EXHIBIT 10.17
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AGREEMENT AND PLAN OF MERGER
Dated as of October 15, 1997
Effective as of 9:00 a.m. EST on October 15, 1997
by and among
AquaPenn Spring Water Company, Inc.
Castle Rock Spring Water Company, Inc.
Dunsmuir Bottling Company
doing business as
Castle Rock Spring Water Company
and
Certain Shareholders of Dunsmuir Bottling Company
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TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER
SECTION 1.1 The Merger........................ 1
SECTION 1.2 Effective Time of the Merger...... 1
ARTICLE II
THE SURVIVING AND PARENT CORPORATIONS
SECTION 2.1 Certificate of Incorporation...... 2
SECTION 2.2 Bylaws............................ 2
SECTION 2.3 Directors and Officers............ 2
ARTICLE III
MERGER CONSIDERATION
SECTION 3.1 Consideration..................... 2
SECTION 3.2 Conversion of Subsidiary Shares... 5
SECTION 3.3 Exchange of Certificates.......... 5
SECTION 3.4 Closing........................... 6
SECTION 3.5 Closing of the Company's Transfer Books 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUBSIDIARY
SECTION 4.1 Organization and Qualification.... 6
SECTION 4.2 Capitalization.................... 7
SECTION 4.3 Authority; Non-Contravention; Approvals 7
SECTION 4.4 Litigation........................ 8
SECTION 4.5 No Violation of Law............... 8
SECTION 4.6 Financial Statements.............. 9
SECTION 4.7 Brokers........................... 9
SECTION 4.8 Employment Agreements............. 9
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE COMPANY SHAREHOLDERS
SECTION 5.1 Organization and Qualification.... 9
SECTION 5.2 Capitalization.................... 10
SECTION 5.3 [Intentionally left blank]........ 10
SECTION 5.4 Subsidiaries...................... 10
SECTION 5.5 Authority; Non-Contravention; Approvals 11
SECTION 5.6 Financial Statements.............. 12
SECTION 5.7 Books of Account.................. 12
SECTION 5.8 Absence of Certain Changes of Events 12
SECTION 5.9 Absence of Undisclosed Liabilities 12
SECTION 5.10 Taxes............................ 13
SECTION 5.11 Title to Assets.................. 13
SECTION 5.12 Assets and Properties Complete... 14
SECTION 5.13 Access to Spring................. 14
SECTION 5.14 Water Quality.................... 14
SECTION 5.15 Contracts........................ 15
SECTION 5.16 Compliance with Agreements....... 15
SECTION 5.17 No Violation of Law.............. 15
SECTION 5.18 Litigation....................... 16
SECTION 5.19 Employee Benefit Plans; ERISA.... 16
SECTION 5.20 Labor Matters.................... 18
SECTION 5.21 Environmental Matters............ 19
SECTION 5.22 Trademarks and Intellectual
Property Compliance............ 20
SECTION 5.23 Insurance........................ 20
SECTION 5.24 Year 2000 Compliance............. 21
SECTION 5.25 Bank Accounts.................... 21
SECTION 5.26 Business Relations............... 21
SECTION 5.27 Potential Conflicts of Interest.. 22
SECTION 5.28 Disclosure....................... 22
SECTION 5.29 Brokers.......................... 22
SECTION 5.30 Resignation of Directors and
Officers....................... 22
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY SHAREHOLDERS
SECTION 6.1 Authority; Non-Contravention;
Approvals........................ 23
SECTION 6.2 Approval of Merger................ 23
SECTION 6.3 Title to Shares................... 23
SECTION 6.4 Tax-Free Reorganization........... 23
SECTION 6.5 Investment; No registration....... 24
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ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1 Expenses and Fees.................. 24
SECTION 7.2 Confidentiality.................... 24
SECTION 7.3 Parent Stock....................... 24
SECTION 7.4 Payment of Obligations............. 25
SECTION 7.5 No Checks, Wires or Withdrawals.... 25
ARTICLE VIII
CONDITIONS
SECTION 8.1 Condition to Parent's Obligation
to Effect the Merger............ 25
SECTION 8.2 Conditions to the Company's
Obligation to Effect the Merger. 25
ARTICLE IX
POST-CLOSING OBLIGATIONS
SECTION 9.1 Agreement to Cooperate............ 26
SECTION 9.2 Public Statements................. 26
SECTION 9.3 Transition........................ 26
SECTION 9.4 Directors and Officers of Surviving
Corporation..................... 26
SECTION 9.5 Lock-up Agreements................ 26
SECTION 9.6 Completion of Minutes............. 26
SECTION 9.7 Execution of Further Documents.... 27
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 Survival of Representations and
Warranties..................... 27
SECTION 10.2 Validity......................... 27
SECTION 10.3 Indemnification.................. 27
SECTION 10.4 Notices.......................... 28
SECTION 10.5 Interpretation................... 29
SECTION 10.6 Miscellaneous.................... 29
SECTION 10.7 Counterparts..................... 29
SECTION 10.8 Parties In Interest.............. 29
SECTION 10.9 Exhibits and Schedules........... 29
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EXHIBITS
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Exhibit A Shareholders of Castle Rock
Exhibit 4.8 Form of Employment Agreement
Exhibit 8.1 Form of Opinion of Company's Counsel
Exhibit 8.2 Form of Opinion of Parent's Counsel
SCHEDULES
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Schedule 4.2 Capitalization (Parent)
Schedule 4.4 Litigation (Parent, Sub)
Schedule 5.2 Capitalization (Castle Rock)
Schedule 5.4 Subsidiaries (Castle Rock)
Schedule 5.5(b) Debt, etc. affected by Merger (Castle Rock)
Schedule 5.8 Absence of Certain Changes of Events (Castle Rock)
Schedule 5.9 Absence of Undisclosed Liabilities (Castle Rock)
Schedule 5.11 Title to Assets (Castle Rock)
Schedule 5.12 Assets and Properties Complete (Castle Rock)
Schedule 5.14 Water Quality (Castle Rock)
Schedule 5.15 Contracts (Castle Rock)
Schedule 5.17 No Violation of Law (Castle Rock)
Schedule 5.18 Litigation (Castle Rock)
Schedule 5.19 Employee Benefits Plans; ERISA (Castle Rock)
Schedule 5.20 Labor Matters (Castle Rock)
Schedule 5.22 Trademarks and Intellectual Property Compliance
(Castle Rock)
Schedule 5.23 Insurance (Castle Rock)
Schedule 5.24 Year 2000 Compliance (Castle Rock)
Schedule 5.25 Bank Accounts (Castle Rock)
Schedule 5.27 Conflicts of Interest (Castle Rock)
Schedule 7.4 Payment of Obligations (Castle Rock)
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of October 15, 1997
and effective as of 9:00 a.m. EST on October 15, 1997 (the
"Agreement"), is by and among AquaPenn Spring Water Company, Inc., a
Pennsylvania corporation ("Parent"), Castle Rock Spring Water Company,
Inc., a California corporation and a wholly owned subsidiary of Parent
("Subsidiary"), Dunsmuir Bottling Company, doing business as Castle
Rock Spring Water Company, a California corporation (the "Company")
and the shareholders of the Company listed in Exhibit A (the "Company
Shareholders").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Parent and the Company have
determined that the merger of Company with and into Subsidiary (the
"Merger") is consistent with and in furtherance of the long-term
business strategy of Parent and the Company, and is fair to and in the
best interests of Parent and the Company and their respective
shareholders; and
WHEREAS, Parent, Subsidiary and the Company intend the Merger to
qualify as a tax-free reorganization under the provisions of Section
368 of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein
and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto, intending to be
legally bound hereby, agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the
conditions of this Agreement, at the Effective Time (as defined in
Section 1.2) in accordance with the California Corporations Code (the
"CCC"), Company shall be merged with and into Subsidiary and the
separate existence of Company shall thereupon cease. Subsidiary shall
be the surviving corporation in the Merger and is hereinafter
sometimes referred to as the "Surviving Corporation."
SECTION 1.2 Effective Time of the Merger. The Merger shall become
effective at such time (the "Effective Time") as shall be stated in
Articles of Merger, in a form mutually acceptable to Parent and the
Company, to be filed with the Secretary of State of the State of
California in accordance with the CCC (the "Merger Filing"). The
Merger Filing shall be made simultaneously with or as soon as
practicable after the closing of the transactions contemplated by this
Agreement in accordance with Section 3.5.
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ARTICLE II
THE SURVIVING AND PARENT CORPORATIONS
SECTION 2.1 Certificate of Incorporation. The Articles of
Incorporation of Subsidiary at and as of the Effective Time shall be
the Articles of Incorporation of the Surviving Corporation following
the Effective Time, and the name of the Surviving Corporation shall be
Castle Rock Spring Water Company, Inc.
SECTION 2.2 Bylaws. The Bylaws of Subsidiary at and as of the
Effective Time shall be the Bylaws of the Surviving Corporation
following the Effective Time, and the name of the Surviving
Corporation shall be Castle Rock Spring Water Company, Inc.
SECTION 2.3 Directors and Officers. The directors and officers of
the Surviving Corporation following the Merger shall not change at the
Effective Time, and such directors and officers shall serve in
accordance with the Bylaws of the Surviving Corporation until their
respective successors are duly elected or appointed and qualified
pursuant to Section 9.4.
ARTICLE III
MERGER CONSIDERATION
SECTION 3.1 Consideration.
(a) Cash Consideration and Adjustments. (i) On the Closing Date,
each Company Shareholder shall be entitled to receive cash
consideration in the amount set forth beside such Shareholder's name
on Exhibit A, such cash consideration to be, in the aggregate, an
amount equal to $1,450,712 (the "Cash Consideration"). One-half of
each Company Shareholder's proportional share of the Cash
Consideration shall be paid to each Company Shareholder on the Closing
Date and the balance of the Cash Consideration for each Company
Shareholder (in the aggregate, the "Escrow Cash") shall be placed in
escrow with Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx, as Escrow Agent
("Escrow Agent") pursuant to that certain Escrow Agreement dated
October 15, 1997 (the "Escrow Agreement"), and released as described
in (iii), (iv) and (v) below.
(ii) Within 120 days of the date hereof, Parent shall satisfy or
identify all debts, payables, liabilities and other obligations of the
Company, as of the date hereof, identified in accordance with
Generally Accepted Accounting Principles (the "Liabilities"); provided
that "Liabilities" shall include all allowances and xxxx-backs to the
Company's customers.
(iii) Upon completion by Parent of the satisfaction or
identification of all Liabilities, and if the Liabilities, both
satisfied and identified, exceed in the aggregate $4,650,000, then the
cash, if any, to be released to the Company Shareholders shall be
calculated as follows:
Escrow Cash - [Liabilities - $4,650,000].
The balance of the Escrow Cash shall be promptly returned to the
Parent.
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If the amount by which the Liabilities exceed $4,650,000 is
greater than the Escrow Cash, then the number of Escrow Shares to be
returned to Parent shall be calculated as follows ("IPO", "IPO Price"
and "Escrow Shares" shall have the meanings set forth in Section
3.1(b) below):
If the IPO has been consummated:
[(Liabilities - 4,650,000) - Escrow Cash] / (75% x IPO
Price)
If the IPO has not been consummated:
[(Liabilities - 4,650,000) - Escrow Cash] / 5
If the IPO has been consummated the balance of the Escrow
Shares, if any, shall be released to the Company Shareholders after an
adjustment, if any, pursuant to Section 3.1(b) below. If the IPO has
not been consummated by February 15, 1998, the balance of the Escrow
Shares shall be released to the Company Shareholders after an
adjustment, if any, pursuant to Section 3.1(b) below.
If the amount by which the Liabilities exceed $4,650,000 is
equal to or less than the Escrow Cash, the Escrow Shares shall be
released to the Company Shareholders upon adjustment, if any, pursuant
to and at the time stipulated in Section 3.1(b) below.
(iv) Upon completion by Parent of the satisfaction or
identification of all Liabilities, and if the Liabilities, both
satisfied and identified, are less than $4,650,000, then the Escrow
Cash shall be released to the Company Shareholders, the Escrow Shares
shall be released to the Company Shareholders upon adjustment, if any,
pursuant to and at the time stipulated in Section 3.1(b) below and
Parent shall promptly pay to the Company Shareholders an amount in the
aggregate equal to the difference between $4,650,000 minus the
Liabilities, both satisfied and identified.
(v) Upon completion by Parent of the satisfaction or
identification of all Liabilities, and if the Liabilities, both
satisfied and identified, equal $4,650,000, then the Escrow Cash shall
be released to the Company Shareholders and the Escrow Shares shall be
released to the Company Shareholders upon adjustment, if any, pursuant
to and at the time stipulated in Section 3.1(b) below.
(vi) Parent shall regularly update the Company Shareholders
regarding the identification of Liabilities and the Company
Shareholders shall have the opportunity to contest the validity or
amount of any Liability identified by Parent, provided that Parent
shall resolve any dispute regarding the validity or amount of any
Liability.
(b) Share Consideration and Adjustments. (i) On or promptly after
the Closing Date, the Company Shareholders shall receive, in the
aggregate, the number of shares of common stock of Parent ("Parent
Stock") equal to one-half the number of shares obtained by dividing by
$5.00 the result of subtracting the aggregate amount of Cash
Consideration received by the Company Shareholders in (a) above from
$3,000,002 ("Base Shares"). The balance of such shares of Parent
Common Stock ("Escrow Shares") shall be placed in escrow with the
Escrow Agent pursuant to the Escrow Agreement and adjusted as
described in (ii), (iii), (iv) and (v) below. For the purposes of
these provisions, "Total Shares" means the sum of Base Shares plus
Escrow Shares.
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(ii) If 75% of the per share price (the "IPO Price") at
which the Parent Stock is sold pursuant to an initial public offering
of the Parent Stock, not including any over-allotment option, (the
"IPO") is $5.00 per share, the number of Escrow Shares shall remain
the same pending release pursuant to Section 3.1(a).
(iii) If 75% of the IPO Price is greater than $5.00, then
the number of Escrow Shares to be released to the Company Shareholders
pursuant to Section 3.1(a) shall be calculated as follows:
Escrow Shares - [Total Shares - [(Total Shares x 5) / (.75 x
IPO Price)]].
The balance of the Escrow Shares shall be promptly returned to the
Parent. If the IPO Price is such that the number of shares to be
returned to the Parent is greater than the number of Escrow Shares,
then the Company Shareholders shall sell such excess to the Parent at
a price equal to $5.00 per share. To the extent that Base Shares plus
Escrow Shares released to Company Shareholders ("Adjusted Shares") is
less than Total Shares, Parent shall issue options to Company
Shareholders for the difference between Total Shares and Adjusted
Shares to be exercisable at the IPO Price for an exercise period of
five years from the date of issuance.
(iv) If 75% of the IPO Price is less than $5.00, then the
Escrow Shares will be released to the Company Shareholders pursuant to
Section 3.1(a) and the number of additional shares the Parent Company
shall issue to the Company Shareholders and place in escrow to be
released pursuant to Section 3.1(a) shall be calculated as follows:
[(Total Shares x 5) / (.75 x IPO Price)] - Total Shares
(v) If the Parent has not made an initial public offering of
its common shares by February 15, 1998, then, after completion by
Parent of the satisfaction or identification of all Liabilities as set
forth under Section 3(a)(iii), the Escrow Shares, as adjusted pursuant
to Section 3.1(a)(iii), if appropriate, shall be released to the
Company Shareholders.
(vi) The Company Shareholders shall be deemed, for federal
income tax purposes and otherwise, to be the owners of the Escrow
Shares while such shares are held by Escrow Agent. The Company
Shareholders shall receive any regular or liquidating dividends paid
on the Escrow Shares and shall be entitled to vote the Escrow Shares,
while such shares are held by Escrow Agent.
(c) Each Company Shareholder shall receive the number of shares
of Parent Stock set forth beside such Shareholder's name on Exhibit A.
(d) No share of Company Common Stock outstanding immediately
prior to the Effective Time shall be deemed to be outstanding or to
have any rights other than those set forth in this Section 3.1 after
the Effective Time.
(e) Shares of Company Common Stock held by shareholders of the
Company who have, prior to the taking of the vote of the Company's
shareholders on the Merger, filed with the Company written demand for
the appraisal of their shares of Company Common Stock in accordance
with the applicable provisions of the CCC, shall not be deemed to be
converted into the right to receive the Merger Consideration unless,
and until such time as, such shareholders shall have withdrawn, failed
to perfect,
4
or shall have effectively lost, their right to appraisal of or payment
for their shares of Company Common Stock under the CCC, at which time
such shares shall be converted into the right to receive the Merger
Consideration as provided in this Section 3.1. The Company shall give
Parent prompt notice of any demand received by the Company for payment
of shares of Company Common Stock from a Dissenting Shareholder, and
Parent shall have the right to participate in all negotiations and
proceedings with respect to such demand. The Company agrees that it
will not, except with the prior written consent of Parent, make any
payment with respect to, or settle or offer to settle, any such demand
for payment. Each Dissenting Shareholder who becomes entitled,
pursuant to the provisions of the CCC, to the payment of the value of
his, her or its shares shall receive payment therefor from Parent or
Subsidiary (but only after the value thereof shall have been agreed
upon or finally determined pursuant to the terms of this Agreement and
as provided under the CCC). In the event that any Dissenting
Shareholder shall have withdrawn, failed to perfect, or shall have
effectively lost, his right to appraisal of and payment for his, her
or its shares, Parent shall issue and deliver, upon surrender by such
Dissenting Shareholder of his, her or its certificate or certificates
representing shares of Company Common Stock, the Merger Consideration
to which such Dissenting Shareholder may then be entitled under and
pursuant to this Section 3.1.
(f) In the event that the Parent Stock is combined into a smaller
number of shares, then all shares of Parent Stock owned by the Company
Shareholders, including the Escrow Shares, and shares of Parent Stock
to which the Company Shareholders are or may be entitled, shall be
combined and the Company Shareholders shall be entitled to receive the
same number of shares of Parent Stock as if Company Shareholders
currently owned and held all of the shares held in escrow or to which
Company Shareholders are or may be entitled.
SECTION 3.2 Conversion of Subsidiary Shares. At the Effective
Time, by virtue of the Merger and without any action on the part of
Parent as the sole shareholder of Subsidiary, each issued and
outstanding share of common stock, no par value, of Subsidiary
("Subsidiary Common Stock") shall be converted into one share of
common stock, no par value, of the Surviving Corporation.
SECTION 3.3 Exchange of Certificates.
(a) At the Effective Time:
(i) each holder of a certificate representing shares of
Company Common Stock shall surrender such certificates (the "Company
Certificates") for cancellation to the Secretary of Parent, together
with a duly executed letter of transmittal and such other documents as
the Secretary shall reasonably require;
(ii) upon surrender of the Company Certificates, the holder
of such Company Certificates shall be entitled to receive, subject to
the terms of Section 3.1 and the Escrow Agreement, in exchange
therefor (A) a certificate representing that number of whole shares of
Parent Common Stock and (B) a check for that portion of the Cash
Consideration, into which the shares of Company Common Stock
theretofore represented by the Company Certificates so surrendered
shall have been converted pursuant to the provisions of Section 3.1,
and the Company Certificates so surrendered shall be cancelled.
Neither Parent nor Subsidiary shall be liable to a holder of shares of
Company Common Stock for any shares of Parent Common Stock or
dividends or distributions thereon delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
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(b) Notwithstanding any other provision of this Agreement, no
certificates or scrip for fractional shares of Parent Common Stock
shall be issued in the Merger and no Parent Common Stock dividend,
stock split or interest shall relate to any fractional security, and
such fractional interests shall not entitle the owner thereof to vote
or to any other rights of a security holder. In lieu of any such
fractional shares, each holder of Company Common Stock who would
otherwise have been entitled to receive a fraction of a share of
Parent Common Stock upon surrender of Company Certificates for
exchange pursuant to this Article III shall be entitled to receive
from the Exchange Agent a cash payment.
(c) From and after the Effective Time, all Company Common Stock
shall no longer be outstanding and shall automatically be cancelled
and retired and shall cease to exist, and each holder of a certificate
representing shares of Company Common Stock shall cease to have any
rights with respect thereto, except the right to receive in exchange
therefor, upon surrender thereof at Closing, the Merger Consideration
into which the aggregate number of shares of Company Common Stock
represented by such certificate or certificate surrendered shall have
been converted pursuant to this Agreement. Notwithstanding any other
provision of this Agreement, (i) until holders or transferees of
certificates theretofore representing shares of Company Common Stock
have surrendered them for exchange as provided herein, no dividends
shall be paid with respect to any shares of Parent Common Stock
represented by such certificates and no payment for fractional shares
shall be made and (ii) without regard to when such certificates
representing shares of Company Common Stock are surrendered for
exchange as provided herein, no interest shall be paid on any Parent
Common Stock dividends or any payment for fractional shares. Upon
surrender of a certificate which immediately prior to the Effective
Time represented shares of Company Common Stock, there shall be paid
to the holder of such certificate the amount of any dividends which
became payable after the Effective Time, but which were not paid by
reason of the foregoing, with respect to the number of whole shares of
Parent Common Stock represented by the certificate or certificates
issued upon such surrender.
(d) If any certificate for shares of Parent Common Stock is to be
issued in a name other than that in which the certificate for shares
of Company Common Stock surrendered in exchange therefor is
registered, it shall be a condition of such exchange that the
certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer and the person requesting such exchange shall
have paid to Parent or its transfer agent any applicable transfer or
other taxes required by reason of such issuance.
(e) In the event any Company Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Company Certificate to be lost, stolen or
destroyed, the Surviving Corporation shall issue in exchange for such
lost, stolen or destroyed Company Certificate the Parent Common Stock
deliverable in respect thereof determined in accordance with this
Section 3.4. When authorizing such payment in exchange therefor, the
Board of Directors of Parent may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed Company Certificate to give Parent such indemnity
as it may reasonably direct as protection against any claim that may
be made against Parent or the Surviving Corporation with respect to
the Company Certificate alleged to have been lost, stolen or
destroyed.
SECTION 3.4 Closing. The closing (the "Closing") of the
transactions contemplated by this Agreement shall take place at a
location mutually agreeable to Parent and the Company on the date
hereof (the date on which the Closing occurs is referred to in this
Agreement as the "Closing Date").
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SECTION 3.5 Closing of the Company's Transfer Books. At the
Effective Time, the stock transfer books of the Company shall be
closed and no transfer of shares of Company Common Stock which were
outstanding immediately prior to the Effective Time shall thereafter
be made. If, after the Effective Time, subject to the terms and
conditions of this Agreement, Company Certificates formerly
representing Company Common Stock are presented to Parent or the
Surviving Corporation, they shall be cancelled and exchanged for
Parent Common Stock in accordance with this Article III.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUBSIDIARY
Parent and Subsidiary each represent and warrant to the Company
as of the date hereof as follows:
SECTION 4.1 Organization and Qualification. Each of Parent and
Subsidiary is a corporation duly organized, validly existing and in
good standing or local equivalent thereof under the laws of the state
of its incorporation and has the requisite power and authority to own,
lease and operate its assets and properties and to carry on its
business as it is now being conducted. True, accurate and complete
copies of Parent's Articles of Incorporation and Bylaws and
Subsidiary's Articles of Incorporation and Bylaws, in each case as in
effect on the date hereof, including all amendments thereto, have been
or in the case of Subsidiary, will promptly be delivered to the
Company.
SECTION 4.2 Capitalization.
(a) The authorized capital stock of Parent consists of (i)
100,000,000 shares of Parent Common Stock, of which 7,358,239 shares
were issued and outstanding as of September 30, 1997, and (ii)
2,000,000 shares of non-voting convertible preferred stock, par value
$1.00 per share, of which 1,702,500 shares are issued and outstanding
as of September 30, 1997. All of the issued and outstanding shares of
Parent Common Stock are validly issued and are fully paid,
nonassessable and free of preemptive rights.
(b) (i) Except as set forth in Schedule 4.2 attached hereto, as
of the date hereof, (A) there were no outstanding subscriptions,
options, calls, contracts, commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of conversion or
exchange under any outstanding security, instrument or other agreement
and also including any rights plan or other anti-takeover agreement,
obligating Parent or any subsidiary of Parent to issue, deliver or
sell, or cause to be issued, delivered or sold or otherwise to become
outstanding, additional shares of the capital stock of Parent or
obligating Parent or any subsidiary of Parent to grant, extend or
enter into any such agreement or commitment. (B) Except as set forth
in Schedule 4.2 and except as contemplated hereby, there are no voting
trusts other than, proxies or other agreements or understandings to
which Parent or any subsidiary of the Parent is a party or is bound
with respect to the voting of any shares of capital stock of Parent or
any subsidiary and there are no such trusts, proxies, agreements or
understandings by, between or among any of Parent's shareholders with
respect to Parent Common Stock. There are no outstanding or authorized
stock appreciation rights, phantom stock, profit participation or
similar rights with respect to Parent.
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(c) The authorized capital stock of Subsidiary consists of 100
shares of Subsidiary Common Stock, of which 100 shares are issued and
outstanding, which shares are owned beneficially and of record by
Parent.
(d) The shares of Parent Common Stock to be issued to
shareholders of the Company in the Merger will be at the Effective
Time duly authorized, validly issued, fully paid and nonassessable and
free of preemptive rights and will be delivered to each Company
Shareholder free and clear of all liens, encumbrances, restrictions
and claims of every kind; provided that a portion of such shares will
be placed in escrow pursuant to Article III hereof.
SECTION 4.3 Authority; Non-Contravention; Approvals.
(a) Parent and Subsidiary each have all necessary corporate power
and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The Parent Common Stock issued
pursuant to Article III will, when issued, be duly authorized, validly
issued, fully paid and nonassessable, and no shareholder of Parent
will have any preemptive right of subscription or purchase in respect
thereof. This Agreement has been approved by the Boards of Directors
of Parent and Subsidiary, and no other corporate proceedings on the
part of Parent or Subsidiary are necessary to authorize the execution
and delivery of this Agreement or the consummation by Parent and
Subsidiary of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by each of Parent and Subsidiary,
and, assuming the due authorization, execution and delivery hereof by
the Company and the Company Shareholders, constitutes a valid and
legally binding agreement of each of Parent and Subsidiary enforceable
against each of them in accordance with its terms, except that such
enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating
to enforcement of creditors' rights generally and (ii) general
equitable principles.
(b) Except for requirements to notify creditors of the occurrence
of the transactions contemplated hereby, the execution and delivery of
this Agreement by each of Parent and Subsidiary do not violate,
conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the
properties or assets of Parent or any of its subsidiaries under any of
the terms, conditions or provisions of (i) the respective charters or
by-laws of Parent or any of its subsidiaries, (ii) any statute, law,
ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority
applicable to Parent or any of its subsidiaries or any of their
respective properties or assets or (iii) any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession,
contract, lease or other instrument, obligation or agreement of any
kind to which Parent or any of its subsidiaries is now a party or by
which Parent or any of its subsidiaries or any of their respective
properties or assets may be bound or affected, excluding those
violations, conflicts, breaches, defaults, terminations, accelerations
or creations of liens, security interests, charges or encumbrances
that would not, in the aggregate, have a material adverse effect on
the business, operations, properties, assets, condition (financial or
other), results of operations or prospects of the Parent and its
subsidiaries taken as a whole (a "Parent Material Adverse Effect").
8
(c) Except for the making of the Merger Filing, no declaration,
filing or registration with, or notice to, or authorization, consent
or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by Parent
or Subsidiary or the consummation by Parent or Subsidiary of the
transactions contemplated hereby.
SECTION 4.4 Litigation. Except as disclosed in Schedule 4.4
attached hereto, there are no claims, suits, actions or proceedings
pending or, to the knowledge of Parent, threatened against or relating
to Parent or any of its subsidiaries, before any court, governmental
department, commission, agency, instrumentality or authority, or any
arbitrator which could reasonably be expected, either alone or in the
aggregate with all such claims, actions or proceedings, to cause a
Parent Material Adverse Effect. Except as set forth in Schedule 4.4
attached hereto, neither Parent nor any of its subsidiaries is subject
to any judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality,
authority or arbitrator which prohibits or restricts the consummation
of the transactions contemplated hereby or would reasonably be
expected, either alone or in the aggregate, to have a Parent Material
Adverse Effect.
SECTION 4.5 No Violation of Law. Neither Parent nor any of its
subsidiaries is in violation of, or has been given notice or been
charged with any violation of, any law, statute, order, rule,
regulation, ordinance, or judgment (including, without limitation, any
applicable environmental law, ordinance or regulation) of any
governmental or regulatory body or authority, except for violations
which, in the aggregate, could not reasonably be expected to have a
Parent Material Adverse Effect. As of the date of this Agreement, to
the knowledge of Parent, no investigation or review by any
governmental or regulatory body or authority is pending or threatened,
nor has any governmental or regulatory body or authority indicated to
Parent an intention to conduct the same, other than, in each case,
those the outcome of which, as far as reasonably can be foreseen, will
not have a Parent Material Adverse Effect. Parent and its subsidiaries
have all permits, licenses, franchises, variances, exemptions, orders
and other governmental authorizations, consents and approvals
necessary to conduct their businesses as presently conducted
(collectively, the "Parent Permits"), except for permits, licenses,
franchises, variances, exemptions, orders, authorizations, consents
and approvals the absence of which, alone or in the aggregate, would
not have a Parent Material Adverse Effect. Parent and its subsidiaries
are not in violation of the terms of any Parent Permit, except for
delays in filing reports or violations which, alone or in the
aggregate, would not have a Parent Material Adverse Effect.
SECTION 4.6 Financial Statements. Parent has previously delivered
to Company copies of its audited financial statements for the years
ending September 30, 1994, 1995 and 1996 and interim unaudited
financial statements for the period ended June 30, 1997. The audited
and unaudited interim financial statements of Parent (collectively,
the "Parent Financial Statements") have been prepared in accordance
with generally accepted accounting principles applied on a consistent
basis (except as may be indicated therein or in the notes thereto) and
fairly present the financial position of Parent 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 and to the omission of notes thereto.
SECTION 4.7 Brokers. Parent has not engaged, or caused to be
incurred, any liability to any finder, broker or sales agent in
connection with the origin, negotiation, execution, delivery, or
9
performance of this Agreement and the transactions contemplated
hereby, other than Xxxxx X. Xxxxxx of Xxxxx Xxxxxx, Xxxxxx
Technological Services, Inc. to whom Parent has paid $100,000.
SECTION 4.8 Employment Agreements. Parent and Subsidiary have
entered into employment agreements effective as of the Closing with
Xxxx Xxxxxx, Xxxxx Xxxxxxx and Xxxxx Xxxxxx, substantially in the form
of Exhibit 4.8.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE COMPANY SHAREHOLDERS
The Company and each of Xxxx Xxxxxx, Xxxxx Xxxxxxx and Xxxxx
Xxxxxx (the "Principal Shareholders"), jointly and severally,
represent and warrant to Parent and Subsidiary as of the date hereof
as follows:
SECTION 5.1 Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing
under the laws of the state of its incorporation and has the requisite
corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted.
The Company is qualified to do business and is in good standing in
each jurisdiction in which the properties owned, leased or operated by
it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to be so qualified
and in good standing will not, when taken together with all other such
failures, have a material adverse effect on the business, operations,
properties, assets, condition (financial or other), results of
operations or prospects of the Company and its subsidiaries, taken as
a whole (a "Company Material Adverse Effect"). True, accurate and
complete copies of the Company's Certificate of Incorporation and
By-laws, in each case as in effect on the date hereof, including all
amendments thereto, have been delivered to Parent.
SECTION 5.2 Capitalization.
(a) The authorized capital stock of the Company consists of (i)
10,000 shares of Series A Common Stock, of which 750 shares were
issued and outstanding as of the date hereof, and (ii) 10,000 shares
of non-voting Series B Common Stock, of which 92 shares were issued
and outstanding as of the date hereof. All of such issued and
outstanding shares are duly authorized, validly issued and are fully
paid, nonassessable and free of preemptive rights and are owned of
record and beneficially, free and clear of any liens, by the persons
set forth on Schedule 5.2. (No subsidiary of the Company holds any
shares of the capital stock of the Company.)
(b) There are no outstanding subscriptions, options, calls,
contracts, commitments, understandings, restrictions, arrangements,
rights or warrants, including any right of conversion or exchange
under any outstanding security, instrument or other agreement and also
including any rights plan or other anti-takeover agreement, obligating
the Company or any subsidiary of the Company to issue, deliver or
sell, or cause to be issued, delivered or sold or otherwise to become
outstanding, additional shares of the capital stock of the Company or
obligating the Company or any subsidiary of the Company to grant,
extend or enter into any such agreement or commitment and (ii) except
for that certain Buy-Sell Agreement dated July 24, 1990 among the
Company and the Principal Shareholders (the "Buy-
10
Sell Agreement"), which will be terminated on the date hereof, and as
contemplated hereby, there are no voting trusts, proxies or other
agreements or understandings to which the Company or any subsidiary of
the Company is a party or is bound with respect to the voting of any
shares of capital stock of the Company and there are no such trusts,
proxies, agreements or understandings by, between or among any of the
Company's shareholders with respect to Company Common Stock. There are
no outstanding or authorized stock appreciation rights, phantom stock,
profit participation or similar rights with respect to the Company.
SECTION 5.3 [Intentionally left blank]
SECTION 5.4 Subsidiaries. Schedule 5.4 sets forth the name and
state of incorporation of each direct and indirect subsidiary of the
Company. Each direct and indirect subsidiary of the Company is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization and has the requisite
corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted.
Each subsidiary of the Company is qualified to do business, and is in
good standing, in each jurisdiction in which the properties owned,
leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so
qualified and in good standing will not, when taken together with all
such other failures, have a Company Material Adverse Effect. All of
the outstanding shares of capital stock of each subsidiary of the
Company are validly issued, fully paid, nonassessable and free of
preemptive rights and are owned directly or indirectly by the Company
free and clear of any liens, claims, encumbrances, security interests,
equities, charges and options of any nature whatsoever except as set
forth in Schedule 5.4 attached hereto. There are no 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
of the Company, including any right of conversion or exchange under
any outstanding security, instrument or agreement.
SECTION 5.5 Authority; Non-Contravention; Approvals.
(a) The Company has full corporate power and authority to enter
into this Agreement to consummate the transactions contemplated
hereby. This Agreement has been approved by the Board of Directors and
the Company Shareholders of the Company, and no other corporate
proceedings on the part of the Company are necessary to authorize the
execution and delivery of this Agreement or the consummation by the
Company of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by the Company, and, assuming the due
authorization, execution and delivery hereof by Parent and Subsidiary,
constitutes a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except
that such enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating
to enforcement of creditors' rights generally and (ii) general
equitable principles.
(b) The execution and delivery of this Agreement by the Company
do not violate, conflict with or result in a breach of any provision
of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result
in a right of termination or acceleration under, or result in the
creation of any lien, security interest, charge or encumbrance upon
any of the properties or assets of the Company or any of its
subsidiaries under any of the terms, conditions or provisions of (i)
the respective charters
11
or by-laws of the Company or any of its subsidiaries, (ii) any
statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any court or governmental
authority applicable to the Company or any of its subsidiaries or any
of their respective properties or assets or (iii) except as disclosed
in Schedule 5.5(b), any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, concession, contract, lease or
other instrument, obligation or agreement of any kind to which the
Company or any of its subsidiaries is now a party or by which the
Company or any of its subsidiaries or any of their respective
properties or assets may be bound or affected, excluding those
violations, conflicts, breaches, defaults, terminations, accelerations
or creations of liens, security interests, charges or encumbrances
that would not, in the aggregate, have a Company Material Adverse
Effect.
(c) Except for the making of the Merger Filing, no declaration,
filing or registration with, or notice to, or authorization, consent
or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by the
Company or the consummation by the Company of the transactions
contemplated hereby, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals which,
if not made or obtained, as the case may be, would not, in the
aggregate, have a Company Material Adverse Effect.
(d) All governmental waivers, consents, orders and approvals
legally required for the consummation of the Merger and the
transactions contemplated hereby, and all consents from lenders
required to consummate the Merger, have been obtained and are in
effect at the Effective Time.
SECTION 5.6 Financial Statements. The Company has previously
delivered to Parent copies of its compiled financial statements for
the years ended December 31, 1992, 1993 and 1994, and its reviewed
financial statements for the years ended December 31, 1995 and 1996
and interim unaudited financial statements for the period ended July
31, 1997. The reviewed consolidated financial statements and unaudited
interim financial statements of the Company (collectively, the
"Company Financial Statements") have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
(except as may be indicated therein or in the notes thereto) and
fairly present the financial position of the Company and its
subsidiaries as of the dates thereof and the results of their
operations, cash flows 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 and to the omission of notes
thereto.
SECTION 5.7 Books of Account. The books of account of the Company
accurately and fairly reflect, in reasonable detail and in all
material respects, the Company's transactions and the disposition of
its assets. All notes and accounts receivable of the Company are
reflected in accordance with generally accepted accounting principles
on its books and records, are valid receivables subject to no material
setoffs or counterclaims, are current and collectible and will be
collected in accordance with their terms at their recorded amounts
subject only to normal adjustments in the ordinary course of business
and the reserves for contractual allowances and bad debts set forth on
the face of the balance sheet contained in the most recent Company
Financial Statements as adjusted for the passage of time through the
Closing Date in accordance with past custom and practice of the
Company and its subsidiaries. The Company and the Company Subsidiaries
have filed all reports and returns required by any material law or
regulation to be filed by them, and have paid all taxes, duties and
charges due on the basis of such reports and returns.
12
SECTION 5.8 Absence of Certain Changes of Events. Except as set
forth in Schedule 5.8, since July 31, 1997, there has not been any
change in the business, operations, properties, assets, liabilities,
condition (financial or other) or results of operations of the Company
and its subsidiaries, taken as a whole, including as a result of any
change in capital structure, employee compensation (including
severance rights and benefit plans), accounting method or applicable
law, other than changes that were both in the ordinary course of
business and which in the aggregate would not have a Company Material
Adverse Effect. Also except as set forth in Schedule 5.8, since July
31, 1997, there have been no dividends or other distributions to
Company Shareholders declared or paid.
SECTION 5.9 Absence of Undisclosed Liabilities. Except as
disclosed in Schedule 5.9 attached hereto, neither the Company nor any
of its subsidiaries had at July 31, 1997, or has incurred since that
date, any liabilities or obligations (whether absolute, accrued,
contingent or otherwise) of any nature, except: (a) liabilities,
obligations or contingencies (i) which are accrued or reserved against
in the Company Financial Statements or reflected in the notes thereto
or (ii) which were incurred after July 31, 1997 and in the ordinary
course of business and consistent with past practices, (b)
liabilities, obligations or contingencies which (i) would not, in the
aggregate, have a Company Material Adverse Effect or (ii) have been
discharged or paid in full prior to the date hereof and (c)
performance obligations with respect to contracts which are of a
nature not required to be reflected or reserved against in the
consolidated financial statements of the Company and its subsidiaries
prepared in accordance with generally accepted accounting principles
consistently applied and which were incurred in the ordinary course of
business.
SECTION 5.10 Taxes. (a) The Company and its subsidiaries have (i)
duly filed with the appropriate governmental authorities all Tax
Returns (as defined in 5.10(c)) required to be filed by them for all
periods ending on or prior to the Effective Time, other than those Tax
Returns the failure of which to file would not have a Company Material
Adverse Effect, and such Tax Returns are true, correct and complete in
all material respects and (ii) duly paid in full or made adequate
provision in the Company Financial Statements for the payment of all
Taxes (as defined in Section 5.10(b)) due for all periods ending at or
prior to the Effective Time. The liabilities and reserves for Taxes
reflected in the Company balance sheet are adequate to cover all
unpaid Taxes for all periods ending at or prior to the Effective Time
and there are no material liens for Taxes upon any property or asset
of the Company or any subsidiary thereof, except for liens for Taxes
not yet due. There are no unresolved issues of law or fact arising out
of a notice of deficiency, proposed deficiency or assessment from the
IRS or any other governmental taxing authority with respect to Taxes
of the Company or any of its subsidiaries which, if decided adversely,
singly or in the aggregate, would have a Company Material Adverse
Effect. Neither the Company nor any of its subsidiaries is a party to
any agreement providing for the allocation or sharing of Taxes with
any entity that is not, directly or indirectly, a wholly owned
corporate subsidiary of Company. Neither the Company nor any of its
corporate subsidiaries has, with regard to any assets or property
held, acquired or to be acquired by any of them, filed a consent to
the application of Section 341(f) of the Code.
(b) For purposes of this Agreement, the term "Taxes" shall mean
all taxes, including, without limitation, income, gross receipts,
excise, property, sales, withholding, social security, occupation,
use, service, service use, license, payroll, franchise, transfer and
recording taxes, fees and charges, windfall profits, severance,
customs, import, export, employment or similar taxes, charges, fees,
levies or other assessments imposed by the United States, or any
state, local or foreign government or subdivision or agency thereof,
whether computed on a separate, consolidated, unitary, combined or any
other basis, and
13
such term shall include any interest, fines, penalties or additional
amounts and any interest in respect of any additions, fines or
penalties attributable or imposed or with respect to any such taxes,
charges, fees, levies or other assessments.
(c) For purposes of this Agreement, the term "Tax Return" shall
mean any return, report or other document or information required to
be supplied to a taxing authority in connection with Taxes.
(d) The Company duly elected to be taxed as an S corporation
under Subchapter S of the Code and under comparable provisions of the
tax laws of the state of California (each an "S Election") effective
from the inception of the Company. The S Elections have been in effect
continuously since their inception and have not been denied, revoked
voluntarily or involuntarily, challenged or contested by any taxing
authority.
SECTION 5.11 Title to Assets. Schedule 5.11 sets forth a list of
all real property leased or owned by the Company and its subsidiaries.
The Company and each of its subsidiaries has good and marketable title
in fee simple to all its real property and good title to all its
leasehold interests and other properties, as reflected in the most
recent balance sheet included in the Company Financial Statements,
except for properties and assets that have been disposed of in the
ordinary course of business since the date of such balance sheet, free
and clear of all mortgages, liens, pledges, charges or encumbrances of
any nature whatsoever, except (i) the lien of current taxes, payments
of which are not yet delinquent, (ii) such imperfections in title and
easements and encumbrances, if any, as are not substantial in
character, amount or extent and do not materially detract from the
value, or interfere with the present use of the property subject
thereto or affected thereby, or otherwise materially impair the
Company's business operations (in the manner presently carried on by
the Company) or (iii) mortgages or security interests incurred in the
ordinary course of business and except for such matters which in the
aggregate could not reasonably be expected to cause a Company Material
Adverse Effect. All leases under which the Company leases real or
personal property have been delivered to Parent and are in good
standing, valid and effective in accordance with their respective
terms, and there is not, under any of such leases, any existing
default or event which with notice or lapse of time or both would
become a default other than defaults under such leases which in the
aggregate will not have a Company Material Adverse Effect.
SECTION 5.12 Assets and Properties Complete. The assets and
properties of the Company and each of its subsidiaries, whether owned
or leased, are and as of the Closing Date shall be adequate and
sufficient to conduct the business of the Company as currently
conducted. Except as disclosed on Schedule 5.12, the Company has
unrestricted rights and access to all present sources of water,
including fully transferable leases, title in fee simple to land,
rights in all resources on such land or within the leasehold, with no
restrictions on quantity, time, use, quality or which would otherwise
affect the ongoing business of the Company.
SECTION 5.13 Access to Spring. To the best of the Company's
knowledge, the Company has the legal right to draw water from the
water transmission main of the City of Dunsmuir (the "City"), which
draws spring water from the source known as Xxxxxxxx Xxxxxxx Xx. 0, X,
X and D in Siskiyou County, California (the "Source") pursuant to a
Water Contract, dated August 8, 1990, between the City and the Company
(the "Water Contract"). The City and the Company filed and
successfully completed a validation action in accordance with the Code
of Civil Procedures as required by Section 6.b. of the Water Contract.
There are no permits, orders, or other authorizing regulations or
certificates required by the Company in order to draw water in the
quantities permitted under the Water Contract from
14
the Source described above or the City's main, or to use such water in
the manner in which the Company is using the water so drawn. To the
knowledge of the Company, the City has the legal right to draw water
from the Source described above and to enter into the Water Contract
with the Company. The Company does not use any other water source for
water that it bottles or sells.
SECTION 5.14 Water Quality. There are no results of laboratory
tests conducted by or for the Company analyzing the water obtained
under the Water Contract which would preclude the use of such water as
bottled spring water to be sold to the public as spring water; and the
Company is not aware of results of any such tests conducted by others
which would preclude the use of such water as bottled water to be sold
to the public. The Company knows of no condition, including, but not
limited to, the actual or threatened presence at, in or near the
Source of hazardous substances (as defined in Section 5.21), which
could preclude the use of water obtained under the Water Contract as
bottled spring water to be sold to the public. Except as set forth in
Schedule 5.14, the Company knows of no civil, criminal or
administrative actions, suits, demands, claims, hearings,
investigations or proceedings pending or threatened, against the
Company, any of its subsidiaries, or the City which, if successful,
could preclude, in whole or in part, the use of the water obtained
under the Water Contract as bottled spring water to be sold to the
public. The Company knows of no past or present private or public
activity, including, but not limited to, mining, silvicultural,
manufacturing, or agricultural operations, that has occurred or is
occurring near the Source which had or has the potential to cause
conditions, including the actual or threatened presence at, in or near
the Source of hazardous substances (as defined in Section 5.21).
SECTION 5.15 Contracts. Schedule 5.15 sets forth a complete and
accurate list of all contracts to which the Company or any of its
subsidiaries is a party or by or to which any of them or any of their
respective assets or properties is bound or subject except contracts
(and related correspondence and other documents) for the sale or
purchase of goods and/or services by the Company and/or any of its
subsidiaries, entered into with customers or suppliers in the ordinary
course of business. All of the contracts listed in Schedule 5.15 are
in full force and effect, and neither the Company nor any of its
subsidiaries is in default under, or material breach of, any of them,
nor to the knowledge of the Company and the Company Shareholders is
any other party to any such contract in default thereunder; nor does
any event or condition exist that after notice or lapse of time or
both could constitute a default thereunder or material breach thereof
on the part of the Company or any of its subsidiaries, or to the
knowledge of the Company and the Company Shareholders, any other party
thereto. The Company has delivered to Parent or its counsel true,
correct, and complete copies of all contracts listed in Schedule 5.15,
together with copies of all modifications and supplements thereto.
SECTION 5.16 Compliance with Agreements. The Company and each of
its subsidiaries are not in breach or violation of or in default in
the performance or observance of any term or provision of, and no
event has occurred which, with notice or lapse of time or action by a
third party, could result in a default under, (a) the respective
charters, By-laws or similar organizational instruments of the Company
or any of its subsidiaries, or (b) any contract, commitment,
agreement, indenture, mortgage, loan agreement, note, lease, bond,
license, approval or other instrument to which the Company or any of
its subsidiaries is a party or by which any of them is bound or to
which any of their property is subject, which breaches, violations and
defaults, in the case of clause (b) of this Section 5.16, would have,
in the aggregate, a Company Material Adverse Effect.
SECTION 5.17 No Violation of Law. Except as disclosed in Schedule
5.17 attached hereto, neither the Company nor any of its subsidiaries
is in violation of or has been given notice or been charged
15
with any violation of, any law, statute, order, rule, regulation,
ordinance or judgment (including, without limitation, any applicable
safety or environmental law, ordinance or regulation) of any
governmental or regulatory body or authority, except for violations
which, in the aggregate, could not reasonably be expected to have a
Company Material Adverse Effect. To the knowledge of the Company, no
investigation or review by any governmental or regulatory body or
authority is pending or threatened, nor has any governmental or
regulatory body or authority indicated to the Company an intention to
conduct the same, other than, in each case, those the outcome of
which, as far as reasonably can be foreseen, will not have a Company
Material Adverse Effect. The Company and its subsidiaries have all
permits, licenses, franchises, variances, exemptions, orders and other
governmental authorizations, consents and approvals necessary to
conduct their businesses as presently conducted (collectively, the
"Company Permits"), except for permits, licenses, franchises,
variances, exemptions, orders, authorizations, consents and approvals
the absence of which, alone or in the aggregate, would not have a
Company Material Adverse Effect. Schedule 5.17 sets forth a complete
list of all Company Permits. The Company and its subsidiaries are not
in violation of the terms of any Company Permit, except for delays in
filing reports or violations which, alone or in the aggregate, would
not have a Company Material Adverse Effect. To the best of the
Company's knowledge, upon consummation of the Merger and the other
transactions contemplated by this Agreement, all Company Permits will
continue to be valid and in full force and effect.
SECTION 5.18 Litigation. Except as referred to in Schedule 5.18
attached hereto, there are no claims, suits, actions or proceedings
pending or, to the knowledge of the Company, threatened against or
relating to the Company or any of its subsidiaries, before any court,
governmental department, commission, agency, instrumentality,
authority or arbitrator that seek to restrain the consummation of the
Merger or which could reasonably be expected, either alone or in the
aggregate with all such claims, actions or proceedings, to cause a
Company Material Adverse Effect. Except as referred to in Schedule
5.18 attached hereto, neither the Company nor any of its subsidiaries
is subject to any judgment, decree, injunction, rule or order of any
court, governmental department, commission, agency, instrumentality or
authority, or any arbitrator which prohibits or restricts the
consummation of the transactions contemplated hereby or would have any
Company Material Adverse Effect.
SECTION 5.19 Employee Benefit Plans; ERISA.
(a) Schedule 5.19 sets forth a list of all plans, whether oral or
written, in which any employee of the Company ("Employee")
participates (individually a "Plan" and collectively the "Plans"). The
term Plans shall include (i) any "employee benefit plan" within the
meaning of Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), (ii) any profit sharing, pension,
deferred compensation, bonus, stock option, stock purchase, severance,
retainer, consulting, health, welfare or incentive plan or agreement
whether legally binding or not, (iii) any plan or policy providing for
"fringe benefits" to the Employees, including but not limited to
vacation, paid holidays, personal leave, employee discount,
educational benefit or similar programs, and (iv) any employment
agreement, or each oral or written contract, commitment and
understanding with each current or former director, officer, employee
or stockholder or any associate or relative of any thereof, which is
not immediately terminable without cost or other liability to the
Company.
(b) Neither Company nor any member of the Company's group or
affiliated service group, as defined in Section 414 of the Internal
Revenue Code ("Members of the Group") is, or has at any time
16
been, a party to any multiemployer plan as defined under Section 3(37)
of ERISA ("Multiemployer Plan"), or is, or has at any time been,
required to contribute to any such Multiemployer Plan.
(c) Neither Company nor any Members of the Group has at any time
sponsored or maintained, directly or indirectly, an employee pension
benefit plan that was subject to the minimum funding requirements of
ERISA or is subject to Title IV of ERISA.
(d) Each Plan has been administered in all material respects in
accordance with its terms. Each Plan which is an "employee benefit
plan", as defined in Section 3(3) of ERISA, complies in all material
respects by its terms and in operation with the requirements provided
by any and all statutes, orders or governmental rules or regulations
currently in effect and applicable to the Plan, including but not
limited to ERISA and the Internal Revenue Code.
(e) The Company has filed or caused to be filed on a timely basis
and distributed to employees and/or participants in the Plans on a
timely basis, each and every return, report, statement, notice,
declaration and other documents required by any federal, state or
local government agency (including, without limitation, the Internal
Revenue Service, the Department of Labor, the Pension Benefit Guaranty
Corporation and the Securities and Exchange Commission), with respect
to each Plan sponsored or maintained by the Company. Furthermore, the
Company has withheld and remitted to the proper depository all income
taxes and wage taxes on benefits derived under the Plans, to the
extent such withholding and remittance is required by law.
(f) Each Plan intended to qualify under Section 401(a) of the
Internal Revenue Code is the subject of a favorable unrevoked
determination letter issued by the Internal Revenue Service as to its
qualified status, the Internal Revenue Service has not threatened to
revoke any favorable determination letter or opinion letter with
respect to each Plan, and nothing has occurred since the date of the
most recent determination letter to cause the loss of any Plan's
qualification.
(g) All contributions for all periods ending prior to the Closing
Date (including periods from the first day of the current plan year to
the Closing Date) have been made prior to the Closing Date by the
Company.
(h) All insurance premiums have been paid in full, subject only
to normal retrospective adjustments in the ordinary course, with
regard to the Plans for plan years ending on or before the Closing
Date. With respect to periods from the close of the most recent plan
year through the Closing Date with respect to the Plans, all insurance
premiums due or payable through the Closing Date have been or will be
paid in full, and no such premium is overdue or in a grace period for
late payment.
(i) With respect to each Plan:
(1) no prohibited transactions (as defined in Section 406 of
ERISA or Section 4975 of the Internal Revenue Code) have occurred;
(2) no action or claim (other than routine claims for
benefits made in the ordinary course of Plan administration for which
Plan administrative review procedures have not been exhausted) is
pending, or to Company's knowledge, threatened or imminent against or
with respect to the Plan, any
17
employer who is participating (or who has participated) in any Plan or
any fiduciary (as defined in Section 21(A) of ERISA) of the Plan; and
(3) Neither the Company nor, to Company's knowledge, any
fiduciary of any Plan has any knowledge of any facts which could give
rise to any action or claim against or with respect to any Plan, any
employer who is participating (or who has participated) in any Plan or
any fiduciary (as defined in Section 3(21)(A) of ERISA), of any Plan.
(j) Neither the Company nor, to the Company's knowledge, any
fiduciary with respect to any Plan has any liability or is threatened
with any liability (whether joint or several) (i) for the termination
of any single employer plan under Sections 4062 or 4064 of ERISA or
any multiple employer plan under Section 4063 of ERISA, (ii) for any
interest payments required under Section 302(e) of ERISA or Section
412(m) of the Internal Revenue Code, (iii) for any excise tax imposed
by Sections 4971, 4972, 4975, 4976, 4977, 4979, 4980, 4980A or 4980B
of the Internal Revenue Code, or (iv) to a fine under Section 502 of
ERISA.
(k) Neither Company nor any of the Members of the Group have
incurred any withdrawal liability with respect to any Multiemployer
Plan within the meaning of Sections 4201 and 4204 of ERISA, and no
liabilities exist with respect to withdrawals from any Multiemployer
Plans which could subject Company or any Members of the Group to any
controlled group liability under ERISA.
(l) None of the Plans that are welfare benefit plans within the
meaning of Section 3(1) of ERISA provide for benefits or coverage for
any former or retired employee or their beneficiaries, except to the
extent required by Section 4980B of the Internal Revenue Code or
Sections 601 through 608, inclusive, of ERISA. There is no VEBA
maintained with respect to any such welfare plan.
(m) Each Plan which is a "group health plan" (as such term is
defined in Section 5000(b)(1) of the Code), complies and has complied
with the continuation of group health coverage provisions contained in
Section 4980B of the Internal Revenue Code and Sections 601 through
608, inclusive, of ERISA.
(n) True, correct and complete copies of all documents creating
or evidencing any Plan have been provided to Parent, and true, correct
and complete copies of all reports, forms and other documents required
to be filed with any governmental entity or distributed to Plan
participants or employees (including, without limitation, summary plan
descriptions, Forms 5500 and summary annual reports for the past three
(3) years for all Plans subject to ERISA) have been provided to
Parent. A true, correct and accurate summary of any oral agreement or
unwritten Plan described in subsection (a) hereof has been provided to
Parent. True, correct and complete copies of employee confidentiality
or other agreements protecting proprietary processes or information
have been provided to Parent.
(o) All expenses and liabilities relating to all of the Plans
have been, and will on the Closing Date be fully and properly accrued
on Company's books and records and disclosed in accordance with
generally accepted accounting principles and in Plan financial
statements.
(p) Any fidelity bond required to be obtained by Company under
ERISA with respect to any Plan has been obtained and is in full force
and effect.
18
(q) the Company has to the extent applicable with respect to each
Plan, made available to Parent copies of the three most recent
attorney's responses to an auditor's request for information.
(r) There are no pending investigations, proceedings or other
matters concerning any Plan before the Internal Revenue Service,
Department of Labor, Pension Benefit Guaranty Corporation, or any
other governmental agency, other than determination letter
applications filed with the Internal Revenue Service.
(s) There are no leased employees employed by the Company (as
such term is defined in Section 414(n) of the Internal Revenue Code)
that must be taken into account with respect to the requirements of
the Plan set forth under Section 414(n)(3) of the Internal Revenue
Code.
(t) The execution of this Agreement by the Company and the
consummation of the transactions contemplated hereunder will not,
except as set forth in Schedule 5.19, result in any obligation or
liability (with respect to accrued benefits or otherwise) to any Plan,
or to any Employee or former Employee of the Company or Members of the
Group.
SECTION 5.20 Labor Matters. Except as set forth in Schedule 5.20,
(a) there are no material controversies pending or, to the knowledge
of the Company, threatened between the Company or its subsidiaries and
any representatives of any of their employees, (b) none of the
employees of the Company or its subsidiaries is covered by any
collective bargaining agreement, (c) no one has petitioned within the
last five years or is now petitioning for union representation of any
of the employees of the Company or its subsidiaries, (d) to the
knowledge of the Company, there are no material organizational efforts
presently being made involving any of the employees of the Company or
its subsidiaries and there have been no work stoppages or other
material labor difficulties, (e) the Company and its subsidiaries
have, to the knowledge of the Company, complied in all material
respects with all laws relating to the employment of labor, including,
without limitation, any provisions thereof relating to wages, hours,
collective bargaining, and the payment of social security and
similar taxes and (f) no person has, to the knowledge of the
Company, asserted that the Company or any of its subsidiaries is
liable in any material amount for any arrears of wages or any
taxes or penalties for failure to comply with any of the
foregoing.
SECTION 5.21 Environmental Matters. (a)(i) the Company and its
subsidiaries have conducted their respective businesses in compliance
with all applicable Environmental Laws (as defined below), including,
without limitation, having all permits, licenses and other approvals
and authorizations necessary for the operation of their respective
businesses as presently conducted, (ii) none of the properties owned
by the Company or any of its subsidiaries contain any Hazardous
Substance (as defined below) as a result of any activity of the
Company or any of its subsidiaries in amounts exceeding the levels
permitted by applicable Environmental Laws, (iii) neither the Company
nor any of its subsidiaries has received any notices, demand letters
or requests for information from any Federal, state, local or foreign
governmental entity or third party indicating that the Company or any
of its subsidiaries may be in violation of, or liable under, any
Environmental Law in connection with the ownership or operation of
their businesses, (iv) there are no civil, criminal or administrative
actions, suits, demands, claims, hearings, investigations or
proceedings pending or threatened, against the Company or any of its
subsidiaries relating to any violation, or alleged violation, of any
Environmental Law, (v) no reports have been filed, or are required to
be filed, by the Company or any of its subsidiaries concerning the
release of any Hazardous Substance or the threatened or actual
violation of any Environmental Law, (vi) no Hazardous Substance has
been treated, disposed of, released or transported in violation of any
applicable Environmental Law from any
19
properties owned by the Company or any of its subsidiaries as a result
of any activity of the Company or any of its subsidiaries during the
time such properties were owned, leased or operated by the Company or
any of its subsidiaries, (vii) there have been no environmental
investigations, studies, audits, tests, reviews or other analyses
regarding compliance or noncompliance with any applicable
Environmental Law conducted by or which are in the possession of the
Company or its subsidiaries relating to the activities of the Company
or its subsidiaries, (viii) there are no underground storage tanks on,
in or under any properties owned by the Company or any of its
subsidiaries and no underground storage tanks have been closed or
removed from any of such properties during the time such properties
were owned, leased or operated by the Company or any of its
subsidiaries, (ix) there is no asbestos or asbestos containing
material present in any of the properties owned by the Company and its
subsidiaries, and no asbestos has been removed from any of such
properties during the time such properties were owned, leased or
operated by the Company or any of its subsidiaries, (x) none of the
properties owned by the Company or any of its subsidiaries contains
environmentally sensitive areas, including, without limitation,
wetlands as defined in the federal Clean Water Act of 1970, and
amendments thereto, which would adversely effect the ability of the
Company or any of its subsidiaries to engage in future development of
said properties, and (xi) neither the Company, its subsidiaries nor
any of their respective properties are subject to any material
liabilities or expenditures (fixed or contingent) relating to any
suit, settlement, court order, administrative order, regulatory
requirement, judgment or claim asserted or arising under any
Environmental Law, except for violations of the foregoing clauses (i)
through (xi) that, singly or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect.
(b) As used herein, "Environmental Law" means any Federal, state,
local or foreign law, statute, ordinance, rule, regulation, code,
license, permit, authorization, approval, consent, order, judgment,
decree, injunction, requirement or agreement with any governmental
entity relating to (x) the protection, preservation or restoration of
the environment (including, without limitation, air, water vapor,
surface water, groundwater, drinking water supply, surface land,
subsurface land, plant and animal life or any other natural resource)
or to human health or safety or (y) the exposure to, or the use,
storage, recycling, treatment, generation, transportation, processing,
handling, labeling, production, release or disposal of Hazardous
Substances, in each case as amended and as in effect on the Closing
Date. The term Environmental Law includes, without limitation, (i) the
Federal Comprehensive Environmental Response Compensation and
Liability Act of 1980, the Superfund Amendments and Reauthorization
Act, the Federal Water Pollution Control Act of 1972, the Federal
Clean Air Act, the Federal Clean Water Act, the Federal Resource
Conservation and Recovery Act of 1976 (including the Hazardous and
Solid Waste Amendments thereto), the Federal Solid Waste Disposal and
the Federal Toxic Substances Control Act, the Federal Insecticide,
Fungicide and Rodenticide Act, the Federal Occupational Safety and
Health Act of 1970, each as amended and as in effect on the Closing
Date, or any state counterpart thereof, and (ii) any common law or
equitable doctrine (including, without limitation, injunctive relief
and tort doctrines such as negligence, nuisance, trespass and strict
liability) that may impose liability or obligations for injuries,
damages or penalties due to, or threatened as a result of, the
presence of, effects of or exposure to any Hazardous Substance.
(c) As used herein, "Hazardous Substance" means any substance
presently or hereafter listed, defined, designated or classified as
hazardous, toxic, radioactive, or dangerous, or otherwise regulated,
under any Environmental Law. Hazardous Substance includes any
substance to which exposure is regulated by any government authority
or any Environmental Law including, without limitation, any toxic
waste, pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste,
20
industrial substance or petroleum or any derivative or by-product
thereof, radon, radioactive material, asbestos containing material,
urea formaldehyde foam insulation, lead or polychlorinated biphenyls.
SECTION 5.22 Trademarks and Intellectual Property Compliance. The
Company and its subsidiaries own or have the right to use, without any
material payment to any other party, all of their patents, trademarks
(registered or unregistered), trade names, service marks, copyrights,
technology, know-how and applications as set forth in Schedule 5.22
("Intellectual Property Rights"), and the consummation of the
transactions contemplated hereby will not alter or impair such rights
in any material respect. Other than the Intellectual Property Rights,
no other intellectual property rights, privileges, licenses, contracts
or other agreements are necessary to or used in the conduct of
business of the Company or any of its subsidiaries. To the knowledge
of the Company, no claims are pending by any person with respect to
the ownership, validity, enforceability or use of any such
Intellectual Property Rights which claims could reasonably be expected
to have a Company Material Adverse Effect. Neither the Company nor any
of its subsidiaries, nor to the knowledge of the Company, any of the
employees of the Company or any of its subsidiaries, has infringed or
made unlawful use of, or is infringing or making unlawful use of, any
proprietary or confidential information of any person or entity.
SECTION 5.23 Insurance. Schedule 5.23 sets forth all of the
insurance policies of the Company. Except to the extent there would be
no Company Material Adverse Effect, all of the Company's and its
subsidiaries' liability, theft, life, health, fire, title, worker's
compensation and other forms of insurance, surety bonds and umbrella
policies, insuring the Company and its subsidiaries and their
directors, officers, employees, independent contractors, properties,
assets and business, are valid and in full force and effect and
without any premium past due or pending notice of cancellation, and
are, in the reasonable judgment of the Company, adequate for the
business of the Company and its subsidiaries as now conducted, and
there are no claims, singly or in the aggregate, under such policies
in excess of $50,000, which, in any event, are not in excess of the
limitations of coverage set forth in such policies. The Company and
its subsidiaries have taken all actions reasonably necessary to insure
that their independent contractors obtain and maintain adequate
insurance coverage. All of the insurance policies referred to in this
Section 5.23 are "occurrence" policies and no such policies are
"claims made" policies. Neither the Company nor any of its
subsidiaries has knowledge of any fact indicating that such policies
will not continue to be available to the Company and its subsidiaries
upon substantially similar terms subsequent to the Effective Time. The
provision and/or reserves in the Company Financial Statements are
adequate for any and all self insurance programs maintained by the
Company or its subsidiaries.
SECTION 5.24 Year 2000 Compliance. Each production system which
includes software, hardware, databases or embedded control systems
(microprocessor controlled, robotic or other device) (collectively, a
"System"), that constitutes any part of, or is used in connection with
the use, operation or enjoyment of, any material tangible or
intangible asset or real property of the Company and its subsidiaries
(i) is designed (or has been modified) to be used prior to and after
January 1, 2000, (ii) will operate without error arising from the
creation, recognition, acceptance, calculation, display, storage,
retrieval, accessing, comparison, sorting, manipulation, processing or
other use of dates or date-based, date-dependent or date-related data,
including but not limited to century recognition, day-of-the-week
recognition, leap years, date values and interfaces of date
functionalities, and (iii) will not be adversely affected by the
advent of the year 2000, the advent of the twenty-first century or the
transition from the twentieth century through the year 2000 and into
the twenty-first century (collectively, items (i) through (iii) are
referred to herein as "Year 2000 Compliant"). No System that is
material to the business,
21
finances or operations of the Company or any subsidiary receives data
from or communicates with any component or system external to itself
(whether or not such external component or system is the Company's,
any subsidiary's or any third party's) that is not itself Year 2000
Compliant. All licenses for the use of any system-related software,
hardware, databases or embedded control system permit the Company or
its subsidiaries or a third party to make all modifications, bypasses,
de-bugging, work-arounds, repairs, replacements, conversions or
corrections necessary to permit the System to operate compatibly, in
conformance with their respective specifications, and to be Year 2000
Compliant. Except as set forth in Schedule 5.24, neither the Company
nor any of its subsidiaries has any reason to believe that it may
incur material expenses arising from or relating to the failure of any
of its Systems as a result of not being Year 2000 Compliant.
SECTION 5.25 Bank Accounts. Schedule 5.25 sets forth all banks or
other financial institutions with which the Company has an account or
maintains a safe deposit box, showing the type and account number of
each such account and safe deposit box and the names of the persons
authorized as signatories thereon or to act or deal in connection
therewith.
SECTION 5.26 Business Relations. Neither the Company nor the
Company Shareholders know or have any reason to believe that any
customer or supplier of the Company or the subsidiaries of the Company
will cease to do business with the Company or the subsidiaries of the
Company after the consummation of the transactions contemplated hereby
in the same manner and at the same levels as previously conducted with
the Company or the subsidiaries of the Company as the case may be.
SECTION 5.27 Potential Conflicts of Interest. Except as set forth
on Schedule 5.27, (a) No officer, director, or shareholder of the
Company or any of its subsidiaries (a) owns, directly or indirectly,
any interest (excepting not more than 1% stock holdings for investment
purposes in securities of publicly held and traded companies) in, or
is an officer, director, employee, or consultant of, any person or
entity that is a competitor, lessor, lessee, customer, or supplier of
the Company or any of its subsidiaries; (b) owns, directly or
indirectly, in whole or in part, any tangible or intangible property
that the Company or any of its subsidiaries is using or the use of
which is necessary for the business of the Company or any of its
subsidiaries; or (c) has any cause of action or other claim whatsoever
against, or owes any amount to, the Company or any of its
subsidiaries, except for claims in the ordinary course of business,
such as for accrued vacation pay, accrued benefits under employee
benefit plans, and similar matters and agreements.
(b) To the knowledge of the Company, no officer, director,
employee, or consultant of the Company or any of its subsidiaries is
presently obligated under or bound by any agreement or instrument, or
any judgment, decree, or order of any court of administrative agency,
that (i) conflicts or may conflict with his or her agreements and
obligations to use his or her best efforts to promote the interests of
the Company or any of its subsidiaries, (ii) conflicts or may conflict
with the business or operations of the Company or any of its
subsidiaries as presently conducted or as proposed to be conducted in
the short term, or (iii) restricts or may restrict the use or
disclosure of any information that may be useful to the Company or any
of its subsidiaries.
SECTION 5.28 Disclosure. No representation or warranty of the
Company or any of the Company Shareholders in this Agreement
(including the exhibits and schedules hereto), or any of the other
Agreements to be executed and delivered by any of them as contemplated
hereby, or any statement made or document presented by the Company or
any of the Company Shareholders in connection
22
therewith or herewith, contains or shall contain any untrue statement
of a material fact or omits or shall omit to state a material fact
required to be stated therein or necessary to make the statements
contained therein not false or misleading. There is no fact that the
Company has not disclosed to Parent in writing that materially
adversely affects the business or condition (financial or otherwise)
of the Company or the ability of the Company or any of the Company
Shareholders to perform their respective obligations under this
Agreement or to consummate any of the transactions contemplated
hereby.
SECTION 5.29 Brokers. Neither the Company nor the Company
Shareholders have engaged, or caused to be incurred, any liability to
any finder, broker or sales agent in connection with the origin,
negotiation, execution, delivery, or performance of this Agreement and
the transactions contemplated hereby.
SECTION 5.30 Resignation of Directors and Officers. Parent has
received the written resignation, effective as of Closing, of each
director and officer of the Company and its subsidiaries.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY SHAREHOLDERS
Each of the Company Shareholders represents and warrants to
Parent and Subsidiary as of the date hereof as follows:
SECTION 6.1 Authority; Non-Contravention; Approvals. (a) Such
Company Shareholder has full legal right, power and authority to enter
into, execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly
executed and delivered by, and assuming the due authorization,
execution and delivery hereof by Parent, and Subsidiary and the
Company, constitutes a valid and legally binding agreement of such
Company Shareholder, enforceable against such Company Shareholder in
accordance with its terms, except that such enforcement may be subject
to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to enforcement of creditors' rights
generally and (ii) general equitable principles.
(b) The execution and delivery of this Agreement by each Company
Shareholder do not violate, conflict with or result in a breach of any
provision of or constitute a default (or an event which, with notice
or lapse of time or both, would constitute a default) under, or result
in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in
the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of such Company Shareholder under
any of the terms, conditions or provisions of (i) any statute, law,
ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority
applicable to such Company Shareholder or any of such Company
Shareholder's respective properties or assets or (ii) any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or
agreement of any kind to which such Company Shareholder is now a party
or by which such Company Shareholder or any of such Company
Shareholder's respective properties or assets may be bound.
(c) No declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory
body or authority is necessary for the execution and delivery
23
of this Agreement by each Company Shareholder or the consummation by
each Company Shareholder of the transactions contemplated hereby.
SECTION 6.2 Approval of Merger. The Company Shareholders have
adopted and approved the Merger and this Agreement by executing a
written consent of the shareholders of the Company.
SECTION 6.3 Title to Shares. Each Company Shareholder has good
and marketable title to and is the lawful owner, of record and
beneficially, of the Company Common Stock set forth next to such
Company Shareholder's name in Schedule 5.2. Such Company Common Stock
constitutes all of the shares of Company Common Stock owned by such
Company Shareholder, either directly or indirectly. The Company Common
Stock owned by such Company Shareholder is not or will not be subject
to any lien, claim, encumbrance or restriction of any type, kind or
nature in favor of any third party or any third party interests.
SECTION 6.4 Tax-Free Reorganization. In order to preserve the
tax-free treatment of the Merger under Sections 368(a)(1)(A) and
368(a)(2)(D) of the Code, each Company Shareholder agrees that such
Company Shareholder has no plan or intention to sell or otherwise
dispose of any shares of Parent Common Stock received by such Company
Shareholder as Merger Consideration, which sale or disposition would
have the effect of reducing the aggregate number of shares of Parent
Common Stock received by all Company Shareholders in the Merger to an
amount that would be equal in value as of the date of the Merger to
less than 51% of the fair market value of all the shares of Company
Common Stock outstanding immediately prior to the Merger.
SECTION 6.5 Investment; No registration. Each Company Shareholder
(i) understands that Parent Common Stock received by such Company
Shareholder as Merger Consideration has not been, and will not be,
registered under the Securities Act, or under any state securities
laws, and is being offered and sold in reliance upon federal and state
exemptions for transactions not involving any public offering, (ii) is
acquiring such Parent Common Stock solely for such Company
Shareholder's own account for investment purposes, and not with a view
to the distribution thereof, (iii) is a sophisticated investor with
knowledge and experience in business and financial matters, (iv) has
received sufficient information concerning Parent and has had the
opportunity to obtain additional information as desired in order to
evaluate the merits and the risks inherent in holding Parent Common
Stock, and (v) is able to bear the economic risk and lack of liquidity
inherent in holding Parent Common Stock.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1 Expenses and Fees. Each party hereto agrees to bear
its own expenses, including reasonable and customary fees and expenses
payable to attorneys and accountants in connection with the
transactions contemplated hereby, provided, however, that any fees and
expenses payable to Reese, Smalley, Xxxxxxx & Xxxxxxxxxx, LLP shall be
payable solely by the Company Shareholders.
SECTION 7.2 Confidentiality. Each of Parent, Subsidiary, the
Company and the Company Shareholders will hold in strict confidence
all documents and information concerning any party hereto furnished to
them and their representatives in connection with the transactions
contemplated by this
24
Agreement and will not release or disclose such information to any
other person, except as required by law, with the same undertaking
from such accountants, attorneys, financial advisors and other
representatives of each party. Regardless of whether the transactions
contemplated by this Agreement shall be consummated, such confidence
shall be maintained and such information shall not be used in
competition with any party hereto. Notwithstanding the foregoing, such
information shall not be considered confidential if it (i) is or
becomes generally available to the public other than as a result of
disclosure by any other party hereto, (ii) becomes available to any
party from a public source, or (iii) is independently developed by any
party hereto through persons who have not had, directly or indirectly,
access to non-public information.
SECTION 7.3 Parent Stock. Each certificate representing
restricted Parent Stock received by Company Shareholders as Merger
Consideration will be imprinted with a legend substantially in the
following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE
DISPOSED OF UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND SUCH LAWS COVERING SUCH
SECURITIES OF AQUAPENN SPRING WATER COMPANY, INC. OR AN
OPINION OF COUNSEL SATISFACTORY TO AQUAPENN SPRING WATER
COMPANY, INC. STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT,
OFFER, PLEDGE OR OTHER DISTRIBUTION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH
ACT AND SUCH LAWS."
SECTION 7.4 Payment of Obligations. On the Closing Date or after
the Closing Date and promptly upon verification of the proper pay-off
amounts, Parent will pay all obligations of the Company, including
obligations to related parties and obligations for which personal
guarantees were given by shareholders, disclosed in Schedule 7.4.
SECTION 7.5 No Checks, Wires or Withdrawals. The Principal
Shareholders agree not to issue any checks, authorize any account or
wire transfers or otherwise withdraw any funds from the Company's or
the Surviving Corporation's bank account(s) on or after the Closing
Date, without the prior written consent of the chief financial officer
of Parent.
ARTICLE VIII
CONDITIONS
SECTION 8.1 Condition to Parent's Obligation to Effect the
Merger. Unless waived by Parent, its obligation to effect the Merger
shall be subject to (a) the receipt of an opinion from Reese, Smalley,
Xxxxxxx & Xxxxxxxxxx, LLP, counsel to the Company, dated as of the
Closing Date, substantially in the form set forth in Exhibit 8.1
attached hereto; (b) the receipt of resignations from
25
the Principal Shareholders as officers and directors of the Company;
and (c) the termination of the Buy-Sell Agreement.
SECTION 8.2 Conditions to the Company's Obligation to Effect the
Merger. Unless waived by Company, its obligation to effect the Merger
shall be subject to the receipt of an opinion from McQuaide, Blasko,
Xxxxxxxx, counsel to Parent, dated as of the Closing Date,
substantially in the form set forth in Exhibit 8.2 attached hereto.
ARTICLE IX
POST-CLOSING OBLIGATIONS
SECTION 9.1 Agreement to Cooperate. Subject to the terms and
conditions herein provided, each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all action and to
do, or cause to be done, all things necessary, proper or advisable
pursuant to all agreements, contracts, indentures or other instruments
to which the parties hereto are a party, or under any applicable laws
and regulations to consummate and make effective the transactions
contemplated by this Agreement, including using its reasonable efforts
(i) to obtain all necessary or appropriate waivers, consents and
approvals from lenders, landlords, security holders or other parties
whose waiver, consent or approval is required in connection with the
Merger, (ii) to effect all necessary registrations, filings and
submissions and (iii) to lift any injunction or other legal bar to the
Merger, the transactions contemplated hereby and all post-closing
actions necessary or required hereunder. By way of clarification and
not limitation of the foregoing, the Principal Shareholders agree to
use their best efforts to fully cooperate with Parent and the
Surviving Corporation in their efforts to identify all Liabilities of
the Company and to complete an audit of the Company's Financial
Statements as quickly as possible following the Closing.
SECTION 9.2 Public Statements. Unless required by law, the
parties (i) shall consult with each other prior to issuing any press
release or any written public statement with respect to this Agreement
or the transactions contemplated hereby, and (ii) shall not issue any
such press release or written public statement prior to such
consultation.
SECTION 9.3 Transition. The Company Shareholders shall not take
any action that is designed or intended to have the effect of
discouraging any employee, lessor, licensor, customer, supplier or
other business associate of the Company or of Parent from maintaining
the same business relationships with the Company after the Closing as
it maintained with the Company or with Parent prior to the Closing
unless such action is taken in accordance with prudent business
practices.
SECTION 9.4 Directors and Officers of Surviving Corporation. As
soon as practicable after closing, Parent shall cause the Shareholder
of the Surviving Corporation to elect Xxxx Xxxxxx and Xxxxx Xxxxxxx as
additional directors of Surviving Corporation, and Xxxx Xxxxxx; Xxxxx
Xxxxxxx; and Xxxxx Xxxxxx to be appointed as President; Vice President
and Secretary; and Vice President and Treasurer, respectively, of
Surviving Corporation each to serve at the pleasure of the shareholder
of Surviving Corporation and directors of Parent. Xxxx Xxxxxx, Xxxxx
Xxxxxxx and Xxxxx Xxxxxx each agree to resign as directors and
officers of the Surviving Corporation immediately upon request of
Parent.
26
SECTION 9.5 Lock-up Agreements. Each Company Shareholder shall
execute a lock-up agreement in relation to the IPO in the same form as
lock-up agreements executed by the shareholders of Parent. Each
Company Shareholder agrees to cooperate fully with Parent in the IPO,
including without limitation assistance with the preparation of
financial statements and the audit of the financial statements
required in connection with the IPO.
SECTION 9.6 Completion of Minutes. Xxxxx Xxxxxxx and Xxxx Xxxxxx
agree to draft and execute minutes to any and all board meetings and
shareholders meetings for which no minutes currently exist.
SECTION 9.7 Execution of Further Documents. Promptly upon request
by another party to this Agreement, each party shall execute whatever
certificates and documents, and will file, record and publish such
certificates and documents which are required to complete all
transactions contemplated by this Merger Agreement.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 Survival of Representations and Warranties. All of
the representations and warranties of Parent, Subsidiary, the Company
and the Company Shareholders contained in this Agreement shall survive
the Closing and continue in full force and effect for a period of
twenty-four (24) months thereafter.
SECTION 10.2 Validity. If any provision of this Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable, the remainder of this Agreement and the application of
such provision to other persons or circumstances shall not be affected
thereby and to such end the provisions of this Agreement are agreed to
be severable.
SECTION 10.3 Indemnification. (a) The Principal Shareholders
jointly and severally agree to defend, indemnify and hold Parent and
Subsidiary and their respective officers, directors, shareholders,
affiliates, employees and agents, and their respective successors and
assigns, harmless from and against any and all claims, actions,
damages, obligations, losses, liabilities, costs and expenses
(including attorneys' fees, costs of collection, other costs of
defense and all other fees and costs incurred by Parent and
Subsidiary) resulting from: (i) any misrepresentation or omission from
or breach of warranty by the Company or the Company Shareholders made
in Articles V and VI of this Agreement or in any certificate or
document delivered to Parent or Subsidiary by the Company or the
Company Shareholders under or in connection with this Agreement; (ii)
any breach of any agreement, covenant or commitment of the Company or
the Company Shareholders made or contained in this Agreement; (iii)
any claim or liability which arises from events or conditions
occurring prior to the Closing Date, other than those reflected on the
Company Financial Statements or the Schedules to this Agreement; and
(iv) tax liabilities incurred by the Company prior to the Closing
Date.
(b) Parent agrees to defend, indemnify and hold the Company
Shareholders and their respective heirs, executors and personal
representatives and the Company harmless from and against any and all
claims, actions, damages, obligations, losses, liabilities, costs and
expenses (including attorneys' fees, costs of collection, other costs
of defense and all other fees and costs incurred by the Company or
27
the Company Shareholders resulting from (i) any misrepresentation or
omission from or by Parent or Subsidiary made in Article IV of this
Agreement or in any certificate or document delivered to the Company
or the Company Shareholders by Parent or Subsidiary under or in
connection with this Agreement (except for any Private Placement
Memorandum), and (ii) any breach of any covenant, agreement or
commitment of Parent or Subsidiary made or contained in this
Agreement.
(c) Any person seeking indemnity under this Section 10.3 (an
"Indemnified Person") shall be entitled to make a claim for indemnity
under Section 10.3(a) or Section 10.3(b) hereof, as the case may be,
only if written notice, specifying in reasonable detail the basis of
the claims shall have been provided to the party from which indemnity
may be sought (the "Indemnifying Party") (a) within ninety days after
the Indemnified Person shall have become aware of facts constituting
the basis for such a claim or (b) if earlier, in the case of any
action or proceeding by a third party, not more than fifteen days
after the commencement of such action or proceeding. In the case of
any such action or proceeding by a third party, if the Indemnifying
Party so elects or is requested by the Indemnified Person, the
Indemnifying Party will assume the defense of such action or
proceeding, including the employment of counsel reasonably
satisfactory to the Indemnified Person and the payment of the fees and
disbursements of such counsel. In the event, however, that such
counsel reasonably determines that its representation of both the
Indemnifying Party and one or more Indemnified Persons would present
such counsel with a conflict of interest or if the Indemnifying Party
fails to assume the defense of the action or proceeding in a timely
manner after receiving notice, then such Indemnified Person may employ
separate counsel to represent or defend it in any such action or
proceeding and the Indemnifying Party will pay the fees and
disbursement of such counsel; provided, however, that the Indemnifying
Party will not be required to pay the fees and disbursements of more
than one separate law firm for all Indemnified Persons in any
jurisdiction in any single action or proceeding.
(d) So long as the Indemnifying Party is conducting the defense
of the Indemnified Party in accordance with this Section 10.3(a), the
Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the claim; (b) the
Indemnified Party will not consent to the entry of any judgment or
enter into any settlement with respect to any claim without the prior
written consent of the Indemnifying Party (not to be withheld
unreasonably), and (c) the Indemnifying Party will not consent to the
entry of any judgment or enter into any settlement with respect to any
claim without the prior written consent of the Indemnified Party (not
to be withheld unreasonably).
SECTION 10.4 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, mailed by registered or certified mail (return receipt
requested) or sent via facsimile to the parties at the following
addresses (or at such other address for a party as shall be specified
by like notice):
(a) If to Parent or Subsidiary to:
AquaPenn Spring Water Company, Inc.
X.X. Xxx 000
0 XxxxXxxx Xxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx
Facsimile Number: (000) 000-0000
28
with a copy to:
Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Facsimile Number: (000) 000-0000
(b) If to the Company, to:
Dunsmuir Bottling Company
d/b/a Castle Rock Spring Water Company
0000 Xxxxxxxx Xxxxx Xxxx.
Xxxxxxx, XX 00000
Attention: President
Facsimile Number: 000-000-0000
with a copy to:
Reese, Smalley, Xxxxxxx & Xxxxxxxxxx, LLP
0000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxxxx
Facsimile Number: (000) 000-0000
SECTION 10.5 Interpretation. The headings contained in this
Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. In this
Agreement, unless a contrary intention appears, (i) the words
"herein", "hereof" and "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular Article,
Section or other subdivision and (ii) reference to any Article or
Section means such Article or Section hereof. No provision of this
Agreement shall be interpreted or construed against any party hereto
solely because such party or its legal representative drafted such
provision.
SECTION 10.6 Miscellaneous. This Agreement (including the
documents and instruments referred to herein) (a) constitutes the
entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties, or any of
them, with respect to the subject matter hereof, (b) is not intended
to confer upon any other person any rights or remedies hereunder,
except for rights of indemnified Parties under Section 10.2 and (c)
shall not be assigned by operation of law or otherwise, except that
Subsidiary may assign this Agreement to any other wholly owned
subsidiary of Parent. THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS
OF THE COMMONWEALTH OF PENNSYLVANIA APPLICABLE TO CONTRACTS EXECUTED
AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
SECTION 10.7 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same agreement. Each of
the parties agrees to accept and be bound by facsimile signatures
hereto.
29
SECTION 10.8 Parties In Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and except
as set forth in the exception to Section 10.3, nothing in this
Agreement, express or implied, is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by
reason of this Agreement.
SECTION 10.9 Exhibits and Schedules. All Exhibits and
Schedules referred to in this Agreement shall be attached hereto
and are incorporated by reference herein.
30
IN WITNESS WHEREOF, Parent, Subsidiary and the Company have
caused this Agreement to be signed by their respective officers
as of the date first written above.
ATTEST: AQUAPENN SPRING WATER COMPANY, INC.
By: /s/ Xxxxxxxx X. Xxxxxxxxxx By: /s/ Xxxxxx X. Xxxxx, III
-------------------------- ------------------------
Name: Xxxxxxxx X. Xxxxxxxxxx Name: Xxxxxx X. Xxxxx, III
Title: COO Title: President
ATTEST: CASTLE ROCK SPRING WATER COMPANY, INC.
By: /s/ Xxxxxxxx X. Xxxxxxxxxx By: /s/ Xxxxxx X. Xxxxx, III
-------------------------- ------------------------
Name: Xxxxxxxx X. Xxxxxxxxxx Name: Xxxxxx X. Xxxxx, III
Title: Secretary Title: President
ATTEST: DUNSMUIR BOTTLING COMPANY
By: /s/ Xxxxx X. Xxxxxxx By: /s/ Xxxx X. Xxxxxx
-------------------- ------------------
Name: Xxxxx X. Xxxxxxx Name: Xxxx X. Xxxxxx
Title: Secretary Title: President
/s/ Xxxx X. Xxxxxx
------------------
Xxxx Xxxxxx
/s/ Xxxxx X. Xxxxxxx
--------------------
Xxxxx Xxxxxxx
/s/ Xxxxx Xxxxxx
----------------
Xxxxx Xxxxxx
/s/ Xxxxxxx X. Xxxxxx TTEF
--------------------------
Xxx Xxxxxx, Trustee
Ray and Xxxxxx Xxxxxx
Trust dtd July 15, 1993
31
/s/ Xxxxxx X. Xxxxxx, Trustee
-----------------------------
Xxxxxx Xxxxxx, Trustee
Ray and Xxxxxx Xxxxxx
Trust dtd July 15, 1993
/s/ Xxxxxx X. Xxxxxxx Trustee
-----------------------------
Xxxxxx X. Xxxxxxx, Trustee
The Xxxxxxx Trust dtd July 1, 1983
and amended June 25, 1987
/s/ Gernith X. X. Xxxxxxx - Trustee
-----------------------------------
Xxxxxxx X. Xxxxxxx, Trustee
The Xxxxxxx Trust dtd July 1, 1983
and amended June 25, 1987
32
EXHIBIT A
Total
Stock Shares Cash Value
----- ------ ---- -----
.2969121 Xxxx Xxxxxx 250 ($ 525,000) 105,000 $ 365,736 $ 890,736
.2969121 Xxxxx Xxxxxxx 250 ($ 525,000) 105,000 365,736 890,736
.2969121 Xxxxx Xxxxxx 250 ($ 200,000) 40,000 690,736 890,736
.0498812 R & S, 42 ($ 149,645) 29,929 0 149,645
Xxxxxx Trust
.0498812 D & G, 42 ($ 149,645) 29,929 0 149,645
Xxxxxxx Trust
.0095011 Xxxxx Xxxxxx 8 28,504 28,504
842 ($1,549,290) 309,858 $1,450,712 $3,000,002
