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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Date of Report (date of earliest event reported) January 18, 1999.
Broughton Foods Company
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(Exact name of registrant as specified in its charter)
Ohio 0-23429 31-4135-025
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(State or other juris- (Commission File No.) (IRS Employer Identi-
diction of corporation) fication No.)
210 N. Seventh Street
P.O. Box 656
Marietta, Ohio 45750-0656
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (740) 373-4121
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Not Applicable
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(Former name or former address, if changes since last report)
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INFORMATION TO BE INCLUDED IN THE REPORT
Item 2. Acquisition or Disposition of Assets
On September 11, 1998, Broughton Foods Company ("Broughton"), an Ohio
corporation, announced that it had executed an Agreement and Plan of Merger
with Suiza Foods Corporation ("Suiza") a Delaware corporation and Suiza Foods
Acquisition Corp. ("Merger Sub"), an Ohio corporation and wholly owned
subsidiary of Suiza dated September 10, 1998 (the "Agreement"), providing for
the merger of Broughton with Merger Sub, with each Broughton share being
exchanged for the sum of Nineteen Dollars ($19.00) cash. Consummation of the
merger is conditioned upon expiration or termination of applicable waiting
periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and
satisfaction of other conditions contained in the Agreement. Upon consummation
of such merger, Broughton will become a wholly-owned subsidiary of Suiza. On
September 10, 1998, 5,774,335 shares of Broughton common stock were issued and
outstanding. The Agreement was approved by Broughton shareholders at a special
meeting held on December 4, 1998.
On January 18, 1999 Broughton announced that Suiza and Broughton had
executed an amendment to the Agreement.
The amended Agreement, dated January 18, 1999, extends from December 31,
1998 to April 15, 1999 the date on which either party may terminate the amended
Agreement if the merger has not been
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completed on such date. A related Stock Purchase Agreement dated January 18,
1999 between Suiza, Broughton and 8 shareholders of Broughton provides that at
completion of the merger, those shareholders will sell Two Million (2,000,000)
Broughton shares to Suiza, and will receive, in lieu of the $19.00 per share
cash merger consideration, the cash sum of $10.00 per Broughton share, without
interest, plus the right to receive up to an additional $9.00 per share if
certain earnings and performance goals are met between the date of the merger
and March 31, 2000. The 8 shareholders, all of whom are either Broughton
directors or related parties, proposed this arrangement in response to Suiza's
concern with Broughton's financial performance since the September 11, 1998
announcement of the proposed merger, in an effort to ensure performance and
consummation of the Agreement and Plan of Merger by Suiza.
Consummation of the merger is conditioned upon satisfaction of all other
conditions contained in the Agreement and Plan of Merger, as amended, including
expiration or termination of applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976. The statutory waiting
period under such act will not expire for a period of twenty days after the
Department of Justice's receipt of all information it has requested. Suiza and
Broughton are in the process of responding to the Department of Justice's
information request.
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Subject to expiration or termination of the applicable antitrust waiting
period, and satisfaction of all other conditions contained in the Agreement and
Plan of Merger, as amended, and the Stock Purchase Agreement, the parties have
agreed to complete the merger on March 31, 1999.
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Item 7. Financial Statements and Exhibits
(c) Exhibits
The exhibits listed on the Exhibit Index on page 4 of this Form 8-K are
filed herewith.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BROUGHTON FOODS COMPANY
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(Registrant)
/s/ Todd R. Fry
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Date: January 18, 1999 Todd R. Fry, Chief Financial Officer
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EXHIBIT INDEX
2.1 Press Release dated January 18, 1999.
2.2 Amendment No. 1 to Agreement and Plan of Merger dated September 10,
1998 by and among Suiza Foods Corporation, Suiza Foods Acquisition
Corp. and Broughton Foods Company, dated as of January 18, 1999.
2.3 Stock Purchase Agreement dated as of January 18, 1999 by and among
Suiza Foods Corporation, Broughton Foods Company and certain
stockholders of Broughton Foods Company.
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EXHIBIT 2.1
FOR IMMEDIATE RELEASE
January 18, 1999
BROUGHTON FOODS AND SUIZA FOODS AMEND MERGER AGREEMENT
Marietta, Ohio. January 18, 1999 - Broughton Foods Company (NASDAQ -
MILK) today announced that Suiza Foods Corporation and Broughton have executed
an amendment to the Agreement and Plan of Merger dated as of September 10,1998
among Suiza, Broughton and a wholly owned subsidiary of Suiza, which Agreement
provides for the merger of Broughton with the Suiza subsidiary in exchange for
receipt of $19.00 cash per Broughton share, without interest. The Agreement was
approved by Broughton shareholders at a special meeting held on December 4,
1998.
The amended Agreement, dated January 18, 1999, extends from December 1,
1998 to April 15, 1999 the date on which either party may terminate the amended
Agreement if the merger has not been completed on such date. A related Stock
Purchase Agreement dated January 18, 1999 between Suiza, Broughton and eight
shareholders of Broughton provides that at completion of the merger, those
shareholders will sell 2,000,000 Broughton shares to Suiza, and will receive, in
lieu of the $19.00 per share cash merger consideration, the cash sum of $10.00
per Broughton share, without interest, plus the right to receive up to an
additional $9.00 per share if certain earnings and performance goals are met
between the date of the merger and March 31, 2000. The eight shareholders, all
of whom are either Broughton directors or related parties, proposed this
arrangement in response to Suiza's concern with Broughton's financial
performance since the September 11, 1998 announcement of the proposed merger, in
an effort to ensure performance and consummation of the Agreement and Plan of
Merger by Suiza.
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Consummation of the merger is conditioned upon satisfaction of all
other conditions contained in the Agreement and Plan of Merger, as amended,
including expiration or termination of applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976. The statutory waiting
period under such act will not expire for a period of twenty days after the
Department of Justice's receipt of all information it has requested. Suiza and
Broughton are in the process of responding to the Department of Justice's
information request.
Subject to expiration or termination of the applicable antitrust
waiting period, and satisfaction of all other conditions contained in the
Agreement and Plan of Merger, as amended, and the Stock Purchase Agreement, the
parties have agreed to complete the merger on March 31, 1999.
Broughton Foods Company is a leading manufacturer and distributor of fresh milk
and dairy products in Michigan, Ohio, West Virginia, Kentucky, Tennessee and
parts of the eastern United States. The company operates through four divisions
- - the Dairy Division, Foods Division, Southern Belle Division and London's Farm
Dairy Division. The Dairy Division, with its raw milk processing plant based in
Marietta, Ohio, manufactures and distributes a full line of fresh milk and
related products and also distributes brand name dairy and non-dairy foods. The
Foods Division, with an ultra-high temperature ("UHT") plant based in
Charleston, West Virginia, processes a variety of extended life products,
including half-and-half, sour cream, dips, dressings, aerosol toppings, whipped
cream, coffee cream, table cream, non-dairy creamers and whipped toppings. The
Southern Belle Division with its raw milk processing plant in Somerset,
Kentucky, manufactures and distributes a full line of fresh milk and other
products and also distributes dairy and non-dairy foods. The London's Farm
Dairy Division, with its raw milk processing plant in
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Port Huron, Michigan, manufactures and distributes a full line of fresh milk and
other products, while its Burton, Michigan plant produces a variety of ice cream
products.
Certain statements contained in this press release that are not
historical fact are "forward-looking" statements and involve important risks
and uncertainties. Such risks and uncertainties, which are detailed in the
company's filings with the Securities and Exchange Commission, could cause the
company's results to differ materially from the company's current expectations
as expressed in this press release.
Media Contact: Todd R. Fry
Chief Financial Officer
Office: (740) 373-4121 Ext. 816
Home: (740) 374-2364
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EXHIBIT 2.2
AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF MERGER
This AMENDMENT NO. 1 (this "Amendment") to the Agreement and Plan of Merger
(the "Merger Agreement"), dated September 10, 1998, by and among Suiza Foods
Corporation, a Delaware corporation ("Parent"), Suiza Foods Acquisition Corp.,
an Ohio corporation and wholly owned subsidiary of Parent ("Merger Sub"), and
Broughton Foods Company, an Ohio corporation (the "Company"), dated as of
January 18, 1999, is entered into by and among Parent, Merger Sub and the
Company.
WHEREAS, concurrently herewith, certain stockholders of the Company are
entering into a Stock Purchase Agreement with Parent and the Company to induce
Parent and Merger Sub not to terminate the Merger Agreement and abandon the
merger contemplated thereby; and
WHEREAS, the parties hereto wish to amend and waive certain provisions of
the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein, the parties hereto
agree as follows:
1. Closing. Section 3.8 of the Merger Agreement is hereby deleted in its
entirety and replaced with the following:
"3.8 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Huddleston,
Bolen, Beatty, Porter & Copen, 611 Third Avenue, Huntington, West Virginia
25722-2185, at 9:00 a.m. local time on March 31, 1999 or at such other time
and place as Parent and the Company shall agree in writing, in either case
upon satisfaction (or waiver) of the conditions set forth in Article IX
(other than those conditions that can be satisfied only at the Effective
Time)."
2. Waiver of Condition. Parent, Merger Sub and the Company acknowledge
that Parent and Merger Sub believe the Company has suffered certain reversals
in its business since June 30, 1998 that may constitute a Company Material
Adverse Effect, but that the Company believes that the reversals identified by
Parent and Merger Sub may not constitute a Company Material Adverse Effect.
Parent and Merger Sub agree to waive any right they may have under Section
9.3(b) of the Merger Agreement to terminate such Agreement based on the
financial operating performance of the Company between June 30, 1998 and the
Effective Time so long as the Company is operated in the ordinary course, and
provided that such waiver shall not affect any right of Parent and Merger Sub
to terminate such Agreement based on the failure of any other condition to
their performance set forth therein. The foregoing waiver shall not be valid
and enforceable if the detailed financial information previously provided by
the Company to Parent and Merger Sub with respect to the Company's financial
operating performance through November 30, 1998 was not true and correct in all
material respects at such date.
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3. Termination of Merger Agreement by Either Parent or the Company.
Clause (a) of Section 10.2 of the Merger Agreement is hereby deleted in its
entirety and replaced with the following:
"... (a) the Merger shall not have been consummated by April 15, 1999,
or..."
4. Authority Relative to the Amendment. The execution, delivery and
performance of the Merger Agreement and this Amendment and the consummation of
the transactions contemplated thereby and hereby have been duly and effectively
authorized by all necessary corporate action of the parties, and the Merger
Agreement, as amended by this Amendment, constitutes the valid and binding
obligations of the parties, enforceable against each of them in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights generally and
except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any
proceeding therefor may be brought.
5. Reference to and Effect on the Merger Agreement.
(a) Upon execution of this Amendment, each reference in the Merger
Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of like
import, and each reference in any document related thereto, or executed in
connection herewith, shall mean and be a reference to the Merger Agreement as
amended hereby, and the Merger Agreement and this Amendment shall be read
together and construed as one single instrument.
(b) Except as specifically amended above, the Merger Agreement
shall remain in full force and effect and is hereby ratified and confirmed by
the parties.
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Amendment to be signed by their respective officers thereunto duly authorized
all as of the date first written above.
SUIZA FOODS CORPORATION
By: /s/ Tracy L. Noll
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Tracy L. Noll, Executive Vice President-
Corporate Development
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SUIZA FOODS ACQUISITION CORP.
By: /s/ Tracy L. Noll
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Tracy L. Noll, Vice President
BROUGHTON FOODS COMPANY
By: /s/ Marshall T. Reynolds
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Title: /s/ Chairman of the Board of Directors
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EXHIBIT 2.3
STOCK PURCHASE AGREEMENT
By and Among
SUIZA FOODS CORPORATION,
a Delaware corporation
BROUGHTON FOODS COMPANY,
an Ohio corporation
and certain
STOCKHOLDERS
of Broughton Foods Company
listed on the signature pages hereto
Dated as of January 18, 1999
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of January 18,
1999, by and among Suiza Foods Corporation, a Delaware corporation ("Parent"),
Broughton Foods Company, an Ohio corporation (the "Company"), and certain
stockholders of the Company listed on the signature pages hereto (the
"Stockholders").
W I T N E S S E T H:
WHEREAS, on September 10, 1998, Parent, Suiza Foods Acquisition Corp., an
Ohio corporation and subsidiary of Parent ("Merger Sub"), and the Company
entered into an Agreement and Plan of Merger (the "Merger Agreement") pursuant
to which Merger Sub would be merged with and into the Company (the "Merger")
and the Company would be the surviving corporation (the "Surviving
Corporation") in the Merger;
WHEREAS, under the Merger Agreement, the obligations of Parent and Merger
Sub to effect the Merger are subject to the fulfillment at or prior to the
effective time of the Merger (the "Effective Time") of certain conditions,
including the following: (i) the waiting period and any other requirements
applicable to the consummation of the Merger under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and any
applicable Foreign Acts (as defined in the Merger Agreement) shall have expired
or been terminated (Section 9.1(b) of the Merger Agreement); (ii) since June
30, 1998, there shall not have been any change, occurrence or circumstance
having or reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect (as defined in the Merger Agreement) (Section
9.3(b)); and (iii) the representations and warranties of the Company contained
in the Merger Agreement shall be true in all material respects when made and on
and as of the Effective Time (Section 9.3(a)).
WHEREAS, the Merger Agreement further provides that, subject to certain
conditions, it may be terminated and the Merger may be abandoned by action of
the Board of Directors of either Parent or the Company if, among other things,
the Merger shall not have been consummated by December 31, 1998 (the "Original
Termination Date");
WHEREAS, to induce Parent and Merger Sub to enter into the Merger Agreement
and to incur the obligations set forth therein, certain stockholders of the
Company (including certain of the "Stockholders" hereunder) entered into an
Inducement Agreement (the "Inducement Agreement") with Parent and the Company
pursuant to which such stockholders granted an irrevocable proxy to Parent to
vote in favor of the Merger and made certain other agreements with respect to
such stockholders' shares of the common stock, par value $1.00 per share, of
the Company (the "Company Stock");
WHEREAS, the waiting period and other requirements applicable to the
consummation of the Merger under the HSR Act had not expired or been terminated
by December 31, 1998;
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WHEREAS, Parent and Merger Sub believe that the Company has suffered certain
reversals in its business since June 30, 1998 that may constitute a Company
Material Adverse Effect;
WHEREAS, the Company believes that the reversals identified by Parent and
Merger Sub may not constitute a Company Material Adverse Effect;
WHEREAS, on December 29, 1998, management of Parent advised the Company that
management was considering a recommendation to the Board of Directors of Parent
that the Board terminate the Merger Agreement and abandon the Merger under the
terms of the Merger Agreement;
WHEREAS, to induce Parent and Merger Sub not to terminate the Merger
Agreement and abandon the Merger as described, the Stockholders and the Company
are entering into this Agreement and making certain agreements with respect to
2,000,000 shares of Company Stock owned by the Stockholders (the "Shares"), and
other matters; and
WHEREAS, concurrently herewith, Parent, Merger Sub and the Company are
entering into an amendment to the Merger Agreement (the "Amendment") to
establish a closing thereunder on March 31, 1999, to extend the Original
Termination Date to April 15, 1999 and to address the effect on the Merger
Agreement of the possible reversals in the Company's business, subject to all
other terms and conditions set forth in the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein the parties hereto
agree as follows:
I.
SALE AND PURCHASE OF THE SHARES
1.1 Sale and Purchase. Upon the terms and subject to the satisfaction or
waiver of the conditions hereof, at the Closing (as defined in Section 1.2),
the Stockholders agree to sell, assign and deliver to Parent, and Parent agrees
to purchase and accept, the Shares, free and clear of any Encumbrance (as
defined in Section 6.1). Each of the Stockholders agrees to sell, assign and
deliver to Parent the number of Shares set forth opposite the name of such
Stockholder on Exhibit A. As consideration in full for the Shares, Parent
shall pay the Purchase Consideration (as defined in Section 2.1) to the
Stockholders.
1.2 Closing. The closing (the "Closing") of the transactions contemplated
by this Agreement shall occur as soon as practicable following fulfillment of
the conditions set forth in Article VIII hereof and immediately prior to the
Effective Time of the Merger.
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II.
PURCHASE CONSIDERATION
2.1 Purchase Consideration. The purchase consideration (the "Purchase
Consideration") payable by Parent to the Stockholders for each of the Shares
shall be as follows:
(a) Cash Portion. Parent shall pay to the Stockholders ten
dollars ($10.00) in immediately available funds for each of the Shares (the
"Cash Portion").
(b) Contingent Portion. In addition, Parent agrees to pay to the
Stockholders in immediately available funds for each of the Shares the
additional amounts, when, as and if due, determined in accordance with the
terms and conditions of Exhibit B (the "Contingent Portion").
III.
CLOSING EXCHANGE PROCEDURES
3.1 Delivery of Certificates.
(a) Exchange Agent. At the Closing, Parent shall deposit in trust
with Harris Trust Company of New York (the "Exchange Agent") an amount in
immediately available funds equal to the product of (i) the number of Shares
held by the Stockholders immediately prior to the Closing as set forth on
Exhibit A and (ii) the Cash Portion per share. The Exchange Agent shall
agree to hold such funds (together with earnings thereon, the "Exchange
Fund") for delivery as contemplated by this Article III and upon such
additional terms as may be agreed upon by the Exchange Agent, Parent, the
Company and the Stockholders before the Closing.
(b) Exchange Procedures. Prior to the Closing, Parent shall cause
the Exchange Agent to mail or deliver to each of the Stockholders entitled
to receive the Cash Portion pursuant to Section 2.1 a form of letter of
transmittal (which shall specify that delivery will be effected, and risk of
loss and title to the certificates evidencing such Shares (the
"Certificates") will pass, only upon proper delivery of the Certificates to
the Exchange Agent) and instructions for use in effecting the surrender of
the Certificates pursuant to such letter of transmittal. Upon surrender to
the Exchange Agent of a Certificate, together with such letter of
transmittal, duly completed and validly executed in accordance with its
instructions, and such other documents as may be required pursuant to such
instructions, the holder of such Certificate shall be entitled upon the
Closing to receive in exchange therefor the Cash Portion per share for each
of the Shares evidenced by such Certificate. No interest shall accrue or be
paid on the Cash Portion payable upon the surrender of any Certificate for
the benefit of the holder of such Certificate. If payment of the Cash
Portion is to be made to a person other than the person in whose name the
surrendered Certificate is registered on the stock transfer books of the
Company,
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it shall be a condition of payment that the Certificate so surrendered shall
be properly endorsed or be otherwise in proper form for transfer and that
the person requesting such payment shall have paid all transfer and other
taxes required by reason of the payment of the Cash Portion to a person
other than the registered holder of the Certificate surrendered or shall
have established to the satisfaction of Parent or the Exchange Agent that
such taxes have been paid or are not applicable.
(c) Termination of Exchange Fund. At any time following the third
month after the Closing, Parent shall be entitled to require the Exchange
Agent to deliver to Parent any funds representing the Cash Portion made
available to the Exchange Agent and not disbursed to the Stockholders
(including, without limitation, all interest and other income received by
the Exchange Agent in respect of all funds made available to it) and,
thereafter, such Stockholders shall be entitled to look to Parent only as
general creditors thereof with respect to any Cash Portion that may be
payable upon due surrender of the Certificates held by them.
Notwithstanding the foregoing, Parent shall not be liable to any of the
Stockholders for any Cash Portion delivered in respect of any Shares to a
public official pursuant to any abandoned property, escheat or similar law.
(d) Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed, and, if
required by Parent, the posting by such person of a bond in such reasonable
amount as Parent may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent shall
disburse the applicable Cash Portion as provided in this Article III in
exchange for such lost, stolen or destroyed Certificate.
3.2 Closing of the Company's Transfer Books. At the Closing, the stock
transfer books of the Company shall be closed, and no transfer of any shares of
Company Stock shall be made thereafter. In the event that Certificates are
presented to Parent, the Company or the Exchange Agent after the Closing, they
shall be canceled in return for the payment of the applicable Purchase
Consideration relating thereto.
3.3 Time and Place of Closing. The Closing shall take place at the
offices of Huddleston, Bolen, Beatty, Porter & Copen, 611 Third Avenue,
Huntington, West Virginia 25722-2185, at 9:00 a.m. local time on the day which
is not more than one business day after satisfaction (or waiver) of the
conditions set forth in Article VIII (other than those conditions that can be
satisfied only at the Closing) or at such other time and place as Parent and
the Company shall agree in writing.
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IV.
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Stockholders as follows (which
representations and warranties as well as other provisions of this Agreement
are qualified by the matters identified, with references to the appropriate
Section and, if applicable, subsection, on the disclosure schedule (the "Parent
Disclosure Schedule") delivered by Parent to the Stockholders prior to
execution of the Merger Agreement, as such Parent Disclosure Schedule may be
amended or supplemented by agreement of the Company, Parent and Merger Sub):
4.1 Organization and Qualification. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the corporate power to carry on its business as it is now
being conducted or currently proposed to be conducted. Parent is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities make such qualification necessary.
Complete and correct copies as of the date hereof of the Certificate of
Incorporation and Bylaws of Parent have been delivered to the Stockholders as
Section 4.1 of the Parent Disclosure Schedule.
4.2 Authority Relative to this Agreement. Parent has the corporate power
to enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized. This Agreement
constitutes a valid and binding obligation of Parent enforceable in accordance
with its terms, except as enforcement may be limited by bankruptcy, insolvency
or other similar laws affecting the enforcement of creditors' rights generally
and except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any
proceeding therefor may be brought. No other corporate proceedings on the part
of Parent are necessary to authorize this Agreement and the Merger Agreement
and the transactions contemplated hereby and thereby. Except as described in
Section 4.2 of the Parent Disclosure Schedule, Parent is not subject to or
obligated under (i) any charter or bylaw provision or (ii) any contract,
indenture, loan or credit document, license, franchise, permit, order, decree,
concession, lease, instrument, judgment, statute, law, ordinance, rule or
regulation applicable to Parent or any of its subsidiaries or their respective
properties or assets, which would be breached or violated, or under which there
would be a default (with or without notice or lapse of time, or both), or under
which there would arise a right of termination, cancellation, modification or
acceleration of any obligation, or any right to payment or compensation, or the
loss of a benefit, by its executing and carrying out this Agreement or the
Merger Agreement, other than the laws and regulations referred to in the next
sentence. Except as required by the HSR Act, similar pre-acquisition
notification or approval requirements applicable to the Company's foreign
operations (the "Foreign Acts"), the Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the corporation, securities or blue sky laws or
regulations of the various states, no filing or registration with, or
authorization, consent or approval of, any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign and including foreign, national, regional, state,
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provincial and municipal authorities (each, a "Governmental Entity"), is
necessary for the consummation by Parent of the Merger, the other transactions
contemplated by the Merger Agreement or the transactions contemplated by this
Agreement.
4.3 Financing. Parent shall have at the Closing sufficient funds
available to it to consummate the transactions contemplated by this Agreement,
including the payment of the Purchase Consideration.
V.
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
AND THE COMPANY TO PARENT
The Stockholders and the Company jointly and severally represent and warrant
to Parent as follows (which representations and warranties as well as other
provisions of this Agreement are qualified by the matters identified, with
references to the appropriate Section and, if applicable, subsection, on the
disclosure schedule (the "Company Disclosure Schedule") delivered by the
Company to Parent prior to execution of the Merger Agreement, as such Company
Disclosure Schedule may be amended or supplemented by agreement of Parent,
Merger Sub and the Company):
5.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio and has the corporate power to carry on its business as it is now being
conducted or currently proposed to be conducted. The Company is duly qualified
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary. Complete and
correct copies as of the date hereof of the Articles of Incorporation and
Regulations of the Company have been delivered to Parent as Section 5.1 of the
Company Disclosure Schedule.
5.2 Capitalization. The authorized stock of the Company consists of
10,000,000 shares of Company Stock of which, as of the date of this Agreement,
(i) 5,774,335 shares were issued and outstanding, and (ii) 540,240 shares were
held in treasury. All of the issued and outstanding and treasury shares of
Company Stock are duly authorized, validly issued, fully paid and
nonassessable. There are no bonds, debentures, notes or other indebtedness
issued or outstanding having the right to vote on any matters on which the
Company's stockholders may vote. There are no options, warrants, calls,
convertible securities or other rights, agreements or commitments presently
outstanding obligating the Company to issue, deliver or sell shares of its
capital stock or debt securities, or obligating the Company to grant, extend or
enter into any such option, warrant, call or other such right, agreement or
commitment. Since December 31, 1997, the Company has not issued any shares of
its capital stock. After the Closing and the Effective Time, the Surviving
Corporation will have no obligation to issue, transfer or sell any shares of
stock of the Company or the Surviving Corporation pursuant to any Company
Employee Benefit Plan (as defined in Section 5.8).
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5.3 Subsidiaries. Each subsidiary of the Company is a corporation,
partnership or other entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and has the
corporate or similar power to carry on its business as it is now being
conducted or currently proposed to be conducted. Each subsidiary of the
Company is duly qualified to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary. Section 5.3 of
the Company Disclosure Schedule contains, with respect to each subsidiary of
the Company, its name and jurisdiction of organization and, with respect to
each subsidiary that is not wholly owned, the number of issued and outstanding
shares of capital stock or share capital and the number of shares of capital
stock or share capital owned by the Company or subsidiary thereof. All the
outstanding shares of capital stock or share capital of each subsidiary of the
Company are validly issued, fully paid and nonassessable, and those owned by
the Company or by a subsidiary of the Company are owned free and clear of any
liens, claims or encumbrances. There are no existing options, warrants, calls,
convertible securities or other rights, agreements or commitments of any
character relating to the issued or unissued capital stock or other securities
of any of the subsidiaries of the Company. Except as set forth in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997 or any Company SEC Report (as defined in Section 5.5) filed subsequent to
such date and prior to the date hereof, or as set forth in Section 5.3 of the
Company Disclosure Schedule, the Company does not directly or indirectly own
any interest in any other corporation, partnership, joint venture or other
business association or entity or have any obligation, commitment or
undertaking to acquire any such interest.
5.4 Authority Relative to this Agreement. The Company has the corporate
power to enter into this Agreement and to carry out its obligations hereunder.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Company's
Board of Directors. This Agreement constitutes a valid and binding obligation
of the Company enforceable in accordance with its terms except as enforcement
may be limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors rights generally and except that the availability of
equitable remedies, including specific performance, is subject to the
discretion of the court before which any proceeding therefor may be brought.
No other corporate proceedings on the part of the Company are necessary to
authorize this Agreement and the Merger Agreement and the transactions
contemplated hereby and thereby. Except as described in Section 5.4 of the
Company Disclosure Schedule, the Company is not subject to or obligated under
(i) any charter or regulations provision or (ii) any contract, indenture, loan
or credit document, license, franchise, permit, order, decree, concession,
lease, instrument, judgment, statute, law, ordinance, rule or regulation
applicable to the Company or any of its subsidiaries or their respective
properties or assets which would be breached or violated, or under which there
would be a default (with or without notice or lapse of time, or both), or under
which there would arise a right of termination, cancellation, modification or
acceleration of any obligation, or any right to payment or compensation, or the
loss of a benefit, by its executing and carrying out this Agreement or the
Merger Agreement, other than the laws and regulations referred to in the next
sentence. Except as required by the HSR Act, the Foreign Acts, the Securities
Act, the Exchange Act, and the corporation, securities or blue sky laws or
regulations of the various states, no filing or registration with, or
authorization, consent or approval of, any
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Governmental Entity is necessary for the consummation by the Company of the
Merger, the other transactions contemplated by the Merger Agreement or the
transactions contemplated by this Agreement.
5.5 Reports and Financial Statements. The Company has previously
furnished Parent with true and complete copies of its (i) Annual Report on Form
10-K for the fiscal year ended December 31, 1997, as filed with the Securities
and Exchange Commission (the "Commission"), (ii) Quarterly Reports on Form 10-Q
for the quarters ended March 31, 1998 and June 30, 1998, as filed with the
Commission, (iii) proxy statements related to all meetings of its stockholders
(whether annual or special) since September 30, 1997 and (iv) all other reports
or registration statements filed by the Company with the Commission since
September 30, 1997, except for preliminary material in the case of clauses
(iii) and (iv) above, which are all the documents that the Company was required
to file with the Commission since September 30, 1997 (the documents in clauses
(i) through (iv) being referred to herein collectively as the "Company SEC
Reports"). As of their respective dates, the Company SEC Reports complied as
to form in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the
Commission thereunder applicable to such Company SEC Reports. As of their
respective dates, the Company SEC Reports did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim financial statements of
the Company included in the Company SEC Reports comply as to form in all
material respects with applicable accounting requirements and with the
published rules and regulations of the Commission with respect thereto. The
financial statements included in the Company SEC Reports: (i) have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis, except as may be indicated therein or in the notes thereto
and subject, in the case of the unaudited interim financial statements, to
normal year-end adjustments and any other adjustments described therein and the
fact that certain information and notes have been condensed or omitted in
accordance with the Exchange Act and the rules promulgated thereunder; (ii)
present fairly, in all material respects, the financial position of the Company
and its subsidiaries as at the dates thereof and the results of their
operations and cash flows for the periods then ended; and (iii) are in all
material respects in accordance with the books of account and records of the
Company and its subsidiaries. As of June 30, 1998, there was no basis for any
claim or liability of any nature against the Company or any of its
subsidiaries, whether absolute, accrued, contingent or otherwise, which, alone
or in the aggregate, has had, or would have, a Company Material Adverse Effect,
other than as reflected in the Company SEC Report filed prior to the date of
this Agreement. For the purposes of this Agreement, a "Company Material
Adverse Effect" means a material adverse effect on the business, properties,
assets, operations, condition (financial or otherwise), customer relations,
supplier relations, business prospects, liabilities or results of operations of
the Company and its subsidiaries taken as a whole, other than any effects
arising out of, resulting from or relating to changes in general economic or
financial conditions.
5.6 Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Reports filed prior to the date of this Agreement or in Section 5.6
of the Company Disclosure Schedule, since June 30, 1998, the Company and its
subsidiaries have operated their respective
8
<PAGE> 10
businesses in the ordinary course of business consistent with past practice and
there has not been (i) any transaction, commitment, dispute or other event or
condition (financial or otherwise) of any character (whether or not in the
ordinary course of business) which, alone or in the aggregate, has had, or
would have, a Company Material Adverse Effect; (ii) any damage, destruction or
loss, whether or not covered by insurance, which has had, or would have, a
Company Material Adverse Effect; (iii) any declaration, setting aside or
payment of any dividend or distribution (whether in cash, stock or property)
with respect to the stock of the Company or any of its subsidiaries (other than
dividends or distributions between the Company and its wholly owned
subsidiaries and the normal and customary quarterly dividends to the Company's
stockholders in an amount not exceeding $.05 per share in any fiscal quarter);
(iv) any material change in the Company's accounting principles, practices or
methods; (v) any repurchase or redemption with respect to its stock; (vi) any
stock split, combination or reclassification of any of the Company's stock or
the issuance or authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for, shares of the Company's stock;
(vii) any adoption of any option or similar plan to purchase shares of stock of
the Company; (viii) any granting by the Company or any of its subsidiaries to
any director, officer or employee of the Company or any of its subsidiaries of
(A) any increase in compensation (other than in the ordinary course of business
consistent with past practice in the case of employees who are not officers or
directors of the Company or a subsidiary thereof), (B) any increase in
severance or termination pay, or (C) acceleration of compensation or benefits;
(ix) any entry by the Company or any of its subsidiaries into any employment,
severance, bonus or termination agreement with any director, officer or
employee of the Company or any of its subsidiaries; or (x) any agreement
(whether or not in writing), arrangement or understanding to do any of the
foregoing.
5.7 Litigation. Except as disclosed in the Company SEC Reports filed
prior to the date of this Agreement or in Section 5.7 of the Company Disclosure
Schedule, there is no suit, action or proceeding pending or, to the Company's
knowledge, threatened against the Company or any of its subsidiaries which,
alone or in the aggregate, has had or would have, a Company Material Adverse
Effect, nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against the Company or any of its
subsidiaries which, alone or in the aggregate, has had, or would have, any such
Company Material Adverse Effect. In addition, the aggregate reasonable
estimate of uninsured exposures or losses under all claims and judgments
pending, or, to the best knowledge of the Company, threatened, does not exceed
$125,000. For purposes of this Agreement, the phrases "the Company's
knowledge" and "knowledge of the Company" and other phrases of like import
shall mean the actual knowledge of any officer or director of the Company or of
any subsidiary of the Company.
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5.8 Employee Benefit Plans.
(a) Section 5.8(a) of the Company Disclosure Schedule hereto sets
forth a list of all "employee benefit plans," as defined in Section 3(3) of
ERISA, and all other material employee benefit or compensation arrangements
or payroll practices, including, without limitation, any such arrangements
or payroll practices providing severance pay, sick leave, vacation pay,
salary continuation for disability, retirement benefits, deferred
compensation, bonus pay, incentive pay, stock options (including those held
by directors, employees, and consultants), hospitalization insurance,
medical insurance, life insurance, scholarships or tuition reimbursements,
that are maintained by the Company, any subsidiary of the Company or any
Company ERISA Affiliate (as defined below) or to which the Company, any
subsidiary of the Company or any Company ERISA Affiliate is obligated to
contribute thereunder for current or former directors, employees,
independent contractors, consultants and leased employees of the Company,
any subsidiary of the Company or any Company ERISA Affiliate (the "Company
Employee Benefit Plans").
(b) Except as set forth in Section 5.8(b) of the Company Disclosure
Schedule, none of the Company Employee Benefit Plans is a "multiemployer
plan", as defined in Section 4001(a)(3) of ERISA (a "Multiemployer Plan"),
and since December 31, 1995, neither the Company nor any Company ERISA
Affiliate has contributed or contributes, or has been or is required to
contribute, to any such plan. With respect to any Multiemployer Plan that
the Company or any Company ERISA Affiliate are required or have been
required in the past to contribute to:
(i) the Company and each Company ERISA Affiliate has or
will have, as of the date of the Closing, made all contributions to
the Multiemployer Plan required by the terms of such Multiemployer
Plan or any collective bargaining agreement;
(ii) neither the Company nor Parent would be subject to
any material withdrawal liability under Part 1 of Subtitle E of Title
IV of ERISA if, as of the date of the Closing, the Company or any
Company ERISA Affiliate were to engage in a complete withdrawal (as
defined in ERISA Section 4203) or a partial withdrawal (as defined in
ERISA Section 4205) from the Multiemployer Plan; and
(iii) the Company has made available to Parent current,
accurate, and complete copies of the Multiemployer Plan and of all
collective bargaining agreements requiring contributions to be made to
such Multiemployer Plan.
(c) Except as set forth in Section 5.8(c) of the Company Disclosure
Schedule, neither the Company nor any of it subsidiaries maintains or
contributes to any plan or arrangement which provides or has any liability
to provide life insurance or medical or other employee welfare benefits to
any employee, officer or director or former employee, officer or director
upon his retirement or termination of employment, and neither the Company
nor any of its subsidiaries has ever represented, promised or contracted
(whether
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<PAGE> 12
in oral or written form) to any employee, officer or director or former
employee, officer or director that such benefits would be provided.
(d) Except as set forth in Section 5.8(d) of the Company Disclosure
Schedule, the execution of, and performance of the transactions contemplated
in, this Agreement will not, either alone or upon the occurrence of
subsequent events, result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with
respect to any employee, officer or director of the Company or any of its
subsidiaries. The only severance agreements or severance policies
applicable to the Company or its subsidiaries in the event of a change of
control of the Company are the agreements and policies specifically referred
to in Section 5.8 of the Company Disclosure Schedule.
(e) Each Company Employee Benefit Plan that is intended to qualify
under Section 401 of the Internal Revenue Code of 1986, as amended (the
"Code"), and each trust maintained pursuant thereto, has been determined to
be exempt from federal income taxation under Section 501 of the Code by the
IRS, and, to the Company's knowledge, nothing has occurred with respect to
the operation or organization of any such Company Employee Benefit Plan that
would cause the loss of such qualification or exemption or the imposition of
any liability, penalty or tax under ERISA or the Code. With respect to any
Company Employee Benefit Plan or other employee benefit plan which is a
"defined benefit plan" within the meaning of Section 3(35) of ERISA, (i) the
Company has not incurred and is not reasonably likely to incur any liability
under Title IV of ERISA (other than for the payment of premiums, all of
which have been paid when due), (ii) the Company has not incurred any
accumulated funding deficiency within the meaning of Section 412 of the Code
and has not applied for or obtained a waiver of any minimum funding standard
or an extension of any amortization period under Section 412 of the Code,
(iii) no "reportable event" (as such term is defined in Section 4043 of
ERISA but excluding any event for which the provision for 30-day notice to
the Pension Benefit Guaranty Corporation has been waived by regulation) has
occurred or is expected to occur and (iv) since December 31, 1996, no
material adverse change in the financial condition of any such plan has
occurred.
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(f) (i) All contributions (including all employer contributions and
employee salary reduction contributions) required to have been made under
any of the Company Employee Benefit Plans to any funds or trusts established
thereunder or in connection therewith have been made by the due date
thereof, (ii) the Company has complied in all material respects with any
notice, reporting and documentation requirements of ERISA and the Code,
(iii) there are no pending actions, claims or lawsuits which have been
asserted, instituted or, to the Company's knowledge, threatened, in
connection with the Company Employee Benefit Plans, (iv) the Company
Employee Benefit Plans have been maintained, in all material respects, in
accordance with their terms and with all provisions of ERISA and the Code
(including rules and regulations thereunder) and other applicable federal
and state laws and regulations, and (v) except as set forth in Section
5.8(f) of the Company Disclosure Statement, each Company Employee Benefit
Plan could be terminated as of the date of the Closing with no liability to
the Company, Parent or any Company ERISA Affiliate.
(g) Neither the Company nor any Company ERISA Affiliate has engaged
in any transaction in violation of Section 406(a) or (b) of ERISA or any
"prohibited transaction" (as defined in Section 4975(c)(1) of the Code),
which would subject the Company or any Company ERISA Affiliate to any taxes,
penalties or other liabilities resulting from such prohibited transaction,
and no condition exists that would subject the Company or any Company ERISA
Affiliate to any excise tax, penalty tax or fine related to any Company
Employee Benefit Plans.
(h) With respect to each Company Employee Benefit Plan, the Company
has furnished or made available to Parent true, correct and complete copies
of the following (to the extent applicable): (i) the plan documents and
summary plan descriptions; (ii) the most recent determination letter
received from the Internal Revenue Service; (iii) the annual reports to be
filed for the three most recent plan years of each such plan; (iv) all
related trust agreements, insurance contracts or other funding agreements
that implement such plans; and (v) all other documents, records or other
materials related thereto reasonably requested by Parent.
(i) Each Company Employee Benefit Plan covering any employee
residing or working outside the United States or sponsored or maintained by
a foreign subsidiary of the Company (i) complies in all material respects
with applicable law; and (ii) could be terminated on the date of the Closing
without any material liability to Parent, the Surviving Corporation or any
subsidiary of the Company.
For purposes of this Agreement, "Company ERISA Affiliate" means any business
or entity which is a member of the same "controlled group of corporations,"
under "common control" or an "affiliated service group" with the Company within
the meanings of Sections 414 (b), (c) or (m) of the Code, or required to be
aggregated with the Company under Section 414(o) of the Code, or is under
"common control" with the Company, within the meaning of Section 4001(a)(14) of
ERISA, or any regulations promulgated or proposed under any of the foregoing
Sections.
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5.9 Company Action; Vote Required. The Board of Directors of the Company,
at meetings duly called and held, has by the unanimous vote of all directors
present (a) determined that the Merger is advisable and fair to and in the best
interests of the Company and its stockholders, (b) approved the Merger in
accordance with the provisions of Section 1701.78 of the OGCL, (c) recommended
the approval of the Merger Agreement and the Merger by the holders of the
Company Stock and directed that the Merger be submitted for consideration by
the Company's stockholders at the meeting of stockholders contemplated by the
Merger Agreement, and (d) approved this Agreement. The Company's stockholders
approved the Merger Agreement and the Merger by the affirmative vote of
two-thirds of the outstanding shares of Company Stock entitled to vote at a
meeting of stockholders duly called and held for the purpose of considering the
Merger.
5.10 Financial Advisors. The Company has received the opinion of Chaffe &
Associates, Inc., financial advisor to the Company, which financial advisor is
not an affiliate (as that term is defined in the Securities Exchange Act of
1934, as amended) of the Company, to the effect that, the Merger Consideration
(as defined in the Merger Agreement) is fair from a financial point of view to
the holders of Company Stock, a copy of which opinion has been delivered to
Parent and Merger Sub. Except for Chaffe & Associates, Inc., no broker, finder
or investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger, the transactions contemplated by the
Merger Agreement or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company or the Stockholders. The
Company has previously delivered to Parent a copy of the engagement letter
executed on August 10, 1998 between the Company and Chaffe & Associates, Inc.
In addition to any such fee and commission arrangements, the Company has
previously delivered to Parent a good faith estimate of all additional fees,
costs and expenses to be incurred by the Company and its subsidiaries in
connection with the Merger Agreement.
5.11 Compliance with Applicable Laws. The Company and each of its
subsidiaries holds all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary or appropriate for the
operation of its respective business (the "Company Permits"). The Company and
each of its subsidiaries is in compliance with the terms of the Company
Permits, except for any failure to comply which, alone or in the aggregate, has
not had, and would not have, a Company Material Adverse Effect. Except as
disclosed in the Company SEC Reports filed prior to the date of this Agreement,
the businesses of the Company and its subsidiaries are not being conducted in
violation of any material Law (as defined below), including, with respect to
the operations of the Company's foreign subsidiaries, any "social law" (as
defined below). Without limitation, any mandated or voluntary plant closing or
product recall due to an actual or potential violation of any health or safety
law, ordinance or regulation shall be deemed to cause a Company Material
Adverse Effect. To the Company's knowledge, during the past five years, none
of the Company's or any of its subsidiaries' directors, officers, employees or
agents, nor any other person acting on behalf of any of them or the Company or
any of its subsidiaries, has, directly or indirectly, given or agreed to give
any gift or similar benefit to any customer, supplier, governmental employee or
other person in violation of any Law, including, without limitation, the
Foreign Corrupt Practices Act. "Law" means any statute, law, ordinance,
decree, order, rule or regulation of any Governmental Entity. "Social law"
means any foreign,
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national, regional, state, provincial and municipal laws, regulations,
ordinances and decisions and any collective bargaining agreements agreed on any
level, affecting the employment of labor, including but not limited to social
security, wages, hours, discrimination, plant closing notices, working
conditions, health and safety in the work place, works council information and
consultation of the work force, the organization of participation by the work
force, internal regulations, maternity and sickness leave, etc.
5.12 Taxes. Except as set forth in Section 5.12 of the Company Disclosure
Schedule, (i) all returns and reports ("Tax Returns") of or with respect to any
tax that are required to be filed by or with respect to the Company and each of
its subsidiaries have been filed; (ii) neither the Company nor any of its
subsidiaries has requested or been granted an extension of time for filing any
Tax Return that has not yet been filed; (iii) the Company and each of its
subsidiaries has paid all taxes that are due from or with respect to it; (iv)
the Company and each of its subsidiaries has withheld and paid all taxes
required by all applicable laws to be withheld or paid in connection with any
amounts paid or owing to any employee, creditor, independent contractor or
other third party; (v) there are no outstanding agreements, waivers or
arrangements extending the statutory period of limitation applicable to any
claim for, or the period for the collection or assessment of, taxes due from or
with respect to the Company or any of its subsidiaries for any taxable period;
(vi) no audit, action, proceeding, investigation, dispute or claim by any
court, governmental or regulatory authority or similar person is pending or, to
the Company's knowledge, threatened in regard to any taxes due from or with
respect to the Company or any of its subsidiaries or any Tax Return filed by or
with respect to the Company or any of its subsidiaries; (vii) no claim has been
made by a taxing authority in a jurisdiction in which neither the Company nor
any of its subsidiaries files Tax Returns that the Company or any subsidiary is
required to file Tax Returns in such jurisdiction, and, to the Company's
knowledge, no taxing authority could reasonably make such a claim; (viii) no
assessment of any deficiency for taxes is proposed against the Company or any
of its subsidiaries or any of their assets; (ix) there are no liens for taxes
(other than for current taxes not yet due and payable) upon the assets of the
Company; (x) the Company has not been a member of an affiliated group as
defined in Section 1504 of the Code (or any analogous combined, consolidated or
unitary group as defined under state, local or foreign income tax law) other
than one of which the Company was the common parent; (xi) neither the Company
nor any subsidiary has any obligation or liability for the payment of taxes of
any other person arising as a result of any obligation to indemnify another
person or as a result of the Company or any such subsidiary assuming or
succeeding to the tax liability of any other person as a successor, transferee
or otherwise; (xii) the Company will not be required to include any amount in
taxable income for any taxable period (or portion thereof) ending after the
Effective Time as a result of (A) a change in method of accounting for a
taxable period ending prior to the Effective Time, (B) any "closing agreement"
as described in Section 7121 of the Code (or any corresponding provision of
state, local or foreign income tax laws) entered into prior to the Effective
Time, (C) any sale reported on the installment method that occurred prior to
the Effective Time or (D) any prepaid amount received prior to the Effective
Time; (xiii) all taxes accrued but not yet due and all contingent liabilities
for taxes are adequately reflected in the reserves for taxes in the financial
statements contained in the Company SEC Reports; and (xiv) except as described
in Section 5.12 of the Company Disclosure Schedule, there has been no
"ownership change" as described in Section 382
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of the Code that has resulted in any limitation on the Company's ability to
offset pre-change losses against its taxable income.
5.13 Certain Material Contracts.
(a) Section 5.13(a) of the Company Disclosure Schedule lists each
agreement and arrangement (whether written or oral and including all
amendments thereto) to which the Company or any of its subsidiaries is a
party or a beneficiary or by which the Company or any of its subsidiaries is
bound that is material, directly or indirectly, to the business of the
Company (collectively, the "Material Contracts"), including without
limitation (i) any supply, distribution or other agreements or arrangements
pursuant to which third parties are or will be entitled or obligated to
purchase or use any of the assets of Company or any of its subsidiaries with
an aggregate per contract purchase price in excess of $100,000; (ii) any
warranty agreements or arrangements (including any bonds) with any party
under which the Company or any of its subsidiaries has any liability, in any
individual agreement or arrangement or in the aggregate under all agreements
or arrangements with such party, with a value in excess of $25,000; (iii)
any capital or operating leases or conditional sales agreements relating to
vehicles or equipment with a value in excess of $100,000; (iv) any supply or
manufacturing agreements or arrangements pursuant to which the Company or
any of its subsidiaries is entitled or obligated to acquire any assets from
a third party in excess of $500,000; (v) any employment, consulting,
noncompetition, separation, collective bargaining, union or labor agreements
or arrangements; (vi) any agreement evidencing, securing or otherwise
relating to any indebtedness for which the Company or any of its
subsidiaries has any liability, (vii) any agreement with or for the benefit
of any stockholder, director, officer or employee of the Company or any of
its subsidiaries, or any affiliate or family member thereof; and (viii) any
other agreement, arrangement or lease of real or personal property pursuant
to which the Company or any of its subsidiaries could be required to make or
be entitled to receive aggregate payments in excess of $100,000 and which is
not cancelable within 30 days notice without penalty.
(b) The Company and, as applicable, each subsidiary of the Company,
has performed in all material respects all of its obligations under each
Material Contract, and there exists no breach or default (or event that with
notice or lapse of time would constitute a breach or default), whether or
not such default has been waived, under any Material Contract.
(c) On the date hereof and at the Effective Time, each Material
Contract will be valid, binding and in full force and effect and enforceable
in accordance with its respective terms. There has been no termination or,
to the Company's knowledge, threatened termination or notice of default
under any Material Contract. The Company has delivered to Parent a copy of
each written Material Contract.
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(d) Except as set forth in Section 5.13(d) of the Company Disclosure
Schedule, no consent of any person is required in connection with the
transactions contemplated by this Agreement in order to preserve the rights
of the Company or any of its subsidiaries under, or to prevent any
disadvantage to the Company or any of its subsidiaries in respect of, any
Material Contract after the Effective Time.
5.14 Labor Relations. Except as set forth in Section 5.14 of the Company
Disclosure Schedule, there is (i) no unfair labor practice, complaint,
grievance or arbitration pending or, to the knowledge of the Company,
threatened against the Company or any subsidiary of the Company, (ii) no
strike, labor dispute, slowdown or stoppage pending or, to the knowledge of the
Company, threatened against the Company or any subsidiary of the Company and
(iii) to the best knowledge of the Company, no labor union organizing campaign
in progress with respect to any employees of the Company or any subsidiary of
the Company.
5.15 Relationship with Customers and Suppliers. Except as disclosed in
Section 5.15 of the Company Disclosure Schedule, in the last 12 months, none of
(i) the ten largest customers of the Company and each of its operating
subsidiaries as determined by the dollar volume of sales for the year ended
December 31, 1997 and for the six months ended June 30, 1998, and (ii) the ten
largest suppliers of the Company and each of its operating subsidiaries as
determined by the dollar volume of purchases for the year ended December 31,
1997 and for the six months ended June 30, 1997, has canceled or otherwise
terminated, or, to the Company's knowledge, threatened to cancel or otherwise
terminate, its relationship with the Company or any of its subsidiaries, and,
to the Company's knowledge, there has not been any material dispute with any
such customer or supplier. Except as described in Section 5.15 of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries, and, to
the Company's knowledge, no director or officer of the Company or any
subsidiary of the Company, owns, directly or indirectly, an interest in any
entity that is a competitor, customer or supplier of the Company or any of its
subsidiaries or that otherwise has material business dealings with the Company
or any of its subsidiaries.
5.16 Intellectual Property.
(a) The Company has made available to Parent a list of the following
(collectively, the "Company Intellectual Property"): (i) each trademark,
trade name, brand name, service mark or other trade designation owned or
licensed by or to the Company or any of its subsidiaries, each patent,
copyright and similar intellectual property owned or licensed to or by the
Company or any of its subsidiaries and each license, royalty, assignment or
other similar agreement and each registration and application relating to
the foregoing that is material to the conduct of the business of the Company
and its subsidiaries taken as a whole, which list is set forth in Section
5.16(a) of the Company Disclosure Schedule; and (ii) each agreement relating
to Company Intellectual Property or any technology, know-how or processes
that the Company or any of its subsidiaries is licensed or authorized to
use, or which the Company or any of its subsidiaries licenses or authorizes
others to use, that is material to the conduct of the business of the
Company and its subsidiaries taken as a whole.
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(b) The Company and its subsidiaries own the Company Intellectual
Property, or have the right to use the same without infringing or violating
the rights of any third parties. No consent of third parties will be
required for the use of the Company Intellectual Property after the
Effective Time. No claim has been asserted by any person against the
Company or any of its subsidiaries regarding the ownership of or the right
to use any Company Intellectual Property or challenging the rights of the
Company or any of its subsidiaries with respect to any of the Company
Intellectual Property.
(c) To the Company's knowledge, no person or entity has asserted any
claim that any product, activity or operation of the Company or any of its
subsidiaries infringes upon or involves, or has resulted in the infringement
of, any proprietary right of such person or entity. No proceedings have
been instituted, are pending or, to the Company's knowledge, are threatened
that challenge the rights of the Company or any of its subsidiaries with
respect thereto.
5.17 Environmental Matters. Except for matters disclosed in Section 5.17
of the Company Disclosure Schedule, to the knowledge of the Company, after due
inquiry, (a) the properties, operations and activities of the Company and its
subsidiaries are in compliance in all material respects with all applicable
Environmental Laws (as hereinafter defined); (b) the Company and its
subsidiaries and the properties and operations of the Company and its
subsidiaries are not subject to any existing, pending or, to the Company's
knowledge, threatened action, suit, claim, investigation, inquiry or proceeding
by or before any Governmental Entity under any Environmental Law; (c) all
notices, permits, licenses or similar authorizations, if any, required to be
obtained or filed by the Company or any of its subsidiaries under any
Environmental Law in connection with any aspect of the business of the Company
or any of its subsidiaries, including without limitation, those relating to the
treatment, storage, disposal or release of a hazardous or otherwise regulated
substance, have been duly obtained or filed and will remain valid and in effect
after the Merger, and the Company and its subsidiaries are in compliance with
the terms and conditions of all such notices, permits, licenses and similar
authorizations; (d) the Company and its subsidiaries have satisfied and are
currently in compliance with all financial responsibility requirements
applicable to their operations and imposed by any Governmental Entity under any
Environmental Law, and neither the Company nor any of its subsidiaries has
received any notice of noncompliance with any such financial responsibility
requirements; (e) there are no physical or environmental conditions existing on
any property of the Company or any of its subsidiaries or resulting from the
Company's or any such subsidiary's operations or activities, past or present,
at any location, that would give rise to any material on-site or off-site
remedial obligations under any Environmental Laws or that would impact the
soil, groundwater, surface water or human health; (f) since the effective date
of the relevant requirements of applicable Environmental Laws and to the extent
required by such applicable Environmental Laws, all hazardous or otherwise
regulated substances generated by the Company or any of its subsidiaries have
been transported only by carriers authorized under Environmental Laws to
transport such substances and wastes, and disposed of only at treatment,
storage, and disposal facilities authorized under Environmental Laws to treat,
store or dispose of such substances and wastes; (g) there has been no exposure
of any person or property to hazardous substances or any pollutant
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or contaminant, nor has there been any release of hazardous substances, or any
pollutant or contaminant into the environment by the Company or any of its
subsidiaries or in connection with their properties or operations that could
reasonably be expected to give rise to any claim against the Company or any of
its subsidiaries for damages or compensation; and (h) the Company has delivered
to Parent all internal and external environmental audits and studies and all
correspondence on substantial environmental matters in the possession of the
Company relating to any of the current or former properties or operations of
the Company and its subsidiaries.
For purposes of this Agreement, the term "Environmental Laws" means
any and all laws, statutes, ordinances, rules, regulations, or orders of any
Governmental Entity pertaining to health or the environment currently in effect
in any and all jurisdictions in which the Company or any of its subsidiaries
owned or owns property or has conducted or conducts business, including without
limitation, the Clean Air Act, as amended, the Comprehensive Environmental,
Response, Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the
Federal Water Pollution Control Act, as amended, the Occupational Safety and
Health Act of 1970, as amended, the Resource Conservation and Recovery Act of
1976 ("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Hazardous & Solid Waste Amendments Act
of 1984, as amended, the Superfund Amendments and Reauthorization Act of 1986,
as amended, any state laws implementing the foregoing federal laws, and all
other environmental conservation or protection laws. For purposes of this
Agreement, the terms "hazardous substance" and "release" have the meanings
specified in CERCLA and RCRA and shall include petroleum and petroleum
products, radon and PCB's, and the term "disposal" has the meaning specified in
RCRA; provided, however, that to the extent the laws of the state in which the
property is located establish a meaning for "hazardous substance," "release,"
or "disposal" that is broader than that specified in either CERCLA or RCRA,
such broader meaning shall apply.
5.18. Insurance. Section 5.18(a) of the Company Disclosure Schedule sets
forth a complete and accurate list of all primary, excess and umbrella
policies, bonds and other forms of insurance currently owned or held by or on
behalf of and/or providing insurance coverage to the Company, its subsidiaries
and their businesses, properties and assets (or their directors, officers,
salespersons, agents or employees). Section 5.18(a) of the Company Disclosure
Schedule also sets forth the following information with respect to each
insurance policy or bond listed therein: coverage, limits, carrier,
deductibles, annual premium, policy term, special provisions and any estimated
losses. All such policies are in full force and effect. Neither the Company
nor any of its subsidiaries has received a notice of default under any such
policy or notice of any pending or threatened termination or cancellation,
coverage limitation or reduction, or material premium increase with respect to
any such policy. Section 5.18(b) of the Company Disclosure Schedule sets forth
a complete and accurate summary of all of the self-insurance coverage provided
by the Company and its subsidiaries, and no letters of credit have been posted
and no cash has been restricted to support any reserves for insurance. The
insurance policies of the Company and its subsidiaries are issued by insurers
of recognized responsibility and insure the Company, its subsidiaries and their
businesses, properties and assets against such losses and risks, and in such
amounts, as are customary in the case of corporations of established reputation
engaged in the same or similar businesses and similarly situated.
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5.19 Properties.
(a) Section 5.19(a) of the Company Disclosure Schedule sets forth a
description (including the street address) of all real property owned or
leased by the Company or any of its subsidiaries (the "Real Estate"). No
lease agreement, letter of intent or proposal (whether written or oral) has
been entered into by the Company or any of its subsidiaries relating to the
Real Estate except as specified on Section 5.19(a) of the Company Disclosure
Schedule. No premises other than the Real Estate are used in the business
of the Company.
(b) Except for properties and assets disposed of in the ordinary
course of business consistent with past practices after June 30, 1998, the
Company and its subsidiaries have good and marketable title to, or hold by
valid and enforceable lease or license, free and clear of all liens, all
properties and assets, whether tangible or intangible, real, personal or
mixed, reflected in the Company's latest Quarterly Report on Form 10-Q for
the period ended September 30, 1998 or purported to be owned by the Company
and its subsidiaries. The equipment of the Company and its subsidiaries in
regular use has been well maintained and is in good and serviceable
condition, reasonable wear and tear excepted.
(c) The Real Estate is zoned for a classification that permits its
continued use in the manner currently used by the Company and its
subsidiaries, and the occupancy, operation and use of the Real Estate
conforms in all material respects to all applicable Laws, covenants,
conditions and restrictions applicable thereto. Improvements to the Real
Estate were constructed in compliance with, and remain in compliance with,
all applicable Laws, covenants, conditions or restrictions, and except for
current construction in process, to the extent required or applicable, final
certificates of occupancy have been issued for such improvements permitting
the existing use of such improvements. There are no actions pending or, to
the Company's knowledge, threatened that would alter the current zoning
classification of the Real Estate or alter any applicable Laws, covenants,
conditions or restrictions that would adversely affect the use of the Real
Estate in the business of the Company and its subsidiaries. To the
Company's knowledge, no insurance company or Governmental Entity has given
notice of any defects or inadequacies in the Real Estate or the improvements
thereon that would adversely affect the insurability or usability of the
Real Estate or such improvements or prevent the issuance of new insurance
policies thereon at rates not materially higher than present rates. To the
Company's knowledge, no fact or condition exists that would result in the
discontinuation of necessary utilities or services to the Real Estate or the
termination of current access to and from the Real Estate.
(d) There is no litigation or proceeding pending or, to the
Company's knowledge, threatened against or relating to any of the Real
Estate, and there is no pending or, to the Company's knowledge, threatened
or contemplated condemnation actions or special assessments with respect to
the Real Estate. Neither the Company nor any of its subsidiaries has
received a request (written or otherwise) from any Governmental Entity with
respect to the dedication of any of the Real Estate. To the Company's
knowledge,
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there is no pending or contemplated change in any regulation or private
restriction applicable to the Real Estate.
(e) None of the Real Estate is situated in a special flood hazard
area according to any of the applicable city maps or flood insurance rate
maps, or the flood hazard boundary maps issued by the Department of Housing
and Urban Development, the Federal Insurance Administration or the Federal
Emergency Management Agency.
(f) No person has, or at the Effective Time will have, any right or
option to acquire all or any portion of the Real Estate.
(g) Except for the tenants under the leases described in Section
5.19(a) of the Company Disclosure Schedule (the "Leases"), there are no
parties in possession of, or that have the right to possess, any portion of
the Real Estate as lessees, tenants at sufferance or trespassers. The
Company and each of its subsidiaries have performed and complied with all of
their respective obligations under the Leases as and when required, and
there exists no fact or circumstance that, with or without notice or passage
of time, or both, could constitute a default of the landlord or lessor under
any of the Leases, or entitle any tenant thereunder to any offset or
defenses against the prompt and current payment of rent or the performance
of any other obligation of tenant thereunder. As of the date of execution of
this Agreement, there are no rental or other concessions of any nature
granted to tenants under the Leases except as set forth therein. There are
no Leases or other agreements with respect to the Real Estate that give any
tenant the right to purchase the Real Estate or any part thereof. The
rentals and other sums due or to become due under the Leases have not been,
and will not be, assigned, encumbered or subjected to any liens as of the
Effective Time. To the Company's knowledge, no tenant under any of the
Leases is in default thereunder, nor is there any fact or circumstance that,
with or without notice or the passage of time, or both, would constitute a
default of any tenant under any of the Leases.
5.20 Year 2000 Compliance. Except as described in Section 5.20 of the
Company Disclosure Schedule, the disclosure contained in the Company's SEC
Reports with respect to the Company's "Year 2000 Compliant" (as hereinafter
defined) status is correct in all material respects. To the extent that the
hardware, software and computer systems of the Company and its subsidiaries are
not "Year 2000 Compliant", such failure has not had and would not have a
Company Material Adverse Effect. As used herein, "Year 2000 Compliant" means
that the hardware, firmware, software and computer systems of the Company and
its subsidiaries (a) will completely and accurately address, produce, store and
calculate data involving dates beginning with January 1, 2000 and will not
produce abnormally ending or incorrect results involving such dates as used in
any forward-or regression-dated based functions; and (b) will provide that all
"date"-related functionalities and data fields include the indication of
century and millennium, and will perform calculations which involve a
four-digit year.
5.21 No Commitments. Except as described in Section 5.21 of the Company
Disclosure Schedule, none of the Company or any of its subsidiaries has entered
into any commitments,
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understandings or agreements of any kind with respect to the proposed expansion
of the Marietta facility.
5.22 Takeover Statutes. No "fair price," "moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation to which the
Company or its subsidiaries or operations is subject (a "Takeover Statute") is
applicable to the transactions contemplated by this Agreement or the Inducement
Agreement.
5.23 Information for Proxy Statement. None of the information supplied or
to be supplied by the Company and its subsidiaries and included or incorporated
by reference in the proxy statement relating to the Merger and the Merger
Agreement (the "Proxy Statement") will, on the date the Proxy Statement (and
any amendment or supplement thereto) is first mailed to stockholders of the
Company, at the time of the stockholders' meeting to vote on the approval of
the Merger Agreement and the transactions contemplated thereby or at the
Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which
they were made, not misleading. If at any time prior to the Effective Time any
event with respect to the Company or any of its subsidiaries, or with respect
to other information supplied by the Company or any of its subsidiaries for
inclusion in the Proxy Statement, shall occur that is required to be described
in an amendment of, or a supplement to, the Proxy Statement, such event shall
be so described, and such amendment or supplement shall be promptly filed with
the Commission and, as required by law, distributed to the stockholders of the
Company. The Proxy Statement, insofar as it relates to the Company or its
subsidiaries or other information supplied by the Company for inclusion
therein, will comply in all material respects with the provisions of the
Exchange Act and the regulations promulgated thereunder.
VI.
REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDERS TO PARENT AND THE COMPANY
The Stockholders jointly and severally represent and warrant to Parent and
the Company as follows:
6.1 Authority, Enforceability and Title. The execution, delivery and
performance by each of the Stockholders of this Agreement will not conflict
with, require a consent, waiver or approval under, or result in a breach of or
default under, any of the terms of any contract, commitment or other obligation
(written or oral) to which any such Stockholder is bound. Each such
Stockholder has full right, power and authority to execute and deliver this
Agreement and to perform such Stockholder's obligations hereunder. This
Agreement has been duly executed and delivered by each Stockholder and
constitutes a legal, valid and binding obligation of such Stockholder,
enforceable against such Stockholder in accordance with its terms. Each
Stockholder is the sole owner of and has the right to vote with respect to such
Stockholder's Shares listed in Exhibit A subject only to the Inducement
Agreement, and such Stockholder does not have any right to acquire, nor is it
the "beneficial owner" (as such term is defined in Rule 13d-3 under the
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Securities Exchange Act of 1934, as amended) of, any other shares of any class
of capital stock of the Company or any securities convertible into or
exchangeable or exercisable for any shares of any class of capital stock of the
Company. Each Stockholder owns its Shares free and clear of all liens, claims,
pledges, charges, proxies, restrictions, encumbrances, proxies and voting
agreements of any nature whatsoever (each an "Encumbrance") other than as
provided by this Agreement and the Inducement Agreement, and good and valid
title to such Stockholder's Shares, free and clear of any Encumbrance, will
pass to Parent upon the Closing.
6.2 Representation by Counsel. Each of the Stockholders has been
represented by counsel in connection with the transactions contemplated by this
Agreement and is not in an unequal bargaining position relative to Parent and
Merger Sub in connection therewith. Each of the Stockholders has relied wholly
on such Stockholder's own judgment and knowledge in entering into this
Agreement and has not been influenced to any extent whatsoever in entering into
this Agreement by any representations or statements of Parent or Merger Sub (or
anyone acting on their behalf), except as is expressly set forth herein.
VII.
ADDITIONAL AGREEMENTS AND COVENANTS
7.1 Additional Agreements of the Parties. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use all
commercially reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including using all commercially
reasonable efforts to obtain all necessary waivers, consents and approvals.
7.2 Additional Covenants of Stockholders. Each of the Stockholders
covenants and agrees for the benefit of Parent that, until any termination of
this Agreement in accordance with the terms hereof, such Stockholder will not:
(a) sell, transfer, pledge, hypothecate, encumber, assign, tender or otherwise
dispose of, or enter into any contract, option or other arrangement or
understanding with respect to the sale, transfer, pledge, hypothecation,
encumbrance, assignment, tender or other disposition of, any of such
Stockholder's Shares or any interest therein; (b) grant any powers of attorney
or proxies or consents in respect of any of such Stockholder's Shares, deposit
any of such Shares into a voting trust, enter into a voting agreement with
respect to any of such Shares or otherwise restrict or take any action
adversely affecting the ability of such Stockholder freely to exercise all
voting rights with respect thereto; or (c) except as permitted by Section
8.7(b) of the Merger Agreement, directly, or indirectly through his or her
agents and representatives, initiate, solicit or encourage, any inquiries or
the making or implementation of any Alternative Proposal (as defined in the
Merger Agreement) or engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to, an Alternative Proposal, or otherwise facilitates any effort or
attempt to make or implement an Alternative Proposal; and such Stockholder
shall (i) immediately cease and cause to be terminated any existing activities,
including discussions or negotiations with any parties,
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conducted heretofore with respect to any of the foregoing and will take the
necessary steps to inform his or her agents and representatives of the
obligations undertaken in this Section, and (ii) notify Parent immediately if
any such inquiries or proposals are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with it.
7.3 Waiver and Assignment by Stockholders. Upon the Closing and the
consummation of the Merger, each of the Stockholders waives, covenants not to
sue, and releases and forever discharges Parent, Merger Sub and their
respective directors, officers, employees, attorneys, accountants, agents and
representatives from any and all claims, liabilities, demands, controversies,
actions, causes of action, obligations, damages, costs and expenses (including
all judgments, amounts paid in settlement, court costs, attorneys' fees and
costs of investigation), at law or in equity, whether now known or unknown that
may be asserted against Parent and Merger Sub and their respective directors,
officers, employees, attorneys, accountants, agents and representatives, and
against the Company (and its directors, officers, employees, attorneys,
accountants, agents and representatives) arising from or in any way related to
the Merger, the Merger Agreement and any rights that any such Stockholder has
or may have thereunder, the Proxy Statement and the Inducement Agreement
(collectively, the "Claims"), provided that such Stockholder shall retain all
of its rights under this Agreement. Additionally, each of the Stockholders
hereby transfers and assigns to Parent any and all of such Claims.
7.4 Acknowledgment by the Company and the Stockholders. The Company and
each of the Stockholders hereby acknowledge and agree that no provision in this
Agreement shall be deemed or construed as a waiver by Parent or Merger Sub of
any of the conditions set forth in Article IX of the Merger Agreement to such
parties' obligations to effect the Merger except as otherwise agreed in the
Amendment.
VIII.
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation. The respective obligations of
each party to effect the transactions contemplated by this Agreement shall be
subject to the fulfillment at or prior to the Closing of the following
conditions:
(a) The Merger Agreement and the transactions contemplated thereby
shall have been approved and adopted by the requisite vote of the holders of
the Company Stock.
(b) The waiting period and any other requirements applicable to the
consummation of the Merger and the transactions contemplated by this
Agreement under the HSR Act and any applicable Foreign Acts shall have
expired or been terminated.
(c) No preliminary or permanent injunction or other order by any
federal or state court of competent jurisdiction or other Governmental
Entity which prevents the consummation of the Merger or the transactions
contemplated by this Agreement shall
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have been issued and remain in effect (each party agreeing to use all
commercially reasonable efforts to have any such injunction removed).
8.2 Conditions to Obligation of the Company and the Stockholders. The
obligations of the Company and the Stockholders to effect the transactions
contemplated by this Agreement shall be subject to the fulfillment at or prior
to the Closing of the following conditions, unless waived by the Company:
(a) Parent shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior
to the Closing, and the representations and warranties of Parent contained
in this Agreement shall be true and correct when made and on and as of the
Closing as if made on and as of such date (except to the extent they relate
to a particular date), except as expressly contemplated or permitted by
this Agreement. The Company shall have received a certificate of the Chief
Executive Officer, President or a Vice President of Parent to that effect.
(b) The conditions set forth in Section 9.2 of the Merger Agreement
shall have been fulfilled, unless waived by the Company.
8.3 Conditions to Obligations of Parent. The obligations of Parent to
effect the transactions contemplated by this Agreement shall be subject to the
fulfillment at or prior to the Closing of the following conditions, unless
waived by Parent. In addition, unless waived by Parent:
(a) The Company and the Stockholders shall have performed in all
material respects their agreements contained in this Agreement required to
be performed on or prior to the Closing, and the representations and
warranties of the Company and the Stockholders contained in this Agreement
shall be true in all material respects when made and on and as of the
Closing as if made on and as of such date (except to the extent they relate
to a particular date), except as expressly contemplated or permitted by this
Agreement. Parent shall have received a certificate of the Chief Executive
Officer, President or a Vice President of the Company to that effect.
(b) The conditions set forth in Section 9.3 of the Merger Agreement
shall have been fulfilled, unless waived by Parent.
(c) Counsel to the Company and the Stockholders shall have delivered
to Parent an opinion or opinions in form and substance satisfactory to
Parent regarding the enforceability of this Agreement under Ohio law.
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IX.
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination by Mutual Consent. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned at any time prior to the
Closing by the mutual consent of Parent, the Company and the Stockholders.
9.2 Termination by Either Parent or the Company. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned by any of
the parties hereto if (a) the transactions contemplated by this Agreement or
the Merger shall not have been consummated by April 15, 1999, or at any
adjournment or postponement thereof, or (b) a federal or state court of
competent jurisdiction or other Governmental Entity shall have issued an
injunction or other order which prevents consummation of the transactions
contemplated by this Agreement or the Merger, and such injunction or order
shall have become final and non-appealable; provided, that the party seeking to
terminate this Agreement pursuant to clause (b) above shall have used all
commercially reasonable efforts to remove such injunction, order or decree; and
provided, in the case of a termination pursuant to clause (a) above, that the
terminating party shall not have breached in any material respect its
obligations under this Agreement or the Merger Agreement in any manner that
shall have approximately contributed to the failure to consummate the
transactions contemplated by this Agreement or the Merger.
9.3 Other Termination Rights.
(a) This Agreement may be terminated at any time prior to the
Closing, by action of the Board of Directors of Parent, if the Board of
Directors of the Company shall have withdrawn or modified in a manner
adverse to Parent its approval or recommendation of this Agreement, the
Merger Agreement or the Merger or shall have recommended an Alternative
Proposal (as defined in the Merger Agreement) to the Company's stockholders.
(b) This Agreement may be terminated and the transactions
contemplated by this Agreement may be abandoned at any time prior to the
Closing, by action of the Board of Directors of the Company, if, in
compliance with Section 8.7(c) of the Merger Agreement, the Board of
Directors of the Company shall have withdrawn or modified in a manner
adverse to Parent its approval or recommendation of this Agreement, the
Merger Agreement or the Merger or shall have recommended an Alternative
Proposal to the Company's stockholders.
9.4 Effect of Termination and Abandonment. In the event of termination of
this Agreement and the abandonment of the transactions contemplated by this
Agreement pursuant to this Article IX, all obligations of the parties hereto
shall terminate, except the obligations of the parties pursuant to Section 10.4
of the Merger Agreement and Sections 10.2 through 10.14 inclusive of this
Agreement. Moreover, in the event of termination of this Agreement pursuant to
Section 9.2(a), nothing herein shall prejudice the ability of the non-breaching
party to pursue any
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remedy at law or in equity, including an action seeking damages from any other
party for the breach of this Agreement.
X.
MISCELLANEOUS
10.1 Non-Survival of Representations, Warranties and Agreements. All
representations and warranties set forth in this Agreement except for those set
forth in Article VI shall terminate at the Closing. The representations and
warranties set forth in Article VI shall survive until expiration of the
applicable statutes of limitation. All covenants and agreements set forth in
this Agreement shall survive in accordance with their terms.
10.2 Notices. All notices or other communications under this Agreement
shall be in writing and shall be given by delivery (and shall be deemed to have
been duly given upon delivery) in person, by telegram, telex or telecopy, or by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to the Company:
Broughton Foods Company
210 North Seventh Street
P.O. Box 656
Marietta, Ohio 45750
Attention: Philip E. Cline
Telecopy No. (710) 376-9301
With a copy to:
Huddleston, Bolen, Beatty, Porter & Copen
611 Third Avenue
P.O. Box 2185
Huntington, West Virginia 25722-2185
Attention: Thomas Murray, Esq.
Telecopy No. (304) 522-4312
If to the Stockholders:
Marshall T. Reynolds
as Representative of the Stockholders
c/o Broughton Foods Company
210 North Seventh Street
P. O. Box 656
Marietta, Ohio 45750
Telecopy No. (710) 376-9301
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If to Parent:
Suiza Foods Corporation
2525 McKinney Avenue
Suite 1200
Dallas, Texas 75201
Attention: Gregg L. Engles
Telecopy No.: (214) 303-3499
With a copy to:
Hughes & Luce, L.L.P.
1717 Main Street, Suite 2800
Dallas, Texas 75201
Attention: William A. McCormack, Esq.
Telecopy No.: (214) 939-5849
or to such other address (or telecopy number) as any party may have furnished
to the other parties in writing in accordance with this Section.
10.3 Fees and Expenses. Whether or not the transactions contemplated by
this Agreement are consummated, except as provided in Section 9.4, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses, whether or not the transactions contemplated by this Agreement are
consummated.
10.4 Publicity. So long as this Agreement is in effect, Parent, the
Company and the Stockholders agree to consult with each other in issuing any
press release or otherwise making any public statement with respect to the
transactions contemplated by this Agreement, and none of them shall issue any
press release or make any public statement prior to such consultation, except
as may be required by law or by obligations pursuant to any listing agreement
with the New York Stock Exchange.
10.5 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
10.6 Assignment; Binding Effect. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to
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the preceding sentence, this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and assigns.
Notwithstanding anything contained in this Agreement to the contrary, nothing
in this Agreement, expressed or implied, is intended to confer on any person
other than the parties hereto or their respective successors and assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
10.7 Entire Agreement. This Agreement, the Exhibits, the Parent Disclosure
Schedule, the Company Disclosure Schedule and any documents delivered by the
parties in connection herewith and therewith constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings among the parties with respect thereto,
provided that the Merger Agreement, the Inducement Agreement, the
Non-Disclosure Agreement and any documents delivered by the parties in
connection therewith shall remain in full force and effect. No addition to or
modification of any provision of this Agreement shall be binding upon any party
hereto unless made in writing and signed by all parties hereto.
10.8 Amendment. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors and by the Stockholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
10.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to its rules
of conflict of laws.
10.10 Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
10.11 Headings and Table of Contents. Headings of the Articles and Sections
of this Agreement and the Table of Contents are for the convenience of the
parties only, and shall be given no substantive or interpretive effect
whatsoever.
10.12 Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and
vice versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
10.13 Waivers. At any time prior to the Closing, the parties hereto, by or
pursuant to action taken by their Boards of Directors of Parent or the Company
or by the Stockholders, may (i) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
documents delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid if set forth in an
instrument in writing signed on behalf of such party. Except as provided in
this Agreement, no action taken pursuant to this Agreement, including,
28
<PAGE> 30
without limitation, any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance
with any representations, warranties, covenants or agreements contained in this
Agreement. The waiver by any party hereto of a breach of any provision
hereunder shall not operate or be construed as a waiver of any prior or
subsequent breach of the same or any other provision hereunder.
10.14 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
10.15 Subsidiaries. As used in this Agreement, the word "subsidiary" when
used with respect to any party means any corporation or other organization,
whether incorporated or unincorporated, of which such party directly or
indirectly owns or controls at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of
the board of directors or others performing similar functions with respect to
such corporation or other organization, or any organization of which such party
is a general partner.
10.16 Adjustments; Additional Shares. In the event (i) of any stock
dividend, stock split, merger (other than the Merger) recapitalization,
reclassification, combination, exchange of shares or the like of the capital
stock of the Company on, of or affecting the Company Stock or (ii) that any
Stockholder shall become the owner of, or otherwise obtain the right to vote
with respect to, any additional shares of Company Stock or other securities
entitling the holder thereof to vote or give consent, then the terms of this
Agreement shall apply to the shares of capital stock or other instruments or
documents that the Stockholders own or have the right to vote immediately
following the effectiveness of the events described in clause (i) or any
Stockholder becoming the owner of or obtaining the right to vote with respect
to any Company Stock or other securities as described in clause (ii), as
though, in either case, they were Shares hereunder, provided that this Section
10.16 shall only apply to any additional shares of Company Stock or other
securities, instruments or documents attributable to the Shares owned by such
Stockholder listed in Exhibit A.
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<PAGE> 31
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto all as of the day and year first above written.
SUIZA FOODS CORPORATION
By: /s/ Tracy L. Noll
----------------------------------------------
Tracy L. Noll, Executive Vice President-
Corporate Development
BROUGHTON FOODS COMPANY
By: /s/ Marshall T. Reynolds
----------------------------------------------
Title: Chairman of the Board of Directors
-------------------------------------------
STOCKHOLDERS:
------------
/s/ Marshall T. Reynolds
-------------------------------------------------
Marshall T. Reynolds
/s/ Philip E. Cline
-------------------------------------------------
Philip E. Cline
/s/ Charles R. Hooten, Jr.
-------------------------------------------------
Charles R. Hooten, Jr.
/s/ Neal W. Scaggs
-------------------------------------------------
Neal W. Scaggs
30
<PAGE> 32
WRIGHT FAMILY PARTNERSHIP
By: /s/ Thomas W. Wright
--------------------------------------
Thomas W. Wright, Partner
THE HARRAH AND REYNOLDS
CORPORATION
By: /s/ Marshall T. Reynolds, President
--------------------------------------
Marshall T. Reynolds, President
/s/ Douglas V. Reynolds
-------------------------------------------
Douglas V. Reynolds
/s/ Shirley A. Reynolds
-------------------------------------------
Shirley A. Reynolds
31
<PAGE> 33
EXHIBIT A
<TABLE>
<CAPTION>
Stockholder Number of Shares
----------- ----------------
<S> <C>
Marshall T. Reynolds 771,270
Shirley A. Reynolds 30,000
Douglas V. Reynolds 300,000
The Harrah and Reynolds Corporation 48,730
Philip E. Cline 175,000
Charles R. Hooten, Jr. 200,000
Neal W. Scaggs 175,000
Wright Family Partnership 300,000
--------------
Total 2,000,000
</TABLE>
<PAGE> 34
EXHIBIT B
Contingent Portion
Parent agrees to pay to the Stockholders in immediately available funds for
each of the Shares the additional amounts, when, as and if due, determined in
accordance with the following provisions.
Certain capitalized terms utilized in this Exhibit and defined in the Stock
Purchase Agreement shall have the meanings set forth therein, and certain
capitalized terms utilized in this Exhibit but not defined in the Stock
Purchase Agreement shall have the meanings set forth below:
"EBITDA" shall mean net income plus interest expense (net of interest
income), income tax expense and depreciation and amortization expense, and plus
or minus any extraordinary loss or gain for the relevant period, each of which
shall be computed in accordance with generally accepted accounting principles,
applied on a consistent basis. "Measurement EBITDA" shall mean the combined
EBITDA of the Subject Operations using their respective historical basis of
accounting, before the application of the purchase method of accounting to the
acquisition of the Company, excluding (i) any EBITDA contribution from
post-closing acquisitions, (ii) any EBITDA contribution from the Foods Division
of the Company, and (iii) any costs associated with a Subject Operations' plant
or branch closing, including but not limited to severance costs, moving costs
and other specific plant closing costs. The assumptions of the parties with
respect to Measurement EBITDA are set forth in detailed financial information
provided to the parties with respect to the Subject Operations and identified
as the "Earn-out Summary."
The "Representative" shall be Marshall T. Reynolds.
"Statement of Operations" shall mean a combined statement of operations for
the Subject Operations for the twelve-month period ending March 31, 2000
prepared in accordance with generally accepted accounting principles,
consistently applied using the respective historical basis of accounting of the
Subject Operations, before the application of the purchase method of accounting
to the acquisition of the Company. Such Statement of Operations shall be
reviewed by Parent's independent auditors and shall reflect the computation of
Measurement EBITDA of the Subject Operations for such period.
"Subject Operations" shall mean the operations of the following designated
subsidiaries, divisions and other assets and properties of Parent and the
Company:
(a) The operations of the Company and its direct and indirect subsidiaries
Americool Refrigeration and Fixtures, Inc., a Kentucky corporation,
Somerset Computer Services, Inc., a Kentucky corporation, Broughton
Food Services, Inc., an Ohio corporation, LFD Holding Corp., a
Delaware corporation, and London's Farm Dairy, Inc., a Delaware
corporation, which include the operations of the
Exhibit B - Contingent Portion - Page 1
<PAGE> 35
Marietta, Southern Belle, London's Farm and General and Administrative
Divisions of the Company but which exclude the Foods Division of the
Company.
(b) The operations of the London Division and the Appalachia Division of
Land-O-Sun Dairies, L.L.C., a Delaware limited liability company and
subsidiary of Parent.
(c) The operations of Louis Trauth Dairy, Inc., a Delaware corporation and
subsidiary of Parent.
(d) The operations of Embest Dairy located in Livonia, Michigan, and
McDonald's Dairy located in Flint, Michigan and owned by Country
Fresh, Inc., a Michigan corporation and subsidiary of Parent.
1. On or before May 31, 2000, Parent shall deliver the Statement of Operations
and the computation of the Measurement EBITDA to the Representative. Parent
shall also deliver to the Representative the operating statements for the
12-month period ended March 31, 2000 of each of the subsidiaries, divisions and
other assets and properties constituting the Subject Operations together with
any additional supporting documentation reasonably requested by the
Representative. Upon delivery of the Statement of Operations, the computation
of the Measurement EBITDA and supporting documentation to the Representative,
Parent and the Representative shall proceed diligently and in good faith to
resolve any disputes they may have with respect to the items set forth in the
Statement of Operations and in the computation of the Measurement EBITDA for
the Subject Operations for the 12-month period ended March 31, 2000. Any
determination by Parent and the Representative regarding the Statement of
Operations, including the calculation of the Measurement EBITDA for the Subject
Operations for the 12-month period ended March 31, 2000, shall be final and
binding on all parties to this Agreement.
2. If Parent and the Representative cannot agree on the Statement of
Operations and the calculation of Measurement EBITDA as contemplated by
paragraph 1 hereof within 30 days of the delivery of the Statement of
Operations and the computation of the Measurement EBITDA by Parent to the
Representative, such dispute shall be resolved by a national "Big Five"
accounting firm appointed by Parent and the Representative, but not including
Parent's independent auditors. Parent and the Representative agree to deliver
or make available to such accounting firm all books, records and other
information and documentation relevant to the resolution of the dispute. Such
accounting firm shall be required to resolve disputes only with respect to
those items of the Operating Statement and the Measurement EBITDA that have not
theretofor been agreed upon by Parent and the Representative, based solely on
the books, records and other information and documentation delivered or made
available to such accounting firm by Parent and the Representative. Any
determination by such accounting firm regarding the Statement of Operations,
including the calculation of Measurement EBITDA for the Subject Operations for
the 12-month period ended March 31, 2000, shall be final and binding on all
Exhibit B - Contingent Portion - Page 2
<PAGE> 36
parties to this Agreement. Any fees and expenses payable to such accounting
firm shall be shared equally by Parent and the Stockholders.
3. Upon the final determination of the Measurement EBITDA for the Subject
Operations for the 12-month period ended March 31, 2000, whether such
determination is made by agreement of Parent and the Representative pursuant to
paragraph 1 hereof or by an accounting firm pursuant to paragraph 2 hereof,
Parent shall promptly pay to the Stockholders, in immediately available funds,
an amount of between $0 to $9.00 for each of the Shares in accordance with the
following:
(a) If the Measurement EBITDA for the Subject Operations for the 12-month
period ended March 31, 2000 is less than or equal to $28,000,000, then
the Stockholders shall not be entitled to, and Parent shall have no
obligation to pay, any Contingent Portion for any of the Shares.
(b) If such Measurement EBITDA is equal to or greater than $31,500,000,
then the Stockholders shall be entitled to, and Parent shall be
obligated to pay, a Contingent Portion of $9.00 for each of the
Shares.
(c) If such Measurement EBITDA is greater than $28,000,000 but less than
$31,500,000, then the Stockholders shall be entitled to, and Parent
shall be obligated to pay, a pro rata portion of $9.00 as the
Contingent Portion equal to the proportion that Measurement EBITDA in
excess of $28,000,000 bears to $3,500,000, provided that in no event
shall the Stockholders be entitled to a Contingent Portion in excess
of $9.00 per Share.
4. Nothing herein shall impose any obligation on Parent to operate the Subject
Operations in any manner except pursuant to its internal policies and
procedures, as the same may exist from time to time.
5. The Stockholders hereby constitute and appoint irrevocably the
Representative as their true and lawful attorney, agent and representative for
them and in their name, place and stead to act for each of them with respect to
all matters arising in connection with the determination, timing and payment of
the Contingent Portion, giving and granting unto the Representative the full
power and authority to execute, sign, acknowledge and deliver any documents or
other instruments as may be required in connection therewith and the full power
and authority to do and perform all other acts necessary, proper or advisable
to be done in the exercise of the foregoing power as each of the Stockholders
could do if present, with full power of substitution and revocation, hereby
ratifying and confirming all that the Representative may do by virtue of this
paragraph 5 or cause to be done hereunder. Parent shall be entitled to rely on
instructions from the Representative, and shall have no liability to the
Stockholders for complying with such instructions.
6. Parent agrees to provide to the Representative promptly on a quarterly
basis the operating statements of the designated subsidiaries, divisions and
other assets and properties of Parent and
Exhibit B - Contingent Portion - Page 3
<PAGE> 37
the Company constituting the Subject Operations for each of the calendar
quarters in the 12-month period ending March 31, 2000. These operating
statements shall be prepared in accordance with generally accepted accounting
principles, consistently applied using the historical basis of accounting of
the Subject Operations, before the application of the purchase method of
accounting to the acquisition of the Company.
Exhibit B - Contingent Portion - Page 4
