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EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), is made and
entered into as of the 29th day of September, 1997, by and among XXXXXXXXX
FOODS COMPANY ("Xxxxxxxxx"), SOUTHERN BELLE DAIRY COMPANY, INC. (the
"Company"), the Company's directors, or a majority of them (collectively the
"Directors"), and the following shareholders of the Company: Xxxxxx X.
Xxxxxxx, Xxx X. Xxxxxxx and Xxxxx X. Xxxxxxx (collectively, the
"Shareholders").
W I T N E S S E T H:
WHEREAS, Xxxxxxxxx is a corporation duly organized and validly
existing under the laws of the State of Ohio, with authorized capital stock
consisting of 10,000,000 common shares, $1.00 par value per share ("Xxxxxxxxx
Common Stock"), of which 4,122,660 shares are currently outstanding;
WHEREAS, the Company is a corporation duly organized and validly
existing under the laws of the Commonwealth of Kentucky with authorized capital
stock consisting of 100,000 common shares, of which 41,868 shares are currently
outstanding, having no par value and 100,000 nonvoting preferred shares, of
which 23,841 shares are currently outstanding (10,341 shares of 8% A Series,
5,200 shares of 10% B Series and 8,300 shares of 9% C Series), having a par
value of $25.00 per share (all such common and preferred shares being
hereinafter referred to as the "Company Stock");
WHEREAS, Xxxxxxxxx and the Company have agreed to the merger of the
Company with and into Xxxxxxxxx in accordance with the General Corporation Law
of the State of Ohio (the "OGCL"), the Kentucky Business Corporation Act (the
"KBCA") and the provisions of this Agreement;
WHEREAS, upon consummation of the Merger (as defined below),
Xxxxxxxxx shall be the surviving corporation and the separate corporate
existence of the Company shall cease;
WHEREAS, the Board of Directors of Xxxxxxxxx and the Company have
approved, adopted and declared advisable this Agreement and authorized the
execution hereof in counterparts;
WHEREAS, the Directors of the Company have directed that this
Agreement be submitted to the Company's shareholders and the Directors have
approved and recommended that the Company shareholders approve, ratify and
confirm this Agreement and the transactions contemplated hereby; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger will qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing premises, which are
not mere recitals but an integral part hereof, and in consideration of the
mutual agreements hereinafter set forth, the parties hereto agree as follows:
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TABLE OF CONTENTS
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Section 1. Merger........................................ 2
1.1. The Merger.................................. 2
1.2. Effects of the Merger....................... 2
1.3. Directors and Officers
of Surviving Company........................ 2
1.4. Offices..................................... 2
Section 2. Conversion, Exchange and
Cancellation of Shares........................ 3
2.1. General..................................... 3
2.2. Conversion Rate............................. 3
2.3. Manner of Exchange.......................... 4
2.4. Fractional Shares........................... 4
2.5. Lost Certificates........................... 5
Section 3. Representations, Warranties and
Covenants of Xxxxxxxxx........................ 5
3.1. Organization, Standing and
Authority................................... 5
3.2. Capital Structure........................... 5
3.3. Authority................................... 6
3.4. Xxxxxxxxx Financial Statements.............. 6
3.5. Accuracy of Annual Report................... 7
3.6. Absence of Undisclosed Liabilities.......... 7
3.7. Compliance with Laws........................ 7
3.8. Absence of Certain Changes
or Events................................... 8
3.9. Reports..................................... 8
3.10. Best Efforts................................ 8
3.11. Accuracy of Information
for Xxxxxxxxx IPO Statement................. 8
3.12. SEC Reporting............................... 8
Section 4. Representations, Warranties
and Covenants of the Company.................. 9
4.1. Organization, Standing and
Authority................................... 9
4.2. Capital Structure........................... 9
4.3. Subsidiaries, Partnerships and
Joint Ventures.............................. 9
4.4. Authority................................... 10
(i)
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4.5. Company Financial Statements................ 11
4.6. Absence of Undisclosed
Liabilities................................. 12
4.7. Tax Matters................................. 12
4.8. Properties.................................. 14
4.9. Compliance with Laws........................ 15
4.10. Employee Benefit Plans...................... 15
4.11. Commitments and Contracts................... 18
4.12. Labor....................................... 19
4.13. Material Contracts Furnished................ 20
4.14. Other Material Contracts.................... 20
4.15. Material Contract Defaults.................. 21
4.16. Legal Proceedings........................... 21
4.17. Absence of Certain Changes or Events........ 21
4.18. Accounts Receivable......................... 21
4.19. Inventories................................. 22
4.20. Proprietary Rights.......................... 22
4.21. Environmental Matters....................... 22
4.22. No Broker................................... 23
4.23. Accuracy of Information for
Xxxxxxxxx IPO Registration
Statement................................... 24
4.24. Best Efforts................................ 24
4.25. No Third Party Consents..................... 24
4.26. Conduct of Business - Negative
Covenants of the Company.................... 24
4.27. Conduct of Business - Affirmative
Covenants of the Company.................... 26
Section 5. Indemnification and Confidentiality........... 27
5.1. Access and Information...................... 27
5.2. Furnishing Information and
Indemnification............................. 27
5.3. Confidentiality............................. 28
5.4. Updates to Information...................... 28
Section 6. Conditions Precedent.......................... 29
Section 7. Closing Date and Effective Time............... 35
7.1. Closing Date................................ 35
7.2. Effective Time.............................. 35
Section 8. Termination of Agreement...................... 35
8.1. Grounds for Termination..................... 35
8.2. Effect of Termination....................... 37
8.3. Return of Information....................... 37
(ii)
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Section 9. Extension, Waiver and Amendment............... 37
Section 10. Meeting of Shareholders of
the Company Voting; Rights of
Dissenting Shareholders....................... 38
10.1. Meeting..................................... 38
10.2. Voting...................................... 38
10.3. Rights of Dissenting
Shareholders................................ 38
Section 11. Miscellaneous................................. 39
11.1. Public Announcements........................ 39
11.2. Brokers and Finders......................... 39
11.3. Disclosed In Writing........................ 39
11.4. Entire Agreement............................ 39
11.5. Counterparts................................ 39
11.6. Invalid Provisions.......................... 40
11.7. Notices..................................... 40
11.8. Headings.................................... 40
11.9. Expenses.................................... 40
11.10. Governing Law............................... 41
11.11. No Assignment............................... 41
11.12. Effectiveness of Agreement.................. 41
11.13. Further Acts................................ 41
11.14. Certain Representations and
Warranties Not to Survive................... 41
11.15. Individual Directors........................ 41
11.16. Shareholders Representations
and Warranties; Indemnification;
and Sophistication.......................... 42
11.17. Legend...................................... 43
Exhibit A Aggregate Merger Consideration
Exhibit B Majority Shareholders
Exhibit C Employment Agreement
Schedule 1 Company Shareholder Jurisdiction
(iii)
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Section 1 Merger
1.1 The Merger. At the Effective Time (as defined in Section 7.2)
and subject to the terms and conditions hereof, the Company shall merge with
and into Xxxxxxxxx (the "Merger") in accordance with this Agreement, the OGCL
and the KBCA. Following the Effective Time of the Merger, Xxxxxxxxx shall be
(and is hereinafter called when reference is made to it at and after the
consummation of the Merger) the Surviving Company. At the Effective Time of
the Merger, the corporate existence of the Company shall, as provided in KRS
271B.11-060 of the KBCA and Section 1701.82 of the OGCL, be merged with and
into Xxxxxxxxx and continued in the Surviving Company and the separate
existence of the Company shall cease.
1.2 Effects of the Merger. The Merger shall have the effects set
forth in KRS 271B.11-060 of the KBCA and Section 1701.82 of the OGCL.
1.3 Directors and Officers of Surviving Company. The Articles of
Incorporation and the Code of Regulations of Xxxxxxxxx in effect immediately
prior to the Effective Time shall be the Articles of Incorporation and the Code
of Regulations of the Surviving Company until changed as provided therein or by
law. The directors and officers of the Surviving Company at the Effective Time
shall be those persons who are directors and officers respectively of Xxxxxxxxx
immediately before the Effective Time. The committees of the Board of
Directors of the Surviving Company at the Effective Time shall be the same as
and shall be composed of the same persons who are serving on committees
appointed by the Board of Directors of Xxxxxxxxx as they exist immediately
before the Effective Time.
1.4 Offices. From and after the Effective Time, the business and
location of the Surviving Company shall be the same as that of Xxxxxxxxx.
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Section 2 Conversion, Exchange and Cancellation of Shares
2.1 General. The manner of converting and exchanging the Company
Stock, all of which is represented by outstanding share certificates into the
merger consideration shall be as hereinafter provided in this Section 2.
2.2 Conversion Rate. At the Effective Time, by virtue of the
Merger and without any action on the part of the Company shareholders or the
Company, each of the:
(i) preferred shares of the Company Stock that shall be
issued and outstanding immediately prior to the Effective Time (which number of
shares shall not exceed 23,841) shall thereupon be converted into the right to
receive Twenty-Five Dollars ($25.00) of the Aggregate Merger Consideration (as
defined below) and such preferred shares will be cancelled;
(ii) common shares of the Company Stock that shall be issued
and outstanding immediately prior to the Effective Time (which number of shares
shall not exceed 41,868) shall thereupon be converted into the right to receive
One Hundred Five Dollars and Eighteen Cents ($105.18) of the Aggregate Merger
Consideration;
provided, however, that the maximum portion of the Aggregate Merger
Consideration that may be comprised of cash shall not exceed Two Million Six
Hundred Fifty Thousand ($2,650,000) and in no event shall the Aggregate Merger
Consideration exceed Five Million Dollars ($5,000,000).
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The "Aggregate Merger Consideration" to be received by the Company
shareholders in the aggregate shall be that combination of cash and shares of
Xxxxxxxxx Common Stock reflected in the "Total" columns on the attached Exhibit
A; provided, however, that by executing this Agreement, each of the
Shareholders listed on Exhibit B hereto (the "Majority Shareholders")
irrevocably acknowledge and agree not to amend, change or dispute that
combination of cash and shares of Xxxxxxxxx Common Stock reflected next to such
Majority Shareholder's name on Exhibit A. (Each individual shareholder's
merger consideration as reflected on Exhibit A is referred to as such
shareholder's "Shareholder Merger Consideration" or SMC".) Each Shareholder
receiving Xxxxxxxxx Common Stock understands that such Shareholder shall
receive that number of shares of Xxxxxxxxx Common Stock determined by taking
the total value of Xxxxxxxxx Common Stock being issued to such Shareholder as
part of such Shareholder's Shareholder Merger Consideration as reflected on
Exhibit A and dividing that amount by the price at which shares of Xxxxxxxxx
Common Stock are issued to the public ("IPO Price") in the initial public
offering ("IPO").
The number of shares of the Company Stock that shall be issued and
outstanding immediately prior to the Effective Time shall not be more than
65,709 shares. All shares of Xxxxxxxxx Common Stock into which the aforesaid
Company Stock is so converted shall be fully paid and nonassessable. All
shares of the Company Stock held by the Company as authorized but unissued
stock immediately prior to the Effective Time shall be cancelled and shall not
be exchanged for shares of Xxxxxxxxx Common Stock or any other consideration.
2.3 Manner of Exchange. After the Effective Time of the Merger,
each holder of a certificate theretofore evidencing outstanding shares of the
Company Stock, upon surrender of such certificate, accompanied by a Letter of
Transmittal to Xxxxxxxxx or its agent, shall be entitled to receive in exchange
therefor a certificate or certificates representing the number of full shares
of Xxxxxxxxx Common Stock for which shares of the Company Stock theretofore
represented by the certificate or certificates so surrendered shall have been
exchanged as provided in this Section 2 and any cash to which such Shareholder
may be entitled as set forth on, and in accordance with, Exhibit A. Until so
surrendered, each outstanding certificate which, prior to the
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Effective Time of the Merger, represented the Company Stock will be deemed to
evidence the right to receive the number of full shares of Xxxxxxxxx Common
Stock and cash into which the shares of the Company Stock represented thereby
may be converted, and will be deemed for all corporate purposes of Xxxxxxxxx to
evidence ownership of the number of full shares of Xxxxxxxxx Common Stock and
cash into which the shares of the Company Stock represented thereby were
converted. Until such outstanding certificates formerly representing the
Company Stock are surrendered, no dividend payable to holders of record of
Xxxxxxxxx Common Stock for any period as of any date subsequent to the
Effective Time of the Merger shall be paid to the holder of such outstanding
certificates in respect thereof. After the Effective Time of the Merger there
shall be no further registry of transfers on the records of the Company of
shares of the Company Stock. No interest shall be payable with respect to such
dividends upon surrender of outstanding certificates.
2.4 Fractional Shares. Xxxxxxxxx will not issue fractional shares
or fractional share certificates, but in lieu of the issuance of fractional
shares will pay cash, without interest, to any Company Shareholder otherwise
entitled to receive such fractional shares. The amount of such cash payment
will be determined by multiplying the fractional share interest to which a
Company Shareholder would otherwise be entitled by the IPO Price of Xxxxxxxxx
Common Stock determined pursuant to Section 2.2. Payment for fractional shares
will be made with respect to each Shareholder at the time such Shareholder's
certificates of Company Stock are exchanged.
2.5 Lost Certificates. If a certificate evidencing outstanding
shares of Company Stock is lost, stolen or destroyed, the registered owner
thereof shall be entitled to receive the Xxxxxxxxx certificate and cash to
which he would otherwise be entitled on exchange of such certificate, by
notifying Xxxxxxxxx in writing of such lost, stolen or destroyed certificate
and giving Xxxxxxxxx evidence of loss and a bond sufficient to indemnify
Xxxxxxxxx against any claim that may be made against it on account of the
alleged lost, stolen or destroyed certificate and the issuance of the
certificate and cash.
Section 3 Representations, Warranties and Covenants of Xxxxxxxxx
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Except as disclosed in writing to the Company, Xxxxxxxxx hereby
represents and warrants to and covenants with the Company and the Shareholders
that:
3.1 Organization, Standing and Authority. Xxxxxxxxx is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Ohio. Xxxxxxxxx has the corporate power to execute and
deliver this Agreement and has taken all action required by law, its Articles
of Incorporation, its Code of Regulations or otherwise, to authorize such
execution and delivery, the Merger and the consummation of the transactions
contemplated hereby, and this Agreement is a valid and binding agreement of
Xxxxxxxxx in accordance with its terms. At the Effective Time, Xxxxxxxxx will
have corporate power to carry on its business as then to be conducted and will
be qualified to do business in every jurisdiction in which the character and
location of the assets to be owned by it or the nature of the business to be
transacted by it require qualification.
3.2 Capital Structure. The authorized capital stock of Xxxxxxxxx
consists of 10,000,000 shares of Xxxxxxxxx Common Stock, of which 4,122,660
shares are currently issued and outstanding. All of such shares are fully paid
and nonassessable. Xxxxxxxxx does not have any other shares of Xxxxxxxxx
Common Stock or any other capital stock issued or outstanding. Xxxxxxxxx does
not have any outstanding subscriptions, options or other agreements or
commitments obligating it to issue shares of its capital stock except as may be
otherwise provided herein and in Section 6(c). The holders of Xxxxxxxxx Common
Stock have no preemptive rights with respect to the issuance of additional
authorized shares of Xxxxxxxxx Common Stock. Nothing in this Agreement shall
prohibit or impair the ability and right of Xxxxxxxxx to increase its
authorized capital stock or issue or agree to commit to issue additional shares
of its capital stock, and any increase in authorized capital stock, or
issuance, or agreement or commitment to issue, additional shares of Xxxxxxxxx
Common Stock shall not alter or affect the conversion rate set forth in Section
2.2 hereof.
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3.3 Authority. The execution and delivery of this Agreement do
not, and the consummation of the Merger and transactions contemplated hereby
will not, violate any provision of the Articles of Incorporation or Code of
Regulations of Xxxxxxxxx, or any provision of, or result in the acceleration of
any obligation under, any material mortgage, deed of trust, note, lien, lease,
franchise, license, permit, agreement, instrument, order, arbitration award,
judgment, injunction or decree, or result in the termination of any material
license, franchise, lease or permit to which Xxxxxxxxx is a party or by which
it is bound, and will not violate or conflict with any other material
restriction of any kind or character to which Xxxxxxxxx is subject.
3.4 Xxxxxxxxx Financial Statements. Xxxxxxxxx has delivered to
the Company prior to the execution of this Agreement copies of the following
financial statements of Xxxxxxxxx (which, together with all future financial
statements to be furnished are collectively referred to herein as the
"Xxxxxxxxx Financial Statements"): the audited consolidated financial
statements of Xxxxxxxxx as of December 31, 1996 and December 31, 1995, and in
each case including the footnotes thereto and examined by and accompanied by
the report of Xxxxxxxxx'x independent public accountants (the "Audited
Financial Statements") and the unaudited Balance Sheet and related Statement of
Operation and Retained Earnings and Statement of Cash Flow, or substantially
similar financial statements, as of June 30, 1997. The Xxxxxxxxx Financial
Statements (as of the dates thereof and for the periods covered thereby):
(a) Are prepared from and in accordance with the books and
records of Xxxxxxxxx, which are complete and correct in all material respects
that are required by generally accepted accounting principles ("GAAP") (except
as otherwise required or approved by applicable regulatory authorities or by
applicable law) and which have been maintained in accordance with good business
practices; and
(b) Present fairly the financial position and results of
operations and changes in financial position of Xxxxxxxxx as of the dates and
for the periods indicated, in each case in accordance with generally accepted
accounting principles
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(except as otherwise required or approved by applicable regulatory authorities
or by applicable law), applied on a basis consistent with prior years, and do
not fail to disclose any material extraordinary or out-of-period items.
3.5 Accuracy of Annual Report. The annual report of Xxxxxxxxx to
its shareholders for 1996 heretofore delivered to the Company does not contain
as of the date thereof any untrue statement of material fact or omit to state
any material fact necessary to make the statements therein not misleading.
3.6 Absence of Undisclosed Liabilities. At December 31, 1996,
Xxxxxxxxx had no obligation or liability (contingent or otherwise) which was
material, or which when combined with all similar obligations or liabilities
would have been material, to Xxxxxxxxx except as disclosed in the Xxxxxxxxx
Financial Statements or as disclosed in writing to the Company; nor does there
exist a set of circumstances resulting from transactions effected or events
occurring on or prior to December 31, 1996, or from any action omitted to be
taken during such period that, to the knowledge of Xxxxxxxxx, could reasonably
be expected to result in any such material obligation or liability, except as
previously disclosed in writing to the Company, or as disclosed or provided for
in the Xxxxxxxxx Financial Statements. The amounts set up as liabilities for
taxes in the Xxxxxxxxx Financial Statements are sufficient for the payment of
all respective taxes (including, without limitation, federal, state, local and
foreign excise, franchise, property, payroll, income, capital stock and sales
and use taxes) accrued in accordance with generally accepted accounting
principles and unpaid at December 31, 1996. Since December 31, 1996, Xxxxxxxxx
has not incurred or paid any obligation or liability which would be material
(on a consolidated basis) to Xxxxxxxxx, except for obligations incurred or paid
in connection with transactions by it in the ordinary course of its business
consistent with generally accepted practices and except as disclosed herein.
3.7 Compliance with Laws. Xxxxxxxxx:
(a) Is in compliance with all laws, regulations, reporting
and licensing requirements and orders applicable to its business or any of its
employees (because of such employee's activities on behalf of it), the breach
or
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violation of which could have a material adverse effect on such business; and
(b) Has received no notification (not previously disclosed in
writing to the Company) from any agency or department of federal, state or
local government or regulatory authorities asserting that it is not in
compliance with any of the statutes, regulations, rules or ordinances which
such governmental authority or regulatory authority enforces, or threatening to
revoke any license, franchise, permit or governmental authorization, and is
subject to no agreement with any regulatory authorities with respect to its
assets or business.
3.8 Absence of Certain Changes or Events. Since December 31,
1996, Xxxxxxxxx has not: (i) incurred any material liability, except in the
ordinary course of its business, and except as permitted pursuant to this
Agreement or as disclosed in the Xxxxxxxxx Financial Statements; (ii) suffered
any material adverse change in its business, operations, assets or condition
(financial or other); or (iii) failed to operate its business consistent with
generally acceptable practice.
3.9 Reports. Since December 31, 1996, Xxxxxxxxx has filed all
reports and statements, together with any amendments required to be made with
respect thereto, which it was required to file with any governmental agency or
regulatory authority having jurisdiction over its operations. Each of such
reports and documents, including the financial statements, exhibits and
schedules thereto, and each other document delivered to the Company by
Xxxxxxxxx does not contain any statement which, at the time and in the light of
the circumstances under which it was made, is false or misleading with respect
to any material fact or which omits to state any material fact necessary in
order to make the statements contained therein not false or misleading.
3.10 Best Efforts. On or prior to the Closing Date (hereinafter
defined in Section 7.1 hereof), Xxxxxxxxx will, to the extent permitted by
applicable laws, rules and regulations, take such actions, and execute and
deliver all such agreements, documents, certificates or amendments to this
Agreement as may
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be necessary or desirable to effectuate the provisions and intent of this
Agreement.
3.11 Accuracy of Information for Xxxxxxxxx IPO Statement. The
material which refers to Xxxxxxxxx and which will be submitted by Xxxxxxxxx for
inclusion in the IPO Registration Statement (as defined below), at the time it
is filed by Xxxxxxxxx with the Securities and Exchange Commission ("SEC") or
becomes effective, will not contain any untrue statements of material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements contained therein not misleading; provided that the
foregoing shall not apply to the extent that any such untrue statement or a
material fact or omission to state a material fact was made by Xxxxxxxxx in
reliance upon and in conformity with written information concerning the Company
furnished to Xxxxxxxxx by the Company.
3.12 SEC Reporting. From and after the Closing Date, Xxxxxxxxx
shall timely file all reports required under the Securities Exchange Act of
1934, as amended, to allow the Shareholders to avail themselves of the resale
provisions of Rule 144 of the Securities and Exchange Commission under the 1933
Act (as defined in Section 5.2 herein).
Section 4 Representations, Warranties and Covenants of the Company
Except as previously disclosed in writing to Xxxxxxxxx, the Company
hereby represents and warrants to and covenants with Xxxxxxxxx that:
4.1 Organization, Standing and Authority. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the Commonwealth of Kentucky. The Company has the corporate power to
execute and deliver this Agreement, and has taken all action required by law,
its Articles of Incorporation, its By-laws or otherwise, to authorize such
execution and delivery, the Merger and the consummation of the transactions
contemplated hereby, and this Agreement is a valid and binding agreement of the
Company in accordance with its terms. At the Effective Time, the Company will
have corporate power to carry on its business as then to be
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conducted and will be qualified to do business in every jurisdiction in which
the character and location of the assets to be owned by it or the nature of the
business to be transacted by it require qualification. The Company has
delivered to Xxxxxxxxx true and complete copies of its Certificate of
Incorporation and By-laws, as in effect on the date hereof.
4.2 Capital Structure. The authorized capital stock of the
Company consists of 100,000 common shares, of which 41,868 shares are currently
outstanding, having no par value and 100,000 nonvoting preferred shares, of
which 23,841 shares are currently outstanding (10,341 shares of 8% A Series,
5,200 shares of 10% B Series and 8,300 shares of 9% C Series, having a par
value of $25.00 per share. The Company does not have any subscriptions,
options, warrants, calls or other agreements or commitments, of any kind
relating to or obligating it to issue any shares of its capital stock. Further,
there are no securities outstanding which are convertible into capital stock of
the Company. None of the shares of Company Stock has been issued in violation
of any preemptive rights of shareholders. To the best knowledge of the Company,
there are no written shareholder agreements, voting trusts, proxies or other
agreements with respect to the voting of the capital stock of the Company.
4.3 Subsidiaries, Partnerships and Joint Ventures.
(a) (i) Each subsidiary of the Company ("Subsidiary") has
been previously disclosed in writing to Xxxxxxxxx and is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or formation, has all corporate or partnership
power, all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted. Each Subsidiary
is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities make such qualification necessary,
except for those jurisdictions where the failure to be so qualified could not
reasonably be expected, individually or in the aggregate, to have a material
adverse effect.
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(ii) All of the outstanding capital stock of, or other
ownership interests in, each Subsidiary, is owned by the Company, free and
clear of any lien or other limitation or restriction (including any restriction
on the right to vote, sell or otherwise dispose of such capital stock or other
ownership interests).
(b) Other than as disclosed in writing to Xxxxxxxxx, the
Company has no subsidiaries (other than the Subsidiaries as defined in this
Section 4.3(a)), and does not directly or indirectly own any capital stock of,
or equity interests in, any other corporation, partnership or limited liability
company and the Company is not a member of or participant in any partnership,
limited liability company or joint venture and is not obligated to become such
a member or participant.
4.4 Authority. The execution and delivery of this Agreement and
the filing of the Certificate of Merger with the State of Ohio and the
Certificate of Merger with the Commonwealth of Kentucky do not, and the
consummation of the Merger and transactions contemplated hereby will not, (a)
violate any provision of the Articles of Incorporation or By-laws of any
Subsidiary or the Company, (b) violate any provision of, or result in the
acceleration of any obligation under, any mortgage, deed of trust, note, lien,
lease, franchise, license, permit, contract, agreement, instrument, order,
arbitration award, judgment, injunction or decree, or result in the termination
of any material license, franchise, lease or permit to which any Subsidiary or
the Company is a party or by which it is bound; (c) violate or conflict with
any other material restriction of any kind or character to which any Subsidiary
or the Company is subject; and (d) require any filing with, notice to or
permits, consent or approval of any other governmental or regulatory body,
except (i) the filing of the Certificate of Merger with the appropriate
regulatory authorities; (ii) the requirement that the Company give notice to
the FCS (as defined in Section 8.1 herein) in accordance with the Compliance
Agreement (as defined in Section 8.1 herein) which the Company acknowledges and
agrees shall be done prior to the execution of this Agreement, and (iii) any
filings required by the SEC or applicable state securities statutes that are
otherwise not required to be filed prior to the execution of this Agreement;
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provided that, excluded from the foregoing clauses (b), (c) and (d) are any
exceptions to the foregoing that, in the aggregate, would not have a material
adverse effect on the business of any Subsidiary or the Company or on the
ability of the Company or the Subsidiaries to consummate the transactions
contemplated hereby. No other corporate proceedings on the part of any
Subsidiary or the Company, other than shareholder approval hereof, are
necessary to authorize this Agreement and the transactions contemplated hereby.
The Directors of the Company have determined that the transactions contemplated
by this Agreement are in the best interest of the Company and its shareholders.
4.5 Company Financial Statements. The Company has delivered to
Xxxxxxxxx prior to the execution of this Agreement copies of the following
financial statements of the Company (which, together with all future financial
statements to be furnished are collectively referred to herein as the "Company
Financial Statements"): the audited consolidated financial statements of the
Company as of May 31, 1997, June 1, 1996 and June 3, 1995 and in each case
including the footnotes thereto and examined by and accompanied by the report
of the Company's independent public accountants (the "Audited Financial
Statements"). The Company Financial Statements (as of the dates thereof and
for the periods covered thereby):
(a) Are prepared from and in accordance with the books and
records of the Company, which are complete and correct in all material respects
that are required by GAAP (except as otherwise required or approved by
applicable regulatory authorities or by applicable law) and which have been
maintained in accordance with good business practice; and
(b) Present fairly the financial position and results of
operations and changes in financial position of the Company as of the dates and
for the periods indicated, in each case in accordance with generally accepted
accounting principles (except as otherwise required or approved by applicable
authorities or by applicable law), applied on a basis consistent with prior
years, and do not fail to disclose any material extraordinary or out-of-period
items.
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The Company's Balance Sheet and the related Statement of Operations
and Retained Earnings and Statement of Cash Flows, and the notes thereto, for
each fiscal quarter after May 31, 1997 until the Effective Time, all of which
the Company shall deliver to Xxxxxxxxx as soon as practicable, will be prepared
in accordance with GAAP consistently applied and will fairly present the
Company's financial condition and results of operations as of such date and for
such period.
4.6 Absence of Undisclosed Liabilities. At May 31, 1997, neither
the Company nor any Subsidiary had any obligation or liability contingent or
otherwise (including liabilities as guarantor or otherwise with respect to
obligations of others or liabilities for taxes due or then accrued or to become
due) which was material, or which when combined with all similar obligations or
liabilities would have been material, to the Company or any Subsidiary, except
as disclosed in the Company Financial Statements or as disclosed in writing to
Xxxxxxxxx, provided that such writing discloses the nature of such liability;
nor does there exist a set of circumstances resulting from transactions
effected or events occurring on or prior to May 31, 1997, or from any action
omitted to be taken during such period that, to the knowledge of any Subsidiary
or the Company, could reasonably be expected to result in any such material
obligation or liability, except as previously disclosed in writing to
Xxxxxxxxx, or as disclosed or provided for in the Company Financial Statements.
The amounts set up as liabilities for taxes in the Company Financial Statements
are sufficient for the payment of all respective taxes (including, without
limitation, federal, state, local and foreign excise, franchise, property,
payroll, income, capital stock and sales and use taxes) accrued in accordance
with generally accepted accounting principles and unpaid at May 31, 1997 by the
Company and its Subsidiaries. Since May 31, 1997, neither the Company nor any
Subsidiary has incurred or paid any obligation or liability which would be
material (on a consolidated basis) to the Company or any Subsidiary, except for
obligations incurred or paid in connection with transactions by it in the
ordinary course of its business consistent with generally accepted practices
and except as disclosed herein.
4.7 Tax Matters.
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18
(a) All federal, state, local and foreign tax returns,
(including, without limitation, estimated tax returns, withholding tax returns
with respect to employees, and FICA and FUTA returns) required to be filed by
or on behalf of the Company and its Subsidiaries have been timely filed or
requests for extensions have been timely filed, granted and have not expired
and all returns filed are complete and accurate in all material respects. All
taxes with respect to such returns and all taxes otherwise due have been timely
paid. As of the date hereof, and as of the Effective Time, there is and shall
be no audit examination, deficiency or refund litigation or matter in
controversy with respect to any taxes that might result in a determination
adverse to any Subsidiary or the Company, except as reserved against in the
Company Financial Statements, or as previously disclosed in writing to
Xxxxxxxxx. All taxes, interest, additions and penalties due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) Except as previously disclosed in writing to Xxxxxxxxx,
neither the Company nor any Subsidiary has executed an extension or waiver of
any statute of limitations on the assessment or collection of any tax due that
is currently in effect.
(c) To the extent any federal, state, local or foreign taxes
are due from the Company or any Subsidiary for the period or periods beginning
June 1, 1997 or thereafter through and including the Effective Time, adequate
provision on an estimated basis has been or will be made for the payment of
such taxes by establishment of appropriate tax liability accounts on the last
monthly financial statements of the Company, or the applicable Subsidiary,
prepared before the Effective Time.
(d) Deferred taxes of the Company and each Subsidiary have
been provided for in accordance with generally accepted accounting principles,
including without limitation Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes."
(e) None of the Company, the Subsidiaries, nor any
shareholder of the Company has made with respect to the Company or any
Subsidiary, or any property held by the Company or any Subsidiary, any consent
under Section 341 of the Code.
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19
No property of the Company is "tax-exempt use property" within the meaning of
Section 168(h) of the Code.
(f) None of the Company shareholders, the Company nor any
Subsidiaries has made any election under Section 13261(g)(2) of the Revenue
Reconciliation Act of 1993.
(g) Neither the Company nor any Subsidiary is subject to any
penalty or other addition to tax by reason of a violation of any tax order, tax
rule or tax regulation or a default with respect to any tax return for taxable
periods ending on or before the date hereof.
(h) There are no (1) liens with respect to taxes (except for
liens for taxes not yet delinquent) or (2) outstanding liabilities with respect
to taxes that could form the basis for liens, upon any of the properties or
assets, whether real, personal or mixed, tangible or intangible, of any
Subsidiary or the Company.
(i) Neither the Company nor any Subsidiary is a party to any
agreement providing for the allocation or sharing of, or indemnification for,
taxes.
(j) Neither the Company nor any Subsidiary is required to
include in income any adjustment in any taxable period ending after the date
hereof pursuant to Section 481(a) of the Code.
(k) Neither the Company nor any Subsidiary, shareholder, or
other person or entity has entered into any agreement with any taxing authority
that will bind Xxxxxxxxx or the Surviving Company after the Closing Date.
(l) There is no contract, agreement, plan or arrangement
covering any current or former employee of any Subsidiary or the Company that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible by Xxxxxxxxx or the Surviving Company by reason of
Section 280G of the Code.
- 16 -
20
(m) The Company has not participated or cooperated in any
international boycott within the meaning of Section 999(b) of the Code.
4.8 Properties. Except as previously disclosed in writing to
Xxxxxxxxx or disclosed in the Company Financial Statements, the Company and its
Subsidiaries have good and marketable title, free and clear of all liens,
encumbrances, charges, defaults or equities of whatever character, to all of
the respective properties and assets, tangible or intangible, whether real,
personal or mixed, reflected in the Company Financial Statements as being owned
by it at May 31, 1997 or acquired by it after May 31, 1997. All buildings, and
all fixtures, equipment and other property and assets which in the opinion of
management are material to its business held under leases or subleases by the
Company and its Subsidiaries are held under valid instruments enforceable in
accordance with their respective terms (except as previously disclosed in
writing to Xxxxxxxxx and except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceedings
may be brought). Other than as previously disclosed in writing to Xxxxxxxxx,
there is no equipment located on the premises of the Company or a Subsidiary
that is on loan from another party. The Company's and its Subsidiaries'
policies and binders for fire, theft, liability xxxxxxx'x compensation,
directors' and officers' vehicular and other insurance are in full force and
effect, are adequate for the business engaged in by the Company and its
Subsidiaries and provide adequate coverage against loss. Neither the Company
nor any of its Subsidiaries is in default with respect to any material
provision contained in any such policy or binder nor has the Company or any of
its Subsidiaries failed to give notice or present any claim under any such
policy or binder in due and timely fashion. There are no outstanding unpaid
claims under any such policy or binder and neither the Company or any of its
Subsidiaries has received notice of premium increase, cancelation or
non-renewal of any such policy or binder.
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21
4.9 Compliance with Laws. Except as previously disclosed in
writing to Xxxxxxxxx, each Subsidiary and the Company:
(a) Is in compliance with all laws, regulations, reporting
and licensing requirements and orders applicable to its business or any of its
employees (because of such employee's activities on behalf of it), the breach
or violation of which could have a material adverse effect on such business;
and
(b) Has received no notification (not previously disclosed
in writing to Xxxxxxxxx) from any agency or department of federal, state or
local government or regulatory authorities or the staff thereof asserting that
any such entity is not in compliance with any of the statutes, regulations,
rules or ordinances which such governmental authority or regulatory authority
enforces, or threatening to revoke any license, franchise, permit or
governmental authorization, and is subject to no agreement with any regulatory
authorities with respect to its assets or business.
4.10 Employee Benefit Plans.
(a) The Company has previously provided to Xxxxxxxxx a true
and complete list of each bonus, deferred compensation, incentive compensation,
stock purchase, stock option, severance pay, medical, life or other insurance,
profit-sharing, or pension plan, program, agreement or arrangement, and each
other employee benefit plan, program, agreement or arrangement, sponsored,
maintained or contributed to or required to be contributed to by the Company
and its Subsidiaries or by any trade or business, whether or not incorporated,
that together with the Company would be deemed a "single employer" under
section 414 of the Code (an "ERISA Affiliate") for the benefit of any employee
or director or former employee or former director of the Company or any ERISA
Affiliate, whether formal or informal and whether legally binding or not (the
"Plans"). None of the Plans is subject to Title IV of ERISA. The Company has
no formal plan or commitment, whether legally binding or not, to create any
additional plan or modify or change any existing Plan that would
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22
affect any employee or director or former employee or former director of the
Company or any ERISA Affiliate.
(b) With respect to each of the Plans, the Company has
heretofore delivered to the Company true and complete copies of each of the
following documents: (i) the Plan and related documents (including all
amendments thereto); (ii) the two most recent annual reports and financial
statements, if any; (iii) the most recent Summary Plan Description, together
with each Summary of Material Modifications, required under ERISA with respect
to such Plan, and all material employee communications relating to such Plan;
and (iv) the most recent determination letter received from the IRS with
respect to each Plan that is intended to be qualified under the Code and all
material communications to or from the IRS or any other governmental or
regulatory authority relating to each Plan.
(c) No liability under Title IV of ERISA has been incurred by
the Company or any ERISA Affiliate since the effective date of ERISA that has
not been satisfied in full, and no condition exists that presents a material
risk to the Company or any ERISA Affiliate of incurring a liability under such
Title.
(d) Neither the Company nor any ERISA Affiliate, nor any of
the Plans, nor any trust created thereunder, nor to the knowledge of the
Company any trustee or administrator thereof has engaged in a transaction in
connection with which the Company, any of the ERISA Affiliates, any of the
Plans, any such trust, or any trustee or administrator thereof, could be
subject to either a civil penalty assessed pursuant to section 409 or 502(i) of
ERISA, or a tax imposed pursuant to section 4975 or 4976 of the Code.
(e) Full payment has been made, or will be made in accordance
with section 404(a)(6) of the Code, of all amounts that the Company or any
ERISA Affiliate is required to pay under section 412 of the Code or under the
terms of the Plans, and all such amounts properly accrued through the Effective
Date will be paid on or prior to the Effective Date or will be properly
recorded on the Company Financial Statements.
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23
(f) Except as previously disclosed in writing to Xxxxxxxxx,
none of the Plans is a "multiemployer pension plan," as such term is defined in
section 3(37) of ERISA, a "multiple employer welfare arrangement," as such term
is defined in section 3(40) of ERISA, or a single employer plan that has two or
more contributing sponsors, at least two of whom are not under common control,
within the meaning of section 4063(a) of ERISA.
(g) With respect to any Plan that is a "multiemployer pension
plan," as such term is defined in Section 3(37) of ERISA (i) neither the
Company nor any ERISA Affiliate has made or suffered a "complete withdrawal" or
a "partial withdrawal," as such terms are respectively defined in section 4203
and 4205 of ERISA, (ii) no event has occurred that presents a material risk of
a partial withdrawal, (iii) neither the Company nor any ERISA Affiliate has any
contingent liability under section 4204 of ERISA, and no circumstances exist
that present a material risk that any such plan will go into reorganization,
and (v) the aggregate withdrawal liability of the Company and the ERISA
Affiliates, computed as if a complete withdrawal by the Company and the ERISA
Affiliates had occurred under each such Plan on the date hereof, would not
exceed $0.
(h) Each of the Plans that is intended to be "qualified"
within the meaning of section 401(a) of the Code is so qualified. Each of the
Plans that is intended to satisfy the requirements of section 125 or 501(c)(9)
of the Code satisfies such requirements. Each of the Plans has been operated
and administered in all material respects in accordance with its terms and
applicable laws, including but not limited to ERISA and the Code.
(i) Except as previously disclosed in writing to Xxxxxxxxx,
each Plan may be amended or terminated without liability to the Company or any
ERISA Affiliate. No amounts payable under the Plans will fail to be deductible
for federal income tax purposes under section 280G of the Code.
(j) There are no actions, suits or claims pending, or, to the
knowledge of the Company threatened, or anticipated (other than routine claims
for benefits) against any Plan, the assets of any Plan or against the Company
or any ERISA
- 20 -
24
Affiliate with respect to any Plan. There is no judgment, decree, injunction,
rule or order of any court, governmental body, commission, agency or arbitrator
outstanding against or in favor of any Plan or any fiduciary thereof (other
than rules of general applicability). There are no pending or, to the
knowledge of the Company threatened, audits or investigations by any
governmental body, commission or agency involving any Plan.
(k) No Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect to current or
former employees or directors of the Company or any ERISA Affiliate after
retirement or other termination of service (other than (i) coverage mandated by
applicable law, (ii) death benefit or retirement benefits under any "employee
pension plan," as that term is defined in Section 3(2) of ERISA, (iii) deferred
compensation benefits accrued as liabilities on the Company Financial
Statements, or (iv) benefits, the full cost of which is borne by the current or
former employee or director (or his beneficiary).
(l) Except as previously disclosed in writing to Xxxxxxxxx,
the consummation of the transactions contemplated by this Agreement will not
(i) entitle any current or former employee or director of the Company or any
ERISA Affiliate to severance pay, unemployment compensation or any similar
payment, or (ii) accelerate the time of payment or vesting, or increase the
amount, of any compensation due to any such current or former employee or
director, or (iii) renew or extend the term of any agreement regarding
compensation for any such current or former employee or director.
4.11 Commitments and Contracts. Except as previously disclosed in
writing to Xxxxxxxxx, neither the Company nor any Subsidiary is a party or
subject to any of the following (whether written or oral, express or implied):
(i) any employment contract or understanding (including any
understandings or obligations with respect to severance or termination pay
liabilities or fringe benefits) with any present or former officer, director,
employee or consultant (other than those which are terminable at will by the
Company or the applicable Subsidiary);
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25
(ii) any plan, contract or understanding providing for
bonuses, pensions, options, deferred compensation, retirement payments, profit
sharing or similar understandings with respect to any present or former
officer, director or consultant;
(iii) any contract or agreement with any labor union;
(iv) any contract not made in the ordinary course of
business containing covenants limiting the freedom of the Company or a
Subsidiary to compete in any line of business or with any person or involving
any restriction of the area in which, or method by which, the Company or a
Subsidiary will carry on its business (other than as may be required by law or
applicable authorities);
(v) any lease, agreement or other contract or series of
related contracts requiring annual rental payments or payments aggregating
$50,000 or more;
(vi) any agreement for the purchase or sale of materials,
supplies, equipment, merchandise or service that contain an escalation,
renegotiation or redetermination clause or that obligate the Company or any
Subsidiary to purchase all or substantially all of its requirements of a
particular product from a supplier, or for periodic minimum purchases of a
particular product from a supplier;
(vii) any agreement for the sale of any of the assets or
properties of the Company or any Subsidiary other than in the ordinary course
of business or for the grant to any person of any options, rights of first
refusal or preferential or similar rights to purchase any such assets or
properties;
(viii) any agreement of surety, guarantee or indemnification,
other than agreements in the ordinary course of business with respect to
obligations in an aggregate amount not in excess of $50,000;
(ix) any agreement with customers or supplier for the
sharing of fees, slotting fees, the rebating of charges or other similar
arrangements;
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26
(x) any agreement relating to the acquisition by the
Company or any Subsidiary of any operating business or the capital stock of
any other person;
(xi) any agreement or note relating to or evidencing
outstanding indebtedness for borrowed money; and
(xii) any other material agreement which is not made in the
ordinary course of business.
True and complete copies of all the contracts described above and
other material agreements (and all amendments, waivers or other modifications
thereto) have been furnished to Xxxxxxxxx. Each of such contacts is valid,
subsisting, in full force and effect, and the Company, and the applicable
Subsidiary, if any, is not in default under any of them, nor, to the best
knowledge of the Company and its Subsidiaries is any other party to any such
contract or other agreement in default thereunder, nor does any condition exist
that with notice or lapse of time or both would constitute a default
thereunder, except, in each case, such defaults as would not, individually or
in the aggregate, have a material adverse effect on the business of the Company
or any Subsidiary.
4.12 Labor.
(a) No work stoppage involving the Company or any Subsidiary
is pending or, to the best of the Company's knowledge, threatened.
(b) Neither the Company nor any Subsidiary is involved in, or
threatened with or affected by, any labor dispute, arbitration, lawsuit or
administrative proceeding which could materially and adversely affect the
business of the Company or any Subsidiary.
(c) Except as previously disclosed in writing to Xxxxxxxxx,
employees of the Company and its Subsidiaries are not represented by any labor
union nor are any collective bargaining agreements otherwise in effect with
respect to such employees.
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27
(d) Neither the Company nor any Subsidiary is delinquent in
payments to any of its respective employees or consultants for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed by them to the date hereof or amounts required to be reimbursed to
such employees. Neither the Company, its Subsidiaries, nor Xxxxxxxxx or the
Surviving Corporation will by reason of the Merger or anything done prior to
the Effective Time be liable to any of such employees for severance pay or any
other payments (other than accrued salary, vacation or sick pay in accordance
with the Company's normal policies). No payments to directors, officers,
employees or consultants of the Company and its Subsidiaries resulting from the
transactions contemplated hereby will cause the imposition of excise taxes
under Section 4999 of the Code or the disallowance of a deduction pursuant to
Section 280G of the Code. True and complete information as to all current
directors, officers, employees or consultants of the Company and its
Subsidiaries, including, in each case, name, current job title, base salary,
bonus potential, commissions and termination obligations has been previously
furnished to Xxxxxxxxx.
4.13 Material Contracts Furnished. The Company has made available
to Xxxxxxxxx true and complete copies of all material contracts, leases and
other agreements to which each of the Company and its Subsidiaries is a party
or by which it is bound and of all employment, pension, retirement, stock
option, profit sharing, deferred compensation, consultant, bonus, group
insurance or similar plans with respect to any of the directors, officers or
other employees of the Company and its Subsidiaries.
4.14 Other Material Contracts. Except as previously disclosed in
writing to Xxxxxxxxx and except as is otherwise provided in this Agreement,
neither the Company nor its Subsidiaries nor any of their respective assets,
businesses or operations is, as of the date hereof, a party to, or is bound or
affected by, or receives benefits under, (i) any material agreement,
arrangement or commitment not cancellable by it without penalty, other than
agreements, arrangements or commitments entered into in the ordinary course of
its business and negotiated on an arms-length basis, or (ii) any material
agreement, arrangement or commitment relating to the employment, election or
retention in office of any director or officer other than agreements,
arrangements or commitments entered into in the
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28
ordinary course of its business and negotiated on an arms-length basis.
4.15 Material Contract Defaults. Neither the Company nor any
Subsidiary is in default in any material respect under any contract, agreement,
commitment, arrangement, lease, insurance policy or other instrument to which
it is a party or by which its respective assets, business or operations may be
bound or affected or under which it or its respective assets, business or
operations receive benefits, and there has not occurred any event which with
the lapse of time or the giving of notice or both would constitute such a
default, except as previously disclosed in writing to Xxxxxxxxx.
4.16 Legal Proceedings. Except as disclosed in writing by the
Company, (a) there are no actions, suits or proceedings instituted or pending,
or to the best knowledge of the Company threatened, (or unasserted but
considered probable of assertion and which if asserted would have at least a
reasonable probability of an unfavorable outcome), including eminent domain
proceedings, against or relating to any Subsidiary or the Company, or against
any property, asset, interest or right of the Company, that could have a
material and adverse effect on the condition (financial or other, present or
prospective), business, properties, assets, operations, liabilities or
prospects of any Subsidiary or the Company, or that threaten or would impede
the consummation of the transactions contemplated by this Agreement, and (b)
neither the Company nor any Subsidiary is a party to any agreement or
instrument or subject to any charter or other corporate restriction or any
judgment, order, writ, injunction, stay, decree, rule, regulation, code or
ordinance that threatens or might impede the consummation of the transactions
contemplated by this Agreement.
4.17 Absence of Certain Changes or Events. Except as disclosed in
writing to Xxxxxxxxx, since May 31, 1997, neither the Company nor any
Subsidiary has: (i) incurred any material liability, except in the ordinary
course of its business, consistent with generally acceptable practice and
except as permitted pursuant to this Agreement; (ii) suffered any material
adverse change in its business, operations, assets or condition
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29
(financial or other); or (iii) failed to operate its business consistent with
generally acceptable practice.
4.18 Accounts Receivable. Except as previously disclosed in writing
to Xxxxxxxxx, all the notes and accounts receivable of the Company and its
Subsidiaries shown on the Company Financial Statements or thereafter acquired
have been collected or are current and collectible subject to the reserves
shown on the Company's Financial Statements and to returns and allowances in
the ordinary course of business (in the case of each note in accordance with
its terms, and in the case of each account within 30 days after billing) at the
aggregate recorded amounts thereof on the books of the Company. The Company
has delivered to Xxxxxxxxx a schedule identifying all bank and brokerage
accounts of the Subsidiaries and the Company, whether or not such accounts are
held in the name of such Subsidiary or the Company, listing the respectively
signatories therefore and the names of all persons holding a power of attorney
from the Company and each Subsidiary and a summary of the terms thereof.
4.19 Inventories. The inventories of the Subsidiaries and Company
are of a quality and quantity usable and salable in the ordinary course of
business, except for obsolete items and items of below-standard quality, all of
which, in the aggregate, are immaterial in amount. Items included in such
inventories are carried on the books of the Company, and are valued on the
Company Balance Sheet, at the lower of cost or market and, in any event, at not
greater than their net realizable value, on an item by item basis, after
appropriate deduction for costs of completion, marketing costs, transportation
expense and allocation of overhead, and reserves reflected on the Company's
Balance Sheet.
4.20 Proprietary Rights. The Company owns or possesses adequate
licenses or other rights to use all patents, trademarks, trade names,
copyrights, inventions, formulae, methods and processes (all such items being
hereinafter referred to as "Intangible Property") currently used by the Company
and its Subsidiaries in the conduct of its business, without any known conflict
with the rights of others. No royalties, honoraria or fees are payable by the
Company or any Subsidiary to any person by reason of the ownership or use of
the Intangible Property. All items of Intangible Property are valid
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30
and in good standing and are adequate and sufficient to permit the Company and
its Subsidiaries to conduct business as now operated, and no other rights of
the kinds enumerated are due or required by the Company or its Subsidiaries in
their respective operations. There are no licenses, sublicenses or agreements
relating to their use now in effect, and none of the aforesaid are being
infringed by others in any material way. No claim is pending or, to the
knowledge of the Company and its Subsidiaries, threatened or has been made
within the past five years, to the effect that operation by the Company or any
Subsidiary of their respective business or the manufacture or sale of any of
its products, or any formula, method, process, part or material it employs,
infringes or conflicts in any way upon any rights of the type enumerated above
owned or claimed by others.
4.21 Environmental Matters.
(a) The operations of the business of the
Company and its Subsidiaries and the buildings in which the operations are
conducted conform in all material respects with all applicable federal, state
and local laws, ordinances and regulations (including those relating to zoning
and environmental protection), and all buildings or operations of the Company
and its Subsidiaries and the businesses that are subject to the Occupational
Safety and Health Act of 1970, as amended, comply in all material respects with
employee working conditions as prescribed by such Act.
(b) Neither the Company nor any Subsidiary has underground
storage tanks, either empty or containing any liquid, including but without
limitation solvents, fuel or waste oil, on any premises used in its business.
(c) The Company and all its Subsidiaries have obtained all
permits, licenses and other authorizations and filed all notices which are
required to be obtained or filed for the operation of its business under
federal, state and local laws relating to pollution, protection of the
environment or waste disposal ("Environmental Laws"). The Company and its
Subsidiaries are in compliance in all material respects (i) with all terms and
conditions of all required permits, licenses and authorizations; and (ii) all
other applicable limitations,
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31
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in the Environmental Laws or contained in
any law, regulation, code, plan, order, decree, judgment, notice or demand
letter issued, entered, promulgated or approved thereunder. There are no past
or present events, conditions, circumstances, activities, practices, incidents,
actions or plans which may interfere with or prevent continued compliance in
all material respects, or which may give rise to any common law or statutory
liability, or otherwise form the basis of any claim, action, suit, proceeding,
hearing or investigation, based on or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling, or the
emission, discharge, release or threatened release into the environment, of any
pollutant, contaminant, waste or hazardous or toxic material with respect to
the Company, its Subsidiaries or their businesses, properties or plants.
(d) There are no actions, suits or proceedings, or demands,
claims, notices or investigations (including, without limitation, notices,
demand letters or requests for information from any environmental agency)
instituted or pending, or to the knowledge of the Company, threatened,
relating to the liability of the Company or any Subsidiary or any of their
operations or buildings under any Environmental Law.
4.22 No Broker. Neither the Company nor any Subsidiary has incurred
any liability for finder's, agent's or brokerage fees, commissions or
compensation in connection with this Agreement or the transactions contemplated
hereby.
4.23 Accuracy of Information for Xxxxxxxxx IPO Registration
Statement. The material which refers to the Company and its Subsidiaries and
which will be submitted by the Company for inclusion in the IPO Registration
Statement (as defined below) to be filed by Xxxxxxxxx with the SEC regarding
Xxxxxxxxx Common Stock will not contain any untrue statements of material fact
or omit to state any material fact required to be stated therein or necessary
to be stated therein or necessary to make the statements contained therein not
misleading.
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32
4.24 Best Efforts. On or prior to the Closing Date (hereinafter
defined in Section 7.1 hereof), the Company and its Subsidiaries will, to the
extent permitted by applicable laws, rules and regulations, take such actions
and execute and deliver all such agreements, documents, certificates or
amendments to this Agreement as may be necessary or desirable to effectuate the
provisions and intent of this Agreement.
4.25 No Third Party Consents.
(a) Except as previously disclosed in writing to Xxxxxxxxx by
the Company, there are no contractual, legal or other restrictions, consents,
approvals, authorizations or clearances of any third party that the Company or
any Subsidiary is required to obtain and that have not been obtained as of the
date hereof and that are necessary for or would prevent the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby.
(b) Neither the Company nor any Subsidiary knows any reason
why the consents, approvals, authorizations and clearances, filings,
declarations and registrations, set forth in 4.25(a), if any, shall not be
obtained in due course without unreasonable burden or expense.
4.26 Conduct of Business - Negative Covenants of the Company and its
Subsidiaries. Except as otherwise contemplated hereby, between the date hereof
and the Effective Time, or the time when this Agreement terminates as provided
herein, neither the Company nor any of its Subsidiaries, respectively, will,
without the prior written approval of the President of Xxxxxxxxx:
(a) Make any change in its authorized capital stock.
(b) Issue any shares of its capital stock, securities
convertible into its capital stock, or any long term debt securities.
(c) Issue or grant any options, warrants or other rights to
purchase shares of its common stock.
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33
(d) Declare or pay any dividends or other distributions on
any shares of common stock.
(e) Purchase or otherwise acquire or agree to acquire for a
consideration any share of Company Stock (other than in a fiduciary capacity).
(f) Enter into or amend any employment, pension, retirement,
stock option, profit sharing, deferred compensation, consultant, bonus, group
insurance or similar plan in respect of any of its directors, officers or
other employees, or increase the current level of contributions to any such
plan now in effect.
(g) Take any action materially and adversely affecting this
Agreement or the transactions contemplated hereby or the financial condition
(present or prospective), businesses, properties or operations of the Company
or its Subsidiaries.
(h) Acquire, consolidate or merge with any other company,
corporation or association, or acquire, other than in the ordinary course of
business, any assets of any other company, corporation or association.
(i) Mortgage, pledge or subject to a lien or any other
encumbrance, any of its assets, dispose of any of its assets, incur or cancel
any debts or claims or increase the current level of compensation or benefits
payable to its officers, employees or directors except in the ordinary course
of business as heretofore conducted or take any other action not in the
ordinary course of their business as heretofore conducted or incur any other
material obligation or enter into any material contract, except in the ordinary
course of business as heretofore conducted.
(j) Amend its Articles of Incorporation, By-laws or Charter.
(k) Take any action to solicit, initiate, encourage or
authorize any person, including directors, officers and other employees, to
solicit from any third party any inquiries or proposals relating to the
disposition of the business or assets of the Company or its Subsidiaries, or
the
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34
acquisition of their Company Stock, or the merger of the Company or its
Subsidiaries, with any person other than Xxxxxxxxx, and the Company shall
promptly notify Xxxxxxxxx orally of all the relevant details relating to all
inquiries and proposals which it may receive relating to any of such matters.
Nothing herein shall be construed to limit or affect the fiduciary obligation
of the Company's officers and directors to the Company shareholders.
4.27 Conduct of Business - Affirmative Covenants of the Company and
its Subsidiaries. The Company and its Subsidiaries covenant and agree that:
(a) Subsequent to the date of this Agreement and prior to the
Effective Time it will operate its business only in the normal course and
manner.
(b) From and after the execution of this Agreement, each of
the Company and its Subsidiaries will promptly advise Xxxxxxxxx of any material
adverse change in the financial condition, assets, business operations or key
personnel of the Company and a Subsidiary and of any material breach of any
representation or warranty made by any Subsidiary or the Company in this
Agreement.
(c) Immediately upon the execution of this Agreement, each of
the Company and its Subsidiaries will direct its accountants to give Xxxxxxxxx
access to all information, documents and working papers pertaining to it.
(d) Subsequent to the date of this Agreement and prior to the
Effective Time, each of the Company and its Subsidiaries shall maintain in full
force and effect adequate fire, casualty, public liability, employee fidelity
and other insurance coverage in effect on the date of this Agreement in order
to protect each of the Company and its Subsidiaries against losses for which
insurance protection can reasonably be obtained.
(e) Within ten days from the execution of this Agreement, the
Company shall furnish to Xxxxxxxxx a list, accurate as of the close of business
on a date not more than ten (10) days prior to the date on which such list is
furnished,
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35
containing the names and addresses of all holders of Company Stock as the same
appear on the stock registration books of the Company and the number of shares
held by each. At the Effective Time, the Company shall furnish to Xxxxxxxxx a
list, true, correct and complete as of the close of business on the preceding
day, containing the names and addresses of all holders of Company Stock as the
same appear on the Company's stock registration books and the number of shares
held by each.
(f) Each of the Company and its Subsidiaries will use its
best efforts in good faith to take or cause to be taken all action required
under this Agreement on its part to be taken as promptly as practicable so as
to permit the consummation of the Merger and the transactions contemplated
hereby at the earliest possible date and cooperate fully with Xxxxxxxxx to that
end.
Section 5 Indemnification and Confidentiality
5.1 Access and Information. The Company and Xxxxxxxxx shall each
afford to the other, and to the other's accountants, counsel and other
representatives, full access during normal business hours throughout the period
prior to the Closing Date to all of its properties, books, contracts,
commitments and records (including but not limited to tax returns), and, during
such period, each shall furnish promptly to the other (i) a copy of each
report, schedule and other document filed or received by it pursuant to the
requirements of federal or state securities and banking laws and (ii) all other
information concerning its business, properties and personnel as such other
party may reasonably request, provided that no investigation pursuant to this
Section 5.1 shall affect any representations or warranties or the conditions to
the obligations of the parties to consummate the Merger.
5.2 Furnishing Information and Indemnification. The Company has
furnished or will furnish as soon as practicable after the date of this
Agreement, to Xxxxxxxxx all the information (including financial statements,
information and schedules) requested by Xxxxxxxxx for inclusion in:
(a) The registration statement or other statement to be
filed, in connection with an initial public
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36
offering of Xxxxxxxxx'x Common Stock, with the SEC on behalf of Xxxxxxxxx ("IPO
Registration Statement") under the Securities Act of 1933, as amended ("1933
Act") in connection with the registration of Xxxxxxxxx Common Stock, and any
documents to be filed with the SEC in connection therewith;
(b) Any filings to be made by Xxxxxxxxx with state securities
authorities in connection with the transactions contemplated hereunder; and
(c) Any other request, application, statement, report or
material to be made or filed by any party to or with any regulatory authority
or any governmental agency, department or instrumentality in connection with
the transactions contemplated hereunder.
The Company represents and warrants to Xxxxxxxxx, that all
information so furnished for such requests, statements, applications, reports
and materials shall be true and correct in all material respects without
omission of any material fact required to be stated to make the information
therein not false or misleading. The Company will indemnify and hold harmless
Xxxxxxxxx and its directors and officers, and each person, if any, who controls
such entities within the meaning of the 1933 Act, from and against any and all
losses, damages, expenses or liabilities to which such entity, or any such
director, officer or controlling person may become subject under applicable
laws (including the 1933 Act and the Securities Exchange Act of 1934) and rules
and regulations thereunder and will reimburse the other, and any such director,
officer or controlling person, for any legal or other expenses reasonably
incurred in connection with investigating or defending any actions, whether or
not resulting in liability, insofar as such losses, damages, expenses,
liabilities or actions arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in any such request,
statement, application, report or material or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to
be stated therein or necessary in order to make the statements therein not
misleading, but only insofar as any such statement or omission was made in
reliance upon and in conformity with information furnished in writing in
connection therewith by such indemnifying party for use therein.
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5.3 Confidentiality. It is hereby agreed that, except (i) as
otherwise required in the performance by the parties of their respective
obligations hereunder or under the Merger and (ii) as otherwise required by
law, any nonpublic information received from the other party during the course
of the investigation contemplated pursuant hereto shall remain and be kept as
confidential information by it and all copies thereof will be returned promptly
at the request of the party furnishing such information in the event of the
termination of this Agreement and the Merger. Each of the parties may disclose
such information to its respective employees, affiliates, counsel, accountants,
representatives, professional advisors and consultants, and shall require each
of them to agree to keep all such information confidential.
5.4 Updates to Information. At the reasonable request of any
party hereto, any other party will update by amendment or supplement any
disclosure made in writing by such party to the other party and each party
hereby represents and warrants that such written disclosures, as so amended or
supplemented, shall be true, correct and complete as of the date or dates
thereof.
Section 6 Conditions Precedent
The consummation of this Agreement and the Merger is conditioned upon
the following:
(a) Governmental Approvals and Third Party Consents. (i) The
approval of and consent to the Merger and the transactions contemplated hereby
shall have been given prior to the Effective Time by the regulatory agencies
whose approval or consent is required, including, without limitation, to the
extent provided by applicable laws, rules, regulations and compliance
agreements, the Food and Consumer Service of the United States Department of
Agriculture, the Attorney General of the United States, and all notice periods,
waiting periods, delay periods, and all periods for review, objection or appeal
of or to any of the consents, approvals or permissions required by law with
respect to the consummation of the Merger and this Agreement shall have
expired. Such approvals shall not be conditioned or restricted in a manner
which, in the judgment of the Board of Directors of Xxxxxxxxx, materially
adversely
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38
affects the economic assumptions of the transactions contemplated hereby so as
to render inadvisable consummation of the Merger.
(ii) The Company shall have obtained all necessary consents,
approvals, authorizations or clearances of any third party to permit the
Company's consummation of the transactions contemplated by this Agreement.
(b) Shareholder Approval. The shareholders of the Company,
and if required, the Xxxxxxxxx shareholders, shall have ratified, confirmed
and approved this Agreement and the terms and conditions herein contained by
the affirmative vote of the shareholders, owning at least a majority of capital
stock outstanding, and final approval of this Agreement by the Company's
shareholders shall have taken place as provided in Section 10 hereof, and all
provisions of Section 10 shall have been fully complied with.
(c) Initial Public Offering. Xxxxxxxxx at its sole cost and
expense shall have consummated an initial underwritten public offering pursuant
to an effective IPO Registration Statement under the provisions of the 1933
Act.
(d) Company Shareholder Letters. On or prior to the Closing
Date, Xxxxxxxxx shall have received in such form acceptable to Xxxxxxxxx
written agreements executed by all of the Company shareholders receiving
Xxxxxxxxx Common Stock pursuant to the Merger (i) to not sell, transfer or
otherwise dispose of Xxxxxxxxx Common Stock received in the Merger for a period
of one year following the Effective Date or otherwise as required by the 1933
Act and state securities law; (ii) giving representations and warranties
substantially similar to those set forth in Section 11.16 (d), (e) and (f); and
(iii) acknowledging the certificates representing the Shares shall bear the
legend described in Section 11.17 hereof.
(e) No Divestiture or Adverse Condition. The consummation of
the Merger shall not have required the divestiture or cessation of any
significant part of the present operations conducted by Xxxxxxxxx or the
Company and shall not have imposed any other condition, which divestiture,
cessation
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39
or condition Xxxxxxxxx deems to be materially disadvantageous or burdensome.
(f) Accuracy of Representations and Warranties; Performance
of Obligations and Covenants - Xxxxxxxxx. Unless waived by the Company, the
representations and warranties of Xxxxxxxxx contained in this Agreement shall
be correct on and as of the Closing Date and thereafter until the Effective
Time in all material respects with the same effect as though made on and as of
such Effective Time except for changes which are not in the aggregate material
and adverse to the financial condition, businesses, properties or operations
of Xxxxxxxxx and Xxxxxxxxx shall have performed in all material respects all
of its obligations and agreements hereunder theretofore to be performed by it
and the Company shall have received on the Closing Date an appropriate
certificate (in affidavit form) to the foregoing effect dated as of the Closing
Date and executed on behalf of Xxxxxxxxx by one or more appropriate executive
officers of Xxxxxxxxx.
(g) Accuracy of Representations and Warranties, Performance
of Obligations and Covenants - The Company. Unless waived by Xxxxxxxxx, the
representations and warranties of the Company contained in this Agreement
shall be correct on and as of the Closing Date and thereafter until the
Effective Time in all material respects with the same effect as though made on
and as of such Effective Time except for changes which are not in the
aggregate material and adverse to the financial condition, businesses,
properties or operations of the Company, and the Company shall have performed
in all material respects all of its obligations and agreements hereunder
theretofore to be performed by it and Xxxxxxxxx shall have received on the
Closing Date an appropriate certificate (in affidavit form) to the foregoing
effect dated as of the Closing Date and executed on behalf of the Company by
one or more appropriate executive officers of the Company.
(h) Opinion of Counsel for the Company and the Shareholders.
Xxxxxxxxx shall have received an opinion of counsel for the Company and the
Shareholders, dated the Closing Date, with respect to such matters as Xxxxxxxxx
may reasonably request and to the effect that:
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(1) The Company and its Subsidiaries are corporations
duly organized, validly existing and in good standing under the laws of the
their respective jurisdictions of incorporation or formation and are duly
authorized to own its properties and to conduct its business as then being
conducted.
(2) The authorized capitalization of the Company and
its Subsidiaries is as set forth in such opinion and the shares of Company
Stock issued and outstanding (as of a date specified in such opinion not more
than 5 days prior to the date of such opinion) are as stated in such opinion.
Such issued and outstanding shares of stock are validly issued, fully paid and
nonassessable, and were not issued in violation of any preemptive rights of the
shareholders of the Company. As of such date, there are, to the best of such
counsel's knowledge, no options, warrants, rights, commitments or convertible
securities outstanding or authorized on behalf of the Company or its
Subsidiaries, calling for the purchase from it of shares of unissued capital
stock, except as contemplated by this Agreement.
(3) The Company had the corporate power and authority
to execute, deliver and perform its obligations under this Agreement. This
Agreement has been duly authorized, executed and delivered by the Company and
the Shareholders and constitutes the legal, valid and binding obligation of the
Company and the Shareholders, enforceable in accordance with its terms.
(4) All necessary corporate proceedings of the
Directors and the shareholders of the Company, to the extent required by law,
its Articles of Incorporation and By-laws or otherwise, to authorize the
execution and delivery of this Agreement by the Company and the Shareholders
and the consummation of the Merger by the Company pursuant to this Agreement
have been duly and validly taken. The number of shares of stock of the
Company voted for and against the Merger are as stated in such counsel's
opinion; and the shareholders' invoking their rights to dissent and appraisal
are as stated in such counsel's opinion.
(5) Such counsel has reviewed the IPO Registration
Statement filed by Xxxxxxxxx as described in
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41
Section 6(c), and with respect to all information relating to the Company
contained therein, such counsel does not know of any respect in which the IPO
Registration Statement contained any false or misleading statement of any
material fact or failed to state a material fact which was necessary to be
stated to prevent the statements made from being false or misleading in any
material respect (except as to the financial statements and related notes and
schedules and other financial data, as to which such counsel need express no
opinion).
(6) The consummation of the Merger will not violate or
result in a breach of, or constitute a default under, the Articles of
Incorporation or By-laws of the Company or constitute a breach or termination
of, or default under, any agreement or instrument of which such counsel has
knowledge and which would have a material adverse affect on the business of the
Company, and to which the Company or any Shareholder is a party or by which the
Company or any of its property is bound.
(i) Opinion of Counsel for Xxxxxxxxx. The Company and the
Shareholders shall have received the opinion of counsel for Xxxxxxxxx, dated
the Closing Date, with respect to such matters as the Company may reasonably
request and to the effect that:
(1) Xxxxxxxxx is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio, and is duly
authorized to own its properties and to conduct its business as then being
conducted.
(2) The authorized capitalization of Xxxxxxxxx is as set
forth in such opinion and the shares of Xxxxxxxxx Common Stock issued and
outstanding (as of a date specified in such opinion not more than 5 days prior
to the date of such opinion) are as stated in such opinion. Such issued and
outstanding shares of stock are validly issued, fully paid and nonassessable,
and were not issued in violation of any preemptive rights of the shareholders
of Xxxxxxxxx. As of such date, there are, to the best of such counsels
knowledge, no options, warrants, rights, commitments or convertible securities
outstanding or authorized on behalf of Xxxxxxxxx, calling for the purchase from
any of them of shares of unissued capital
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42
stock or capital stock held as treasury shares, except as otherwise permitted
by this Agreement.
(3) All necessary corporate proceedings of the Board of
Directors and the shareholders of Xxxxxxxxx to the extent required by law, its
Articles of Incorporation or Code of Regulations or otherwise, to authorize the
execution and delivery of this Agreement and the consummation of the Merger
pursuant to this Agreement have been duly and validly taken. Xxxxxxxxx has the
corporate power and authority to execute, deliver and perform this Agreement.
This Agreement has been duly authorized, executed and delivered by Xxxxxxxxx
and constitutes the legal, valid and binding obligation of Xxxxxxxxx
enforceable in accordance with its terms.
(4) The consummation of the Merger will not violate or
result in a breach of, or constitute a default under, the Articles of
Incorporation or Code of Regulations of Xxxxxxxxx or constitute a breach or
termination of, or default under, any agreement or instrument of which such
counsel has knowledge and to which Xxxxxxxxx is a party or by which it or its
property is bound.
(5) To the best of such counsel's knowledge, all
approvals of public authorities, federal, state or local, the granting of which
is necessary for the consummation of the Merger by Xxxxxxxxx, have been
obtained.
(6) The shares of Xxxxxxxxx Common Stock into which
shares of Company Stock are to be converted upon the Effective Time will upon
the Effective Time be duly authorized, and such shares, when transferred to
holders of Company Stock pursuant to the terms of the Merger, will be validly
issued, fully paid and nonassessable shares of Xxxxxxxxx Common Stock.
(j) Comfort Letter - Company. Coopers & Xxxxxxx LLP or
other certified public accountants satisfactory to the Company shall have
audited the financial statements of Xxxxxxxxx for the year ended December 31,
1996 and, based on such review, the Company shall have reasonably determined
that such statements are satisfactory to the Company.
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(k) Comfort Letter - Xxxxxxxxx. Coopers & Xxxxxxx LLP or
other certified public accountants satisfactory to Xxxxxxxxx shall have
reviewed the financial statements of the Company as of and for the year ended
May 31, 1997 and, based on such review, Xxxxxxxxx shall have reasonably
determined that such statements are satisfactory to Xxxxxxxxx.
(l) Opinion Letter. The Company shall have received an
opinion of tax counsel acceptable to it, and Xxxxxxxxx shall have received an
opinion of tax counsel acceptable to it, both to the effect that:
(1) The Merger should constitute and qualify as a
reorganization within the meaning of Section 368(a) of the Code and the Company
and Xxxxxxxxx will each qualify as "a party to a reorganization" as that term
is defined in the Code;
(2) No gain or loss should be recognized by Xxxxxxxxx
or the Company by reason of the Merger;
(3) A Shareholder's holding period in the Xxxxxxxxx
Common Stock received in the Merger should include the period that the
Shareholder held the Company Stock exchanged therefor, provided that the
Shareholder held such Company Stock as a capital asset at the Effective Time;
(4) The gain, if any, to be realized by the
shareholders should be recognized, but not in excess of the total of any cash
received;
(5) The basis of the Xxxxxxxxx Common Stock received by
the shareholders should be the same as the basis of the Company Stock
surrendered in exchange therefor, decreased by the total of any cash received,
and increased by the amount, if any, which is treated as a dividend plus the
amount of other gain recognized on the exchange; and
(6) Such other matters as may be reasonably requested by
Xxxxxxxxx, the Company or the Shareholders.
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In rendering the opinion described in this subsection (l), counsel
will rely on representations and facts as provided by Xxxxxxxxx, the Company
and the shareholders, including without limitation the standard representations
set forth in Revenue Procedure 86-42, 1986-2 C.B. 722. In addition, each of
the shareholders shall enter into an agreement dated as of the Closing Date
pursuant to which each such shareholder shall covenant not to take any action
following the Closing Date that might adversely affect the status of the Merger
as a reorganization for federal income tax purposes. Among other things, each
of the agreements referred to in the preceding sentence shall, if requested by
Xxxxxxxxx, place reasonable limitations on the ability of each shareholder to
sell, exchange, transfer or otherwise dispose of any Xxxxxxxxx Common Stock
received pursuant to the Merger.
(m) The Employment Agreement in all material respects
identical to the form attached hereto as Exhibit C shall have been executed, by
Xxxxxx Xxxxxxx and delivered to Xxxxxxxxx.
(n) All approvals and consents to the Merger shall have been
obtained in writing prior to, and shall be in full force and effect on the
Closing Date, from all entities whose consent is required. All such consents
shall explicitly provide that the respective agreements shall survive the
Merger in full force and effect, without amendment. Such consents shall not be
conditioned or restricted in a manner which, in the sole judgment of Xxxxxxxxx,
materially adversely affects the ability of Xxxxxxxxx to conduct the business
of the Company after the Merger.
(o) Absence of Material Adverse Changes - Xxxxxxxxx. Unless
waived by the Company at or before the Effective Time, there shall have been no
material adverse change in the financial condition, business or assets of
Xxxxxxxxx since December 31, 1996, and there shall be no suit, action or
proceeding pending or threatened against Xxxxxxxxx which, if successful, would
have a material adverse effect on Xxxxxxxxx or the Surviving Company after the
consummation of the Merger.
(p) Absence of Material Adverse Changes - The Company.
Unless waived by Xxxxxxxxx at or before the Effective
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45
Time, there shall have been no material adverse change in the financial
condition, business or assets of the Company since May 31, 1997, and there
shall be no suit, action or proceeding pending or threatened against the
Company which if successful would have a material adverse effect on the Company
or the Surviving Company after the consummation of the Merger.
Section 7 Closing Date and Effective Time
7.1 Closing Date. The closing shall be effected as soon as
practicable after all of the conditions contained herein shall have been
satisfied. The closing shall be held at the offices of Xxxxxxxxx in Marietta,
Ohio, and the closing date ("Closing Date") shall be a date specified by
Xxxxxxxxx, but, in no event, later than forty-five (45) days following the date
when all such conditions are satisfied.
7.2 Effective Time. Subject to the terms and upon satisfaction on
or before the Closing Date of all conditions specified in this Agreement,
certificates of merger shall be filed with, respectively, the Secretary of
State of the Commonwealth of Kentucky and the Secretary of State of the State
of Ohio in accordance with KRS 271B.11-050 and Section 1701.81 of the OGCL.
The Merger shall become effective at such time as the later of the Secretary of
State of the State of Ohio and the Secretary of State of the Commonwealth of
Kentucky accept the certificates of merger for record, or at such subsequent
date or time as Xxxxxxxxx and the Company shall agree, and if required by the
KBCA or the OGCL, specify in such certificates of merger (the time the Merger
becomes effective being hereinafter referred to as the "Effective Time").
Section 8 Termination of Agreement
8.1 Grounds for Termination. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Closing Date:
(a) By mutual consent in writing of the Company and
Xxxxxxxxx; or
(b) By the Company by giving written notice thereof to
Xxxxxxxxx if (i) a material adverse change shall have
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46
occurred in the financial condition, results of operations or business of
Xxxxxxxxx since December 31, 1996, or (ii) Xxxxxxxxx has in any material
respect breached any covenant, undertaking, representation or warranty
contained in this Agreement and such breach has not been cured within thirty
(30) days after the giving of such notice; or
(c) By Xxxxxxxxx by giving written notice thereof to the
Company if (i) a material adverse change shall have occurred in the financial
condition, results of operations or business of the Company since May 31, 1997
or (ii) the Company has in any material respect breached any covenant,
undertaking, representation or warranty contained in this Agreement and such
breach has not been cured within thirty (30) days after the giving of such
notice; or
(d) By either the Company or Xxxxxxxxx upon written notice to
the other if any regulatory agency whose approval of the transactions
contemplated by this Agreement is required denies such application for approval
by final order or ruling (which order or ruling shall not be considered final
until expiration or waiver of all periods for review or appeal); or
(e) By either the Company or Xxxxxxxxx upon written notice to
the other if any condition precedent to either party's performance hereunder is
not satisfied or fulfilled; or
(f) By either the Company or Xxxxxxxxx if the Merger shall
violate any nonappealable final order, decree or judgment of any court or
governmental body having competent jurisdiction; or
(g) By either the Company or Xxxxxxxxx upon the bankruptcy,
insolvency or assignment for the benefit of creditors of the Company or
Xxxxxxxxx; or
(h) By Xxxxxxxxx in the event Xxxxxxxxx determines that any
information "disclosed in writing" and delivered pursuant to Section 11.3
hereof is (i) materially inaccurate, incomplete, untrue; (ii) exposes a
material adverse change relating to the business of the Company; or
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47
(iii) otherwise breaches any material covenant, undertaking, representation or
warranty contained herein; or
(i) By the Company in the event the Company determines that
any information "disclosed in writing" and delivered pursuant to Section 11.3
hereof is (i) materially inaccurate, incomplete, untrue; (ii) exposes a
material adverse change relating to the business of Xxxxxxxxx; or (iii)
otherwise breaches any material covenant, undertaking, representation or
warranty contained herein; or
(j) By Xxxxxxxxx, in the event Xxxxxxxxx and the Food and
Consumer Service of the United States Department of Agriculture ("FCS") do not
agree, in a manner satisfactory to Xxxxxxxxx, to limit the terms and conditions
of the Compliance Agreement in Lieu of Debarment between the Company and the
FCS ("Compliance Agreement") solely to the business operations and management
of the Company following the Merger.
In any event, the obligations of the parties under this Agreement
shall terminate on December 31, 1997, if the closing provided in Section 7.1
has not occurred on or before that date, unless Xxxxxxxxx and the Company
otherwise agree.
8.2 Effect of Termination. In the event of termination of this
Agreement for any reason other than a breach thereof, neither party hereto
shall have any liability to the other of any nature whatsoever, including any
liability for loss, damages or expenses suffered or claimed to be suffered by
reason thereof, except as provided in Section 8.3.
8.3 Return of Information. In the event of the termination of
this Agreement for any reason, each party shall deliver to the other party, and
shall require each of its officers, agents, employees and independent advisers
(including legal, financial and accounting advisers) to deliver to the other
party all documents, work papers and other material obtained from such other
party relating to the transactions contemplated hereby, whether obtained before
or after the execution hereof, including information obtained pursuant to
Section 5 hereof. Each party agrees that notwithstanding any other provision
contained in this Agreement, the undertakings
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48
and covenants regarding confidentiality contained in Section 5 shall survive
termination of this Agreement.
Section 9 Extension, Waiver and Amendment.
At any time prior to the Effective Time, the Company and Xxxxxxxxx
may:
(a) Extend the time for the performance of any of the
obligations or acts of any other party;
(b) Waive any inaccuracies in the representations and
warranties of any other party contained herein or in any document delivered
pursuant hereto; or
(c) Waive compliance with any of the agreements or conditions
of any other party contained herein.
This Agreement may be amended or supplemented at any time by mutual
agreement of the parties (except that they may not be amended in any material
respect after approval by the shareholders of the parties without further
approval by such shareholders). Any waiver, amendment or supplement hereof
shall be in writing. Notwithstanding the foregoing, no failure of delivery by
the Company or Xxxxxxxxx in exercising any right hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right hereunder.
Any waiver by Xxxxxxxxx or the Company of a condition to its obligation to
perform this Agreement and the subsequent Closing hereunder shall be without
prejudice to the rights or remedies it may have arising out of any breach of
any representation, warranty, covenant or other agreement hereunder.
Section 10 Meeting of Shareholders of the Company; Voting; . . . . . Rights
of Dissenting Shareholders
10.1 Meeting. The Company shall take all steps necessary to call
and hold a meeting of its shareholders in accordance with applicable law and
the Articles of Incorporation and By-laws of Company as soon as practicable for
the purpose of submitting this Agreement to its shareholders for their
ratification, approval and confirmation.
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49
10.2 Voting. By executing this Agreement, each and every Shareholder
represents and warrants that at any shareholders' meeting held for the purpose
of approving the Merger, this Agreement and/or the transactions contemplated
hereby, or at any other meeting of the shareholders at which a vote on the
Merger, this Agreement and/or the transactions contemplated hereby, is
presented, each such Shareholder entitled to vote hereby irrevocably
acknowledges and agrees to vote all of such Shareholder's shares in the Company
(and any shares under such Shareholder's control by virtue of proxy or other
voting arrangement) in favor of approving, ratifying and confirming the Merger,
this Agreement and the transactions contemplated hereby.
10.3 Rights of Dissenting Shareholders. The procedures to be
followed and the rights of dissenting shareholders of the Company shall be
those set forth in the Kentucky Business Corporation Act, KRS 271B.13-010 et
seq. Shares of Company Stock held by any holder who shall have properly
dissented to the Merger and who shall have properly demanded payment on his
stock in accordance with and subject to the provisions of the Kentucky Business
Corporation Act shall not be converted into the right to receive Xxxxxxxxx
Common Stock and cash pursuant to Section 2 unless and until such time as such
holder shall have failed to perfect, or shall have effectively lost, his right
to appraisal of and payment for his shares of Company Stock, at which time such
shares shall be converted into the right to receive Xxxxxxxxx Common Stock and
cash as provided for in Section 2.
Section 11 Miscellaneous
11.1 Public Announcements. Prior to the Closing Date, each party
shall use its best efforts to consult with the other party with respect to any
prepared public announcement, statement or release to the press, or statement
to a competitor, customer or other third party (except to its consultants or to
the regulatory authorities in connection with applications for governmental
approvals or filings) with respect to this Agreement or the Merger or the
transactions contemplated hereby or thereby, except as may be necessary, in the
opinion of
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counsel, to comply with any law, governmental order or regulation.
11.2 Brokers and Finders. The Company and Xxxxxxxxx represent each
to the other that this Agreement and the Merger contemplated hereby are the
result of direct negotiations between them and that neither the Company nor
Xxxxxxxxx has incurred any liability for any broker's, finder's or similar fees
in connection with this Agreement or the Merger.
11.3 Disclosed In Writing. As used in this Agreement, the phrase
"disclosed in writing" shall mean disclosed or delivered prior to or within 20
days after, the date of this Agreement by means of a single writing describing
in reasonable detail all of the matters and information required by this
Agreement; provided that, such writing shall also reference the appropriate
sections of this Agreement to which the matters and information therein refer
and shall be delivered in accordance with Section 11.7 hereof. For purposes of
this Agreement, anything appearing, contained, disclosed or described in any
Xxxxxxxxx Financial Statement or Company Financial Statement (including the
notes thereto) shall be deemed to be previously disclosed in writing.
11.4 Entire Agreement. This Agreement embodies the entire agreement
among the parties and there have been no agreements, representations or
warranties among the parties other than those set forth herein or those
provided for herein.
11.5 Counterparts. This Agreement has been executed in a number of
identical counterparts, and each such counterpart shall be deemed to be an
original instrument, but in making proof of this Agreement, it shall not be
necessary to produce or account for more than one such counterpart.
11.6 Invalid Provisions. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such
invalid or unenforceable provision were omitted.
11.7 Notices. Any notices or other communication required or
permitted hereunder shall be sufficiently given if
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51
sent by registered or certified mail, postage prepaid, addressed as follows:
TO THE COMPANY:
Southern Belle Dairy Company, Inc.
000 Xxxx Xxxxxx Xxxxxx
P. 0. Xxx 0000
Xxxxxxxx, XX 00000-0000
Attention: Xxxxxx Xxxxxxx, President
TO XXXXXXXXX:
Xxxxxxxxx Foods Company
000 0xx Xxxxxx
X. 0. Xxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxxxxx, Chairman
of the Board of Directors
with a copy to: Xxxx X. Xxxxx
or such other addresses as shall be furnished in writing by either party to the
other party. Any such notice or communication shall be deemed to have been
given as of the date so mailed.
11.8 Headings. The captions contained in this Agreement are
inserted solely for convenience of reference and shall not affect the meaning
or interpretation of this Agreement.
11.9 Expenses. Each of the parties hereto will pay its own fees and
expenses incurred in connection with the transactions contemplated by this
Agreement, except as otherwise specifically provided herein.
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52
11.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio and the United
States of America.
11.11 No Assignment. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement may not be assigned by either
party without the written consent of the other party.
11.12 Effectiveness of Agreement. This Agreement shall become
effective and binding as to Xxxxxxxxx and the Company when one or more
counterparts shall have been signed and delivered by Xxxxxxxxx and the Company.
11.13 Further Acts. Xxxxxxxxx and the Company each agree to execute
and deliver on or before the Closing Date such other documents, certificates,
agreements or other writings and to take such other actions as may be necessary
or desirable in order to consummate or implement expeditiously the transactions
contemplated by this Agreement.
11.14 Certain Representations and Warranties Not to Survive. The
representations and warranties contained in Sections 3, 4, 5, 8.3, 11.9, 11.15
and 11.16(a), (b), (d), (e) and (f) shall survive the Closing Date and
Effective Time. The representations and warranties by the Shareholders set
forth in Section 11.16(c) shall survive for a period of eighteen (18) months
following the Effective Time.
11.15 Individual Directors. The several Directors of the Company
who are signatories to this Agreement have joined into this Agreement to
evidence their assent hereto, and for the express purpose of binding
themselves, and each of them, to the fulfillment of each of the terms and
conditions hereof by the respective parties and to the diligent, expeditious
and good faith pursuit, and timely consummation, of the transactions herein
contemplated. Each of the Directors hereby agrees to cooperate fully with the
parties, their assistants and agents, in consummating the Merger, to vote
appropriately upon all corporate resolutions toward that end, and to take no
action inconsistent with the purposes of this Agreement or the consummation of
the Merger. Nothing in this Agreement shall be
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53
construed to limit or affect the fiduciary obligation of the Company's officers
and directors to the Company shareholders.
11.16 Shareholders Representations and Warranties; Indemnification;
and Sophistication.
(a) The Shareholders of the Company who are signatories to
this Agreement have joined into this Agreement to evidence their assent hereto,
and for the express purpose of binding themselves, and each of them, to the
fulfillment of each of the terms and conditions hereof by the respective
parties and to the diligent, expeditious and good faith pursuit, and timely
consummation, of the transactions herein contemplated.
(b) Each of the Shareholders hereby agrees to cooperate
fully with the parties, their assistants and agents, in consummating the
Merger, and agrees not to take any action inconsistent with the purposes of
this Agreement or the consummation of the Merger.
(c) Each of the Shareholders adopts and joins with the
Company in making the representations and warranties contained in Section 4
and Section 6(g) of this Agreement, and hereby expressly does so. Without
limiting any other right of indemnification or any other cause of action, the
Shareholders shall jointly and severally defend, indemnify and hold Xxxxxxxxx
and Surviving Company harmless from and against any and all losses,
liabilities, damages, costs, claims, judgments and expenses (including
attorney's fees) whatsoever arising out of or resulting from any breach of
warranty or misrepresentation by the Company or Shareholders contained herein,
or from any misrepresentation, omission or inaccuracy in any schedule, exhibit,
certificate, instrument or paper delivered or to be delivered by the Company or
Shareholders hereunder in connection with the transactions herein contemplated;
provided that such indemnification required to be provided by the Shareholders
pursuant hereto shall not exceed in the aggregate Five Million Dollars
($5,000,000).
(d) Each Company Shareholder represents and warrants that
such Shareholder is acquiring shares of Xxxxxxxxx Common Stock ("Shares")
from Xxxxxxxxx for such Shareholder's own account for investment only and not
with a view to making a
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54
distribution thereof within the meaning of the 1933 Act. Each Company
Shareholder represents and warrants that the Shares will not be sold or
transferred by the Company Shareholder in violation of the securities laws of
the United States or any state thereof or other jurisdiction. Each Company
Shareholder is aware that the Shares have not been registered under the 1933
Act or any state or other jurisdiction's securities laws, and that the shares
must be held indefinitely unless subsequently registered or an exemption from
such registration is available. Each Company Shareholder is aware that it will
not be readily able to liquidate its investment in the Shares. Each Company
Shareholder is a bona fide resident of the jurisdiction set forth on Schedule 1
hereto and has no present intention of changing its jurisdiction of residence.
Each Company Shareholder understands and agrees that the certificate or
certificates representing the Shares will bear a legend substantially to the
effect set forth in Section 11.17 hereto and that a stop transfer order may be
placed with respect thereto. The proposed investment in the Shares is a
permissible and legal investment for a Company Shareholder under any legal
investment laws applicable to the Company Shareholder.
(e) Each Shareholder acknowledges that all documents, books
and records requested by such Shareholder and pertaining to Xxxxxxxxx have
been made available for inspection by such Shareholder and such Shareholder's
agents and representatives; that it and its agents and representatives have
had a reasonable opportunity to ask questions of, and receive answers from,
Xxxxxxxxx or officers thereof concerning the terms and conditions of the
offering of the Shares and the business and prospects of Xxxxxxxxx. Each
Company Shareholder and its respective agents and representatives have such
knowledge and experience in financial and business matters as to enable them
to utilize the information made available to them in connection with the
purchases contemplated hereby, to evaluate the merits and risks of an
investment in Xxxxxxxxx and to make an informed decision with respect thereto
and such an evaluation and informed decision has been made.
(f) Each Shareholder is the beneficial and record owner of
the respective number of shares set forth in each such Shareholder's Merger
Consideration Request Form and has good title to such shares free and clear of
all liens.
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55
11.17 Legend. The certificates representing the Shares
shall bear the following legend:
The securities represented by this
Certificate have not been registered
under the Securities Act of 1933, as
amended, or applicable state securities
laws, and shall not be sold or otherwise
transferred unless so registered or, if
in the opinion of counsel to Xxxxxxxxx,
an exemption from registration thereunder
is applicable.
IN WITNESS WHEREOF, Xxxxxxxxx and the Company have caused this
Agreement to be executed by their duly authorized officers and their corporate
seals to be hereunto affixed as of the date first above written, pursuant to
resolutions adopted by the boards of directors of Xxxxxxxxx and the Company,
acting by a majority thereof, and WITNESS also the signatures hereto of a
majority of the board of directors of the Company, and all of the undersigned
Shareholders of the Company.
XXXXXXXXX FOODS COMPANY
By
------------------------------
Xxxxxx X. Xxxxx, President and
Chief Executive Officer
ATTEST:
--------------------------
Xxxxx X. Xxxxxx, Secretary
SOUTHERN BELLE DAIRY COMPANY, INC.
By
------------------------------
Xxxxxx Xxxxxxx, President
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56
ATTEST:
--------------------------
, Secretary
---------------
The following Directors of Southern Belle Dairy Company, Inc. do hereby join
in the foregoing Agreement to evidence their consent and agreement thereto:
----------------------------
Xxxxxx X. Xxxxxxx, Director
----------------------------
Xxx X. Xxxxxxx, Director
----------------------------
Xxxxx X. Xxxxxxx, Director
The following Shareholders of Southern Belle Dairy Company, Inc. do hereby
join in the foregoing Agreement to evidence their consent and agreement thereto:
------------------------------
Xxxxxx X. Xxxxxxx, Shareholder
------------------------------
Xxx X. Xxxxxxx, Shareholder
------------------------------
Xxxxx X. Xxxxxxx, Shareholder
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57
EXHIBIT A
AGGREGATE MERGER CONSIDERATION
Dollar Amount of SMC to
be received in form of Amount of SMC to be
Xxxxxxxxx Common Stock received in form of Cash Total SMC
Shareholder Name
1. Xxx X. Xxxxxxx $ 890,010.0 $ 957,897.4 $1,847,907.4
2. Xxxxxx X. Xxxxxxx $ 935,625.0 $ 912,177.2 $1,847,802.2
3. Xxxxxxx Xxxxxxx $ 0 $ 435,550.4 $ 435,550.4
4. Xxxxxxxx Xxxxx $ 0 $ 136,734.0 $ 136,734.0
5. Xxxxxx Xxxxxx $ 0 $ 42,072.0 $ 42,072.0
6. Xxxxxxx Xxxxxxxx $ 0 $ 31,554.0 $ 31,554.0
7. Xxxxxx Xxxxx $ 0 $ 21,036.0 $ 21,036.0
8. Xxxxxx Xxxxxxxx $ 0 $ 21,036.0 $ 21,036.0
9. Xxxxxx Xxxxxx $ 0 $ 10,518.0 $ 10,518.0
10. Broadway Baptist Church $ 0 $ 5,259.0 $ 5,259.0
11. Xxxxx Xxxxxxxx $ 0 $ 841.4 $ 841.4
12. Xxxxx Xxxxxxx $ 0 $ 841.4 $ 841.4
13. Xxxxx Xxxxxx $ 0 $ 841.4 $ 841.4
14. Xxxxxxxx Xxx Xxxxxx $ 0 $ 841.4 $ 841.4
15. Xxxxxx Xxxxx $ 0 $ 841.4 $ 841.4
16. Xxxxx X. Xxxxxxx $ 524,500.0 $ 0 $ 524,500.0
17. A.R. Xxxxxxx/Xxxxx Xxxxxxx $ 0 $ 37,500.0 $ 37,500.0
18. X.X. Xxxxxx/Xxxxxx Xxxxxx $ 0 $ 29,025.0 $ 29,025.0
19. Xxxx XxXxxxx $ 0 $ 5,000.0 $ 5,000.0
TOTAL $2,350,135.0 $2,649,566.0
============ ============
58
EXHIBIT B
MAJORITY SHAREHOLDERS
1. Xxxxxx X. Xxxxxxx
2. Xxx X. Xxxxxxx
3. Xxxxx X. Xxxxxxx
59
Schedule 1
COMPANY SHAREHOLDER JURISDICTION
Each Company Shareholder is a bona fide resident of the jurisdiction set
forth hereon and has no present intention of changing its jurisdiction of
residence.
Shareholder Jurisdiction
----------- ------------
Xxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
Xxxxxxx Xxxxxxx
Xxxxxxxx Xxxxx
Xxxxxx Xxxxxx
Xxxxxxx Xxxxxxxx
Xxxxxx Xxxxx
Xxxxxx Xxxxxxxx
Xxxxxx Xxxxxx
Broadway Baptist Church
Xxxxx Xxxxxxxx
Xxxxx Xxxxxxx
Xxxxx Xxxxxx
Xxxxxxxx Xxx Xxxxxx
Xxxxxx Xxxxx
Xxxxx X. Xxxxxxx
A.R. Xxxxxxx/Xxxxx Xxxxxxx
X.X. Xxxxxx/Xxxxxx Xxxxxx
Xxxx XxXxxxx
