment) and not enter into any collective bargaining or other labor agreements or commit to hire or terminate any employee except for cause or otherwise in the ordinary course of business; (xiii) Not dispose of any asset having a value in excess of $50,000, except in the ordinary course of business or which is currently for sale; (xiv) Not issue substitute stock certificates to replace certificates which have been lost, misplaced, mutilated, destroyed, stolen or are otherwise irretrievable, unless an adequate bond or indemnity agreement has been duly executed and delivered to the issuer; (xv) Not make any change in any method of accounting or accounting principle or practice used by it; 43 (xvi) Not defer beyond the Closing Date 37 any capital expenditures which, in accordance with the current budget and the normal practice of TBG or its Subsidiary, would have been made prior to the Closing Date, and not defer any expenditures to fund benefit plans which, in accordance with the normal practice of TBG or its Subsidiary, would have been made prior to the Closing Date; (xvii) Not enter into any commitment with third parties under which TBG or its Subsidiary is obligated to purchase raw materials or inventory except in the ordinary course of business consistent with prior practice; and (xviii) Not enter into any material leases (whether as lessor or lessee) of real or personal property. (b) Manner of Consent. Any consent of Enterprises shall be in writing, and shall not be unreasonably withheld or delayed. 5.02 Expenses. Except as otherwise specifically provided in this Agreement, the Buyers, TBG and the TBG Shareholders shall each pay all costs and expenses incurred by such party or on such party's behalf in connection with this Agreement and the transactions contemplated hereby (including those of investment bankers or other investment advisors); provided, however, that TBG may pay the TBG Shareholders' expenses so long as such payment is properly accounted for in the TBG Adjusted Consolidated Working Capital. 5.03 Bottling Authorizations. At the request of Enterprises, TBG and its Subsidiary will authorize the issuers of soft drink franchises it holds to discuss such franchises and related agreements with Enterprises and its representatives (including without limitation the status of such franchises and related agreements) and will also authorize such franchisors to provide Enterprises with copies of such franchises and related agreements. 5.04 Access. (a) Pre-Closing. For the purpose of conducting, at Enterprises' expense, a financial, business, environmental, and legal due diligence review of TBG and its Subsidiary and their respective operations, TBG shall: (1) provide Enterprises with such information as Enterprises may from time to time reasonably request with respect to TBG and its Subsidiary; (2) provide Enterprises and its authorized representatives access during regular business hours and upon reasonable prior notice to the facilities, books, records, officers and employees of TBG and its Subsidiary, as Enterprises may from time to time reasonably request; and (3) permit Enterprises to make such investigation thereof as Enterprises may reasonably request. All such information which Enterprises receives which is treated as confidential information by TBG or its Subsidiary shall be held by the Buyers in confidence, shall not be disclosed to third parties (except as required by Applicable Law) and shall not be 44 used by Buyers except for purposes of evaluating the Exchange. 38 (b) After the Closing. Enterprises will cause TBG upon reasonable prior notice to provide the Shareholders' Representative with reasonable access to TBG's books and records relating to periods ending on or before the Closing Date and TBG's personnel in connection with the exercise of the rights of the Shareholders' Representative and the TBG Shareholders under this Agreement or any agreement executed and delivered in connection with this Agreement. 5.05 Other Offers. So long as this Agreement shall not have been terminated, TBG shall not solicit or entertain any offer for, or sell or agree to sell, or participate in any business combination with respect to, any TBG Shares or any shares of its Subsidiary, or any of the material assets of TBG or its Subsidiary, except as contemplated by this Agreement and except sales of inventory in the usual and ordinary course of business. 5.06 Transfer Taxes. Each of the parties will use their reasonable, good faith efforts legally to minimize any sales, use and/or transfer Taxes associated with the transactions contemplated in this Agreement. All such Taxes will be the sole responsibility of the TBG Shareholders. 5.07 Tax Attributes, Returns and Audits. (a) Tax Attributes. The following information with respect to TBG and any Subsidiary has been, or prior to the Closing will be, made available to Enterprises, to the extent available in TBG's Dallas offices (but no representation or warranty is made regarding the accuracy thereof): (1) the basis of assets, (2) the current and accumulated earnings and profits, (3) the amount of any net operating loss, net capital loss, unused investment credit or other credit, and excess charitable contributions, (4) the amount of any deferred gain or loss arising out of any intercompany transaction, and (5) all items of income or gain reported for financial accounting purposes in any pre-Closing period that is required to be included in taxable income for any post-Closing period (in accordance with Statement of Financial Accounting Standards 109). (b) Filing of Returns. The Shareholders' Representative shall be responsible, at the TBG Shareholders' expense, for preparing and filing, or causing TBG's Accountants to prepare and file, all Returns for the taxable periods ending on or before the Closing Date. In preparing such Returns, the Shareholders' Representative (or such accounting firm, as the case may be) shall not, without Enterprises' prior consent, deviate from the manner in which any item of income or expense of TBG or its Subsidiary was reported in the prior period, except as required by changes in Applicable Law. Without the prior consent of Enterprises or except as required by the preceding sentence, the Shareholders' Representative shall not propose on or in any such Returns to make any election to take any action or position which might have an adverse impact on TBG or any consolidated group of which it is considered a part for tax purposes with respect to any period ending after the Closing Date. Such 45 Returns shall be submitted to Enterprises for review at least 15 39 Business Days before the earlier of the filing or due date for any such Returns. Enterprises shall cause an appropriate officer of TBG or its Subsidiary or the legal successor thereof to sign such Returns (which officer may, by appointment by Enterprises and at Enterprises' direction, be a former officer of TBG). Enterprises shall be responsible for filing or causing TBG to file all Returns for taxable periods ending subsequent to the Closing Date. (c) Control of Audits. Notwithstanding Section 6.07, the Shareholders' Representative shall, at the expense of the TBG Shareholders, control and conduct any audit of, and settle any matter relating to, liability for Taxes, refunds or adjustments related to the Taxes of TBG and any Subsidiary for all taxable periods ending on or before the Closing Date; provided, however, that, without Enterprises' consent (which shall not be unreasonably withheld or delayed), (1) any matter in connection with any tax return of TBG or its Subsidiary which could affect TBG's or its Subsidiary's liabilities, refunds or adjustments for any period following the Closing Date shall not be changed or adjusted; and (2) the Shareholders' Representative will not consent to or acquiesce to any action which would increase the liabilities of TBG or its Subsidiary for Taxes in excess of the amount accrued as current liabilities for Taxes in the TBG Adjusted Consolidated Working Capital. (d) Cooperation. Enterprises and the Shareholders' Representative shall, upon reasonable notice, provide each other with the right to have access to, and to copy and use, any records or information that may be relevant in connection with the preparation of any Tax returns, or any audit or other examination by any authority or any judicial or administrative proceeding relating to liability for Taxes. Enterprises and the Shareholders' Representative shall provide each other with such additional cooperation and assistance in matters related to Taxes as may be reasonably requested. Without limiting the foregoing, promptly after the Closing the Shareholders' Representative shall cause to be delivered to Enterprises copies of all federal and state income Tax Returns of TBG and any Subsidiary for taxable periods ending on December 31, 1986 through and including December 31, 1994. The party requesting access or assistance hereunder shall reimburse the other party for reasonable out-of-pocket expenses incurred by it in providing such access or assistance. Any position taken by Enterprises on a Tax return with respect to an item for which the TBG Shareholders bear economic responsibility under the provisions of this Agreement shall be defended by Enterprises in good faith. 5.08 TBG Shareholders' Approval. This Agreement and the transactions contemplated hereby will be submitted to the TBG Shareholders (and Southwest, in its capacity as a holder of TBG Shares) for their approval. Subject to the fiduciary duties of the Board of Directors of TBG under Applicable Law, TBG shall use its best efforts to obtain TBG shareholder approval and adoption of this Agreement and the transactions contemplated hereby (the "TBG Shareholders' Approval"). 46 5.09 Certain Obligations Under the Shareholders' 40 Representative Agreement. Enterprises acknowledges and agrees to its obligations set forth in Section 4.4 and Section 4.6 of the Shareholders' Representative Agreement as binding on it even though it is not a party to such agreement. 5.10 Certain Payments to Employees. Promptly after the Closing, Enterprises shall cause TBG to make payments to employees in the amounts specified in Exhibit B. 5.11 Employee Matters. (a) Continued Employment. Enterprises acknowledges and agrees that it shall cause TBG and its Subsidiary to continue to employ their respective employees immediately after the Closing subject to compliance with Enterprises' written policies distributed to employees (the "Continuing TBG Employees"), but the foregoing does not give any person the right to be employed or restrict in any way TBG's and/or its Subsidiary's and/or Enterprises' right to terminate any person's employment after the Closing. (b) Employee Benefit Plans. Except as specifically provided in this Section 5.11: (i) nothing in this Agreement obligates Enterprises to cause TBG and/or its Subsidiary to continue any existing Employee Benefit Plan for the Continuing TBG Employees; and (ii) without limiting the foregoing, TBG and/or its Subsidiary may amend or terminate any existing plan subject to applicable law and the plan terms. If Enterprises offers Continuing TBG Employees participation in an Enterprises plan in lieu of (or in addition to) an Employee Benefit Plan maintained by TBG or its Subsidiary, then Enterprises will give such employees credit for years of service with TBG or its Subsidiary or any predecessor in interest for purposes of participation, vesting and eligibility for early retirement benefits, but not necessarily for purposes of accrual of benefits. (c) Severance Payments. Enterprises agrees that it will cause TBG and/or its Subsidiary to make payments in accordance with the severance policy in a lump sum amount to each Continuing TBG Employee terminated after the Closing pursuant to the following formula: Four days pay for each year of service (the daily rate is calculated by dividing 260 into the employee's salary) Four days pay for each year over age 40 Five days pay for each $10,000 of base pay Receipt of a separation package is contingent upon the terminated employee signing a release and waiver of liability for his or her termination. Also, separation packages will not be made available to employees terminated for fraud, misconduct, or other acts of bad faith. Such payments shall not be reduced or otherwise affected by the fact that any otherwise eligible person obtains employment with another person during the period in which severance payments 47 are being made. Upon the termination of employment of any of the 41 Continuing TBG Employees entitled to such severance payments, TBG or its Subsidiary shall inform such terminated employees of their rights to such severance payments. (d) Bonus Plan. Enterprises will cause TBG and/or its Subsidiary to make payments under the Company-wide "Annual Performance Incentive" bonus plan described in Disclosure Schedule 5.11(d) to be made in such amount accrued on TBG's books at the Closing Date and such payments relating to periods through the Closing Date shall be taken into account in determining the adjustment to the Exchange Consideration pursuant to Section 1.04. 5.12 No Cancellation of Officer and Director Insurance. Enterprises will not, and it shall cause each of its current and future subsidiaries and affiliates not to, cancel any insurance providing coverage to TBG and its Subsidiary for officers' and directors' acts and omissions in such capacity. 5.13 Public Announcements. No public announcement shall be made with regard to the transactions contemplated by this Agreement without the prior consent of TBG and the Buyers; provided, however, that either TBG or the Buyers may make such disclosure if it is required to do so by Applicable Law. TBG and the TBG Shareholders, on the one hand, and the Buyers, on the other, agree that they will not make any disclosures about the contents of this Agreement or cause the contents hereof to be publicized in any manner whatsoever by way of interviews, responses to questions or inquiries, press releases or otherwise, or otherwise disclose any aspect of the transactions provided for hereunder, without prior notice to and approval of the other party, except for disclosure to the employees as coordinated with TBG and the Buyers and otherwise to employees, attorneys, accountants and advisors to the parties having a need to know, to the TBG Shareholders, and except as may otherwise be required by Applicable Law; provided, further, that if either party determines that it is required by Applicable Law or its prior disclosure practices to make any such disclosure, then it will notify the other party prior to making such disclosure in order to permit the other party to obtain an appropriate protective order. TBG and the Buyers will in all events discuss any public announcements or disclosures concerning the transactions contemplated by this Agreement with the other party prior to making such announcements or disclosures. 5.14 Current Public Information. At all times after the Effective Time, Enterprises shall file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations promulgated thereunder, and will take such further action as any holder of Enterprises Common Stock issued in the Exchange may reasonably request, all to the extent required from time to time to enable such holder to sell Enterprises Common Stock without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act. Upon the request of any holder of Enterprises Common Stock issued in the Exchange, Enterprises shall deliver to such holder a written statement as to whether it has complied with such reporting requirements. 48 5.15 Brokers. TBG and the TBG Shareholders hereby 42 represent and warrant for the benefit of Buyers that all negotiations relative to this Agreement and the transactions described herein have been conducted by TBG and the TBG Shareholders directly with Buyers, without the assistance or intervention on behalf of TBG or the TBG Shareholders by any other person which would give rise to any valid claim against Buyers, TBG or the TBG Shareholders for a finder's fee, brokerage commission, investment adviser's fee or other like payment, except for any fees and expenses due Overend & Company, Inc., which shall be paid by the TBG Shareholders. 5.16 Consent as to Representation. Enterprises and Southwest each acknowledge that the law firm of Sutherland, Asbill & Brennan LLP is expected, after the Exchange, to represent the TBG Shareholders and the Shareholders' Representative in connection with this Agreement and agrees that it shall be entitled to represent the TBG Shareholders and the Shareholders' Representative in any disputes that arise concerning this Agreement or any other agreement to be delivered pursuant to this agreement and waives any conflict of interest that may result from its representing TBG under this Agreement or otherwise. ARTICLE VI CERTAIN POST-CLOSING EXCHANGE CONSIDERATION ADJUSTMENTS To provide for a return of some or all of the Exchange Consideration to Enterprises under certain circumstances, and to provide for the payment of increased Exchange Consideration to the TBG Shareholders under other circumstances, based upon breaches of certain representations and warranties and non- compliance with certain covenants and as otherwise provided in this Article VI or under Article VI of the CCBG Agreement, the parties agree to the following limitations and procedures for a post-Closing Exchange Consideration adjustment, which shall be in addition to and not in lieu of the post-Closing adjustments provided for in Section 1.04 of this Agreement. The TBG Shareholders acknowledge that they are obligated to make adjustments to the "Merger Consideration" (as defined in the CCBG Agreement) with respect to matters involving TBG and its Subsidiary, but only to the extent provided in the CCBG Agreement. 6.01 Certain Definitions. For the purposes of this Article VI, the following definitions apply: "Buyers' Protected Parties" means Enterprises, the TBG Companies, the CCBG Companies, and their affiliated companies and any successors or assigns thereto. "Claim" or "Claims" means, as the context may require, a claim or claims for Losses asserted under this Article VI. "Claimant" means the person or entity asserting a Claim. 49 "Finally Resolved" means that the amount due to the 43 Claimant has been finally determined under the provisions of Section 6.06 or by the decision of a court of competent jurisdiction from which there is no further appeal. "Loss" or "Losses" means losses, liabilities, damages, costs (including required (but not permissive) indemnification expenses to officers, directors, employees and agents of any of Buyers' Protected Parties and court costs) and expenses (including the reasonable fees and expenses of attorneys and accountants relating to Claims based on Third Party Actions). "Recipient of Claim" means (1) the Shareholders' Representative, if the Claim is asserted under Section 6.02(a), (2) the TBG Shareholder against whom the Claim is asserted, if the Claim is asserted under Section 6.02(b), and (3) Enterprises, if the Claim is asserted under Section 6.04. "Stock Claims" means a Claim based upon a breach of a Stock Representation. "Stock Representations" means the several representations and warranties of the TBG Shareholders in the Transmittal Letters. "Third Party" means a person or entity other than the parties to this Agreement and/or the CCBG Agreement and their affiliates. "Third Party Action" means a proceeding, demand or controversy (1) in which an asserted Loss arises from a Claim by a Third Party and (2) which is the basis for a Claim. The Tax matters dealt with specifically in Section 5.07(b) shall not be subject to Section 6.07. 6.02 Post-Closing Reduction of Exchange Consideration. (a) Certain CCBG and TBG Representations and Warranties and Other Matters. The TBG Shareholders acknowledge that they are obligated to make adjustments to the Merger Consideration with respect to matters involving TBG and its Subsidiary, but only to the extent provided in the CCBG merger agreement. (b) TBG Shareholder Representations, Warranties and Covenants. Subject to the limitations contained herein, the Exchange Consideration otherwise payable to any individual TBG Shareholder shall be reduced by the amount of any Losses actually suffered or incurred by any of Buyers' Protected Parties arising out of or with respect to any breach or inaccuracy of the Stock Representations of such TBG Shareholder and any breach or non- compliance by such TBG Shareholder with respect to any covenant or agreement made in such TBG Shareholder's Transmittal Letter. (c) No Subrogation, Etc. Except as provided in Section 6.03(a), no TBG Shareholder shall have any rights whatsoever against any of the TBG Companies or the CCBG 50 Companies, by way of subrogation or otherwise, for contribution 44 or indemnity or any other payment whatsoever for any reduction to the Exchange Consideration that may occur under this Article VI. 6.03 Limitations on Reduction of Exchange Consideration. (a) Reduction of Losses. The amount of Losses suffered by Buyers' Protected Parties shall be reduced by the amount, if any, of the recovery (reduced by the cash Taxes actually payable with respect to such recovery and any reasonable expenses actually incurred in obtaining such recovery) Buyers' Protected Parties shall have received with respect thereto from any other person or entity (including any insurance recovery and the present value of any income tax benefit). If such a recovery is received by any of Buyers' Protected Parties after it receives a payment or other credit under this Agreement with respect to Losses, then a refund equal in aggregate amount of the recovery, net of cash Taxes actually payable and expenses actually incurred, shall be made promptly to the TBG Shareholders in accordance with their respective TBG Interests. (b) Maximum Liability and Payment -- Stock Claims. The maximum liability of the TBG Shareholders for Stock Claims, and the manner of payment, shall be as follows: (i) the maximum liability of any TBG Shareholder for any Losses for Stock Claims shall be the aggregate amount of the Exchange Consideration received by such TBG Shareholder. (ii) Within 10 Business Days after a Stock Claim has been Finally Resolved, such TBG Shareholder shall pay to Enterprises the full amount of such Claim. 6.04 Increase in Exchange Consideration. The Exchange Consideration shall be increased by the amount of any Losses suffered or incurred by the TBG Shareholders as a result of or with respect to any breach of any representation, warranty, covenant or agreement by the Buyers contained in this Agreement or any other agreement or instrument executed and delivered by Buyers in connection with the transactions contemplated herein. Such increase shall be paid by Enterprises in Enterprises common stock (valued at the Notional Value) to the TBG Shareholders in accordance with their respective TBG Interests. In no event shall the Buyers' aggregate liability for Losses hereunder and under the CCBG Agreement exceed $25,000,000 (but not with respect to the payment of the Exchange Consideration pursuant to Section 1.03 or Section 1.04 or claims that may exist under applicable securities laws). 6.05 Time Limitations for Assertion of Claims. (a) Survival. Only the Stock Claims, Tax Claims, Environmental Claims and Competition Claims shall survive the Closing, as follows: (i) Stock Claims will survive the Closing indefinitely; 51 (ii) Tax Claims will survive the Closing for 45 the longest applicable statute of limitations, plus 90 days, it being specifically understood that a Tax Claim may be made prior to the Claimant's having made actual payment, as contemplated under Section 6.02(a)(i)(B) or Section 6.02(a)(i)(C), and (iii) Environmental and Competition Claims shall survive the Closing for 18 months. (b) Post-Closing Acts or Omissions. There shall be no reduction of the Exchange Consideration for Losses accruing after the Closing Date which arise from Claims made with respect to acts or omissions occurring after the Closing Date even though those acts or omissions are consistent with, or a continuation of, those preceding the Closing Date; provided, however, that nothing in the foregoing sentence shall in any way limit the ability of the Buyers to achieve a reduction of the Exchange Consideration for Losses accruing from Claims made with respect to such pre-Closing acts or omissions. 6.06 Procedure for Claims. (a) Generally. Claimants must assert Claims as promptly as practicable and no later than the expiration of the applicable period provided in Section 6.05(a). Each Claim must be in writing and set forth in reasonable detail the basis for the Claim and the Section of this Agreement under which the Claim arises. (b) To Whom Sent. For Claims against one or more individual TBG Shareholders pursuant to Section 6.02(b), the Notice of a Claim shall be sent to the individual TBG Shareholder(s). Notice of a Claim by one or more TBG Shareholders for an increase of the Exchange Consideration shall be sent to Enterprises. (c) Response by Recipient. The Recipient of a Claim shall, within 30 days after receipt of the Claim, give notice to the Claimant either that he accepts the Claim or objects to the Claim. If no notice is given within such period, it shall be conclusively presumed that the Recipient of Claim has accepted the Claim. If the Recipient of Claim timely objects to the Claim, the Claimant and the Recipient of Claim shall negotiate in good faith to determine the amount, if any, of the Loss. If no resolution of the Claim has occurred within 90 days after the receipt of the Claim by the Recipient of Claim, then either party may institute proceedings in a court of competent jurisdiction to resolve the Claim. (d) Payment Notice to the TBG Shareholders by the Shareholders' Representative. Whenever a Loss becomes Finally Resolved, the Shareholders' Representative shall promptly notify each TBG Shareholder of the amount of any payment required to be made by the TBG Shareholders pursuant to this Article VI and that portion for which each TBG Shareholder is liable. Each payment from the TBG Shareholders is due to Enterprises no later than 10 Business Days from the date on which the foregoing notice to the TBG Shareholders is given by Enterprises; provided, however, that payments may be deferred until the earlier to occur of (1) the 52 total payments being at least $100,000 and (2) the next calendar 46 quarter end at least 10 Business Days after an Open Item becomes conclusive and binding. 6.07 Third Party Action. When a Claim involves a Third Party Action, the Recipient of Claim shall have the option to prosecute or defend, at its expense, the Third Party Action, unless the potential liability of the Claimant in the Third Party Action exceeds the maximum liability of the Recipient of Claim established under Section 6.03 or Section 6.04. If the Recipient of Claim does not or cannot elect this option, the Claimant shall diligently prosecute or defend such claim as if it were paying any Losses arising from the Claim, but the Claimant shall not settle such Claim without the consent of the Recipient of Claim, which shall not be unreasonably withheld or delayed. If the Recipient of Claim has undertaken to prosecute or defend the Third Party Action, as permitted herein, then (1) the Claimant may participate, at its own expense, in any and all proceedings related to the Third Party Action and shall be entitled to receive copies of all notices and pleadings or other submissions in any judicial or regulatory proceeding, (2) there shall be no settlement of the Third Party Action without the consent of the Claimant (which shall not be unreasonably withheld or delayed), and (3) if the Claim is fully satisfied, the Recipient of Claim shall be subrogated to all rights and remedies of the Claimant. If the Recipient of Claim submits to the Claimant a bona fide settlement offer from the Third Party Claimant (which settlement offer shall include as an unconditional term of it the release by such Third Party of the Claimant from all liability in respect of such Claim) and the Claimant refuses to consent to such settlement, then thereafter the Recipient of Claim's liability to the Claimant under this Article VI with respect to such Third Party Action shall not exceed the settlement amount included in said bona fide settlement offer, and the Claimant shall either assume the defense of such Third Party Action or pay the Recipient of Claim's attorney's fees and other out-of-pocket costs incurred thereafter in continuing the defense of such Third Party Action. All parties to this Agreement shall cooperate in the defense and prosecution of Third Party Actions and shall furnish such records, information and testimony, and shall attend such conferences, discovery proceedings, hearings, trials and appeals, as may be reasonably requested in connection therewith. 6.08 Investigations. No investigation or other examination of TBG or its Subsidiary by the Buyers or of the Buyers by TBG shall affect the survival of any representations, warranties or covenants contained herein. 6.09 Exclusive Remedy. If the Closing occurs, then the remedies provided in this Article VI constitute the sole and exclusive remedies for recoveries against another party for breaches or failures to comply with or non-fulfillment of the representations, warranties, covenants and agreements in this Agreement or in the exhibits, schedules and other attachments to this Agreement or in any agreement, instrument or document executed and delivered by a party pursuant to this Agreement and for the matters specifically listed in this Article VI; provided, however, that nothing in this Agreement shall limit the right of 53 a party to sue at law or in equity, without following the 47 procedures set forth in Section 6.06 of this Agreement: (1) to enforce the performance of the procedures of this Article VI or any other covenant or agreement in this Agreement or of any contract, document or other instrument executed and delivered pursuant to this Agreement by any remedy available to it at law or in equity; (2) to recover damages suffered by the failure of a party to pay expenses required to be paid related to the transactions contemplated by this Agreement; or (3) to recover for common law fraud. ARTICLE VII THE CLOSING 7.01 Time, Date and Place of Closing; Articles of Exchange. The payments and deliveries contemplated by this Agreement to be made at the Closing shall be made at the offices of Sutherland, Asbill & Brennan LLP, 999 Peachtree Street, Atlanta, Georgia, at 2:00 p.m., local time, on June 5, 1998, or, if later, one Business Day after all the conditions to Closing have been satisfied or such other date and location as may be mutually agreeable, and immediately thereafter the Articles of Exchange to be executed and delivered pursuant to Section 7.05(b) and Section 7.06(b) shall be filed with the Secretary of State of Nevada. The date on which the last of such payments, deliveries and filings occurs is the "Closing Date," and the events comprising such payments, deliveries and filings are collectively the "Closing." 7.02 Events Comprising the Closing. The Closing shall not be deemed to have occurred unless and until the payments, deliveries and filings contemplated by Section 7.01 have been made, and none of these items shall have been deemed to be paid, delivered or filed unless and until all of them have been paid, delivered or filed. 7.03 Conditions to Obligations of Buyers. The obligations of Buyers to make the deliveries and payments under this Article VII are subject to the fulfillment prior to or at the Closing Date of each of the following conditions, any one or more of which may be waived by Enterprises: (a) Representations and Warranties. The representations and warranties of the TBG Shareholders contained in the Transmittal Letters and of TBG contained in Article III hereof shall be true as of the date when made and again as of the Closing Date as if made on such date (except for changes permitted or contemplated by this Agreement and disregarding any time, materiality or knowledge qualifiers) and the Buyers shall not be aware of any Competition Claims as of the Closing Date, or, to the extent they are not true or Buyers are aware of such Competition Claims, the Buyers' aggregate Losses from such breach(es) and from such Competition Claims of which Buyers are aware would not reasonably be expected to exceed $1 million. In making the estimation of expected Losses, the otherwise applicable Deductibles shall not be considered. (b) Compliance. The TBG Shareholders and TBG shall have performed and complied in all material respects with all agreements and conditions required by this Agreement to be 54 performed or complied with by them prior to or at the Closing 48 Date. (c) Governmental Actions. No Governmental Authority shall have instituted any action, suit or proceeding, or given notice of its intent to do so, that has not subsequently been withdrawn, dismissed with prejudice or otherwise eliminated, which in the reasonable opinion of Enterprises and its counsel has or is likely to have a material and adverse effect on the transactions contemplated by this Agreement. (d) Adverse Change. Neither TBG nor its Subsidiary has suffered any material adverse change in its respective business, prospects, financial condition, working capital, assets, liabilities (absolute, secured, contingent or otherwise), reserves or operations; provided, however, that a material adverse change shall not be deemed to have occurred by reason of (1) the seasonal nature of the business, (2) a change in the business or assets of TBG after the date of this Agreement either contemplated by this Agreement or its Exhibits and Schedules or relating solely to market conditions beyond the control of TBG, or (3) damage or destruction to the property or assets that is reasonably insured and can be replaced or restored without long-term disruption of the business of TBG or its Subsidiary taken as a whole. (e) Consents. Buyers shall have received (1) commitments from Dr Pepper Company that it will consent to the Exchange and will enter into its standard form production, sale and distribution agreements for such soft drink products with Southwest, TBG or Enterprises, including any special provisions which Enterprises has in its other agreements with it in other territories, and (2) any other consents required as a result of the Exchange, the failure to obtain would have a material adverse effect on TBG and its Subsidiaries taken as a whole. (f) Satisfactory Documents. All agreements, certificates, opinions and other documents delivered by TBG or the TBG Shareholders to Buyers hereunder, the form of which is not prescribed in this Agreement or an Exhibit hereto, shall be in form and substance reasonably satisfactory to Enterprises. (g) Delivery of Shares. Each holder of a certificate or certificates representing TBG Exchange Shares shall have (1) surrendered such certificate(s) to Enterprises, and (2) delivered to Enterprises (A) an executed Transmittal Letter in the form of Exhibit E (the "Transmittal Letter") and (B) such other documents as may be necessary to establish an exemption from registration for the Enterprises Common Stock under the Securities Act and any applicable state blue sky laws. (h) Copies of Resolutions. TBG shall have delivered certified copies of the resolutions of the TBG Board of Directors and the TBG Shareholders authorizing the consummation of the transactions herein contemplated. (i) Opinion. TBG and its Subsidiary shall have delivered an opinion of counsel, dated the Closing Date, in the form of Exhibit F. 55 (j) Approvals. All governmental approvals 49 regarding the proposed transaction shall have been obtained and all waiting periods shall have expired without further requests for information. (k) CCBG Merger. The Merger (as defined in the CCBG Agreement) shall be effective. (l) Upstream Merger. The Upstream Merger shall be effective. (m) Termination of Certain TBG Agreements. The agreements listed in Disclosure Schedule 7.03(m) shall have been terminated. 7.04 Conditions to Obligations of TBG. The obligations of TBG to make the deliveries under this Article VII and to close this transaction are subject to the fulfillment prior to or at the Closing Date of each of the following conditions, any one or more of which may be waived by TBG: (a) Representations and Warranties. The representations and warranties of Buyers contained in Article IV shall be true as of the date when made and as of the Closing Date as if made on such date or, to the extent they are not true, the TBG Shareholders' aggregate Losses from such breach(es) would not reasonably be expected to exceed $1 million. (b) Compliance. Buyers shall have performed and complied in all material respects with all agreements and conditions required by this Agreement to be performed or complied with by them prior to or at the Closing Date. (c) Governmental Action. No Governmental Authority shall have instituted any action, suit or proceeding, or given notice of its intent to do so, that has not subsequently been withdrawn, dismissed with prejudice or otherwise eliminated, which in the reasonable opinion of TBG and its counsel has or is likely to have a material and adverse effect on the transactions contemplated by this Agreement. (d) Approval of TBG Shareholders. The execution, delivery and performance of this Agreement (including the payments contemplated by this Agreement) and the Exchange shall have been approved by all of the TBG shareholders (including Southwest). (e) Satisfactory Documents. All agreements, certificates, opinions and other documents delivered by Buyers to TBG hereunder, the form of which is not prescribed in this Agreement or an exhibit hereto, shall be in form and substance reasonably satisfactory to TBG. (f) Opinion of Counsel. Buyers shall have delivered an opinion of counsel dated the Closing Date, in the form of Exhibit G. 56 (g) Approvals. All governmental approvals 50 regarding the proposed transaction shall have been obtained and all waiting periods shall have expired without further requests for information. (h) CCBG Merger. The Merger shall be effective. (i) Copies of Resolutions. Buyers shall have delivered certified copies of the resolutions of the respective Board of Directors of the Buyers and of the sole shareholder of Southwest authorizing the consummation of the transactions herein contemplated. 7.05 Deliveries by TBG at the Closing. TBG shall deliver the following at the Closing: (a) Certificate. A certificate dated the Closing Date executed by a Co-Chairman and the Secretary of TBG certifying to the best of TBG's knowledge that (1) solely for purposes of the Buyers determining whether the Closing conditions in Section 7.03 have been met, the representations and warranties of TBG hereunder are true and correct on the Closing Date as if made on and as of such date except for changes contemplated by this Agreement or permitted by this Agreement or if not, to what extent they are not and that there are no Competition Claims or if there are, the extent to which there are such Competition Claims, (2) the TBG Shareholders and TBG have performed and complied with all agreements and covenants required by this Agreement to be performed or complied with by them prior to or at the Closing or if not in what respects they have not, (3) the applicable conditions precedent to the obligations of TBG hereunder have been fulfilled or waived or if not in what respects they are not, and (4) the Shareholders' Representative Agreement has been signed by each TBG Shareholder. (b) Articles of Exchange. The Articles of Exchange, executed by TBG. (c) Minute Books. The minute books, stock books and corporate seal of TBG and its Subsidiary. (d) Resignation. The resignation, dated as of the Closing Date, of each director and officer of TBG and its Subsidiary, as such, [but not as an employee]. (e) Other. Such other documents, certificates and opinions as the Buyers may reasonably and timely request to document or to consummate more effectively the transactions contemplated by this Agreement or to evidence the compliance by TBG, the TBG Shareholders or TBG's Subsidiary with any condition or obligation in this Agreement. 7.06 Deliveries by Enterprises at the Closing. Enterprises shall deliver the following at the Closing: (a) Certificates. A certificate dated the Closing Date executed by the Chairman, President or Vice President and the Secretary or Assistant Secretary of each of the Buyers certifying to the best of Enterprises' knowledge that (1) the representations and warranties of each of the Buyers 57 hereunder are true and correct on the Closing Date as if made on 51 and as of such date or if not, to what extent they are not, (2) each of the Buyers has performed and complied with all agreements, covenants and conditions required by this Agreement to be performed or complied with by Buyers prior to or at the Closing or if not in what respects they have not, and (3) the applicable conditions precedent to the obligations of Buyers hereunder have been fulfilled or waived or if not in what respects they are not. (b) Articles of Exchange. The Articles of Exchange, executed by Southwest. (c) Exchange Consideration. The Estimated Exchange Consideration, delivered in accordance with Section 1.03 (b). (d) Other Documents. Such other documents, certificates and opinions as TBG may reasonably and timely request to document or to consummate more effectively the transactions contemplated by this Agreement or to evidence the compliance by the Buyers with any condition or obligation in the Agreement. ARTICLE VIII TERMINATION AND ABANDONMENT 8.01 Termination and Abandonment. This Agreement may be terminated at any time and the Exchange abandoned at any time prior to the Closing without liability of any party to any other party, except as provided in Section 8.02 below, under the following circumstances: (a) Mutual Agreement. The mutual written agreement of TBG, pursuant to a resolution approved by its board of directors, and Enterprises. (b) TBG. By the board of directors of TBG if the Closing has not occurred before July 15, 1998 because all conditions to TBG's obligations have not been satisfied or waived or because Buyers have not made all required deliveries, unless the Closing has not occurred solely because of a Governmental Objection. (c) Enterprises. By Enterprises if the Closing has not occurred before July 15, 1998 because all conditions to Buyers' obligations have not been satisfied or waived or because TBG has not made all required deliveries, unless the Closing has not occurred solely because of a Governmental Objection. (d) Governmental Authority. Either TBG or Enterprises may terminate by written notice to the other if any action or proceeding shall have been instituted before any Governmental Authority or, to the knowledge of the party giving such notice, shall have been threatened formally in writing by any Governmental Authority with requisite jurisdiction, to restrain or prohibit the transactions contemplated by this Agreement or to subject one or more of the parties or their directors or their officers to liability on the grounds that it 58 or they have breached any law or regulation or otherwise acted 52 improperly in connection with such transactions (a "Governmental Objection"), and such action or proceeding shall not have been dismissed or otherwise eliminated or such written threat shall not have been withdrawn or rescinded or otherwise eliminated before July 15, 1998. 8.02 Rights and Obligations Upon Termination. Upon the termination of this Agreement, no party shall have any further obligation to the other, except that (1) unless terminated by mutual agreement or pursuant to Section 8.01(d), no termination of this Agreement under any provision of this Article VIII shall prejudice any claim a party may have under this Agreement that arises prior to the effective date of such termination, and (2) termination of this Agreement shall not terminate or otherwise affect the rights and obligations set forth in Section 5.02 and Section 5.13 of this Agreement (which shall survive termination as independent obligations). 8.03 Return of Confidential Information. If this Agreement is terminated and abandoned as provided in this Article VIII, each party will, at the request of the other, return all documents, work papers and other material of the requesting party, including all copies thereof, relating to the transactions contemplated by this Agreement, whether so obtained before or after the execution of this Agreement, to the party furnishing the same, and all information received by any party to this Agreement with respect to the business of any other party shall not at any time be used for the advantage of, or disclosed to third parties by, such party to the detriment of the party furnishing such information except as may be required by law; provided, however, that this shall not apply to any document, work paper, material, or any other information which is a matter published in any publication for public distribution or filed as public information with any Governmental Authority or is otherwise in the public domain. ARTICLE IX MISCELLANEOUS PROVISIONS 9.01 Good Faith; Further Assurances. The parties to this Agreement shall in good faith undertake to perform their obligations under this Agreement, to satisfy all conditions, and to cause the transactions contemplated by this Agreement to be carried out promptly in accordance with the terms of this Agreement. Upon the execution of this Agreement and thereafter, the parties hereto shall do such things as may be reasonably requested by the other parties hereto in order more effectively to consummate or document the transactions contemplated by this Agreement. 9.02 Notices. All notices, communications and deliveries under this Agreement: (1) shall be made in writing, signed by the party making the same; (2) shall specify the Section of this Agreement pursuant to which it is given; (3) shall either be delivered in person or by telecopier or a nationally recognized next business day delivery service for next business day delivery; (4) shall be deemed given (x) if delivered in person, on the date delivered, (y) if sent by telecopier, on 59 the date transmitted (if the party, or its employee or agent, 53 giving the notice has no reason to believe that the transmission was not made or received); or (z) if sent by a nationally recognized next business day delivery service for next business day delivery (with cost prepaid), on the first Business Day after so sent; and (5) shall be deemed received (x) if delivered in person, on the date of personal delivery, (y) if telecopied, on the first Business Day after transmitted (if the party giving the notice, or its employee or agent, has no reason to believe that the transmission was not made or received), or (z) if sent by a nationally recognized next business day delivery service for next business day delivery, on the first Business Day after so sent. Such notice shall not be effective unless copies are provided contemporaneously as specified below, but neither the manner nor the time of giving notice to those to whom copies are to be given shall control the date notice is given or received. The addresses and requirements for copies are as follows: To Buyers: Mr. John R. Alm Executive Vice President and Chief Financial Officer Coca-Cola Enterprises Inc. 2500 Windy Ridge Parkway Atlanta, Georgia 30339 with a copy to: Mr. E. Liston Bishop III Miller & Martin 1000 Volunteer Building 832 Georgia Avenue Chattanooga, Tennessee 37402-2289 * * * * * * * To TBG (prior to Closing): Suite 3300 1999 Bryan Street Dallas, Texas 75201 Attn: Mr. Robert K. Hoffman To the Shareholders' Representative or to the TBG Shareholders, in care of the Shareholders' Representative: Mr. Robert K. Hoffman Suite 3300 1999 Bryan Street Dallas, Texas 75201 To individual TBG Shareholders, at the addresses stated in their respective Transmittal Letters. 60 in either case with a copy to: 54 Mr. Thomas B. Hyman, Jr. Sutherland, Asbill & Brennan LLP 999 Peachtree Street Atlanta, Georgia 30309 and Mr. George D. Overend Overend & Company, Inc. Suite 200 -- Building B 2900 Paces Ferry Road, NW Atlanta, Georgia 30339 or to such representative or to such other address as the parties hereto may furnish to the other parties in writing. If notice is given pursuant to this Section 9.02 of a permitted successor or assign of a party to this Agreement, then notice shall be given as set forth above to such successor or assign of such party. 9.03 Definition of Knowledge. For the purposes of this Agreement: (a) TBG. The phrases "to TBG's knowledge" or "to its knowledge" and variations of them when used with respect to TBG shall refer to all matters actually known to any of Edmund M. Hoffman, Robert K. Hoffman, Charles F. Stephenson, E. T. Summers III and Stephanie L. Ertel or which any of them had any reason to know. (b) Enterprises. The phrases "to Buyers' knowledge" and variations thereof when used with respect to Buyers shall refer to all matters actually known to any of John R. Alm, G. David Van Houten, Jr. and Cornel R. Pike or which any of them had reason to know. 9.04 Assignment. This Agreement is binding upon the parties hereto, and their respective legal representatives, heirs, successors and assigns, and inures to the benefit of the parties and their respective legal representatives, heirs, legatees, devisees, beneficiaries and other permitted successors and assigns (and to or for the benefit of no other person whatsoever). No assignment or transfer of rights and obligations hereunder shall be made except with the prior written consent of the parties hereto, except that Enterprises need not obtain TBG's or TBG Shareholders' consent to Enterprises' assignment of rights and delegation of obligations under this Agreement to an affiliated corporation of Enterprises (which, for purposes of this Agreement, shall be limited to any of Enterprises' direct wholly-owned subsidiaries) that expressly assumes such liabilities and obligations and except that a TBG Shareholder need not obtain any other party's consent to any transfer or assignment of rights and obligations under this Agreement, in whole or in part, upon the death of a TBG Shareholder or upon distributions from a non-individual TBG Shareholder to the heirs, legatees or devisees of a deceased TBG Shareholder or to such other distributees (who take subject to the representations, warranties, covenants and agreements of this Agreement). In the event of a successor to a TBG Shareholder, his TBG Interest as 61 reflected in Disclosure Schedule 3.01 shall be allocated among 55 his successors as certified to the parties and to the Shareholders' Representative by an appropriate party. Without limiting the foregoing or any other provision of this Agreement or the agreements to be delivered pursuant to it (and thus acknowledging that the failure or refusal to accomplish the following does not affect the foregoing), the TBG Shareholders shall undertake in good faith to have any heir, legatee, devisee, beneficiary, personal representative or other successor or assign of a deceased or incapacitated TBG Shareholder ratify and confirm the agreements and obligations of such TBG Shareholder (including the authority of the Shareholders' Representative) under this Agreement and under the other agreements to be delivered pursuant to this Agreement (including the Shareholders' Representative Agreement). Enterprises shall remain liable for the prompt payment and performance of all the assigned, transferred or assumed obligations under this Agreement, which obligation shall be a primary obligation for full and prompt payment and performance rather than a secondary guaranty of collection. 9.05 Captions; Definitions. The titles or captions of articles, sections and subsections contained in this Agreement are inserted only as a matter of convenience and for reference and in no way define, limit, extend or describe the scope of this Agreement or the intent of any provision hereof and shall not be considered in the interpretation or construction of this Agreement in any proceeding. The parties agree to all definitions in the statement of parties to this Agreement. Without limiting the foregoing, the captions in the Disclosure Schedules and the descriptive language in such captions to them do not alter, expand or otherwise affect the scope of the representations and warranties in this Agreement. 9.06 Amendment; Waiver; Remedies Cumulative. This Agreement may not be altered or amended except in writing signed by Buyers, TBG (until the Closing) and the Shareholders' Representative, subject to the proviso of Section 1.01(d). The failure of any party hereto at any time to require performance of any provisions hereof shall in no manner affect the right to enforce the same. No waiver by any party hereto of any condition, or of the breach of any term, provision, warranty, representation, agreement or covenant contained in this Agreement, whether by conduct or otherwise, in any one or more instances shall be deemed or construed as a further or continuing waiver of any such condition or breach or a waiver of any other condition or of the breach of any other term, provision, warranty, representation, agreement or covenant herein contained. 9.07 No Third-Party Beneficiaries. With the exception of the parties to this Agreement and the TBG Shareholders and each of their legal representatives, heirs, and permitted successors and assigns, there shall exist no right of any person to claim a beneficial interest in this Agreement or any rights arising by virtue of this Agreement. 9.08 Exhibits; Disclosure Schedules. All Exhibits and Disclosure Schedules to this Agreement are hereby incorporated into this Agreement and hereby are made a part of this Agreement as if set out in full in the first place that reference is made thereto. 62 9.09 Counterparts; Entire Agreement. This 56 Agreement may be executed by each party upon a separate copy, and in such case one counterpart of this Agreement shall consist of enough of such copies to reflect the signatures of all of the parties to this Agreement. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement or the terms of this Agreement to produce or account for more than one of such counterparts. One or more execution pages may be detached from one copy of this Agreement and attached to another copy in order to form one or more counterparts. This Agreement shall become effective when one or more counterparts have been executed by the Buyers and TBG and delivered to such parties. This Agreement together with all schedules and exhibits hereto and all other agreements and undertakings provided for hereunder shall constitute the entire agreement of the parties and supersedes any and all prior agreements, oral or written, with respect to the subject matter contained herein. There are no other agreements, representations, warranties or other understandings between the parties in connection with this transaction which are not set forth in this Agreement or the schedules and exhibits hereto. 9.10 Time of the Essence; Computation of Time. Time is of the essence of each and every provision of this Agreement. If the last day for the exercise of any privilege or the discharge of any duty under this Agreement shall fall upon a Saturday, Sunday or any public or legal holiday, whether federal or of a state in which the party having such privilege or duty resides or has its principal place of business, then the party having such privilege or duty shall have until 5:00 p.m. local time on the next succeeding regular Business Day to exercise such privilege or to discharge such duty. 9.11 Severability. Any determination by any court of competent jurisdiction of the invalidity of any provision of this Agreement that is not essential to accomplishing its purposes shall not affect the validity of any other provision of this Agreement, which shall remain in full force and effect and which shall be construed as valid under Applicable Law. 63 DULY EXECUTED by the parties hereto, under seal, as of 57 the date first above written. COCA-COLA ENTERPRISES INC. By: /S/ LOWRY F. KLINE ------------------------------- Lowry F. Kline, Executive Vice President and General Counsel THE COCA-COLA BOTTLING GROUP (SOUTHWEST), INC. By: ------------------------------------------ Name: ----------------------------------------- Title: ---------------------------------------- TEXAS BOTTLING GROUP, INC. By: /s/ ROBERT K. HOFFMAN, PRESIDENT ------------------------------------------- Robert K. Hoffman, President 64 58 INDEX OF DEFINED TERMS
Page Defined Term Number 1954 IRC 18 1997 Financial Statements 1, 13 Accounts Receivable 14 Agreement 1 Applicable Law 10 Articles of Exchange 1 Bottling Authorizations 13 Business Day(s) 6 Buyers 1 Buyers' Documents 34 Buyers' Protected Parties 44 Capital Leases 13 CCBG 1 CCBG Share 2 CCBG Shareholder 2 CCBG Shareholders 2 CCBG Shares 2 CCBG's Accountants 5 Claim 44 Claimant 44 Claims 44 Claims Escrow Amount 4 Closing 49 Closing Adjustment Escrow Amount 3 Closing Date 49 Continuing TBG Employees 41 Difference 6 Effect of Open Items 6 Effective Time 1 Employee Benefit Plans 22 Enterprises 1 Enterprises 10-K 35 Enterprises Common Stock 4 Enterprises Financial Statements 35 Enterprises SEC Reports 35 Environmental Laws 27 Equitable Adjustment 4 ERISA 22 ERISA Affiliate 22 Estimated Merger Consideration 5 Estimated Merger Consideration Per Share 5 Exchange 1 Exchange Act 35 Finally Resolved 44 Financial Statements 13 GAAP 2 Governmental Authority 10 Governmental Objection 54 Indebtedness For Borrowed Money 13 Intellectual Property 30 Interim Financial Statements 13 Loss 44 Losses 44
65 Loyalty Payments 2 Merger Consideration 2 Merger Consideration Per Share 2 Nevada Act 1 NLRB 24 Notional Value 4 Off-Site Environmental Matters 27 Open Items 6 OSHA 24 Permitted Lien 21 Recipient of Claim 44 Remaining Estimated Exchange Consideration 4 Required Statutory Approvals 11 Returns 17 SEC 35 Securities Act 35 Shareholders' Representative 4 Shareholders' Representative Agreement 4 Specified Contracts 29 Stock Claims 45 Stock Representations 45 Subsidiary 11 Surviving Tax Representations 20 Taxes 17 TBG Adjusted Consolidated Working Capital 2 TBG Certificate of Adjustments 5 TBG Closing Date Financial Statements 5 TBG Documents 9 TBG Exchange Shares 1 TBG Interest 11 TBG Interests 11 TBG Shareholders' Approval 41 TBG Shares 2 TBG's Accountants' Post-Closing Deliveries 5 Third Party 45 Third Party Action 45 Third-Party Loans 29 to Buyers' knowledge 56 to its knowledge 56 to TBG's knowledge 56 Transmittal Letter 50 Upstream Merger 1 WARN Act 25 66 INDEX OF EXHIBITS
Exhibit Page Description of Exhibit Designation Number ----------------------- ----------- ------ Articles of Exchange Exhibit A 1 Certain Deductions Exhibit B 2 TBG Adjusted Consolidated Working Capital Exhibit C 2 Shareholders' Representative and Exhibit D 4 Escrow Agreement Transmittal Letter Exhibit E 50 TBG's Lawyers' Opinion of Counsel Exhibit F 50 Buyers' Lawyers' Opinion of Counsel Exhibit G 51
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