<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 22, 1998
REGISTRATION STATEMENT NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MONROE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 5141-02 04-3411833
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
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8 CEDAR STREET, SUITE 54A
WOBURN, MASSACHUSETTS 01801
(781) 933-3998
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
JAMES L. MONROE
PRESIDENT
MONROE, INC.
8 CEDAR STREET, SUITE 54A
WOBURN, MASSACHUSETTS 01801
(781) 933-3998
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
---------------
Copy to:
STUART M. CABLE, ESQ.
GOODWIN, PROCTER & HOAR LLP
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109-2881
(617) 570-1000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act Registration Statement number of the earlier
effective Registration Statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C>
Common Stock, par value $.01 per share..... $100,000,000 $29,500
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 of the Securities Act of 1933, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(A), MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
This Registration Statement contains a Prospectus relating to an offering in
the United States and Canada (the "U.S. Offering") of an aggregate of
shares of Common Stock (the "Common Stock"), together with separate Prospectus
pages relating to a concurrent offering outside of the United States and
Canada (the "International Offering," and, together with the U.S. Offering,
the "Offering") of an aggregate of shares of Common Stock. The complete
Prospectus for the U.S. Offering follows immediately after this Explanatory
Note. After such Prospectus are the following alternate pages for the
International Offering: a front cover page, a "Certain United States Tax
Consequences to Non-U.S. Holders of Common Stock" section, an "Underwriting"
section and a back cover page. All other pages of the Prospectus for the U.S.
Offering are identical and are to be used for both the U.S. Offering and the
International Offering. The Registrant will change its name to "Merkert
American Corporation" subsequent to the date of this filing.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED , 1998
PROSPECTUS
SHARES
MONROE, INC.
COMMON STOCK
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All of the shares of Common Stock offered hereby are being sold by
Monroe, Inc. (the "Company"). Of the shares of Common Stock offered hereby,
are being offered for sale initially in the United States and Canada by
U.S. Underwriters to be selected by the Company and shares are being
offered for sale initially in a concurrent offering outside the United States
and Canada by International Managers to be selected by the Company. The initial
public offering price and the underwriting discount per share will be identical
for both offerings. See "Underwriting."
Prior to the Offering, there has been no public market for the Common Stock.
It is currently estimated that the initial public offering price will be
between $ and $ per share. For a discussion relating to factors to be
considered in determining the initial public offering price, see
"Underwriting." Application will be made to list the Common Stock on the New
York Stock Exchange under the symbol "MKR."
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share................................ $ $ $
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Total(3)................................. $ $ $
</TABLE>
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(1) The Company will agree to indemnify the several Underwriters against
certain liabilities, including certain liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $ .
(3) The Company will grant to the U.S. Underwriters and the International
Managers options to purchase up to an additional and shares of
Common Stock, respectively, in each case exercisable within 30 days after
the date hereof, solely to cover over-allotments, if any. If such options
are exercised in full, the total Price to Public, Underwriting Discount and
Proceeds to Company will be $ , $ and $ , respectively. See
"Underwriting."
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The date of this Prospectus is , 1998.
<PAGE>
[Map of United States showing territory covered by the Company and the
location of the Company's facilities]
[ART WORK]
[Other art work to be provided by amendment]
Certain persons participating in the Offering may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Stock.
Such transactions may include stabilizing, the purchase of Common Stock to
cover syndicate short positions and the imposition of penalty bids. For a
description of these activities, see "Underwriting."
<PAGE>
PROSPECTUS SUMMARY
Prior to or upon consummation of the Offering, Monroe, Inc. will change its
name to Merkert American Corporation. Unless the context otherwise requires,
all references to the "Company" herein mean Monroe, Inc., including its
subsidiaries, after the Combination (as defined herein). References to the
Company's business prior to the Combination mean the business of each of
Merkert Enterprises, Inc. and Rogers-American Company, Inc., including each of
their respective subsidiaries. See "The Combination."
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements and
related notes appearing elsewhere in this Prospectus. Unless otherwise
indicated, all share, per share and financial information in this Prospectus
(a) has been adjusted to give effect to the Combination, (b) assumes an initial
public offering price of $ per share, (c) assumes no exercise of the
Underwriters' over-allotment options and (d) does not include shares issuable
upon exercise of outstanding options or reserved for issuance pursuant to the
Company's stock option and incentive plan. See "Underwriting," "Management--
1998 Stock Option and Incentive Plan" and "Description of Capital Stock."
THE COMPANY
Monroe, Inc. is a leading food brokerage firm providing outsourced sales,
merchandising and marketing services to manufacturers, suppliers and producers
of food products and consumer goods ("Manufacturers"). The Company acts as an
independent sales and marketing representative, selling grocery and consumer
products on behalf of Manufacturers and coordinating the execution of
Manufacturers' marketing programs with retailers and wholesalers ("Retailers").
The Company's principal source of revenues is commissions that it receives from
Manufacturers. The Company's other activities include managing private label
programs on behalf of selected Retailers.
The Company has long-standing relationships with many of its Manufacturers,
including Dean Foods/Birds Eye (41 years), H.J. Heinz (24 years), Minute Maid
(44 years), Ocean Spray (29 years) and Pillsbury (19 years). Key Retailer
relationships include C&S Wholesale Grocers, Inc., Food Lion Supermarkets,
Giant Foods, Hannaford Brothers, Kroger, Publix Supermarkets, Royal Ahold
(including Stop & Shop and Bi-Lo), Safeway, Wakefern (Shop Rite) and Winn-
Dixie. The Company represents approximately 750 Manufacturers and more than
70,000 food and non-food stock-keeping units ("SKUs").
Since 1994, the Company has acquired and successfully integrated 21
companies, resulting in coverage of new geographic markets and expanded
representation of Manufacturers' product offerings within existing markets. The
Company's strategic acquisition plan includes the selection, acquisition and
management of acquisition candidates in industry segments, including the retail
food brokerage, food service brokerage and private label brokerage business
segments.
The Company will be the first publicly held food broker in the United States.
The Company is one of the three largest food brokers in the United States and
believes that it is the largest food broker in the eastern United States. The
Company is the only food broker with comprehensive geographic coverage of the
eastern United States and the capability to provide service throughout that
region to the region's largest Retailers. The eastern United States is the most
concentrated retail store region in the United States and represents
approximately 43% of national food store sales. The Company has 36 offices
servicing Retailers in 22 states. In 1997, the Company had pro forma combined
revenue of approximately $227.9 million and pro forma combined net income of
approximately $9.2 million.
3
<PAGE>
INDUSTRY OVERVIEW
The Company estimates, based on information published by industry sources,
that the food brokerage industry in the United States had annual commission
revenues of approximately $6 billion in 1997. Food brokers serve Manufacturers,
Retailers and food service providers. Retail food brokers represent
approximately 3,200 Manufacturers that produce more than 100,000 food and non-
food SKUs, which are sold to approximately 128,000 grocery stores, including
chain and independent supermarkets, convenience stores, wholesale clubs and
other stores ("Grocery Stores") and more than 700 wholesalers nationwide. The
industry includes three types of food brokers, as follows:
Retail Food Brokers. Manufacturers of branded food and non-food products use
retail food brokers as a cost effective alternative to a direct sales force and
rely on retail food brokers to provide local market penetration, integrated
brand and category-management as well as access to local merchandising data.
Retail food brokers typically perform two types of services on behalf of
Manufacturers: headquarters functions and retail store functions.
Headquarters functions include services provided to both Manufacturers and
Retailers at the headquarters level. Retail food brokers conduct business
development activities including sales calls and new product introductions to
Retailers on behalf of Manufacturers. Retail food brokers also assist
Manufacturers in developing, reviewing and executing annual marketing plans.
Other headquarters services include order management, supervision of shelf
space management, the coordination of Manufacturers' promotional spending, and
facilitating the resolution of billing issues between Manufacturers and
Retailers. In connection with the implementation of category management at the
Retailers' headquarters level, retail food brokers assist Retailers by
gathering and analyzing demographic, consumer, and store sales information
utilized in the management of product categories as strategic business units.
Retail store functions generally include execution of sales plans for
Manufacturers' products at the store level by assisting in merchandising, shelf
and display management, new store set-ups, implementation of promotional plans,
and placement of point-of-sale coupons, signs and other information. Retail
food brokers also assist Retailers with coupon and advertising programs,
quality assurance and technical training (primarily in relation to prepared
foods). In addition, retail food brokers assist Retailers and Manufacturers in
the collection, analysis and application of retail sales data.
The retail food brokerage industry has been growing as food brokers represent
an increasing percentage of the volume of all commodities (the "ACV") sold
through Grocery Stores. In 1997, the percentage of ACV sold through Grocery
Stores was 55% compared to 45% in 1985. The food industry is non-cyclical, and
according to Progressive Grocer, Grocery Store revenues, of which an increasing
portion is represented by food brokers, have grown from approximately $292
billion in 1985 to $436 billion in 1997, representing a compound annual growth
rate of approximately 4% per year.
The Company believes that the retail food brokerage industry is highly
fragmented and is experiencing significant consolidation. In the past ten
years, the number of food brokerage firms has decreased from 2,500 to 1,100,
while the number of sales representatives employed by such firms increased from
35,000 to 42,000. There are three multi-regional food brokerage firms,
including the Company, each with approximately 3% market share. Additionally,
there are 12 to 15 large regional food brokerage firms in the United States. A
number of the companies in the food brokerage industry, including Merkert and
Rogers, have participated in the trend towards consolidation by acquiring other
food brokerage businesses, generally financing these transactions with debt
and/or earn-out agreements.
The Company believes that the consolidation of food brokers is primarily the
result of a desire by Manufacturers and Retailers to manage their businesses
more efficiently and effectively by reducing the number of brokers they
interact with in a given region. Additionally, Management believes that
consolidation within the
4
<PAGE>
food brokerage industry is being driven, in part, by the consolidation of
Retailers and Manufacturers and the increasing demand for the application of
more sophisticated information technology on the part of food brokers.
Food Service Brokers. Food service providers include operators of
restaurants, school and hospital cafeterias and other similar establishments.
The food service business also includes prepared meals sold at convenience
stores. Food brokers sell Manufacturers' products to food service providers
through a number of means, including headquarters sales calls and the
representation of Manufacturers' products at trade shows. The food service
segment of the industry has experienced significant growth in recent years as
an increasing percentage of consumer spending for food in the United States has
shifted to meals away from home.
Private Label Food Brokers. Private label food brokers work with
Manufacturers to develop and manage private label programs. A food broker's
responsibilities in connection with a private label program may include
procurement and inventory management and in-store delivery of private label
products. The private label segment has been a substantial growth segment for
Retailers and represented 20% of supermarket food sales in 1997.
BUSINESS STRATEGY
The Company's objective is to become the leading national provider of
outsourced sales, merchandising and marketing services to Manufacturers,
Retailers and food service providers throughout the United States. The
Company's business strategy is comprised of the following key elements:
Expand Current and Develop New Manufacturer Relationships. The Company seeks
to increase its representation of existing Manufacturers' product lines by
representing Manufacturers' products in new geographic markets and non-
supermarket trade channels, including mass merchandisers, food service
providers, membership warehouses, drug stores and convenience stores. The
Company also seeks to increase the range of products it represents on behalf of
the Manufacturers it currently serves and enter into new relationships with
Manufacturers.
Provide Effective Marketing Support and Valuable Category Management
Technology. The Company's marketing expertise, combined with its proprietary
information technology system, allows it to utilize local demographic
information and information about retail store level conditions to understand
consumer purchasing preferences in local markets. As a result, the Company is
able to develop and implement targeted consumer sales promotions for its
Manufacturers' products. The Company also deploys category analysts who use
local sales data to assist Retailers with shelf schematics, category layouts
and total store space management.
Growth Through Strategic Acquisitions. The Company intends to pursue
strategic acquisitions in the food brokerage industry. Since 1994, the Company
has acquired and successfully integrated 21 companies, resulting in coverage of
new geographic regions and expanded representation of Manufacturer product
offerings in existing markets. The Company's plans include the selection,
acquisition and management of businesses in the following brokerage market
segments:
. Retail: A key element of the Company's acquisition strategy is to expand
its geographic coverage by acquiring existing retail food brokerage
firms in new geographic markets. The Company also seeks acquisition
candidates that conduct business within the Company's existing territory
and offer the Company the opportunity to expand its representation of
Manufacturers and product categories and its coverage of Retailers
within existing markets. The Company also seeks acquisitions that will
enable it to represent additional product categories and cover
additional distribution channels. In particular, the Company believes
that health and beauty care and general merchandise brokerage and
bakery, deli, meat, seafood, floral and produce brokerage have
significant growth potential. The Company also plans to cover
convenience stores in its strategy, as it believes convenience stores
will account for an increasingly larger portion of food sales as sales
of meal replacements and traditional grocery items continue to grow.
5
<PAGE>
. Food Service: Sales to entities in the food service segment of the food
industry currently represent a small part of the Company's business. The
Company believes that it will be able to expand its operations within
the fragmented food service segment through the acquisition of existing
food service brokers who sell Manufacturers' products to food service
providers.
. Private Label: The Company believes that the private label food
brokerage segment is currently fragmented and that the Company can
further develop its private label operations through targeted
acquisitions of private label food brokers within this growing segment
of the food industry.
The Company believes that its acquisition strategy will enable it to:
. Strengthen Market Presence: By expanding its geographic coverage, the
Company will be able to offer Manufacturers more extensive and better
coordinated coverage of Retailers who operate across geographic regions.
As the Company expands the portion of a given Manufacturer's sales it
represents, it will be better positioned to meet Manufacturers' needs by
providing a wide range of services across a broader geographic area.
This will enable Manufacturers to increase the effectiveness of their
marketing programs and reduce the costs associated with managing their
brokerage networks by using fewer food brokerage companies.
. Benefit from Increased Economies of Scale: As the Company expands the
number of Manufacturers and product lines it represents, it expects to
realize certain economies which will result from the low incremental
cost of representing additional Manufacturers and product lines. The
Company also expects to recognize certain economies of scale as the
Company expands its operations to cover a larger geographic region.
. Improve Operating Efficiencies: The Company believes that as it
integrates acquired companies it will be able to eliminate certain
duplicative operations, facilities and personnel. The Company expects to
realize cost savings through the consolidation of certain administrative
functions.
Increase Private Label Brokerage. The Company has a division that specializes
in the development, procurement and inventory management of private label
frozen products, including fruits, vegetables and other products on behalf of
certain Retailers. The Company's private label division currently works in
conjunction with Retailers such as A&P, Price Chopper, Publix and Royal Ahold
(including Stop & Shop and Bi-Lo). The increasing geographic coverage of the
Company will provide the Company with the opportunity to offer private label
services to more Retailers and retail locations.
COMPANY HISTORY
Prior to or upon the consummation of the Offering, Monroe, Inc. will acquire
in separate transactions (collectively, the "Combination") Merkert Enterprises,
Inc., a Massachusetts corporation ("Merkert"), and Rogers-American Company,
Inc., a North Carolina corporation ("Rogers"). Prior to the Offering, the
Company's business was conducted through Merkert and Rogers. See "Certain
Transactions--Organization of the Company" and "The Combination."
Merkert has operated as a food broker in the northeastern and mid-Atlantic
regions of the United States since 1950. In 1997, Merkert had total revenues of
approximately $147.4 million, the principal source of which was commissions it
received from Manufacturers. Merkert also manages private label programs on
behalf of selected Retailers. Merkert has grown through both internally
generated growth and through acquisitions, having successfully acquired and
integrated six smaller food brokers since 1994.
Rogers has operated as a food broker in the southeastern region of the United
States since 1934. In 1997, Rogers had total revenues of approximately $83.0
million, all of which was derived from commissions it received from
Manufacturers. Rogers has grown through both internally generated growth and
through acquisitions, having successfully acquired and integrated 15 smaller
food brokers since 1994.
The Company is a Delaware corporation with its executive offices located at 8
Cedar Street, Suite 54A, Woburn, Massachusetts 01801. The Company's telephone
number is (781) 933-3998.
6
<PAGE>
THE OFFERING
The offering of shares of the Company's Common Stock, par value $.01 per
share, in the United States and Canada (the "U.S. Offering") and the offering
of shares of Common Stock outside the United States and Canada (the
"International Offering") are collectively referred to herein as the
"Offering."
<TABLE>
<C> <S>
Common Stock offered by the Company................ shares
Common Stock to be outstanding after the Offering.. shares(1)
Use of proceeds.................................... The net proceeds to be
received by the Company
will be used to finance,
in part, the Combination,
to repay certain
indebtedness of the
Company, to pay for the
buyout of certain
obligations of Merkert and
Rogers, and for general
corporate purposes. See
"Use of Proceeds."
Proposed New York Stock Exchange symbol............ MKR
</TABLE>
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(1) Includes shares of Common Stock to be issued to the stockholders of
Merkert and Rogers, respectively, in connection with the Combination.
Excludes (i) shares of Common Stock issuable upon exercise of
outstanding stock options granted pursuant to the Company's 1998 Stock
Option and Incentive Plan (the "1998 Stock Plan") and (ii) shares of
Common Stock available for future grants under the 1998 Stock Plan. See
"Management--1998 Stock Option and Incentive Plan." At the request of the
Company, the U.S. Underwriters have reserved for sale, at the initial
public offering price, up to 5% of the shares offered hereby to be sold to
certain directors, officers, and employees of the Company and certain
distributors, dealers, business associates and related persons. See
"Underwriting."
RISK FACTORS
Purchasers of Common Stock in the Offering should carefully consider the risk
factors set forth under the caption "Risk Factors" and the other information
included in this Prospectus prior to making an investment decision. See "Risk
Factors."
7
<PAGE>
SUMMARY PRO FORMA COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The Company has conducted operations to date only in connection with the
Combination and the Offering, and will acquire Merkert and Rogers
simultaneously with and as a condition to the consummation of the Offering. For
financial statement presentation purposes, the Company has been designated as
the accounting acquirer. The following table presents summary pro forma
combined financial data of the Company, as adjusted for: (i) the consummation
of the Combination; (ii) certain pro forma adjustments to the historical
financial statements of Merkert and Rogers; and (iii) the consummation of the
Offering and the application of the net proceeds therefrom. The unaudited pro
forma combined financial data set forth do not proport to represent the
Company's combined results of operation or financial position for any future
period. The summary combined financial data set forth below should be read in
conjunction with, and are qualified by reference to, "Management's Discussion
and Analysis of Financial Condition and Results of Operations," the Company's
Unaudited Pro Forma Combined Financial Statements, Merkert's and Rogers'
financial statements and accompanying notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
1997 1998
------------ ---------------
<S> <C> <C>
STATEMENTS OF OPERATING DATA
(1)(2)(3)(4):
Commissions.............................. $184,759 $ 44,499
Sales.................................... 43,105 12,424
-------- --------
Revenues................................. 227,864 56,923
Cost of sales............................ 39,027 11,420
Selling, general and administrative
expense................................. 163,153 39,496
Depreciation and amortization............ 5,894 1,471
-------- --------
Operating Income......................... 19,790 4,536
Interest expense......................... 3,029 604
Other (income) expense, net.............. (79) 103
-------- --------
Income before income taxes............... 16,840 3,829
Net Income............................... 9,176 2,063
-------- --------
Basic net income per share...............
-------- --------
Shares used in computing net income per
share (5)...............................
-------- --------
Diluted income per share.................
-------- --------
Shares and potential dilutive securities
used in computing diluted earnings per
share...................................
-------- --------
OTHER FINANCIAL DATA:
EBITDA (6)............................... $ 25,684 $ 6,007
-------- --------
<CAPTION>
AS OF MARCH 31, 1998
PRO FORMA AS
COMBINED(7) ADJUSTED(8)
------------ ---------------
<S> <C> <C>
BALANCE SHEET DATA
Working capital (deficit)................ $(98,621)(9) $ 8,879
Total assets............................. 181,599 194,025
Total long term debt, net of current
portion................................. 30,477 30,477
Stockholders' equity..................... 28,115 125,615
</TABLE>
8
<PAGE>
FOOTNOTES FOR SUMMARY FINANCIAL DATA
(1) The pro forma combined statements of operating data assume that the
Combinations and the Offering took place on January 1, 1997 and are not
necessarily indicative of the results the Company would have obtained had
these events actually occurred on that date or of the Company's future
results.
(2) Includes $3,600 for the twelve months ended December 31, 1997 and $900 for
the three months ended March 31, 1998 of amortization of goodwill to be
recorded as a result of the Combinations computed on a basis described in
the Notes to Unaudited Pro Forma Combined Financial Statements.
(3) The pro forma combined statements of operating data reflect reductions in
salaries, benefits, rents and other related costs in the aggregate of
$16,376 for the year ended December 31, 1997 and $3,991 for the three
months ended March 31, 1998 as the result of: (i) the departure of former
owners and officers upon the consummation of the Offering; and (ii) the
impact of closing duplicate offices. The pro formas also include (i) the
loss of revenue resulting from manufacturing conflicts of $2,500 for the
year ended December 31, 1997 and $500 for the three months ended March 31,
1998; (ii) a reduction in interest expense of $5,900 for the year ended
December 31, 1997 and $1,200 for the three months ended March 31, 1998 as a
result of the anticipated repayment of long term obligations; and (iii) the
increase in rent expense as a result of the distribution of the Rogers
corporate headquarters to certain selling shareholders and the related
lease back to the Company pursuant to an operating lease.
(4) Reflects the estimated effective income tax rate after considering the non-
deductibility of goodwill.
(5) Includes (i) shares to be issued to owners of Merkert and Rogers, (ii)
shares issued to the management of and consultants to the Company, and
(iii) shares sold in this Offering necessary to pay the cash portion of the
Combination consideration, retire certain indebtedness relating to outside
bank debt and other obligations of Merkert and Rogers and pay the expenses
of the Offering. In addition, shares and potential dilutive securities used
in computing diluted earnings per share include the dilutive effect of the
outstanding options to purchase shares to be granted upon consummation of
this Offering.
(6) EBITDA represents Earnings Before Interest, Taxes, Depreciation and
Amortization and is presented because it is commonly used by certain
investors and analysts to analyze and compare operating performance. EBITDA
should not be considered in isolation from or as a substitute for net
income (loss), cash flows from operating activities or other statements of
operations or cash flows prepared in accordance with generally accepted
accounting principles or as a measure of profitability or liquidity.
(7) The pro forma combined balance sheet assumes that the Combinations were
consummated on March 31, 1998.
(8) Adjusted for the sale of shares of Common Stock offered hereby and the
application of the net proceeds therefrom. See "Use of Proceeds."
(9) Includes a $53,200 payable, representing the cash portion of the
Combination consideration, $14,600 representing bank indebtedness and
$14,000 relating to indebtedness associated with acquisitions made by
Merkert and Rogers to be paid from a portion of the net proceeds.
9
<PAGE>
SUMMARY INDIVIDUAL FINANCIAL DATA FOR MERKERT AND ROGERS
(IN THOUSANDS)
The following table presents summary financial data for each of Merkert and
Rogers for each of their three most recent years and have not been adjusted to
reflect the anticipated increase in income as reflected in the pro forma
statements of operations. See the Unaudited Pro Forma Combined Financial
Statements and the Notes thereto and the Merkert and Rogers financial
statements and the Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
UNAUDITED
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------------ --------------------
1995 1996 1997 1997 1998
------- ------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
MERKERT:
Commissions.................... $73,336 $80,661 $104,274 $ 26,201 $ 24,168
Sales.......................... 49,233 44,916 43,105 11,257 12,424
------- ------- -------- --------- ---------
Revenues................... 122,569 125,577 147,379 37,458 36,592
Operating income (loss)........ 2,434 633 1,373 (1,705) (283)
EBITDA(1)...................... 4,566 3,080 5,857 (556) 854
ROGERS:
Commissions.................... $47,496 $63,311 $ 82,985 $ 20,025 $ 20,831
Operating income (loss)........ 3,149 107 4,085 (425) 1,190
EBITDA(1)...................... 4,222 1,753 6,601 211 1,825
</TABLE>
- --------
(1) EBITDA represents earnings before interest, taxes, depreciation and
amortization and is presented because it is commonly used by certain
investors and analysts to analyze and compare operating performance. EBITDA
should not be considered in isolation from or as a substitute for net
income (loss), cash flows from operating activities or other statements of
operations or cash flows prepared in accordance with generally accepted
accounting principles or as a measure of profitability or liquidity.
10
<PAGE>
RISK FACTORS
The following factors should be carefully considered, together with the
other information in this Prospectus, in evaluating an investment in the
Company. This Prospectus contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ significantly from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include those risk factors set forth below as well as those
factors discussed elsewhere in this Prospectus.
ABSENCE OF COMBINED OPERATING HISTORY; RISKS OF INTEGRATION
To date, Merkert and Rogers have operated independently of one another. The
Company intends to operate Merkert and Rogers and subsequently acquired
businesses on a cohesive, but locally oriented, basis. If proper overall
business incentives and controls are not implemented, this locally oriented
operating strategy could result in inconsistent operating and financial
practices and the Company's overall profitability could be adversely affected.
The failure of the Company to integrate successfully the operations of Merkert
and Rogers and subsequently acquired businesses could have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Management" and "Business--Business Strategy." Currently, the
Company has no centralized financial reporting system and initially will rely
on the existing reporting systems of each of Merkert and Rogers. Merkert and
Rogers offer different services, use different capabilities and technologies,
target different clients and have different management styles. Although the
Company believes that there are substantial opportunities to cross-market and
integrate the businesses of Merkert and Rogers, these differences increase the
risk inherent in the integration of the two companies. There can be no
assurance that the Company will be able to integrate successfully the
operations of Merkert and Rogers or institute the necessary Company-wide
systems and procedures to manage successfully the combined enterprise on a
profitable basis or to implement the Company's business and growth strategies.
IMPLEMENTATION OF ACQUISITION STRATEGY; RISKS RELATED TO GROWTH STRATEGY
One of the Company's strategies is to increase its revenues and the markets
it serves through the acquisition of additional food brokerage companies. The
Company expects to spend significant time and effort in expanding its existing
business and identifying, completing and integrating acquisitions. Moreover,
the Company expects to face competition for acquisition candidates which may
limit the number of acquisition opportunities available to the Company and may
result in higher acquisition prices. There can be no assurance that the
Company will be able to identify, acquire or profitably manage additional
companies or successfully integrate such additional companies into the Company
without substantial costs, delays or other problems. In addition, there can be
no assurance that companies acquired in the future will achieve sales and
profitability that justify the investment therein. The Company's inability to
identify appropriate acquisition candidates, to acquire such candidates at
prices acceptable to the Company or to manage such acquired businesses
profitably could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, acquisitions may
involve a number of special risks, including adverse short-term effects on the
Company's reported operating results, Manufacturer representation conflicts,
diversion of management's attention, dependence on retention, hiring and
training of key personnel, risks associated with unanticipated problems or
legal liabilities and amortization of acquired intangible assets, some or all
of which could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Business
Strategy."
The Company's growth strategy includes broadening its service and product
offerings, implementing an aggressive marketing plan, and deploying leading
technologies. There can be no assurance that the Company's systems, procedures
and controls will be adequate to support the Company's operations as they
expand. Any future growth also will impose significant added responsibilities
on members of senior management, including the need to identify, recruit and
integrate new senior level managers and executives. There can be no assurance
that such additional management can be identified and retained by the Company.
The inability of the Company to manage its growth or recruit and retain
additional qualified management could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Business Strategy" and "Management."
11
<PAGE>
The Company currently intends to finance future acquisitions by using cash,
bank financing or additional debt or equity financing. There can be no
assurance that the Company will be able to obtain such financing if and when
it is needed or that, if available, such financing will be on terms acceptable
to the Company. Any debt financing will result in additional leverage and any
further equity financing may result in dilution to the Company's stockholders.
In the event that the Company does not have sufficient cash resources, or if
the Common Stock does not maintain a sufficient valuation, or if potential
acquisition candidates are unwilling to accept shares of Common Stock as
consideration, the Company may be unable to implement its acquisition
strategy. The Company has certain obligations in connection with certain
businesses acquired by the Company prior to the Offering to make additional
payments to the sellers of such businesses in the event that the earnings
attributable to any of such businesses exceed specific thresholds determined
at the time of acquisition. The Company may incur similar obligations with
respect to acquisitions completed after the Offering. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources" and "Business--Business Strategy."
There can be no assurance that the Company's growth strategy will be
successful or that the Company will be able to generate cash flow sufficient
to fund its operations and to support internal growth. The Company's inability
to achieve internal earnings growth or otherwise execute its growth strategy
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--Business Strategy."
MANUFACTURER REPRESENTATION CONFLICTS
Certain Manufacturers may not allow food brokers they have engaged to
represent any lines or products such Manufacturers believe to be in
competition with their own line of products in a given market territory.
Manufacturers can be subjective in their definition of a conflict. In
addition, a Manufacturer may object to the Company's private label business or
its representation of another Manufacturer which produces a similar product
for sale in other geographic regions or trade channels. The Company is
sensitive to potential conflicts and must exercise care in determining how to
resolve conflicts and potential conflicts as new food broker businesses are
acquired and as Manufacturers continue to grow, merge and expand into new
product categories and geographic areas. The Combination may result in certain
Manufacturer conflicts, particularly in the mid-Atlantic where Merkert's and
Rogers' operations overlap. The Company may be required, in order to resolve a
conflict, to choose to represent particular lines or products in lieu of
others, and the Company may not select the lines of products that are
ultimately the most successful. The inability of the Company to resolve or
deal with Manufacturer representation conflicts or potential conflicts could
have a material adverse effect on the Company's business, financial condition
and results of operations. In addition, industry practice is that food
brokers' relationships with Manufacturers are not generally governed by long-
term contracts. In the ordinary course of business the Company experiences
turnover in these relationships as a result of Manufacturer conflicts or
strategic decisions by the Company or a Manufacturer.
POTENTIAL CHANGES IN INDUSTRY
The food brokerage industry is presently being affected by changes in the
industries of both Manufacturers and Retailers as well as by changes in the
food brokerage industry itself. Consolidation among both Manufacturers and
Retailers has resulted in a competitive advantage for food brokers which can
offer products and services on a regional or national basis and as a
consequence has contributed to the consolidation of the food brokerage
industry. In addition, mass merchandisers such as warehouse clubs and
superstores have experienced significant growth in recent years. Historically,
many mass merchandisers have tended to use fewer brokerage services and,
instead, rely on direct relationships with Manufacturers. These changes in the
food industry marketplace will require the Company to adapt its operations.
There can be no assurance that the Company will be able to adjust to such
industry changes or that the changes the Company undertakes will be effective
and enable the Company to operate its business profitably. The inability of
the Company to make appropriate adjustments in response to these trends could
have a material adverse effect on the Company's business, financial condition
and results of operations.
12
<PAGE>
COMPETITION
The food brokerage industry is highly fragmented and competitive. The
Company's competitors include several large privately held companies and
hundreds of small privately held food brokers. In addition, the Company
expects that it will face additional competition from new entrants into the
food brokerage market due to the relatively low barriers to entry. The food
brokerage industry is currently undergoing substantial consolidation. In
addition, many Manufacturers, including some of the Manufacturers served by
the Company, employ sales personnel to sell direct to retailers, wholesalers
and distributors. Further, food brokers also compete with specialty
distributors, wholesalers and other entities engaged in businesses which
provide avenues of distribution linking Manufacturers, Retailers, food service
establishments and/or consumers. Certain of these competitors may have lower
overhead costs than the Company, have greater financial resources than the
Company or have better knowledge of, or relationships in, local and regional
markets which may give such competitors advantages in offering services and
products that are similar to those of the Company. Consequently, the Company
may encounter significant competition in its efforts to achieve both its
acquisition and internal growth objectives. There can be no assurance that the
Company will be successful against such competition. See "Business--
Competition."
DEPENDENCE ON KEY PERSONNEL
The Company will depend on Gerald R. Leonard, Chairman and Chief Executive
Officer, and Douglas H. Holstein, Chief Operating Officer. In addition, the
Company relies on many of the executives of each of Merkert and Rogers, whose
reputations and relationships with Manufacturers and Retailers have
contributed in large part to those companies' success. Though the Company will
be entering into employment agreements with certain key executives, there can
be no assurance that the Company will be able to retain the services of such
executives or any other management or key sales personnel. A loss of the
services of any of these individuals could have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Business--Business Strategy" and "Management."
SEASONALITY OF OPERATING RESULTS
Each of Merkert and Rogers has experienced and the Company expects to
continue to experience fluctuations in quarterly revenues and operating
results as a result of seasonal patterns. The Company's business is seasonal
in nature, as many Retailers generate relatively lower revenues in January,
February, July and August. As a result, the Company has historically generated
lower revenues in the first and third quarters of the year. Results of
operations for any particular quarter therefore are not necessarily indicative
of the results of operations for any future period. Future seasonal and
quarterly fluctuations could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
YEAR 2000 ISSUES
The Company recognizes the importance of ensuring that its business
operations are not disrupted as a result of Year 2000 related computer system
and software issues. The Company is working with Manufacturers, Retailers and
other parties with which it does business to coordinate Year 2000 conversion
and coordination efforts. At the present time, the Company believes that its
computer systems and software are substantially Year 2000 compliant and does
not expect Year 2000 issues to materially affect its products, services,
competitive position or financial performance. However, there can be no
assurance that this will be the case. In addition, the ability of third
parties with whom the Company transacts business to adequately address their
Year 2000 issues is outside the Company's control. Although the Company is
working with Manufacturers, Retailers and other parties, there can be no
assurance that the failure of such third parties to adequately address their
respective Year 2000 issues will not have a material adverse effect on the
Company's business, financial condition and results of operations.
VOTING CONTROL BY DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS
After giving effect to the sale of the shares of Common Stock offered
hereby, the directors and executive officers of the Company and their
affiliates will beneficially own in the aggregate approximately % of the
13
<PAGE>
outstanding Common Stock (approximately % if the Underwriters exercise the
over-allotment options in full). This percentage ownership does not give
effect to the exercise of options to purchase shares of Common Stock held
by certain of these individuals, which, if exercised in whole or in part, will
further concentrate ownership of the Common Stock. As a result, these
stockholders, if they were to act together, would have the ability to
determine the outcome of the election of the Company's directors and to
approve all other matters requiring approval by a majority of the stockholders
of the Company including, in many cases, significant corporate transactions,
such as mergers and sales of all or substantially all of the Company's assets.
Such concentration of ownership, together, in some cases, with certain
provisions of the Company's Amended and Restated Certificate of Incorporation
and By-laws and certain sections of the Delaware General Corporation Law, may
have the effect of delaying or preventing a "change in control" of the
Company. See "--Anti-takeover Effect of Certificate of Incorporation and By-
law Provisions and Delaware Law," "Management--Directors and Executive
Officers" and "Principal Stockholders."
ANTI-TAKEOVER EFFECT OF CERTIFICATE OF INCORPORATION AND BY-LAW PROVISIONS AND
DELAWARE LAW
Certain provisions of the Company's Amended and Restated Certificate of
Incorporation and Amended and Restated By-laws, certain sections of the
Delaware General Corporation Law and the ability of the Company's Board of
Directors (the "Board of Directors") to issue shares of preferred stock and to
establish the voting rights, preferences and other terms thereof may be deemed
to have an anti-takeover effect and may discourage takeover attempts not first
approved by the Board of Directors, including takeovers which certain
stockholders may deem to be in their best interests. See "Description of
Capital Stock--Certain Provisions of Certificate and By-laws" and "--Statutory
Business Combination Provision."
POSSIBLE FUTURE SALES OF SHARES
Sales of substantial amounts of Common Stock in the public market after the
Offering under Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"), or otherwise, or the perception that such sales could
occur, may adversely affect prevailing market prices of the Common Stock and
could impair the future ability of the Company to raise capital through an
offering of its equity securities or to effect acquisitions using shares of
its Common Stock. The shares of Common Stock outstanding prior to the Offering
and the shares to be issued in the Combination will be "restricted securities"
within the meaning of Rule 144. Unless the resale of the shares is registered
under the Securities Act (including pursuant to registration rights granted by
the Company (see "Certain Transactions")), these shares may not be sold in the
open market until after the first anniversary of the transaction in which they
were acquired, and then only in compliance with the applicable requirements of
Rule 144. See "Shares Eligible for Future Sale." The Company, the holders of
all shares outstanding prior to the Offering and all stockholders of Merkert
and Rogers expect to agree with the U.S. Representatives (as defined herein
under the caption "Underwriting"), with certain exceptions, not to sell or
otherwise dispose of any shares of Common Stock, or any securities convertible
into or exercisable or exchangeable for shares of Common Stock, for a period
of 180 days after the date of this Prospectus without the written consent of
the U.S. Representatives. The Company intends to register additional shares of
Common Stock under the Securities Act after completion of the Offering for
issuance in connection with future acquisitions. These shares generally will
be freely tradeable after their issuance by persons not affiliated with the
Company unless the Company contractually restricts their resale. See "Shares
Eligible for Future Sale" and "Underwriting."
RESTRICTIONS ON PAYMENT OF DIVIDENDS
Following the consummation of the Offering, the Company intends to retain
earnings to finance the growth and development of its business and does not
anticipate paying cash dividends in the foreseeable future. Declaration of any
future dividends will depend upon, among other things, the Company's results
of operations, financial condition, acquisitions, capital requirements, the
terms and provisions of the Company's debt financing agreements, and general
business condition. See "Dividend Policy" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Combined Liquidity
and Capital Resources Following the Combination."
14
<PAGE>
ABSENCE OF PUBLIC MARKET; DETERMINATION OF OFFERING PRICE AND FLUCTUATIONS IN
MARKET PRICE
Prior to the Offering, there has been no public market for the Common Stock.
There can be no assurance that an active trading market will develop after the
Offering or, if developed, that it will be sustained. The initial public
offering price has been determined by negotiation between the Company and U.S.
Representatives of the Underwriters and may not be indicative of prices that
will prevail in the trading market after the Offering. Following the Offering,
the trading price of the Common Stock may be subject to significant
fluctuations in response to variations in the annual or quarterly operating
results of the Company, changes in earnings estimates for the Company by
investment analysts, the failure of the Company to meet such estimates or
changes in business or regulatory conditions affecting the Company, its
Manufacturers or Retailers or its competitors. See "Underwriting" for a
description of the factors considered in determining the initial public
offering price.
IMMEDIATE AND SUBSTANTIAL DILUTION TO PURCHASERS IN OFFERING
The initial public offering price is substantially higher than the book
value per share of Common Stock. Accordingly, purchasers in the Offering will
suffer immediate and substantial dilution in the net tangible book value per
share of $ . Additional dilution will occur upon the exercise of outstanding
options to purchase shares of Common Stock granted by the Company to non-
employee members of its Board of Directors and certain of the Company's
employees, including certain members of the Company's management, pursuant to
the 1998 Stock Plan. See "Dilution" and "Management--1998 Stock Option and
Incentive Plan."
THE COMBINATION
Prior to or upon the consummation of the Offering, the Company will acquire
each of Merkert and Rogers. In connection with the Company's acquisition of
Merkert and Rogers, the Company will amend and restate its Certificate of
Incorporation in order, among other things, to increase the Company's
authorized shares of Common Stock and to authorize a class of preferred stock,
and will declare a stock dividend. Such transactions are referred to herein
collectively as the "Combination." For a description of the transactions
pursuant to which each of Merkert and Rogers will be acquired by the Company,
see "Certain Transactions--Organization of the Company."
The aggregate consideration to be paid by the Company at the closing of the
Combination is $86.3 million, consisting of $53.2 million in cash
(representing approximately % of the net proceeds of the Offering) and
shares of Common Stock (assuming an initial public offering price of $ per
share). If the initial public offering price is other than $ per share, the
number of shares issued to the former stockholders of Merkert and Rogers will
be increased or decreased so that such stockholders receive an aggregate of $
million of Common Stock valued at the initial public offering price. However,
the total number of shares of Common Stock outstanding following the
Combination will not vary as a result of an initial public offering price of
other than $ per share because the size of the stock dividend that will be
declared by the Company prior to the consummation of the Combination will
increase as the initial offering price increases and decrease as the initial
offering price decreases. As a result, upon the consummation of the
Combination (but without giving effect to the Offering), there will be
outstanding a total of shares of Common Stock. In connection with the
Combination, the Company will repay, in the aggregate, approximately $15.6
million of indebtedness of Merkert and Rogers from the net proceeds of the
Offering. The consideration to be paid by the Company for Merkert and Rogers
was determined by arm's length negotiations between the Company and
representatives of each of Merkert and Rogers, respectively, and was based
primarily on a percentage of the historical revenues and pro forma EBITDA
(earnings before interest, taxes, depreciation and amortization) of each of
Merkert and Rogers. For a more detailed description of these transactions, see
"Certain Transactions--Organization of the Company."
The stockholders of Merkert and Rogers will hold approximately shares of
Common Stock immediately following the Offering and have the right in certain
circumstances to include some or all of their shares of Common Stock in a
registration statement filed by the Company. The Company also intends to
register, soon after the consummation of the Offering, at least shares of
Common Stock issuable pursuant to the 1998 Stock Plan. See "Management--1998
Stock Option and Incentive Plan," "Certain Transactions" and "Shares Eligible
for Future Sale."
15
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common
Stock offered by the Company hereby (assuming an initial public offering price
of $ per share), after deducting the underwriting discounts and estimated
offering expenses payable by the Company, will be approximately $ million ($
million if the Underwriters' over-allotment options are exercised in full).
The uses of such net proceeds will be as follows: (i) approximately $53.2
million will be used to pay the cash portion of the purchase price for Merkert
and Rogers, (ii) approximately $15.6 million will be used to repay certain
indebtedness of Merkert and Rogers assumed in connection with the Combination
(which indebtedness bears interest at a weighted average interest rate of
approximately 8.5% and has a weighted average maturity of approximately 5
years), (iii) approximately $14.0 million will be used to fund buyouts of
certain obligations of the Company to make additional payments to certain
sellers of businesses acquired by the Company prior to the Offering in the
event that the earnings attributable to any of such businesses exceed specific
thresholds determined at the time of acquisition, (iv) approximately $ will
be used to repay a note payable to Monroe & Company II, LLC which is
attributable to certain of the Company's expenses and (v) the remaining net
proceeds of approximately $ million will be used for general corporate
purposes, which may include future acquisitions. Until used, the proceeds of
the Offering will be invested in short-term, investment grade, interest-
bearing obligations.
DIVIDEND POLICY
The Company intends to retain earnings to finance the growth and development
of its business and for general corporate purposes, including future
acquisitions, and does not anticipate paying cash dividends in the foreseeable
future. Any payment of cash dividends in the future will be at the discretion
of the Board of Directors and will depend upon the financial condition,
capital requirements and earnings of the Company and such other factors as the
Board of Directors may deem relevant. In addition, the Company may in the
future enter into financing arrangements that may place restrictions on the
Company's ability to pay dividends. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
16
<PAGE>
CAPITALIZATION
(IN THOUSANDS)
The following table sets forth the short-term and long-term obligations and
capitalization at March 31, 1998 of the Company on a pro forma combined basis
to give effect to: (i) the issuance of shares of Common Stock to management
and consultants to the Company after March 31, 1998; (ii) the acquisitions of
Merkert and Rogers by the Company and the distribution of certain real estate
and non-operating assets and liabilities; and (iii) this Offering and the
application of a portion of the estimated net proceeds therefrom. This table
should be read in conjunction with the Unaudited Pro Forma Combined Financial
Statements of the Company and the Notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
---------------------
PRO FORMA AS
COMBINED ADJUSTED
---------- ----------
<S> <C> <C>
Short-term debt including current portion of long
term debt (1)..................................... $ 33,829 $ 4,229
========= ==========
Long term debt, less current portion (2)........... $ 30,477 $ 30,477
--------- ----------
Shareholder's Equity:
Preferred stock $ , par value, shares
authorized
none issued or outstanding...................... -- --
Common stock, $.01 par value per share,
authorized
shares issued and outstanding pro forma, shares
issued and outstanding pro forma as adjusted
(3)............................................. 15 15
Additional paid in capital....................... 28,100 125,600
Retained earnings................................ -- --
--------- ----------
Total stockholders' equity..................... 28,115 125,615
--------- ----------
Total capitalization............................... $ 58,592 $ 156,092
========= ==========
</TABLE>
- --------
(1) For a description of the Company's debt, see the Notes to Unaudited Pro
Forma Combined Financial Statements and Notes to Merkert and Rogers'
Financial Statements.
(2) Includes the portion of the estimated amount of acquisition obligations at
Merkert and Rogers to be paid within the next twelve months.
(3) Excludes (i) incentive stock options granted to members of the Company's
management at an exercise price per share equal to the price to the public
in the Offering, (ii) non-qualified stock options granted to certain
members of the Company's management at an exercise price of $ per share
and (iii) options granted to the Company's independent Directors at an
exercise price per share equal to the price to the public in the Offering.
See "Management-1998 Stock Option and Incentive Plan" and "1998 Non-
Employee Directors' Stock Plan."
17
<PAGE>
DILUTION
(IN THOUSANDS)
The deficit in pro forma net tangible book value of the Company at March 31,
1998 was approximately $ million, or $. per share of Common Stock. The
deficit in net tangible book value per share represents the amount of the
Company's stockholder's equity, less the intangible assets, divided by the
number of shares of Common Stock issued and outstanding after giving effect to
the acquisitions of Merkert and Rogers by the Company. Net tangible book value
dilution per share represents the difference between the amount per share paid
by purchasers of shares of Common Stock immediately after completion of the
Offering. After giving effect to the sale of shares of Common Stock by the
Company in the Offering and the application of the estimated net proceeds
therefrom, the pro forma net tangible book value of the Company as of March
31, 1998 would have been or per share. This represents an immediate
increase in pro forma net tangible book value of per share to
stockholders as of March 31, 1998, and an immediate dilution in pro forma net
tangible book value of per share to purchasers of Common Stock in the
Offering. The following table illustrates the dilution per share:
<TABLE>
<CAPTION>
<S> <C>
Initial public offering price per share............................ $
Pro forma deficit in net tangible book value per share before the
Offering........................................................ $ ( )
Increase in pro forma net tangible book value per share
attributable to new investors...................................
Pro forma net tangible book value per share after the Offering.....
Dilution per share to new investors................................ $
</TABLE>
The following table sets forth, on a pro forma basis to give effect to the
Combination as of March 31, 1998, the number of shares of Common Stock
purchased from the Company, the aggregate cash consideration paid and the
average price per share paid to the company:
<TABLE>
<CAPTION>
SHARES PURCHASED
------------------- TOTAL CONSIDERATION AVERAGE PRICE
NUMBER PERCENT AMOUNT PER SHARE
-------- -------- ------------------- -------------
<S> <C> <C> <C> <C>
Existing Shareholder....
New Investors........... $ --
-------- -------- -----
Total................. -- $ --
======== ======== =====
</TABLE>
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Prospectus contains, in addition to historical information, forward-
looking statements that involve risks and uncertainties. The Company's actual
results could differ significantly from the results discussed in the forward-
looking statements. Factors that could cause or contribute to such differences
include those discussed in "Risk Factors" as well as those discussed elsewhere
in this Prospectus. The following discussion and analysis should be read in
conjunction with the Company's unaudited pro forma combined financial
statements and Merkert's and Rogers' respective financial statements and
related notes thereto presented elsewhere in this Prospectus.
INTRODUCTION
The Company is a leading food brokerage firm providing outsourced sales,
merchandising and marketing services to Manufacturers. The Company acts as an
independent sales and marketing representative, selling grocery and consumer
products on behalf of Manufacturers and coordinating the execution of
Manufacturers' marketing programs with Retailers. The Company's principal
source of revenue is commissions it receives from Manufacturers. The Company's
other activities include managing private label programs on behalf of selected
Retailers.
The Company will acquire Merkert and Rogers in the Combination. Prior to the
Combination, Merkert and Rogers have operated throughout the periods presented
as independent, privately-owned entities. For financial reporting purposes,
the Company is presented as the acquiror of Merkert and Rogers.
Merkert, headquartered in Canton, Massachusetts, was founded in 1950 and is
one of the three largest food brokers in the northeastern United States.
Merkert operates 17 offices throughout New England, New York, and the mid-
Atlantic, from Maine west to Ohio and south to Virginia. Rogers, headquartered
in Charlotte, North Carolina, was founded in 1934 and is one of the three
largest food brokers in the southeastern United States. Rogers operates 26
offices throughout the southeastern and mid-Atlantic United States.
The Company has long-standing relationships with many of its Manufacturers
and represents approximately 750 Manufacturers. Industry practice is that food
brokers' relationships with Manufacturers are not generally governed by long-
term contracts. In the ordinary course of business the Company experiences
turnover in these relationships as a result of Manufacturer conflicts or
strategic decisions by the Company or a Manufacturer.
ACQUISITION HISTORY
The food brokerage industry has experienced significant consolidation as the
number of food brokerage firms has decreased from 2,500 to 1,100 over the past
ten years. There are 12 to 15 large regional firms, which have emerged as the
result of acquiring competitors. A number of the companies in the food
brokerage industry, including Merkert and Rogers, have participated in the
trend towards consolidation by acquiring other food brokerage businesses,
generally financing these transactions with debt and/or earn-out agreements.
As part of their business development, both Merkert and Rogers have been
active in pursuing acquisition opportunities. Since 1995, each of Merkert and
Rogers has completed several acquisitions, although their respective
acquisition strategies resulted in different operational outcomes.
Merkert has focused on larger acquisitions within its existing markets which
have given it the opportunity to consolidate operations and achieve greater
efficiencies. Merkert acquired the assets of Toomey-DeLong ("T-D") in New
England (January 1997), and integrated them into Merkert's existing New
England operation. Of T-D's $14.5 million of annual revenues, approximately
$12.5 million was retained by the Company in 1997. The decrease in revenue was
principally due to Manufacturer conflicts. However, personnel reductions, made
possible by the elimination of duplicate responsibilities, resulted in an
improvement in Merkert's 1997 operating income in New England, as compared to
1996, of $1.0 million after adjusting for severance costs and the 1997 expense
relating to a duplicate facility which has subsequently been sublet. Merkert's
New England operating income continued to increase in the first quarter of
1998, to $1.5 million as compared to $0.9 million in the first quarter of
1997.
19
<PAGE>
Since the beginning of 1995, Merkert has completed four other asset
acquisitions of food brokerage companies, including the asset purchases of
Food Associates in metropolitan New York (September 1995), ABD Sales, Inc. in
Metropolitan New York ("ABD") (October 1996), DelGrosso, Richardson-Morrison,
Inc. in the mid-Atlantic region ("DRM") (October 1996) and JP Luciano Food
Brokers, Inc. in upstate New York ("Luciano") (January 1997). DRM was the only
acquisition outside an existing territory of Merkert.
Merkert has achieved cost savings through the consolidation of its
acquisitions within its existing markets by eliminating duplicate offices and
combining sales and administrative organizations. These acquisitions have
allowed Merkert to further penetrate its existing markets.
Rogers has focused on the expansion of its geographic coverage. Rogers'
acquisitions have generally represented opportunities for entry into
territories not previously covered by Rogers. Rogers' acquisition program has
been driven by a strategy designed to ensure that it is capable of
representing its most significant Retailers in all the territories these
Retailers serve as they expand.
Since the beginning of 1995, Rogers has completed ten significant
acquisitions of food brokerage companies including, among others, Dopson-Hicks
in Florida (November 1995), Fitzwater (November 1996) and G.B.S. (October
1996) in the mid-Atlantic region, Clarke & Wittekind in Tennessee (March
1995), Sales Support in South Carolina (November 1996) and Marketing
Performance, Inc. in Alabama (November 1996).
Rogers has been able to achieve significant growth in revenues as a result
of capturing new business from existing Manufacturers in new territories
acquired. Because many of Rogers' acquisitions have been in new territories,
Rogers has not had the same degree of cost saving opportunities through
consolidation as Merkert. This is discussed more fully in "Results of
Operations--Rogers."
RESULTS OF OPERATIONS
The following defined terms are used in conjunction with both Merkert's and
Rogers' discussion of operating results.
Revenues. Revenues are derived mainly from commissions earned from
Manufacturers based on the Manufacturers' invoices to Retailers for products
sold. Commissions are usually expressed as a percentage of the invoice as
agreed by contract between the Manufacturer and broker. Commission rates
typically range from 3% for full brokerage services to 1% for retail-only
services. Merkert also derives revenues, referred to as "Sales" from the sale
of products including private label packaging materials and frozen products,
including fruits and vegetables, to certain Retailers, and other products for
certain Manufacturers.
Cost of sales. Cost of sales are primarily the direct cost of private label
products sold by Merkert, such as the cost of packaging and frozen vegetables
purchased from suppliers.
Selling, general and administrative expenses. Selling expenses are
predominately comprised of salaries, fringe benefits and incentives for
personnel directly involved in providing services to Manufacturers and
Retailers. Other selling expenses include, among other things, automobiles
utilized by the sales personnel, promotional expenses, and travel and
entertainment. General and administrative expenses consist primarily of
salaries and fringe benefits for administrative and corporate personnel,
occupancy and other office expenses, information technology, communications
and insurance.
Depreciation and amortization expenses. Depreciation and amortization
expenses relate to intangible assets including goodwill incurred and
noncompete agreements entered into in connection with the Company's
acquisition program and property, plant and equipment.
Following the Combination, the Company expects to achieve certain savings as
a result of its consolidation of operations in geographic areas where Merkert
and Rogers both have operations. Certain of these savings are reflected in the
pro forma combined statement of operations.
20
<PAGE>
RESULTS OF OPERATIONS--MERKERT
The following table sets forth, in thousands of dollars, the results of
operations of Merkert on a historical basis. The historical results of Merkert
discussed below do not reflect the operations of Rogers or the effect of any
pro forma adjustments.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
(IN THOUSANDS) ----------------------------------------------- -----------------------------------
1995 1996 1997 1997 1998
-------------- -------------- --------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commissions............. $73,336 $80,661 $104,274 $ 26,201 $ 24,168
Sales................... 49,233 44,916 43,105 11,257 12,424
------- ----- ------- ----- -------- ----- -------- ------ -------- ------
Revenues................ 122,569 100.0 125,577 100.0 147,379 100.0 37,458 100.0 36,592 100.0
Cost of sales........... 45,615 37.2 41,890 33.4 39,027 26.5 10,467 27.9 11,420 31.2
Selling expenses........ 45,717 37.3 52,510 41.8 69,913 47.4 19,181 51.2 16,144 44.1
General and
administrative......... 26,671 21.8 28,097 22.4 32,582 22.1 8,366 22.3 8,174 22.3
Depreciation and
amortization........... 2,132 1.7 2,447 1.9 4,484 3.0 1,149 3.1 1,137 3.1
------- ----- ------- ----- -------- ----- -------- ------ -------- ------
Operating income
(loss)................. 2,434 2.0 633 0.5 1,373 0.9 (1,705) (4.6) (283) (0.8)
Interest expense........ 1,660 1.4 2,283 1.8 5,010 3.4 1,222 3.3 829 3.1
Other (income) expense.. (33) 0.0 (380) (0.3) (79) (0.1) 27 0.1 103 0.3
------- ----- ------- ----- -------- ----- -------- ------ -------- ------
Income (loss) before
income taxes........... 807 0.7 (1,270) (1.0) (3,558) (2.4) (2,954) (7.9) (1,515) 4.1
Provision (benefit) for
income taxes........... 1,268 1.0 804 0.6 (109) (0.1) 40 (0.1) 100 0.03
------- ----- ------- ----- -------- ----- -------- ------ -------- ------
Net income (loss)....... $ (461) (0.4) (2,074) (1.7) (3,449) (2.3) (1,994) (5.3) (1,615) (4.4)
Preferred stock
dividend............... 445 0.4 445 0.4 445 0.3 111 0.3 100 0.3
------- ----- ------- ----- -------- ----- -------- ------ -------- ------
Net income available to
common shareholders.... $ (906) (0.7) $(2,519) (2.0) $ (3,894) (2.6) $ (3,105) 8.3 $ (1,715) (4.7)
======= ===== ======= ===== ======== ===== ======== ====== ======== ======
</TABLE>
Note: Merkert derives its Sales from sales of private label products, price
marking devices and bio-degreasers. Cost of Sales is directly related to this
activity. Selling expenses relate to Merkert's commission revenues.
Merkert results for the first quarter of 1998 compared to the first quarter of
1997:
Revenues. Revenues decreased by $0.9 million, or 2.3%, from $37.5 million in
the first quarter of 1997 to $36.6 million in the first quarter in 1998.
Revenues from commissions decreased by $2.0 million, or 7.8%, from $26.2
million in the first quarter of 1997 to $24.2 million in the first quarter of
1998. The decrease is primarily due to the impact of a discontinued
merchandising operation, which had been established in 1995 to serve one
specific Retailer and which was shut down in October 1997, and decreases due
to lost business, principally in the Mid-Atlantic region, including one major
Manufacturer which switched to retail-only brokerage service in 1997, but has
since returned to a full brokerage service relationship in 1998. Sales of
products increased by $1.2 million, or 10.4%, from $11.3 million in the first
quarter of 1997 to $12.4 million in the first quarter of 1998 primarily as a
result of the growth of a major customer of private label frozen foods.
Selling, general and administrative expenses. Selling expenses, principally
related to payroll, auto and related costs, decreased by $3.0 million, or
15.8%, from $19.2 million in the first quarter of 1997 to $16.1 million in the
first quarter of 1998 due to reductions in personnel associated with the
synergies achieved from the acquisitions in overlapping geographic areas which
were made in late 1996 and early 1997. Administrative expenses decreased by
$0.2 million, or 2.3%, from $8.4 million in the first quarter of 1997 to $8.2
million in the first quarter of 1998, also due to the personnel reductions
noted above. The full effects of the rationalization of payroll were not
experienced until the second half of 1997. As a percentage of revenues,
selling, general and administrative expenses decreased from 73.5% in the first
quarter of 1997 to 66.4% in the first quarter of 1998. The Company's practice
with respect to acquisitions is to achieve efficiencies through the
rationalization of administrative and other functions and the leveraging of
the Company's information technology, purchasing power and other strengths.
21
<PAGE>
Depreciation and amortization. Depreciation and amortization remained
consistent between quarters.
Interest expense. Interest expense remained consistent between quarters.
Income (loss) before income taxes. The loss before income taxes decreased by
$1.4 million, or 48.7% from ($3.0) million in the first quarter of 1997 to
($1.5) million in the first quarter of 1998 mainly due to the benefits derived
from the payroll reduction discussed above.
Provision (benefit) for income taxes. Provision for income taxes represents
a net provision of $0.1 million in the first quarter of 1998.
Net income (loss). Net loss decreased by $0.4 million, or 19.0%, from ($2.0)
million in the first quarter of 1997 to ($1.6) million in the first quarter of
1998. The first quarter is historically Merkert's weakest quarter due to the
factors discussed in "Seasonality; Fluctuations in Quarterly Operating
Results" below.
Preferred stock dividends. Preferred stock dividends paid to Merkert's
Employee Stock Ownership Plan ("ESOP") totalled $0.1 million in the first
quarter of 1998. These dividends are a direct charge to retained earnings and
do not impact the net loss as reported.
Net income (loss) applicable to common stockholders. The loss applicable to
common stockholders decreased $1.4 million, or 44.8% from ($3.1) million in
the first quarter of 1997 to ($1.7) million in the first quarter of 1998.
Merkert results for 1997 compared to 1996:
Revenues. Revenues increased by $21.8 million, or 17.4% from $125.6 million
in 1996 to $147.4 million in 1997. Revenues from commissions increased by
$23.6 million, or 29.3% from $80.7 million to $104.3 million, substantially
all of which is attributable to acquisitions consummated in late 1996 and
early 1997 net of account resignations associated with product conflicts
related to the acquired companies Merkert, based on its analysis of the
Manufacturer relationships of acquisition candidates, selected what it viewed
as the strongest on-going relationships between Manufacturers it represented
and Manufacturers represented by the acquired companies. Sales of products
decreased by $1.8 million, or 4.0%, from $44.9 million in 1996 to $43.1
million in 1997 primarily as a result of a major Retailer choosing to manage
its private label frozen vegetable program program internally in the fourth
quarter of 1996.
Selling, general and administrative expenses. Selling expenses, principally
related to payroll, auto and related costs, increased by $17.4 million, or
33.1%, from $52.5 million in 1996 to $69.9 million in 1997 due to increased
personnel associated with the acquisitions. General and administrative
expenses increased by $4.5 million, or 16.0%, from $28.1 million in 1996 to
$32.6 million in 1997 also due principally to costs associated with the full
year effect of the acquisitions.
1997 was devoted to the integration of these acquisitions into the Merkert
operating systems. Included in these activities was the rationalization of
selling, general and administrative expenses in connection with Merkert's
metropolitan New York operations. The Boerner Division, which operated as one
of three separate Merkert Divisions in the metro New York area following the
ABD acquisition, was merged into Merkert's remaining two metropolitan New York
divisions. Additionally, Merkert undertook staff reductions in the mid-
Atlantic region in response to competitive conditions.
Annualized payroll was reduced by $12.0 million, or 18.5%, from $65.0
million in January 1997 to $53.0 million in December 1997 as a result of these
efforts as well as the discontinuation of the merchandising operation. As the
changes were made over the course of the year, the historical periods do not
reflect the full effect of the implementation of these cost-saving
initiatives. Selling, general and administrative expenses in 1997 also reflect
the impact of approximately $1.0 million of restructuring costs associated
with severance and the elimination of duplicate offices as a result of these
acquisitions.
22
<PAGE>
Depreciation and amortization. Depreciation and amortization increased by
$2.0 million, or 83.2%, from $2.4 million in 1996 to $4.5 million in 1997,
primarily as a result of the amortization of goodwill and other intangible
assets associated with acquisitions.
Interest expense. Interest expense increased by $2.7 million from $2.3
million in 1996 to $5.0 million in 1997, due mainly to interest expense
related to obligations to sellers in connection with acquisitions. Interest
expenses associated with the revolving line of credit and Merkert's real
estate mortgage increased by $0.6 million due to increased borrowings to fund
working capital as well as a new corporate headquarters which was completed
late in 1997.
Income (loss) before income taxes. The loss before income taxes increased by
$2.3 million from ($1.3) million in 1996 to ($3.6) million in 1997, mainly due
to the effects of the charges for amortization and interest associated with
the acquisitions.
Provision (benefit) for income taxes. Provision for income taxes represented
a benefit of ($0.1) million in 1997 versus a $0.8 million provision in 1996.
The 1996 provision resulted from an increase in the valuation allowance of
$1.6 million for deferred tax assets not likely to be realized, as well as to
permanent non-deductible expenses, principally related to travel and
entertainment expenses.
Net income (loss). The net loss increased by $1.4 million, or 66.3%, from
($2.1) million in 1996 to ($3.4) million in 1997 due to the significant
increase in acquisition-related amortization, interest expense and other
factors as discussed above.
Preferred stock dividends. Preferred stock dividends paid to the ESOP
totalled $0.4 million in 1996 and 1997. These dividends are a direct charge to
retained earnings and do not impact the net loss as reported.
Net income (loss) applicable to common stockholders. The net loss applicable
to common shareholders increased by $1.4 million, or 54.6%, from ($2.5)
million in 1996 to ($3.9) million in 1997 as "Net income (loss)" and "Net
income (loss) available to common stockholders" differ only by the direct
retained earnings charge for the preferred dividend.
Merkert results for 1996 compared to 1995:
Revenues. Revenues increased by $3.0 million, or 2.5% from $122.6 million in
1995 to $125.6 million in 1996. Revenues from commissions increased by $7.3
million or 10.0% from $73.3 million in 1995 to $80.7 million in 1996 primarily
resulting from acquisitions consummated in late 1996, including ABD in New
York and DRM in the mid-Atlantic representing 8.2% of the increase and
internal growth of 1.8% representing the balance of the increase. Sales of
products decreased by $4.3 million, or 8.8%, from $49.2 million in 1995 to
$44.9 million in 1996 primarily as a result of the loss of a private label
frozen vegetable program due to a major Retailer choosing to manage their
program internally.
Selling, general and administrative expenses. Selling expenses principally
related to payroll, auto and related costs, increased by $6.8 million, or
14.9%, from $45.7 million in 1995 to $52.5 million in 1996 due to increased
personnel associated with the acquisitions. General and administrative
expenses increased by $1.4 million, or 5.3%, in 1995 to $28.1 million in 1996
also due principally to costs associated with the acquisitions in the fourth
quarter of 1996. As a percentage of revenue, selling, general and
administrative expenses increased from 59.1% in 1995 to 64.2% of revenue in
1996.
Depreciation and amortization. Depreciation and amortization increased by
$0.3 million, or 14.8%, from $2.1 million in 1995 to $2.4 million in 1996,
largely due to the amortization of goodwill and other intangible assets
associated with the acquisitions.
Interest expense. Interest expense increased by $0.6 million, or 37.5%, to
$2.3 million in 1996, due mainly to interest expense associated with Merkert's
revolving line of credit to fund working capital.
23
<PAGE>
Income (loss) before income taxes. The loss before taxes decreased by $2.1
million from income before taxes of $0.8 million in 1995 to a loss before
income taxes of ($1.3) million in 1996 mainly due to the effects of the
additional operating costs associated with the acquisitions.
Provision (benefit) for income taxes. The provision for income taxes
decreased by $0.5 million from $1.3 million in 1995 to $0.8 million in 1996.
The 1996 provision, despite the loss before income taxes, is due to the $1.1
million increase in the valuation allowance.
Net income (loss). Net loss increased by $1.6 million from ($0.5) million in
1995 to ($2.1) million in 1996.
Preferred stock dividend. The required dividend was $0.4 million in both
periods.
Net income (loss) applicable to common stockholders. The loss applicable to
common stockholders was $0.9 million in 1995 and $2.5 million in 1996.
LIQUIDITY AND CAPITAL RESOURCES -- MERKERT
At March 31, 1998, Merkert's working capital deficit was $22.4 million,
compared to $25.0 million and $17.4 million at December 31, 1997 and 1996,
respectively. Merkert's principal capital requirements are to fund its
obligations to sellers in connection with acquisitions, its working capital
and its obligation relating to income taxes payable. Historically, these
requirements have been met by cash flows generated from operations and
borrowings under bank credit facilities. Merkert's independent auditor, Arthur
Andersen LLP, has qualified its report for the period ended December 31, 1997
relative to Merkert's ability to continue as a going concern. This going
concern qualification was issued as a result of a historical working capital
deficit of Merkert. After giving effect to the Offering and the expected
application of the net proceeds therefrom, the Company will not have a working
capital deficit.
Net cash provided by (used in) operating activities for the first quarter of
1998 and 1997, 1996 and 1995 were $(0.7) million, $3.5 million, $4.1 million
and $6.2 million, respectively. The 1998 change was principally due to
increases in accounts receivable from increases in revenue. The changes in
cash from operations in 1997, 1996, and 1995 were due to decreases in accounts
receivable resulting from improved collections and increases in accounts
payable and accrued expenses associated with its higher operating volume.
Net cash provided by (used in) investing activities for the first quarter of
1998, 1997, 1996 and 1995 were $0.1 million, $(7.3) million, $(4.7) million
and $(1.3) million, respectively. Additions to property, plant and equipment,
including a new corporate headquarters completed in late 1997, were $7.3
million, $3.4 million and $1.4 million in 1997, 1996 and 1995, respectively.
Initial cash payments for acquisitions were $0.7 million and $1.4 million in
1997 and 1996, respectively.
Net cash provided by (used in) financing activities for the first quarter of
1998, 1997, 1996 and 1995 were $2.4 million, $3.9 million, $(0.5) million and
$(2.8) million, respectively. The 1998 cash provided by financing activities
relates to the refinancing of the mortgage debt in February 1998. The 1997
cash provided by financing activities relates to borrowings under Merkert's
credit facility to fund working capital of $4.5 million and increases in the
mortgage of $3.4 million to fund the construction of Merkert's new corporate
headquarters, offset by payments on notes payable of $2.5 million, $0.6
million of redemptions of preferred stock from the ESOP and stock repurchases
from former officers of Merkert of $1.5 million. 1996 and 1995 cash provided
by financing activities relates primarily to the repurchase of stock and
repayment of notes payable.
24
<PAGE>
RESULTS OF OPERATIONS--ROGERS
The following table sets forth, in thousands of dollars, the results of
operations of Rogers on a historical basis. The historical results of Rogers
discussed below do not reflect the operations of Merkert or the effect of any
pro forma adjustments.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
(IN THOUSANDS) ------------------------------------------ ----------------------------------
1995 1996 1997 1997 1998
------------ ------------- ------------ ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commissions............. $47,496 100% $63,311 100 % $82,985 100% $ 20,025 100 % $ 20,831 100%
Selling Expenses........ 35,817 75.4 50,614 79.9 63,361 76.3 16,625 83.0 15,785 75.8
General and
Administrative......... 7,457 15.7 10,944 17.3 13,023 15.7 3,189 15.9 3,221 15.5
Depreciation and
Amortization........... 1,073 2.3 1,646 2.6 2,516 3.0 636 3.2 635 3.0
------- ---- ------- ---- ------- ---- -------- ----- -------- -----
Operating Income
(Loss)................. 3,149 6.6 107 0.2 4,085 5.0 (425) (2.1) 1,190 5.7
Interest Expense........ 1,176 2.4 1,656 2.6 2,536 3.1 660 3.3 650 3.1
------- ---- ------- ---- ------- ---- -------- ----- -------- -----
Income (loss) Before
Income Taxes........... 1,973 4.2 (1,549) (2.4) 1,549 1.9 (1,085) (5.4) 540 2.6
Provision (benefit) for
Income Taxes........... 939 2.0 (460) (0.7) 804 1.0 (576) (2.9) 308 1.5
------- ---- ------- ---- ------- ---- -------- ----- -------- -----
Net Income (loss)....... $ 1,034 2.2% $(1,089) (1.7)% $ 745 0.9% $ (509) (2.5)% $ 232 1.1%
======= ==== ======= ==== ======= ==== ======== ===== ======== =====
</TABLE>
Rogers results for the first quarter of 1998 compared to the first quarter of
1997:
Revenues. Commission revenues increased $0.8 million, or 4.0%, from $20.0
million for the first quarter of 1997 to $20.8 million for the first quarter
of 1998. This increase is due to growth from both business gained from
Manufacturers not previously represented by Rogers and from expansion of
business with Manufacturers already represented by Rogers.
Selling, general and administrative expenses. Selling expenses, principally
related to payroll, decreased $0.8 million, or 5.1%, from $16.6 million for
the first quarter of 1997 to $15.8 million for the first quarter of 1998. This
decrease is due to cost savings achieved through the integration of
acquisitions. General and administrative expenses remained consistent between
the first quarter of 1997 and the first quarter of 1998. Salaries and related
expenses declined as a percentage of commission revenues from 65.9% in the
first quarter of 1997 to 59.5% in the first quarter of 1998.
Depreciation and amortization. Depreciation and amortization remained
consistent between quarters.
Interest expense. Interest expense remained consistent between quarters.
Income (loss) before taxes. Income before taxes increased by $1.6 million
from a loss of ($1.1) million for the first quarter of 1997 to income of $0.5
million for the first quarter of 1998. This increase is due to internal growth
in commission revenues coupled with the integration of acquisitions into
Rogers.
Provision (benefit) for income taxes. Provision for income taxes increased
by $0.9 million from a benefit of ($0.6) million for the first quarter of 1997
to $0.3 million for the first quarter of 1998. This increase is due to the
corresponding increase in income before taxes.
Net income (loss). Net income increased by $0.7 million or 54.4%, from a
loss of ($0.5) million for the first quarter of 1997 to income of $0.2 million
for the first quarter of 1998. This increase is due to the corresponding
increase in income before taxes.
Rogers results for 1997 compared to 1996:
Revenues. Commission revenues increased by $19.7 million, or 31.1%, from
$63.3 million in 1996 to $83.0 million in 1997. Approximately $13.0 million of
the increase is due to acquisitions made in late 1996, mainly in the mid-
Atlantic region (Fitzwater and G.B.S.). The balance of the increase, $6.7
million, is due to
25
<PAGE>
revenue growth from both new Manufacturers and existing Manufacturers
represented. This represents an internal growth rate of 10.6% and is largely
attributable to the development of Manufacturer relationships in newly
acquired regions, including significant growth in Florida.
Selling, general and administrative expenses. Selling expenses, principally
related to payroll, auto and related costs, increased by $12.8 million, or
25.2%, from $50.6 million for 1996 to $63.4 million for 1997, due to temporary
increases in staffing levels associated with acquisitions. General and
administrative expenses increased by $2.1 million or 19.0% from $10.9 million
in 1996 to $13.0 million in 1997 also due principally to increased costs
associated with acquisitions. Salaries and related expenses declined as a
percentage of commission revenues from 66.1% in 1996 to 61.0% in 1997 due to
the continuing integration of acquisitions into Rogers and related synergies
coupled with improved utilization of existing personnel relating to the
internal growth.
Depreciation and amortization. Depreciation and amortization increased by
$0.9 million, or 52.9%, from $1.6 million in 1996 to $2.5 million in 1997 due
to the amortization of goodwill and other intangible assets associated with
the acquisitions.
Interest expense. Interest expense increased by $0.8 million, or 53.1%, from
$1.7 million in 1996 to $2.5 million in 1997, due mainly to continuing
principal payments on obligations to Sellers in connection with acquisitions.
Interest expense associated with Rogers' revolving line of credit increased by
$0.4 million due to increased borrowings to fund Rogers' working capital.
Income (loss) before taxes. Income before taxes increased by $3.0 million
from a loss of ($1.5) million in 1996 to income of $1.5 million in 1997.
Provision (benefit) for income taxes. Provision for income taxes increased
by $1.3 million from a benefit of ($0.5) million in 1996 to a provision of
$0.8 million in 1997. This increase results from the corresponding increase in
income before taxes.
Net income (loss). Net income increased by $1.8 million from a loss of
($1.1) million in 1996 to income of $0.7 million in 1997. This increase is a
result of the corresponding increase in income before taxes.
Rogers results for 1996 compared to 1995:
Revenues. Commission revenue increased by $15.8 million, or 33.3%, from
$47.5 million in 1995 to $63.3 million for 1996. Approximately $11.0 million
of the growth was due to acquisitions made in 1995 including Dopson-Hicks and
Clarke & Wittekind. The balance of the increase, $4.8 million, is due to
growth from both business gained from Manufacturers not previously represented
by Rogers and from expansion of business with Manufacturers already
represented by Rogers. This represents an internal growth rate of 10.1%.
Selling, general and administrative expenses. Selling expenses, principally
related to payroll, auto and related costs increased $14.8 million, or 41.3%,
from $35.8 million for 1995 to $50.6 million for 1996 due to increased
personnel associated with the acquisitions. General and administrative
expenses increased by $3.4 million, or 46.8%, from $7.5 million in 1995 to
$10.9 million in 1996 also due principally to increased costs associated with
acquisitions. Salaries and related expenses increased as a percentage of
commission revenues from 63.8% in 1995 to 66.1% in 1996.
Depreciation and amortization. Depreciation and amortization increased by
$0.5 million, or 53.4%, from $1.1 million in 1995 to $1.6 million in 1996
largely due to the amortization of goodwill and other intangible assets
associated with the acquisitions.
Interest expense. Interest expense increased by $0.5 million, or 40.8%, from
$1.2 million in 1995 to $1.7 million in 1996 due mainly to interest expense
incurred on the payment of obligations to sellers in connection with
acquisitions.
26
<PAGE>
Income (loss) before taxes. Income before taxes decreased by $3.5 million
from income of $2.0 million in 1995 to a loss of ($1.5) million in 1996. This
decrease is due to a substantial increase in payroll relating to the
assumption of personnel in acquisitions as well as additions to administrative
and other support personnel to support Rogers' rapid growth.
Provision (benefit) for income taxes. Provision for income taxes decreased
by $1.4 million from a provision of $0.9 million in 1995 to a benefit of
($0.5) million in 1996. This decrease is a result of the corresponding
decrease in income before taxes.
Net income (loss). Net income decreased by $2.1 million from $1.0 million in
1995 to a loss of ($1.1) million in 1996. This decrease is a result of the
corresponding decrease in income before taxes.
LIQUIDITY AND CAPITAL RESOURCES -- ROGERS
At March 31, 1998, Rogers' working capital (deficit) was $(4.5) million,
compared to $3.1 million and $(4.7) million at December 31, 1997 and 1996.
Rogers' principal capital requirements are to fund its obligations with
respect to acquisitions and its working capital requirements. Historically,
these requirements have been met by cash flows generated from operations and
borrowings under bank credit facilities. The March 31, 1998 deficit is due to
the classification of Rogers' borrowings of $9.5 million under its revolving
line of credit as a current liability, because the term expires on January 31,
1999. This debt will be repaid with a portion of the proceeds of the Offering.
Net cash provided (used) by operating activities for the first quarter 1998
and the three years ended 1997, 1996 and 1995 were $(1.1) million, $(0.9)
million, $0.2 million, and $5.3 million, respectively. The changes were
principally due to increases in working capital associated with the growth in
commission revenues.
Net cash provided (used) in investing activities for the first quarter of
1998, 1997, 1996 and 1995 were $0.1 million, $(1.4) million, $(12.8) million
and $(12.5) million, respectively. Payments for acquisitions were $11.2
million and $11.6 million in 1996 and 1995, respectively. Additions to
property, plant and equipment and increases in the cash surrender value of
life insurance accounted for the balance of the uses.
Net cash provided by financing activities for the first quarter of 1998,
1997, 1996 and 1995 were $0.9 million, $2.2 million, $13.1 million and $7.2
million, respectively. The 1998 and 1997 activity related to net borrowings
under Rogers' credit facility to fund working capital was $4.5 million and
$1.2, million, respectively. In 1996 and 1995, obligations to sellers of $10.2
million and $7.9 million, respectively, were incurred in connection with
acquisitions.
COMBINED LIQUIDITY AND CAPITAL RESOURCES FOLLOWING THE COMBINATION
At March 31, 1998, the combined working capital deficit of Merkert and
Rogers was $(26.9) million.
Subsequent to the Offering, the Company will have working capital, following
the completion of the Offering and the expected application of the net
proceeds therefrom, payment of debt and the payment of other obligations as
described in the Unaudited Pro Forma Combined Financial Statements and notes
thereto presented elsewhere in this Prospectus. The Company anticipates that
its cash flow from operations and cash on hand will provide cash sufficient to
satisfy the Company's working capital needs, debt service requirements and
planned capital expenditures for the next 12 months.
On a combined basis, Merkert and Rogers used $1.7 million of net cash from
operating activities for the first quarter of 1998 due to increases in
accounts receivable as March revenues were high for Merkert and Rogers.
Receivables are substantially collected within 45 days of the recognition of
commission revenues, therefore increases in accounts receivable are normally
associated with increases in revenues. On a combined basis, cash flows from
financing activities were $3.4 million for the first quarter of 1998 due to
borrowing activity at Merkert and Rogers.
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The Company intends to pursue acquisition opportunities. The Company expects
to fund future acquisitions through the issuance of additional Common Stock,
borrowings, cash on hand following the Offering and cash flow from operations.
The Company anticipates that its cash flow from operations will provide cash
in excess of the Company's normal working capital needs, debt service needs
and planned capital expenditures. On a combined basis, Merkert and Rogers made
capital expenditures of $1.5 million in 1997, exclusive of $5.5 million for
the construction of a new corporate headquarters for Merkert.
The Company estimates that its ongoing requirements for capital additions,
based on the requirements of Merkert and Rogers, will be approximately $2.0
million per year. Capital additions will be made to ensure that the Company
maintains its strong position in information technology and systems and
anticipates that significant capital will be required to upgrade and integrate
the systems of companies acquired in the future.
The Company is seeking, and has begun negotiations with a lender for, a
revolving credit facility for acquisitions, working capital and other general
corporate purposes and expects to close on a senior credit facility between
$75.0 million and $100.0 million within 60 days following the completion of
the Offering.
SEASONALITY; FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
Merkert and Rogers have both experienced, and the Company expects to
continue to experience, fluctuations in quarterly revenues and operating
results as a result of seasonal patterns. The Company's business is seasonal
in nature, as many Retailers generate relatively lower revenues in the first
and third calendar quarters. As a result, Merkert and Rogers have historically
generated lower revenues in the first and third quarters of the year.
Rogers' business has been stronger in the first calendar quarter as compared
to Merkert due to its presence in Florida while Merkert's business has been
stronger in the fourth quarter as compared to Rogers due to the historically
strong sales in the northeast associated with the holiday season. Merkert, due
to the production patterns of a significant Manufacturer, also has
historically experienced a strong August.
Quarterly results may also be impacted by the timing of any future
acquisitions as well as the timing of any consolidation activities undertaken.
The Company's revenues may also be adversely impacted by disruptions in food
production by Manufacturers it represents, particularly as it relates to
weather dependent production, such as fresh produce.
INFLATION
The Company does not believe that its revenues have been substantially
affected by inflation.
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BUSINESS
OVERVIEW
Monroe, Inc. is a leading food brokerage firm providing outsourced sales,
merchandising and marketing services to Manufacturers. The Company acts as an
independent sales and marketing representative, selling grocery and consumer
products on behalf of Manufacturers and coordinating the execution of
Manufacturers' marketing programs with Retailers. The Company's principal
source of revenues is commissions that it receives from Manufacturers. The
Company's other activities include managing private label programs on behalf
of selected Retailers.
The Company has long-standing relationships with many of its Manufacturers,
including Dean Foods/Birds Eye (41 years), H.J. Heinz (24 years), Minute Maid
(44 years), Ocean Spray (29 years) and Pillsbury (19 years). Key Retailer
relationships include C&S Wholesale Grocers, Inc., Food Lion Supermarkets,
Giant Foods, Hannaford Brothers, Kroger, Publix Supermarkets, Royal Ahold
(including Stop & Shop and Bi-Lo), Safeway, Wakefern (Shop Rite), and Winn-
Dixie. The Company represents approximately 750 Manufacturers and more than
70,000 food and non-food stock-keeping units ("SKUs"), and does business with
key Retailers in 22 states.
Since 1994, the Company has acquired and integrated 21 companies, resulting
in coverage of new geographic markets and expanded representations of
Manufacturer product offerings within existing markets. The Company's
strategic acquisition plan includes the selection, acquisition and management
of acquisition candidates in industry segments including the retail food
brokerage, food service brokerage and private label brokerage business
segments.
The Company will be the first publicly held food broker in the United
States. The Company is one of the three largest food brokers in the United
States and believes that it is the largest food broker in the eastern United
States. The Company is the only broker with comprehensive geographic coverage
of the eastern United States and the capability to provide service to the
region's largest Retailers. The eastern United States is the most highly
concentrated retail store region in the United States and represents
approximately 43% of national food store sales. The Company has 36 offices
serving Retailers in 22 states. In 1997, the Company had pro forma combined
revenue of approximately $227.9 million and pro forma combined net income of
approximately $9.2 million.
INDUSTRY OVERVIEW
The Company estimates, based on information published by industry sources,
that the food brokerage industry in the United States had annual commission
revenues of approximately $6 billion in 1997. Food brokers serve
Manufacturers, Retailers and food service providers. Retail food brokers
represent approximately 3,200 Manufacturers, that produce more than 100,000
food and non-food SKUs, which are sold to approximately 128,000 Grocery Stores
and more than 700 wholesalers nationwide. The industry includes three types of
food brokers, as follows:
Retail Food Brokers. Manufacturers of branded food and non-food products use
retail food brokers as a cost effective alternative to a direct sales force
and rely on retail food brokers to provide local market penetration,
integrated brand and category-management as well as access to local
merchandising data. Retail food brokers typically perform two types of
services on behalf of Manufacturers: headquarters functions and retail store
functions.
Headquarters functions include services provided to both Manufacturers and
Retailers at the headquarters level. Retail food brokers conduct business
development activities including sales calls and new product introductions to
Retailers on behalf of Manufacturers. Retail food brokers also assist
Manufacturers in developing, reviewing and executing annual marketing plans.
Other headquarters services include order management, supervision of shelf
space management, the coordination of Manufacturers' promotional spending, and
facilitating the resolution of billing issues between Manufacturers and
Retailers. In connection with the implementation of category management at the
Retailers' headquarters level, retail food brokers assist Retailers
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by gathering and analyzing demographic, consumer, and store sales information
utilized in the management of product categories as strategic business units
Retail store functions generally include execution of sales plans for
Manufacturers' products at the store level by assisting in merchandising,
shelf and display management, new store set-ups, implementation of promotional
plans, and placement of point-of-sale coupons, signs and other information.
Retail food brokers also assist Retailers with coupon and advertising
programs, quality assurance and technical training (primarily in relation to
prepared foods). In addition, retail food brokers assist Retailers and
Manufacturers in the collection, analysis and application of retail sales
data.
The retail food brokerage industry has been growing as food brokers
represent an increasing percentage of the volume of all commodities sold
through Grocery Stores (the "ACV"). In 1997, the percentage of ACV sold
through Grocery Stores was 55% compared to 45% in 1985. The food industry is
non-cyclical, and according to Progressive Grocer, Grocery Store revenues, of
which an increasing portion is represented by food brokers, have grown from
approximately $292 billion in 1985 to $436 billion in 1997, representing a
compound annual growth rate of approximately 4% per year.
The Company believes that the retail food brokerage industry is highly
fragmented and is experiencing significant consolidation. In the past ten
years, the number of food brokerage firms has decreased from 2,500 to 1,100,
while the number of sales representatives employed by such firms increased
from 35,000 to 42,000. There are three multi-regional food brokerage firms,
including the Company, each with approximately 3% market share. Additionally,
there are 12 to 15 large regional food brokerage firms in the United States. A
number of the companies in the food brokerage industry, including Merkert and
Rogers, have participated in the trend towards consolidation by acquiring
other food brokerage businesses, generally financing these transactions with
debt and/or earn-out agreements.
The Company believes that the consolidation of food brokers is primarily the
result of a desire by Manufacturers and Retailers to manage their businesses
more efficiently and effectively by reducing the number of brokers they
interact with in a given region. Additionally, Management believes that
consolidation within the food brokerage industry is being driven, in part, by
the consolidation of Retailers and Manufacturers and the increasing demand for
the application of more sophisticated information technology on the part of
food brokers.
Food Service Brokers. Food service providers include operators of
restaurants, school and hospital cafeterias and other similar establishments.
Food brokers sell Manufacturers' products to food service providers through a
number of means, including headquarters sales calls and the representation of
Manufacturers' products at trade shows. The food service segment of the
industry has experienced significant growth in recent years as an increasing
percentage of consumer spending for food in the United States has shifted to
meals away from home.
Private Label Food Brokers. Private label food brokers work with
Manufacturers to develop and manage the private label programs on behalf of
Retailers. A food broker's responsibilities in connection with a private label
program may include procurement and inventory management and in-store delivery
of private label products. The private label segment has been a substantial
growth segment for Retailers and represented 20% of supermarket food sales in
1997.
BUSINESS STRATEGY
The Company's objective is to become the leading national provider of
outsourced sales, merchandising and marketing services to Manufacturers,
Retailers and food service providers throughout the United States. The
Company's business strategy is comprised of the following key elements:
Expand Current and Develop New Manufacturer Relationships. The Company seeks
to increase its representation of existing Manufacturers' product lines by
representing Manufacturers' products in new geographic markets and non-
supermarket trade channels, including mass merchandisers, food service
providers, membership warehouses, drug stores and convenience stores. The
Company also seeks to increase the range of
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products it represents on behalf of the Manufacturers it currently serves and
enter into new relationships with Manufacturers.
Provide Effective Marketing Support and Valuable Category Management
Technology. The Company's marketing expertise, combined with its proprietary
information technology system, allows it to utilize local demographic
information and information about retail store level conditions to understand
consumer purchasing preferences in local markets. As a result, the Company is
able to develop and implement targeted consumer sales promotions for its
Manufacturers' products. The Company also deploys category analysts who use
local sales data to assist Retailers with shelf schematics, category layouts
and total store space management.
Growth Through Strategic Acquisitions. The Company intends to pursue
strategic acquisitions in the food brokerage industry. Since 1994, the Company
has acquired and successfully integrated 21 companies, resulting in coverage
of new geographic regions and expanded representations of Manufacturer product
offerings in existing markets. The Company's plans include the selection,
acquisition and management of businesses in the following brokerage market
segments:
. Retail: A key element of the Company's acquisition strategy is to expand
its geographic coverage by acquiring existing retail food brokerage
firms in new geographic markets. The Company also seeks acquisition
candidates that conduct business within the Company's existing territory
and offer the Company the opportunity to expand its representation of
Manufacturers and product categories and its coverage of Retailers
within existing markets. The Company also seeks acquisitions that will
enable it to represent additional product categories and cover
additional distribution channels. In particular, the Company believes
that health and beauty care and general merchandise brokerage and
bakery, deli, meat, seafood, floral and produce brokerage have
significant growth potential. The Company also plans to cover
convenience stores in its strategy as it believes convenience stores
will account for an increasingly larger portion of food sales as sales
of meal replacements and traditional grocery items continue to grow.
. Food Service: Sales to entities in the food service segment of the food
industry currently represent a small part of the Company's business. The
Company believes that it will be able to expand its operations within
the fragmented food service segment through the acquisition of existing
food service brokers who sell Manufacturers' products to food service
providers.
. Private Label: The Company believes that the private label food
brokerage segment is currently fragmented and that the Company can
further develop its private label operations through targeted
acquisitions of private label food brokers within this growing segment
of the food industry.
The Company believes that its acquisition strategy will enable it to:
. Strengthen Market Presence: By expanding its geographic coverage, the
Company will be able to offer Manufacturers more extensive and better
coordinated coverage of Retailers who operate across geographic regions.
As the Company expands the portion of a given Manufacturer's sales it
represents, it will be better positioned to meet Manufacturers' needs by
providing a wide range of services across a broader geographic area.
This will enable Manufacturers to increase the effectiveness of their
marketing programs and reduce the costs associated with managing their
brokerage networks by using fewer food brokerage companies.
. Benefit from Increased Economies of Scale: As the Company expands the
number of Manufacturers and product lines it represents, it expects to
realize certain economies which will result from the low incremental
cost of representing additional Manufacturers and product lines. The
Company also expects to recognize certain economies of scale as the
Company expands its operations to cover a larger geographic region.
. Improve Operating Efficiencies: The Company believes that as it
integrates acquired companies it will be able to eliminate certain
duplicative operations, facilities and personnel. The Company expects to
realize cost savings through the consolidation of certain administrative
functions.
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Increase Private Label Brokerage. The Company has a division that
specializes in the development, procurement and inventory management of
private label frozen products, including fruits, vegetables and other products
on behalf of certain Retailers. The Company's private label division currently
works in conjunction with Retailers such as A&P, Price Chopper, Publix and
Royal Ahold (including Stop & Shop and Bi-Lo). In addition, the increasing
geographic coverage of the Company will provide the Company with the
opportunity to offer private label services to more retailers and more retail
locations.
Expand Food Service Brokerage. Sales to entities in the food service
brokerage segment of the food industry currently represent a small part of the
Company's business. The Company believes that there is a high degree of
fragmentation in this industry segment and that the food service brokerage
segment presents opportunities for profitable growth through strategic
acquisitions, as well as through developing new account relationships through
its existing operations. The Company intends to pursue expansion of its food
service brokerage line within its existing geographic coverage and to develop
food service brokerage in new territories.
Seek International Opportunities. The Company believes that many
opportunities exist outside the United States for sales, marketing and food
brokerage services in connection with retail food stores and in the
development of private label programs for Retailers. Certain Retailers,
including Royal Ahold, J. Sainsbury PLC and Food Lion Supermarkets, among
others, currently operate on an international basis. The Company believes that
international expansion would involve the acquisition of food brokers in
countries where food brokers are used by Manufacturers and Retailers. The
Company has recently entered into an agreement to provide private label
services to a Retailer based in Japan for its peanut butter and red wine
products.
Empower Local Management and Develop Professional Staff. The senior
management of the Company will provide overall strategic direction and
guidance with respect to acquisitions, financing, marketing and operations. In
general, however, it is the intention of the Company to continue to operate
its day-to-day business on a locally oriented basis. The Company intends to
continue the development of proprietary "best practices" by emphasizing an
entrepreneurial culture at the local level. The Company believes that the
flexibility of a locally oriented approach to operational matters enables the
Company to effectively respond to changes in the competitive environment.
The Company believes that a key factor to its continuing success is the
strength of its professionals. The development and training of employees has
contributed to the Company's continued growth and profitability. In keeping
with the Company's philosophy and operating structure, the Company intends to
continue to manage employee relations and human resource development at the
local level. Management at the local level is responsible for developing and
training the professional staff which reports to them and for creating an
environment that promotes employee satisfaction and optimal performance.
COMPANY HISTORY
Prior to the Offering, the Company's business was conducted through Merkert
and Rogers. Prior to or upon the consummation of the Offering, the Company
will acquire each of Merkert and Rogers. See "Certain Transactions--
Organization of the Company" and "The Combination."
Merkert has operated as a food broker in the northeastern and mid-Atlantic
regions of the United States since 1950. In 1997, Merkert had total revenues
of approximately $147.4 million, the principal source of which was from
commissions it received from Manufacturers. Merkert also manages private label
programs on behalf of selected Retailers. Merkert has grown through both
internally generated growth and through acquisitions, having successfully
acquired and integrated six smaller food brokers since 1994.
Rogers has operated as a food broker in the southeastern region of the
United States since 1934. In 1997, Rogers had total revenues of approximately
$83.0 million, all of which was derived from commissions it received from
Manufacturers. Rogers has grown through both internally generated growth and
through acquisitions, having successfully acquired and integrated 15 smaller
food brokers since l994.
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SERVICES AND OPERATIONS
The Company has traditionally provided Manufacturers with a full array of
sales, marketing and administrative services and has been paid a commission by
Manufacturers. In certain cases, the Company has entered into "hybrid"
arrangements with Manufacturers under which the Company provides less than
full geographic coverage and/or services. The functions and services provided
by the Company are described below.
Full Services. The Company currently provides full services to approximately
92% of the Manufacturers that it represents. Where the Company provides full
services to a Manufacturer in connection with the sale of its products to
Retailers, the commission is generally 3% of the Manufacturer's net sales to
such Retailers. The services that the Company provides to Manufacturers in a
full services arrangement include:
. Account Service and Business Development: In general, the Company's
Manufacturers are serviced by business managers, each of whom is
responsible for identified products of a number of Manufacturers within
one region (such as New England). The Company's business managers,
customer service personnel and support staff utilize information
developed by the Company to assist Manufacturers in devising strategic
sales plans and achieving merchandising goals and in utilizing retail
information to develop customized marketing strategies, including
determining the assortment of current and new products to be offered and
promotions designed to increase revenues and profitability. The
activities of these business managers are supervised by general managers
who manage categories of products such as groceries, frozen foods and
perishables, or health, beauty care and confection products.
The Company's Regional Business Managers ("RBMs") are Company
executives who provide the primary link between the Company and certain
of the Company's largest Manufacturers. Each of the Company's RBMs is
dedicated to a single Manufacturer and directs a multi-regional team (a
"Manufacturer Team") comprised of business managers (each of whom
manages the Company's activities on behalf of a Manufacturer in a
specified region), customer service personnel and support staff. These
RBMs provide their Manufacturers with services similar to those
provided by business managers.
. Administrative Management: The Company handles both order management and
certain billing management services for Manufacturers. The Company's
order management system enables it to perform all major order management
functions relating to orders for goods from Retailers to Manufacturers.
The Company has developed a centralized order management system to
generate electronic orders through electronic data interchange ("EDI").
This system enables the Company to verify quantities, product codes,
pricing, pack sizes and promotions pertaining to an order. The Company's
order management system also reconciles Manufacturer invoices with
Retailer purchase orders and manages and processes promotional
allowances and credits for Retailers. In addition, the Company
facilitates the resolution of billing issues between Manufacturers and
Retailers.
. Category and Shelf Space Management: The Company's category management
analysts and shelf space management analysts serve as liaisons, linking
the Company, RBMs, business managers and Manufacturer Teams with
retailer teams, comprised of headquarters account managers and retail
merchandisers ("Retailer Teams"). These retail analysts develop
information from retail data collected by the Company's Retailer Teams
and by outside sources, including ACNielson Corp. and Information
Resources, Inc. RBMs and business managers use this information in
developing multi-regional, regional and local strategies with
Manufacturers. Retailer Teams also use this information, as well as
store-specific sales and demographic information provided by these
analysts, to implement sales and merchandising strategies at the local
level. These category management activities enable Manufacturers to
prepare fact-based selling strategies used in product and promotional
planning. These activities also enable Retailers to increase sales and
profitability by more effectively utilizing their resources, including
shelf space as well as marketing and promotional expenditures.
. Retail Services: In general, the Company's headquarters account managers
and retail merchandisers represent a wide range of Manufacturers'
products to specified Retailers within a region. The
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Company's headquarters account managers call upon Retailers at the
headquarters level and represent numerous products on behalf of the
Company's Manufacturers. The Company's largest Retailers are called upon
by multiple headquarters account managers, each representing specific
product categories such as groceries, frozen food/perishables or health,
beauty care and confectionery products. Smaller Retailers are generally
called upon by headquarters account managers who represent multiple
product categories. Headquarters account managers help execute sales
plans developed by RBMs, business managers and Manufacturers. Through
their frequent service calls, the Company's retail merchandisers develop
relationships with store managers and in-store category managers and
assist headquarters account managers to execute sales plans for
Manufacturers' products. The Company's retail merchandisers execute
sales plans at the store level by providing shelf and display
management, new store set-ups, stocking of new items and placement of
point-of-sale coupons and signs.
The company's largest Retailers are serviced by dedicated Retailer
Teams. In some cases, these dedicated Retailer Teams include shelf space
management analysts who provide shelf management and display expertise.
The Company also initiates and executes local marketing events on behalf
of Manufacturers in order to build Manufacturer brand recognition. These
efforts include the preparation and display of special signage, coupon
programs and other promotional activities between Manufacturers and
Retailers.
Hybrid Services. In response to increasing demand from certain Manufacturers
who are outsourcing more of their retail services functions, the Company has
recently entered into "hybrid" agreements under which the Company provides
only specified services, geographic coverage and Retailer coverage to a
Manufacturer. The Company has entered into hybrid agreements with
approximately 5% of the Manufacturers the Company represents. The fee for such
services varies based on the particular services provided. By providing a
flexible alternative to commission-based pricing, the Company has increased
the total number of Manufacturers it represents and believes that such hybrid
services may also result in sales of additional services to Manufacturers.
Providing retail-only services is a common hybrid arrangement. Retail-only
services primarily include initial retail shelf set-ups and subsequent store
shelf space management. The Company provides retail-only services to
approximately 3% of the Manufacturers it represents. These retail-only
services generally provide for compensation equivalent to a commission of
approximately 1.0% of the value of product sales to the Retailer.
Private Label. The Company's private label division develops, procures, and
manages inventory of private label products (including frozen fruits and
vegetables and other products) on behalf of certain Retailers. This division
works in conjunction with major Retailers such as A&P, Price Chopper, Publix
and Royal Ahold. The Company intends to expand its private label programs into
all of its regional markets as part of the integrated package of services the
Company offers.
Store Supplies. The Company's store supplies division operates as a
distributor for Monarch Marking Systems, Inc. and sells price marking
equipment, labels and other store supplies to Retailers in New England and New
York City. In addition, the Company sells a bio-degreaser product to
Retailers' supermarket, meat and bakery departments through local
distributors. The Company intends to expand distribution of this bio-degreaser
product into all its markets.
MANUFACTURERS AND RETAILERS
Manufacturers. The Company has had up to 44 years of successful
relationships with companies such as Dean Foods/Birds Eye, H.J. Heinz, Lipton,
Mars, Minute Maid, Ocean Spray, Pillsbury, Quaker and hundreds of others.
These companies manufacture grocery-related and food service products covering
a wide spectrum of categories and sub-categories from staples to perishables.
Retailers. On the retail side, the Company has a long established history
with many large and mid-sized Retailers in the food industry. Many of these
Retailers are, or are owned by, some of the world's largest food retailers,
while others are leading regional players. The following is a list of selected
key Retailers:
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<TABLE>
<CAPTION>
RETAILER NAME OPERATING REGION
------------- -------------------------------
<S> <C>
C&S Wholesale Grocers, Inc................. Northeast US
Food Lion/Delhaizen Supermarkets........... Southeast US
Hannaford Brothers......................... New England and southeast US
J. Sainsbury PLC (Shaws Supermarkets and
Giant Foods).............................. New England and mid-Atlantic US
Kroger..................................... Southeast US
Public Supermarkets........................ Southeast US
Royal Ahold (including Stop & Shop and Bi-
Lo)....................................... Eastern US
Safeway.................................... Mid-Atlantic US
Supervalu.................................. Northeast and southeast US
White Rose................................. Northeast US
Wakefern (Shop Rite)....................... Mid-Atlantic US
Winn-Dixie................................. Southeast US
</TABLE>
No single Manufacturer or Retailer represented more than 6% of the Company's
revenues for the year ended December 31, 1997, on a pro forma basis.
INFORMATION TECHNOLOGY
The application of information technology has become an increasingly
important element in the food brokerage industry. In order to provide
Manufacturers and Retailers with the most efficient and useful information and
services, the Company has invested in current retail information technology.
Electronic Data Interchange. The EDI system, which was first used in the
industry in 1980, streamlines order communications among food brokers,
Retailers and Manufacturers. EDI has played a growing role as an increasing
number of Manufacturers, Retailers and food brokers have integrated their
systems with EDI. Orders sent by EDI are transmitted on-line from the Retailer
to the Company and entered automatically into the Company's order databases.
Orders are reviewed by the Company to verify that quantities, product codes,
pricing, pack sizes and promotions have been correctly submitted. The Company
then places orders with certain Manufacturers via EDI. By reducing manual
order processing, the system significantly curtails order input errors,
expedites order processing and reduces the number of personnel required to
fulfill this function.
Retail Information. The Company utilizes a proprietary retail reporting
system to update Manufacturers with store-specific information regarding their
products. The Company's retail representatives record information on in-store
merchandise conditions, including product placement and pricing information.
This information is then entered into the Company's retail reporting system.
The Company's retail reporting system allows both the Company and its
Manufacturers to easily access store-level information. The Company believes
that it is one of only a few food brokers offering comprehensive merchandising
information regarding store-specific retail conditions.
Local Area Network and Web Technology. The Company was among the first food
brokers to install a company-wide local area network and wide area network,
enabling it to provide on-line information to Manufacturers and Retailers. To
disseminate this information, the Company utilizes the internet and dedicated
extranets. The Company's internet site on the worldwide web is being developed
to market the Company's services to potential Manufacturers and Retailers. The
Company's on-line service allows it to communicate on a secure basis with
Retailers and Manufacturers and to provide them with marketing, sales and
other information related to their products and operations.
COMPETITION
The food brokerage market is large and fragmented, with brokers serving
numerous local markets and a few large brokers serving multiple regions in the
United States. The Company competes with other food brokers for product lines
of Manufacturers and for the right to represent products to Retailers and
across distribution
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chains. In addition, the Company expects that it will face additional
competition from new entrants into the food brokerage market due to the
relatively low barriers to entry. Competition is based primarily on breadth of
geographic coverage, and the quality and scope of services provided. See "Risk
Factors--Competition."
The entire food distribution chain, including Manufacturers, Retailers, and
food brokers, has been consolidating over the past ten years. As the market
becomes more concentrated in terms of the total number of Manufacturer and
Retailer accounts served by food brokers, the Company believes that large
brokers that can provide a full array of services to leading Manufacturers and
Retailers across multiple geographic markets have a competitive advantage. The
Company believes that Manufacturers will favor large regional and national
food brokers with the personnel and technology resources necessary to operate
in an increasingly sophisticated and complex environment, and the capability
to provide the local market focus required by Manufacturers and Retailers.
The Company will, upon completion of the Offering, become the first publicly
held food broker in the United States, with operations spanning most of the
eastern United States. The Company competes with other multi-regional food
brokers such as Richmont Marketing Specialists and Sales Mark. On a local and
regional basis the Company competes with Acosta, Pezrow, Budd Mayer, REM, and
MAI. Some of the Company's competitors include alliances of smaller regional
food brokers.
EMPLOYEES
The Company has approximately 3,200 full and part time employees. The
Company believes that its relations with its employees are good. To the
Company's knowledge, its employees are not members of any labor union.
PROPERTIES
The Company's corporate offices are located at 8 Cedar Street, Suite 54A,
Woburn, Massachusetts 01801. The Company's telephone number at such location
is (781) 933-3998. In addition to its corporate offices, the Company maintains
36 facilities in 22 states, the two largest of which are:
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION PRINCIPAL USAGE AREA IN SQ. FT. LEASED/OWNED
-------- --------------- --------------- ------------
<S> <C> <C> <C>
Charlotte, NC Office 54,000 Leased*
Canton, MA Office 50,000 Owned
</TABLE>
- --------
* This facility is currently owned by Rogers. In connection with the
Combination, the Company will sell this facility to a third party. Such
third party will lease this facility to the Company. The proceeds of the
sale by the Company will be distributed to certain Rogers shareholders. See
"Certain Transactions."
The Company believes that its properties are generally well maintained and
in good condition. The Company believes that its properties are adequate for
present needs and that suitable additional or replacement space will be
available as required.
LEGAL PROCEEDINGS
Merkert has received written notice from the seller of a food brokerage
business acquired by Merkert alleging that Merkert has breached certain
covenants contained in an agreement with such seller, claiming that such
breaches have caused the acceleration of certain obligations of Merkert to
such seller and threatening litigation in connection with such claims. The
Company believes that this matter, if determined adversely to the Company,
would not have a material adverse effect on the Company. The Company is from
time to time a party to litigation arising in the ordinary course of business.
There can be no assurance that the Company's insurance coverage will be
adequate to cover all liabilities occurring out of such claims. In the opinion
of management, any liability that the Company might incur upon the resolution
of this litigation will not, in the aggregate, have a material adverse effect
on the financial condition or results of operations of the Company.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information concerning the Company's
directors and executive officers and those persons who will become directors
and executive officers upon consummation of the Offering.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gerald R. Leonard............... 51 Chairman of the Board, Chief Executive
Officer and President
James L. Monroe................. 39 Non-Executive Chairman of the Board
Douglas H. Holstein............. 54 Chief Operating Officer of the Company,
President of Rogers (a subsidiary of the
Company) and Director
Sidney D. Rogers, Jr............ 46 Chief Financial Officer
Marty D. Carter................. 38 Vice President of Acquisitions and Chief
Financial Officer of Rogers (a
subsidiary of the Company)
Glenn F. Gillam................. 46 President of Merkert (a subsidiary of
the Company)
Edward P. Grace, III............ 47 Director
James A. Schlindwein............ 69 Director
</TABLE>
Gerald R. Leonard will become Chairman of the Board, Chief Executive Officer
and President of the Company upon consummation of the Offering. Mr. Leonard
has been Chief Executive Officer of Merkert since September 1994. From May
1992 to September 1994, Mr. Leonard served Merkert (a subsidiary of the
Company) as President of the Food Enterprises, New England Division, and has
been with Merkert in various executive capacities since 1983. Mr. Leonard has
held sales and management positions with Procter & Gamble, William Underwood
Company and Green Giant Company. Mr. Leonard has more than 26 years of
experience in food brokerage, manufacturing and related industries.
James L. Monroe has served as President of the Company since March 1998.
Upon consummation of the Offering, Mr. Monroe will serve as Non-Executive
Chairman of the Board of the Company. In 1997, Mr. Monroe founded Monroe &
Company, LLC, a merchant banking firm that invests in companies in
consolidating industries. From January 1994 until December 1996, Mr. Monroe
was a Senior Vice President of Oppenheimer & Co., Inc. where he managed the
Boston Corporate Finance department and the national consumer industry banking
practice. From 1992 until 1993, Mr. Monroe was a Managing Director at Advest,
Inc., an investment banking and brokerage firm. Mr. Monroe has thirteen years
of investment and merchant banking experience.
Douglas H. Holstein will become Chief Operating Officer, President of
Rogers, and a director of the Company upon consummation of the Offering. Mr.
Holstein has been President of Rogers since January 1993, and has been with
Rogers in various executive capacities since 1981. Prior to joining Rogers,
Mr. Holstein was the Regional Director of the Southeast for the Green Giant
Company.
Sidney D. Rogers, Jr. will become the Chief Financial Officer of the Company
upon consummation of the Offering. Mr. Rogers has been Chief Financial Officer
and Vice President of Merkert since 1994 and has been with Merkert since 1977.
Prior to serving as Chief Financial Officer of Merkert, Mr. Rogers was Vice
President Administration of Merkert since 1986.
Marty D. Carter will become Vice President of Acquisitions of the Company
and Chief Financial Officer of Rogers (a subsidiary of the Company) upon
consummation of the Offering. Mr. Carter has been the Chief Financial Officer
of Rogers since 1987. From 1984 to 1987, Mr. Carter was in the audit practice
group of Touche Ross & Co.
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<PAGE>
Glenn F. Gillam will become President of Merkert (a subsidiary of the
Company) upon consummation of the Offering. Mr. Gillam has been President of
the Food Enterprises, New England Division, of Merkert since 1994, and has
been with Merkert in various capacities since 1983. Mr. Gillam has held sales
and management positions with companies involved in health and beauty
care/general merchandise, frozen food, confection and grocery since 1973.
Edward P. Grace, III will become a director upon consummation of the
Offering. Mr. Grace is President of Phelps Grace International, Inc., a
restaurant consulting and investment company. From 1989 until September 1996,
Mr. Grace served as Chairman of the Board, President and Chief Executive
Officer of Bugaboo Creek Steak House, Inc., operator of Bugaboo Creek Steak
House and The Capital Grille restaurants. Mr. Grace is Vice Chairman and a
Director of RARE Hospitality International, Inc. and Professional Facilities
Management, Inc. He also serves as a Trustee of the University of Vermont and
of Johnson & Wales University.
James A. Schlindwein will become a director of the Company upon consummation
of the Offering. Mr. Schlindwein has been a director of Merkert since 1994.
Prior to his retirement in September 1994, Mr. Schlindwein served as Executive
Vice President, Merchandising Services, and a director of Sysco Corporation, a
national institutional food service distributor, where he had served since
1980. He is also a director of Riser Foods, Inc., American Italian Pasta
Company and Tri-Valley Growers.
BOARD OF DIRECTORS
The business of the Company is managed under the direction of the Board of
Directors. After consummation of the Combination and the Offering, the Board
of Directors will consist of five directors. The Company's Amended and
Restated Certificate of Incorporation provides that the Board of Directors
shall be divided into three classes. The members of each class of directors
serve for staggered three-year terms. The Board of Directors will be composed
of one Class I Director (Mr. Schlindwein), two Class II Directors (Messrs.
Grace and Holstein) and two Class III Directors (Messrs. Leonard and Monroe),
whose initial terms will expire upon the election and qualification of
directors at the annual meetings of stockholders held following the years
ending 1998, 1999 and 2000, respectively. Beginning in 1999, directors of each
class will be chosen for three-year terms upon the expiration of their current
terms and each year one class of directors will be elected by the
stockholders. The Company believes that classification of the Board of
Directors will help to assure the continuity and stability of the Company's
business strategies and policies as determined by the Board of Directors.
Holders of shares of Common Stock will have no right to cumulative voting in
the election of directors. Consequently, at each annual meeting of
stockholders, the holders of a majority of the shares of Common Stock will be
able to elect all of the successors of the class of directors whose terms
expire at that meeting.
Following consummation of the Offering, the Board of Directors will
establish an audit committee (the "Audit Committee") and a Compensation
Committee (the "Compensation Committee"). The Audit Committee, a majority of
which will be outside directors, will recommend to the Board of Directors the
firm to be appointed as independent accountants to audit financial statements
and to perform services related to the audit, review the scope and results of
the audit with the independent accountants, review with management and the
independent accountants the Company's year-end operating results, consider the
adequacy of the internal accounting procedures and consider the effect of such
procedures on the accountants' independence. The Compensation Committee, which
will consist solely of outside directors, will review and recommend to the
Board of Directors the compensation arrangements for all directors and
officers, approve such arrangements for other senior level employees and
administer and take such other action as may be required in connection with
certain compensation and incentive plans of the Company. The Compensation
Committee will also determine the number of options to be granted or shares of
Common Stock to be issued to eligible persons under the Company's 1998 Stock
Plan. In addition, the Compensation Committee will construe and interpret the
1998 Stock Plan and issuances thereunder, and establish, amend and revoke
rules and regulations for administration of the 1998 Stock Plan.
Members of the Board of Directors who are also employees of the Company do
not receive compensation for their services on the Board of Directors or any
committee thereof. Each director who is not an employee of
38
<PAGE>
the Company (an "Independent Director") receives an annual fee of $25,000.
Upon consummation of the Offering, each Independent Director will be granted
an option to purchase 20,000 shares of Common Stock at an exercise price equal
to the initial public offering price per share of Common Stock. Under the 1998
Stock Plan, each new Independent Director elected following the Offering is
also entitled to receive an initial grant of an option to purchase 20,000
shares of Common Stock upon his or her election to the Board of Directors, and
each Independent Director who is serving as a director of the Company on the
fifth business day after each annual meeting of stockholders, beginning with
the 1999 annual meeting, will automatically be granted an option to purchase
5,000 shares of Common Stock. In addition, the Independent Director who serves
as chairman of the Audit Committee of the Board of Directors will receive
options to purchase an additional 5,000 shares of Common Stock upon
consummation of the Offering and an additional 5,000 shares of Common Stock on
the fifth business day after each annual meeting of stockholders beginning
with the 1999 annual meeting. All options granted to Independent Directors
under the 1998 Stock Plan shall vest in equal annual installments over the
number of years remaining in each Director's term on the date of grant and
shall terminate upon the tenth anniversary of the date of grant. See "--1998
Stock Option and Incentive Plan-Stock Options Granted to Independent
Directors."
All members of the Board of Directors are reimbursed for travel expenses
incurred in attending meetings of the Board of Directors and its committees.
EXECUTIVE COMPENSATION; EMPLOYMENT AND NONCOMPETITION AGREEMENTS
The Company was incorporated in March 1998, has conducted no operations
other than those associated with the Offering, and will not pay any of its
executive officers any compensation prior to the consummation of the Offering.
The Company will enter into employment and noncompetition agreements upon
consummation of the Offering with certain of its executive officers. The
material terms of these agreements are summarized below.
Each of Messrs. Leonard, Holstein, Rogers, Carter and Gillam will enter into
employment and noncompetition agreements with the Company providing for base
salaries of $ , $ , $ , $ and $ , respectively. Each employment and
noncompetition agreement will be for a term of three years, and unless
terminated or not renewed by the Company or the executive officer, the term
will continue thereafter on a month-to-month basis. Each of these agreements
will provide that the executive officer's employment with the Company may be
terminated for "cause" by the Company for (i) dishonest statements or acts
which constitute material disloyalty or dishonesty toward the Company or cause
significant damage to the Company; (ii) the commission by or indictment of the
executive officer for a felony, or any misdemeanor involving moral turpitude,
deceit, dishonesty or fraud; (iii) an uncured failure by the executive officer
to perform a substantial portion of his duties and responsibilities; (iv)
uncured gross negligence, willful misconduct or insubordination; or (v) an
uncured material breach of any of his material obligations under the
employment and noncompetition agreement. In the event of termination of
employment by the Company without cause, the executive officer will be
entitled to receive from the Company continuation of his then current base
salary until the later of expiration of the initial term or 12 months from the
date of termination of employment, provided that in the case of Messrs.
Holstein and Carter, the executive officer will also be entitled to receive
from the Company continuation of health plan benefits and automobile benefits
until the expiration of the initial term. Each employment and noncompetition
agreement will contain a covenant not to compete with the Company during the
initial term of the agreement and for a period of one year following
termination of employment or, if longer, for the period during which the
executive officer shall be entitled to receive continuation of his base salary
following termination of employment by the Company without cause.
1998 STOCK OPTION AND INCENTIVE PLAN
On May 19, 1998, the Board of Directors of the Company adopted, and the
stockholders approved, the Monroe, Inc. 1998 Stock Option and Incentive Plan
(the "1998 Stock Plan"). The 1998 Stock Plan is designed and intended as a
performance incentive for officers, employees, consultants and Independent
Directors to promote the financial success and progress of the Company. The
Company anticipates that providing such
39
<PAGE>
persons with a direct stake in the Company's welfare will assure a closer
identification of their interests with those of the Company, thereby
stimulating their efforts on the Company's behalf and strengthening their
desire to remain with the Company. All officers and Independent Directors are
eligible to participate in the 1998 Stock Plan.
The 1998 Stock Plan provides for the issuance of up to thirteen percent of
the number of shares of Common Stock outstanding from time to time. The
Company currently has reserved shares of Common Stock for issuance under
the 1998 Stock Plan, of which shares are subject to outstanding options
and remain available for issuance. Upon consummation of the Offering, the
number of shares reserved for issuance under the 1998 Stock Plan will be .
On and after the date the 1998 Stock Plan becomes subject to Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"), options with
respect to no more than 1,300,000 shares of Common Stock may be granted to any
one individual in any calendar year.
The following summary description does not purport to be complete and is
qualified in its entirety by the 1998 Stock Plan, a copy of which is filed as
an exhibit to the Registration Statement of which this Prospectus is a part.
Plan Administration; Eligibility. The 1998 Stock Plan is administered by the
Board of Directors or the Compensation Committee thereof. All members of the
Committee must be "disinterested persons" as that term is defined under the
rules promulgated by the Securities and Exchange Commission and "outside
directors" as defined in Section 162(m) of the Code and the regulations
promulgated thereunder.
The Compensation Committee has full power to select, from among the
employees and other persons eligible for awards, the individuals to whom
awards will be granted, to make any combination of awards to participants, and
to determine the specific terms and conditions of each award, subject to the
provisions of the 1998 Stock Plan. The Compensation Committee may permit
Common Stock, and other amounts payable pursuant to an award, to be deferred.
In such instances, the Compensation Committee may permit dividends or deemed
dividends, if any, to be credited to the amount of deferrals.
Persons eligible to participate in the 1998 Stock Plan will be those
officers, employees and other key persons, such as consultants, of the Company
and its subsidiaries who are responsible for or contribute to the management,
growth or profitability of the Company and its subsidiaries, as selected from
time to time by the Compensation Committee. Independent Directors will also be
eligible for certain awards under the 1998 Stock Plan.
Stock Options. The 1998 Stock Plan permits the granting of (i) options to
purchase Common Stock intended to qualify as incentive stock options under
Section 422 of the Code ("Incentive Options") and (ii) options that do not so
qualify ("Non-Qualified Options"). Only employees of the Company and its
subsidiaries may be granted Incentive Options. The option exercise price of
each option will be determined by the Compensation Committee but may not be
less than 100% of the fair market value of the Common Stock on the date of
grant in the case of Incentive Options, and may not be less than 85% of the
fair market value of the Common Stock on the date of grant in the case of Non-
Qualified Options.
The term of each option will be fixed by the Compensation Committee and may
not exceed ten years from the date of grant in the case of an Incentive
Option. The Compensation Committee will determine at what time or times each
option may be exercised and, subject to the provisions of the 1998 Stock Plan,
the period of time, if any, after retirement, death, disability or termination
of employment during which options may be exercised. Options may be made
exercisable in installments, and the exercisability of options may be
accelerated by the Compensation Committee.
Upon exercise of options, the option exercise price must be paid in full
either in cash or by certified or bank check or other instrument acceptable to
the Compensation Committee or, if the Compensation Committee so permits, by
delivery of shares of Common Stock already owned by the optionee. The exercise
price may also be delivered to the Company by a broker pursuant to irrevocable
instructions to the broker from the optionee.
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<PAGE>
At the discretion of the Compensation Committee, stock options granted under
the 1998 Stock Plan may include a "re-load" feature pursuant to which an
optionee exercising an option by the delivery of shares of Common Stock would
automatically be granted an additional stock option (with an exercise price
equal to the fair market value of the Common Stock on the date the additional
stock option is granted) to purchase that number of shares of Common Stock
equal to the number delivered to exercise the original stock option. One of
the purposes of this feature is to enable participants to maintain an equity
interest in the Company without dilution.
To qualify as Incentive Options, options must meet additional U.S. Federal
tax requirements, including limits on the value of shares subject to Incentive
Options which first become exercisable in any one calendar year, and a shorter
term and higher minimum exercise price in the case of certain large
stockholders.
Stock Options Granted to Independent Directors. The 1998 Stock Plan provides
for the automatic grant to each Independent Director of a Non-Qualified Option
to purchase 20,000 shares of Common Stock in connection with the consummation
of the Offering. The 1998 Stock Plan also provides for the automatic grant to
each Independent Director of a Non-Qualified Option to purchase 20,000 shares
of Common Stock upon his or her initial election to the Board of Directors
following the Offering. Each Independent Director who is serving as a director
of the Company on the fifth business day after each annual meeting of
stockholders, beginning with the 1999 annual meeting of stockholders, will
also automatically be granted on such day a Non-Qualified Option to acquire
5,000 shares of Common Stock. In addition, the Independent Director who serves
as chairman of the Audit Committee of the Board of Directors will receive
options to purchase an additional 5,000 shares of Common Stock upon
consummation of the Offering and an additional 5,000 shares of Common Stock on
the fifth business day after each annual meeting of stockholders beginning
with the 1999 annual meeting. The exercise price of each such Non-Qualified
Option will be the fair market value of the Common Stock on the date of grant.
All of such Non-Qualified Options granted to Independent Directors shall vest
in equal annual installments over the number of years remaining in each
Director's term on the date of grant and shall terminate on the tenth
anniversary of the date of grant.
Stock Appreciation Right. The Committee may award a stock appreciation right
("SAR") either as a freestanding award or in tandem with a stock option. Upon
exercise of the SAR, the holder will be entitled to receive an amount equal to
the excess of the fair market value on the date of exercise of one share of
Common Stock over the exercise price per share specified in the related stock
option (or, in the case of freestanding SAR, the price per share specified in
such right, which price may not be less than 85% of the fair market value of
the Common Stock on the date of grant) times the number of shares of Common
Stock with respect to which the SAR is exercised. This amount may be paid in
cash, Common Stock, or a combination thereof, as determined by the Committee.
If the SAR is granted in tandem with a stock option, exercise of the SAR
cancels the related option to the extent of such exercise.
Restricted Stock. The Committee may also award shares of Common Stock to
officers, other employees and key persons of the Company subject to such
conditions and restrictions as the Committee may determine ("Restricted
Stock"). These conditions and restrictions may include the achievement of
certain performance goals and/or continued employment with the Company through
a specified restricted period. The purchase price of shares of Restricted
Stock will be determined by the Committee. If the performance goals and other
restrictions are not attained, the employees will forfeit their awards of
Restricted Stock.
Unrestricted Stock. The Committee may also grant shares (at no cost or for a
purchase price determined by the Committee) which are free from any
restrictions under the 1998 Stock Plan ("Unrestricted Stock"). Unrestricted
Stock may be issued to employees and key persons in recognition of past
services or other valid consideration, and may be issued in lieu of cash
bonuses to be paid to such employees and key persons.
Performance Share Awards. The Committee may also grant performance share
awards to employees or other key persons of the Company entitling the
recipient to receive shares of Common Stock upon the achievement of individual
or Company performance goals and such other conditions as the Committee shall
determine ("Performance Share Award").
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<PAGE>
Dividend Equivalent Rights. The Committee may grant dividend equivalent
rights, which give the recipient the right to receive credits for dividends
that would be paid if the grantee had held specified shares of Common Stock.
Dividend equivalent rights may be granted as a component of another award or
as a freestanding award. Dividend equivalents credited under the 1998 Stock
Plan may be paid currently or be deemed to be reinvested in additional shares
of Common Stock, which may thereafter accrue additional dividend equivalents
at fair market value at the time of deemed reinvestment or on the terms then
governing the reinvestment of dividends under the Company's dividend
reinvestment plan, if any. Dividend equivalent rights may be settled in cash,
shares, or a combination thereof, in a single installment or installments, as
specified in the award. Awards payable in cash on a deferred basis may provide
for crediting and payment of interest equivalents.
Adjustments for Stock Dividends, Mergers, Etc. The Committee will make
appropriate adjustments in outstanding awards to reflect stock dividends,
stock splits and similar events. In the event of a merger, liquidation, sale
of the Company or similar event, the Committee, in its discretion, may provide
for substitution or adjustments of outstanding options and SARs, or may
terminate all unexercised options and SARs with or without payment of cash
consideration.
Amendments and Termination. The Board of Directors may at any time amend or
discontinue the 1998 Stock Plan and the Committee may at any time amend or
cancel outstanding awards for the purpose of satisfying changes in the law or
for any other lawful purpose. No such action may be taken, however, which
adversely affects any rights under outstanding awards without the holder's
consent. Further, amendments to the 1998 Stock Plan shall be subject to
approval by the Company's stockholders if and to the extent required by the
Securities Exchange Act of 1934, as amended (the "1934 Act"), to ensure that
awards granted under the 1998 Stock Plan are exempt under Rule 16b-3
promulgated under the 1934 Act, or required by the Code to preserve the
qualified status of Incentive Options.
Change in Control Provisions. The 1998 Stock Plan provides that in the event
of a sale of all or substantially all of the assets or Common Stock of the
Company, a merger or consolidation which results in a change in control of the
Company or the liquidation or dissolution of the Company (a "Change in
Control"), all stock options and stock appreciation rights shall automatically
become fully exercisable. In addition, at any time prior to or after a Change
in Control, the Committee may accelerate awards and waive conditions and
restrictions on any awards to the extent it may determine appropriate.
U.S. FEDERAL INCOME TAX CONSEQUENCES
Nonqualified Stock Options. The grant of a Non-Qualified Option will not
result in the recognition of taxable income by the participant or in a
deduction to the Company. Upon exercise, a participant will recognize ordinary
income in an amount equal to the excess of the fair market value of the
Company's Common Stock purchased over the exercise price. The Company is
required to withhold tax on the amount of income so recognized, and a tax
deduction is allowable equal to the amount of such income (subject to the
satisfaction of certain conditions in the case of options exercised by Section
162(m) officers). Gain or loss upon a subsequent sale of any of the Company's
Common Stock received upon the exercise of a Non-Qualified Option generally
would be taxed as capital gain or loss (long-term or short-term, depending
upon the holding period of the Common Stock sold). Certain additional rules
apply if the exercise price for an option is paid in Common Stock previously
owned by the participant.
Incentive Stock Options. Upon the grant or exercise of an Incentive Stock
Option within the meaning of Section 422 of the Code, no income will be
realized by the participant for federal income tax purposes and the Company
will not be entitled to any deduction. However, the excess of the fair market
value of the Company's Common Stock as of the date of exercise over the
exercise price will constitute an adjustment to taxable income for purposes of
the alternative minimum tax. If the shares of the Company's Common Stock are
not disposed of within the one-year period beginning on the date of the
transfer of such Common Stock to the participant, or within the two-year
period beginning on the date of grant of the Option, any profit realized by
the participant upon the disposition of such Common Stock will be taxed as
long-term capital gain and no deduction will be
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<PAGE>
allowed to the Company. If the shares of the Company's Common Stock are
disposed of within the one-year period from the date of transfer of such
Common Stock to the participant or within the two-year period from the date of
grant of the option, the excess of the fair market value of the Common Stock
upon the date of exercise or, if less, the fair market value on the date of
disposition, over the exercise price will be taxable as ordinary income of the
participant at the time of disposition, and a corresponding deduction will be
allowable. Certain additional rules apply if the exercise price for an option
is paid in Common Stock previously owned by the participant. If an option
intended to qualify as an incentive stock option is exercised by a person who
was not continually employed by the Company or certain of its affiliates from
the date of grant of such option to a date not more than three months prior to
such exercise (or one year if such person is disabled), then such option will
not qualify as an incentive stock option and will instead be taxed as a Non-
Qualified Option, as described above.
OPTION GRANTS
In May 1998, the Company granted Non-Qualified Options under the 1998 Stock
Plan to the following persons who will be officers of the Company following
the consummation of the Offering: Glenn F. Gillam ( shares), Murray Rosen
( shares), Sidney D. Rogers, Jr. ( shares), Thomas Studer ( shares) and
Douglas H. Holstein ( shares). These options were issued at an exercise
price of $ . One-fourth of these options become exercisable upon
consummation of the Offering, and one-fourth become exercisable on each of the
first, second and third anniversaries of the date of grant. See "Certain
Transactions." In addition, in connection with the Offering, the Company will
grant to employees of the Company options under the 1998 Stock Plan to
purchase an aggregate of shares of Common Stock. Each such option will have
a per share price equal to the Offering price, will expire ten years from the
date of grant and generally will become exercisable as to one-fourth of the
shares covered by such option on each of the first, second, third and fourth
anniversaries of the date of grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All executive officer compensation decisions will be made by the Committee.
The Committee will review and make recommendations regarding the compensation
for management and key employees of the Company, including salaries and
bonuses.
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CERTAIN TRANSACTIONS
ORGANIZATION OF THE COMPANY
The Combination will be accomplished through separate purchases by the
Company of the stock of each of Merkert and Rogers. As a result, after the
closing of the Combination and the Offering (the "Closing"), each of Merkert
and Rogers will exist as a separate subsidiary of the Company. Each of the
stock purchase agreements provides for the Company to pay the stockholders of
Merkert and Rogers, respectively, (i) a fixed amount of cash at the Closing
and (ii) shares of Common Stock at the Closing having a fixed dollar value,
with the final number of shares being determined by the Offering price.
The aggregate consideration to be paid by the Company in the Combination
consists of approximately $86.3 million consisting of $53.2 million in cash
(representing approximately % of the net proceeds of the Offering) and
shares of Common Stock (assuming an initial public offering price of $ per
share).
The consideration to be paid for each of Merkert and Rogers was determined
through arm's length negotiations between the Company and representatives of
each of Merkert and Rogers. The factors considered by the parties in
determining the consideration to be paid included, among others, the
historical revenues and pro forma EBITDA of each of Merkert and Rogers.
In connection with the Combination, the following principals of Merkert and
Rogers who will become directors and executive officers of the Company
immediately following the Closing will receive the following:
<TABLE>
<CAPTION>
SHARES OF
CASH COMMON STOCK
----- ------------
<S> <C> <C>
Gerald R. Leonard............................................
Douglas H. Holstein..........................................
Sidney D. Rogers, Jr.........................................
Marty D. Carter..............................................
Glenn F. Gillam..............................................
</TABLE>
Messrs. Holstein and Carter, together with certain other former stockholders
of Rogers, will receive in connection with the Combination (i) the net
proceeds of approximately $3,000,000 resulting from the sale by Rogers to a
third party of its Charlotte, North Carolina headquarters, (ii) cash bonuses
in an aggregate amount equal to approximately $950,000 based upon certain
income tax refunds receivable by the Company and (iii) cash bonuses,
previously accrued by Rogers, in the aggregate amount of approximately
$600,000.
The consummation of the Combination is subject to completion of the Offering
and customary conditions including, among others, the continuing accuracy at
the Closing of the representations and warranties made by Merkert or Rogers,
as appropriate, and the Company in the stock purchase agreements, receipt of
all necessary consents and approvals, delivery of opinions of counsel, the
performance of covenants included in the agreements relating to the
Combination, and the nonexistence of a material adverse change in the business
of each of Merkert and Rogers. The stock purchase agreements provide that the
stockholders of Merkert and Rogers, respectively, will indemnify the Company
against certain liabilities, including breaches of Merkert's or Rogers'
representations and warranties thereunder, as appropriate.
In connection with the founding and organization of the Company, Monroe &
Company II, LLC purchased shares of Common Stock for an aggregate purchase
price of approximately $150. As a result of such purchase, Monroe & Company
II, LLC beneficially owns 1,500 shares of the Common Stock. On May 11, 1998,
Monroe & Company, LLC entered into a consulting agreement with the Company
pursuant to which Monroe & Company, LLC was engaged to render certain business
consulting, financial advisory and investment banking services to the Company
on an exclusive basis for three years. Pursuant to the consulting agreement,
Monroe & Company, LLC will be paid a financial advisory fee equal to (i) 5% of
any consideration paid by the Company in connection with any acquisition by
the Company ("Consideration") up to $1 million, plus (ii) 4% of the
Consideration paid in excess of $1 million and up to $2 million, plus (iii) 3%
of the Consideration paid in excess
44
<PAGE>
of $2 million and up to $3 million, plus (iv) 2% of the Consideration paid in
excess of $3 million and up to $4 million, plus (v) 1% of the Consideration
paid in excess of $4 million. Monroe & Company, LLC will also be paid a fee
equal to 0.75% of any principal amount committed under a senior credit
facility for the Company from a lending institution. An additional fee shall
be payable to Monroe & Company, LLC upon increases in such amount or upon
refinancings with a new lender during the term of the consulting agreement.
Monroe & Company, LLC will also be entitled to consulting fees based on
projects and fee schedules to be mutually agreed upon by Monroe & Company, LLC
and the independent directors of the Company.
During 1997, members of the management team and certain consultants were
assembled by Monroe & Company II, LLC to pursue the consolidation of companies
in the food brokerage industry. Mr. Monroe, Non-Executive Chairman of the
Board of the Company, is a member and the sole manager of Monroe & Company II,
LLC and Monroe & Company, LLC, and Mr. Grace, a director of the Company, is a
member of Monroe & Company II, LLC. Monroe & Company II, LLC provided the
Company with expertise regarding the consolidation process. Expenses paid by
the Company prior to the Closing in connection with the Combination and the
Offering have been financed with funds advanced to the Company by Monroe &
Company II, LLC. Outstanding advanced amounts bear interest at the applicable
federal rate in effect under Section 1274(d) of the Internal Revenue Code of
1986, as amended, as of the respective dates on which the advances were made,
compounded semi-annually. The Company will repay the advanced amounts plus
interest to Monroe & Company II, LLC at the Closing out of the proceeds of the
Offering. See "Use of Proceeds." As of April 1, 1998, Monroe & Company II, LLC
had advanced approximately $500,000 to the Company for such expenses.
In April 1998 Gerald R. Leonard purchased shares of Common Stock from the
Company for an aggregate purchase price of $1,500,000. The purchase price for
such stock was paid by a promissory note from Mr. Leonard to the Company in
the principal amount of $1,500,000 (the "Leonard Note"). The Leonard Note
provides that amounts outstanding thereunder will bear interest at a rate of
6% per annum, and that the entire principal amount and accrued interest will
be due and payable on April 8, 2003. Mr. Leonard's obligations under the
Leonard Note are secured by the shares of Common Stock purchased thereby.
The Leonard Note is a recourse obligation of Mr. Leonard with respect to the
sum of (i) the outstanding principal amount from time to time less $750,000
(but not less that $0) and (ii) one-half of the accrued and unpaid interest at
such time.
In May 1998 the Company granted Non-Qualified Options under the 1998 Stock
Plan to the following persons who will be officers of the Company following
the consummation of the Offering: Glenn F. Gillam ( shares), Murray Rosen
( shares), Sidney D. Rogers, Jr. ( shares), Thomas Studer ( shares)
and Douglas H. Holstein ( shares). These options were issued at an exercise
price of $ . One-fourth of these options become exercisable upon
consummation of the Offering, and one-fourth become exercisable on each of the
first, second and third anniversaries of the date of grant.
The Company and Messrs. Monroe and Leonard are parties to a Registration
Rights Agreement dated May 18, 1998, pursuant to which Messrs. Monroe and
Leonard have the right, subject to certain restrictions, beginning on the date
that is 180 days following the completion of the Offering, to cause the
Company to effect a registration of their shares of Common Stock under the
Securities Act of 1933, as amended (the "1933 Act"), on not more than two
occasions. Messrs. Monroe and Leonard also have certain "piggy back"
registration rights in the event the Company registers any of its securities
for either itself or for security holders exercising their registration
rights.
The Company will also enter into Registration Rights Agreements with the
former stockholders of Merkert and Rogers, respectively, pursuant to which
such former stockholders will have the right, subject to certain restrictions,
to include their shares of Common Stock received in the Combination in a
registration statement filed by the Company under the 1933 Act.
COMPANY POLICY
The Company's policy is that any future transactions with directors,
officers, employees or affiliates of the Company be approved in advance by a
majority of the Company's Board of Directors, including a majority of the
disinterested members of the Board, and be on terms no less favorable to the
Company than the Company could obtain from non-affiliated parties.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock after giving effect to the
Combination, and as adjusted to reflect the Offering, by (i) each person known
by the Company to beneficially own five percent or more of the outstanding
shares of the Common Stock, (ii) each director, nominee for director and
certain executive officers of the Company, and (iii) all directors, nominees
for director and executive officers of the Company as a group. Except as
otherwise indicated, the Company believes that the beneficial owners of the
Common Stock listed below, based on information furnished by such owners, have
sole investment and voting power with respect to such shares, subject to
community property laws where applicable.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
SHARES BENEFICIALLY OWNED
BENEFICIALLY ------------------------------
NAME OF BENEFICIAL OWNER(1) OWNED(2)(3) BEFORE OFFERING AFTER OFFERING
- --------------------------- ------------ --------------- --------------
<S> <C> <C> <C>
Gerald R. Leonard..................
James L. Monroe....................
Douglas H. Holstein................
Sidney D. Rogers, Jr...............
Marty D. Carter....................
Glenn F. Gillam....................
Edward P. Grace, III...............
James A. Schlindwein...............
All directors, director nominees
and executive officers as a group
(8 persons).......................
</TABLE>
- --------
* less than 1%
(1) Unless otherwise indicated, the mailing address for each stockholder and
director is c/o Monroe, Inc., 8 Cedar Street, Suite 54A, Woburn,
Massachusetts 01801.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares of
Common Stock beneficially owned by a person, shares of Common Stock
subject to options held by that person that are currently exercisable or
exercisable within 60 days of this Prospectus are deemed outstanding. As
of , a total of shares of Common Stock were issued and outstanding.
(3) Share information assumes an initial public offering price of $ per
share. The acquisition agreements for each of Merkert and Rogers specify
the aggregate dollar values, but not the share amounts, of the Common
Stock to be received by their stockholders in the Combination. As a
result, if the initial public offering price is less or greater than $ ,
the stockholders of Merkert and Rogers, respectively (and, in particular,
Messrs. , , and ), will receive a larger or smaller number of
shares of Common Stock, respectively. In addition, the Company will
declare a stock dividend on all outstanding Common Stock prior to the
closing of the Combination such that, without giving effect to the
Offering (but giving effect to the Combination), there will be outstanding
a total of shares of Common Stock. The size of the stock dividend
(and, as a result, the number of shares of Common Stock held by Monroe &
Company II, LLC) will vary if the initial offering price is less or
greater than $ , with the size of the dividend increasing if the initial
public offering price increases and decreasing if the initial public
offering price decreases.
46
<PAGE>
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
The authorized capital stock of the Company consists of 50,000,000 shares of
Common Stock and 1,000,000 shares of undesignated preferred stock issuable in
series by the Board of Directors ("Preferred Stock"). As of , 1998, there
were shares of Common Stock outstanding, that were held of record by
stockholders. There will be shares of Common Stock outstanding after
giving effect to the shares of Common Stock offered to the public hereby
(assuming no exercise of the Underwriters' over-allotment options and no
exercise of outstanding options). The following summary description of the
capital stock of the Company does not purport to be complete and is qualified
in its entirety by reference to the Company's Amended and Restated Certificate
of Incorporation (the "Certificate") and Amended and Restated By-laws (the
"By-laws"), copies of which are filed as exhibits to the Registration
Statement of which this Prospectus is a part. The Certificate and By-laws have
been adopted by the stockholders of the Company and the Board of Directors.
Common Stock. The holders of Common Stock are entitled to one vote per share
on all matters to be voted on by stockholders. Holders of Common Stock are
entitled to receive such dividends, if any, as may be declared from time to
time by the Board of Directors from funds legally available therefor. See
"Dividend Policy." The possible issuance of Preferred Stock with a preference
over Common Stock as to dividends could impact the dividend rights of holders
of Common Stock. Holders of Common Stock are not entitled to cumulative voting
rights. Therefore, the holders of a majority of the votes cast in the election
of directors can elect all of the directors then standing for election,
subject to the rights of the holders of any then outstanding Preferred Stock,
if and when issued. The holders of Common Stock have no preemptive or other
subscription rights, and there are no conversion rights or redemption or
sinking fund provisions with respect to the Common Stock. Upon the voluntary
or involuntary liquidation, dissolution or winding up of the Company, the net
assets of the Company shall be distributed pro rata to the holders of the
Common Stock in accordance with their respective rights and interests, subject
to the rights and interests of the holders of Preferred Stock, if and when
issued. All outstanding shares of Common Stock, including the shares of Common
Stock offered hereby, are, or will be upon consummation of the Offering, fully
paid and non-assessable.
The Certificate and By-laws provide, subject to the rights of the holders of
any Preferred Stock then outstanding, that the number of directors shall be
fixed by the Board of Directors. The directors, other than those who may be
elected by the holders of any Preferred Stock, are divided into three classes,
as nearly equal in number as possible, with each class serving for a three-
year term. Subject to any rights of the holders of Preferred Stock to elect
directors and to remove any director whom the holders of any such stock had
the right to elect, any director of the Company may be removed from office
only with cause and by the affirmative vote of at least two-thirds of the
total votes which would be eligible to be cast by stockholders in the election
of such director. See "Management--Board of Directors."
47
<PAGE>
The Company will apply to list the Common Stock on The New York Stock
Exchange under the symbol "MKR."
Undesignated Preferred Stock. The Board of Directors is authorized, without
further action of the stockholders of the Company, to issue up to 1,000,000
shares of Preferred Stock in classes or series and to fix the designations,
powers, preferences and the relative, participating, optional or other special
rights of the shares of each series and any qualifications, limitations and
restrictions thereon as set forth in the Certificate. Any such Preferred Stock
issued by the Company may rank prior to the Common Stock as to dividend
rights, liquidation preference or both, may have full or limited voting rights
and may be convertible into shares of Common Stock.
The purpose of authorizing the Board of Directors to issue Preferred Stock
is, in part, to eliminate delays associated with a stockholder vote on
specific issuances. The issuance of Preferred Stock could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring or seeking to acquire, a significant portion of the
outstanding Common Stock.
CERTAIN PROVISIONS OF CERTIFICATE AND BY-LAWS
General. A number of provisions of the Company's Certificate and By-laws
concern matters of corporate governance and the rights of stockholders.
Certain of these provisions, as well as the ability of the Board of Directors
to issue shares of Preferred Stock and to set the voting rights, preferences
and other terms thereof, may be deemed to have an anti-takeover effect and may
discourage takeover attempts not first approved by the Board of Directors,
including takeovers which certain stockholders may deem to be in their best
interests. To the extent takeover attempts are discouraged, temporary
fluctuations in the market price of the Company's Common Stock, which may
result from actual or rumored takeover attempts, may be inhibited. These
provisions, together with the classified Board of Directors and the ability of
the Board of Directors to issue Preferred Stock without further stockholder
action, also could delay or frustrate the removal of incumbent directors or
the assumption of control by stockholders, even if such removal or assumption
would be beneficial to stockholders of the Company. These provisions also
could discourage or make more difficult a merger, tender offer or proxy
contest, even if a transaction or contest could be favorable to the interests
of stockholders, and could potentially depress the market price of the Common
Stock. The Board of Directors believes that these provisions are appropriate
to protect the interests of the Company and all of its stockholders. The Board
of Directors has no present plans to adopt any other measures or devices which
may be deemed to have an "anti-takeover effect."
Meetings of Stockholders. The Company's By-laws provide that a special
meeting of stockholders may be called only by the Board of Directors unless
otherwise required by law. The Company's By-laws provide that only those
matters set forth in the notice of the special meeting may be considered or
acted upon at that special meeting, unless otherwise provided by law. In
addition, the Company's By-laws set forth certain other requirements, such as
advance notice and informational requirements and time limitations on any
director nomination or any new business which a stockholder wishes to propose
for consideration at an annual meeting of stockholders.
No Stockholder Action by Written Consent. The Certificate provides that for
so long as the Company has a class of stock registered pursuant to the
provisions of the Securities Exchange Act of 1934, as amended, any action
required or permitted to be taken by the stockholders of the Company at an
annual or special meeting of stockholders must be effected at a duly called
meeting and may not be taken or effected by a written consent of stockholders
in lieu thereof.
Indemnification and Limitation of Liability. The By-laws provide that
directors and officers of the Company shall be, and in the discretion of the
Board of Directors non-officer employees may be, indemnified by the Company to
the fullest extent authorized by Delaware law, as it now exists or may in the
future be amended, against all expenses and liabilities reasonably incurred in
connection with service for or on behalf of the Company, and further permits
the advancing of expenses incurred in defense of claims. The By-laws also
provide that the right of directors and officers to indemnification shall be a
contractual right and shall not be exclusive of
48
<PAGE>
any other right now possessed or hereafter acquired under any by-law,
agreement, vote of stockholders or otherwise. The Certificate contains a
provision permitted by Delaware law that generally eliminates the personal
liability of directors for monetary damages for breaches of their fiduciary
duty, including breaches involving negligence or gross negligence in business
combinations, unless the director has breached his or her duty of loyalty,
failed to act in good faith, engaged in intentional misconduct or a knowing
violation of law, paid a dividend or approved a stock repurchase in violation
of the Delaware General Corporation Law or obtained an improper personal
benefit. This provision does not alter a director's liability under the
federal securities laws. In addition, this provision does not affect the
availability of equitable remedies, such as an injunction or rescission, for
breach of fiduciary duty.
Amendment of the Certificate. The Certificate provides that an amendment
thereof must first be approved by a majority of the Board of Directors and
(with certain exceptions) thereafter approved by the holders of a majority of
the outstanding shares entitled to vote on such amendment, and the affirmative
vote of a majority of the outstanding shares of each class entitled to vote
thereon as a class; provided, however, that the affirmative vote of not less
than two-thirds of the outstanding shares entitled to vote on such amendment,
and the affirmative vote of not less than two-thirds of the outstanding shares
of each class entitled to vote thereon as a class, is required to amend
provisions of the Certificate relating to the establishment, composition and
powers of the Board of Directors and amendments to the Certificate.
Amendment of By-laws. The Certificate provides that the By-laws may be
amended or repealed by the Board of Directors or by the stockholders. Such
action by the Board of Directors requires the affirmative vote of a majority
of the directors then in office. Such action by the stockholders requires the
affirmative vote of the holders of at least two-thirds of the total votes
present and eligible to be cast by holders of voting stock voting as a single
class with respect to such amendment or repeal at an annual meeting of
stockholders or a special meeting called for such purpose, unless the Board of
Directors recommends that the stockholders approve such amendment or repeal at
such meeting, in which case such amendment or repeal shall only require the
affirmative vote of a majority of the total votes present and eligible to be
cast by holders of voting stock voting as a single class with respect to such
amendment or repeal.
Ability to Adopt Stockholder Rights Plan. The Board of Directors may in the
future resolve to issue shares of Preferred Stock or rights to acquire such
shares, to implement a stockholder rights plan which creates voting or other
impediments or under which shares are distributed to a third-party investor, a
group of investors or stockholders or issued to an employee stock ownership
plan to discourage persons seeking to gain control of the Company by means of
a merger, tender offer, proxy contest or otherwise, if such change in control
is not in the best interests of the Company and its stockholders. The Board of
Directors has no present intention of adopting a stockholder rights plan and
is not aware of any attempt to obtain control of the Company.
STATUTORY BUSINESS COMBINATION PROVISION
Upon completion of the Offering, the Company will be subject to the
provisions of Section 203 of the Delaware General Corporation Law ("Section
203"). Section 203 provides, with certain exceptions, that a Delaware
corporation may not engage in any of a broad range of business combinations
with a person, or an affiliate or associate of such person, who is an
"interested stockholder" for a period of three years from the date that such
person became an interested stockholder unless: (i) the transaction resulting
in a person becoming an interested stockholder, or the business combination,
is approved by the board of directors of the corporation before the person
becomes an interested stockholder; (ii) the interested stockholder acquired
85% or more of the outstanding voting stock of the corporation in the same
transaction that makes it an interested stockholder (excluding shares owned by
persons who are both officers and directors of the corporation, and shares
held by certain employee stock ownership plans); or (iii) on or after the date
the person becomes an interested stockholder, the business combination is
approved by the corporation's board of directors and by the holders of at
least 66 2/3% of the corporation's outstanding voting stock at an annual or
special meeting, excluding shares owned by the interested stockholder. Under
Section 203, an "interested stockholder" is defined (with certain
49
<PAGE>
limited exceptions) as any person that is (i) the owner of 15% or more of the
outstanding voting stock of the corporation or (ii) an affiliate or associate
of the corporation and was the owner of 15% or more of the outstanding voting
stock of the corporation at any time within the three-year period immediately
prior to the date on which it is sought to be determined whether such person
is an interested stockholder.
A corporation may, at its option, exclude itself from the coverage of
Section 203 by amending its certificate of incorporation or by-laws by action
of its stockholders to exempt itself from coverage; provided, however, that
such by-law or charter amendment shall not become effective until 12 months
after the date the stockholders adopt such exclusion. Neither the Certificate
nor the By-laws contains any such exclusion.
TRANSFER AGENT AND REGISTRAR
BankBoston, N.A. is the transfer agent and registrar for the Company's
Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Combination and the Offering, the Company will have
shares of Common Stock outstanding (assuming the Underwriters' over-
allotment options are not exercised), excluding (i) shares issuable upon
exercise of options to purchase shares of Common Stock outstanding at ,
1998 under the 1998 Stock Plan and (ii) shares of Common Stock reserved
for issuance upon grant or exercise of future awards under the 1998 Stock
Plan, subject to increase upon consummation of the Offering. Of the total
shares outstanding, only the shares sold in the Offering will be freely
tradeable without restriction or further registration under the Securities
Act, except for any shares purchased by affiliates of the Company, which will
be subject to the limitations of Rule 144 under the Securities Act ("Rule
144"). All of the remaining shares outstanding (the "Restricted Shares")
may be sold only pursuant to an effective Registration Statement filed by the
Company or an applicable exemption, including sales meeting the applicable
requirements of Rule 144 under the Securities Act.
None of the shares of Common Stock owned by current stockholders of the
Company will be eligible for sale in accordance with Rule 144 prior to ,
1999, at which such time all shares of Common Stock will be eligible for
sale in the public market.
In general, Rule 144 as currently in effect provides that any person (or
persons whose shares are aggregated), including a person who may be deemed an
"affiliate" of the Company (as defined under the Securities Act), whose
Restricted Shares have been fully paid for and held for at least one year from
the later of the date of issuance by the Company or acquisition from an
affiliate of the Company is entitled to sell, within any three-month period, a
number of shares that does not exceed the greater of (i) the average weekly
trading volume of the Common Stock during the four calendar weeks preceding
the date on which notice of such sale is filed on Form 144 with the Securities
and Exchange Commission (the "Commission") and (ii) 1% of the shares of Common
Stock then outstanding (approximately shares upon consummation of the
Offering). In addition, sales under Rule 144 are subject to certain other
restrictions regarding the manner of sale, required notice and availability of
public information concerning the Company. Persons who are not affiliates at
the time of sale and who have not been affiliates of the Company for at least
90 days prior to a sale, and who have beneficially owned the shares proposed
to be sold for at least two years (including the holding period of any prior
owner other than an affiliate), are entitled to sell such shares under Rule
144(k) without the limitations referenced above. Affiliates, including members
of the Board of Directors and senior management, continue to be subject to the
limitations under Rule 144, including volume of sale limitations for all
shares held by them, regardless of the time period held. Shares of Common
Stock sold by the Company to, among others, its employees, officers and
directors upon exercise of options granted pursuant to written compensation
plans or contracts (including certain options granted under the 1998 Stock
Plan), and in reliance on Rule 701 under the Securities Act, may be resold,
beginning 90 days after the effective date of this Prospectus, in reliance on
Rule 144 by such persons who are not affiliates subject only to the provisions
of Rule 144 regarding manner of sale,
50
<PAGE>
and by such persons who are affiliates subject to all provisions of Rule 144
except its one-year minimum holding period requirement.
Under the 1998 Stock Plan, the Company is authorized to issue options for up
to thirteen percent of the number of shares of Common Stock outstanding from
time to time, of which shares were issuable upon the exercise of
outstanding stock options. Upon consummation of the Offering, shares of
Common Stock will be reserved for issuance under the 1998 Stock Plan (
shares of Common Stock will be reserved for issuance under the 1998 Stock Plan
if the Underwriters' over-allotment options are exercised in full). See
"Management--1998 Stock Option and Incentive Plan" and "Management--Option
Grants." The Company intends to file a Registration Statement under the
Securities Act to register the shares of Common Stock reserved for issuance
under the 1998 Stock Plan. Such Registration Statement is expected to be filed
as soon as practicable after the date of this Prospectus and will become
automatically effective upon filing. Shares of Common Stock issued upon the
exercise of options under the 1998 Stock Plan after the effective date of such
Registration Statement generally will be available for sale in the open
market, subject to Rule 144 limitations with respect to affiliates, and
subject to the lock-up agreements described below.
After the closing of the Offering, the Company intends to register
additional shares of its Common Stock under the Securities Act for use by the
Company in connection with future acquisitions. Upon such registration, these
shares will generally be freely tradeable after their issuance. In some
instances, however, the Company may contractually restrict the sale of shares
issued in connection with future acquisitions.
LOCK-UP AGREEMENTS
The Company and the holders of all shares of Common Stock outstanding prior
to the Offering, including the directors and officers and the holders of
shares issued in connection with the Combination, holding in the aggregate
shares of Common Stock, expect to agree that they will not, without the prior
written consent of the U.S. Representatives, agree to sell, contract to sell
or otherwise dispose of any shares of Common Stock of the Company for a period
of 180 days after the date of this Prospectus except that (i) in the case of
the Company, stock options granted under the 1998 Stock Plan or shares issued
upon the exercise of options granted under the 1998 Stock Plan and (ii) in the
case of all such holders, the exercise of stock options under the 1998 Stock
Plan and shares of Common Stock disposed of as bona fide gifts, subject, in
each case, to any remaining portion of the lock-up period applying to any
shares so issued or transferred.
REGISTRATION RIGHTS
Following the Combination, the holders of shares of Common Stock will
have the right, in certain circumstances, to require the Company to include
their shares in a registration statement filed by the Company under the 1933
Act. In addition, the holders of shares of Common Stock have the right, in
certain circumstances, beginning on the date that is 180 days following the
consummation of the Offering, to require the Company to register their shares
of Common Stock under the 1933 Act. See "Certain Transactions."
EFFECT OF FUTURE SALES
Prior to the Offering, there has been no trading market for shares of Common
Stock, and the effect, if any, that future market sales of shares of Common
Stock or the availability of shares of Common Stock for sale will have on the
prevailing market prices for the Common Stock cannot be predicted.
Nevertheless, sales of a substantial number of shares in the public market, or
the perception that such sales could occur, could adversely affect prevailing
market prices for the Common Stock and could impair the Company's future
ability to raise capital through an offering of its equity securities. See
"Risk Factors--Possible Future Sales of Shares."
51
<PAGE>
UNDERWRITING
Certain U.S. underwriters will act as representatives (the "U.S.
Representatives") of each of the U.S. underwriters to be selected by the
Company (the "U.S. Underwriters"). Subject to the terms and conditions that
will be set forth in a U.S. purchase agreement (the "U.S. Purchase Agreement")
among the Company and the U.S. Underwriters, and concurrently with the sale of
shares of Common Stock to the International Managers (as defined below),
the Company agreed to sell to the U.S. Underwriters, and each of the U.S.
Underwriters severally and not jointly has agreed to purchase from the Company
the number of shares of Common Stock set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITER SHARES
---------------- ---------
<S> <C>
----
Total............................................................
====
</TABLE>
The Company will also enter into an international purchase agreement (the
"International Purchase Agreement") with certain underwriters outside the
United States and Canada (the "International Managers" and, together with the
U.S. Underwriters, the "Underwriters") for whom underwriters selected by the
Company will act as lead managers (the "Lead Managers"). Subject to the terms
and conditions set forth in the International Purchase Agreement, and
concurrently with the sale of shares of Common Stock to the U.S.
Underwriters pursuant to the U.S. Purchase Agreement, the Company will agree
to sell to the International Managers, and the International Managers
severally will agree to purchase from the Company, an aggregate of shares
of Common Stock. The initial public offering price per share and the total
underwriting discount per share of Common Stock will be identical under the
U.S. Purchase Agreement and the International Purchase Agreement.
In the U.S. Purchase Agreement and the International Purchase Agreement, the
several U.S. Underwriters and the several International Managers,
respectively, will agree, subject to the terms and conditions set forth
therein, to purchase all of the shares of Common Stock being sold pursuant to
each such agreement if any of the shares of Common Stock being sold pursuant
to such agreement are purchased. Under certain circumstances, under the U.S.
Purchase Agreement and the International Purchase Agreement, the commitments
of non-defaulting Underwriters may be increased. The closings with respect to
the sale of shares of Common Stock to be purchased by the U.S. Underwriters
and the International Managers will be conditioned upon one another.
The Company expects that U.S. Representatives will advise the Company that
the U.S. Underwriters propose initially to offer the shares of Common Stock to
the public at the initial public offering price set forth on the cover page of
this Prospectus, and to certain dealers at such price less a concession not in
excess of $ per share of Common Stock. The U.S. Underwriters may allow, and
such dealers may reallow, a discount not in excess of $ per share of Common
Stock on sales to certain other dealers. After the initial public offering,
the public offering price, concession and discount may be changed.
The Company will grant options to the U.S. Underwriters, exercisable for 30
days after the date of this Prospectus, to purchase up to an aggregate of
additional shares of Common Stock at the initial public offering price set
forth on the cover page of this Prospectus, less the underwriting discount.
The U.S. Underwriters may exercise these options solely to cover over-
allotments, if any, made on the sale of the Common Stock offered hereby. To
the extent that the U.S. Underwriters exercise these options, each U.S.
Underwriter will be obligated, subject to certain conditions, to purchase a
number of additional shares of Common Stock proportionate to such U.S.
Underwriter's initial amount that will be reflected in the foregoing table.
The Company also will grant options to the International Managers, exercisable
for 30 days after the date of this Prospectus, to purchase up to an aggregate
of additional shares of Common Stock to cover over-allotments, if any, on
terms similar to those granted to the U.S. Underwriters.
52
<PAGE>
At the request of the Company, the Underwriters will reserve for sale, at
the initial public offering price, up to 5% of the shares offered hereby to be
sold to certain directors, officers, and employees of the Company and certain
business associates of the Company. The number of shares of Common Stock
available for sale to the general public will be reduced to the extent such
persons purchase such reserved shares. Any reserved shares which are not
orally confirmed for purchase within one day of the pricing of the Offering
will be offered by the U.S. Underwriters to the general public on the same
terms as the other shares offered hereby.
The Company and holders of all shares of Common Stock outstanding prior to
the Offering, including the Company's executive officers and directors and the
holders of shares of Common Stock issued in connection with the Combination
will agree, subject to certain exceptions, not to directly or indirectly (i)
offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant for the sale of or otherwise dispose of or transfer any shares of
Common Stock or securities convertible into or exchangeable or exercisable for
Common Stock, whether now owned or thereafter acquired by the person executing
the agreement or registration statement under the Securities Act with respect
to the foregoing or (ii) enter into any swap or other agreement that
transfers, in whole or in part, the economic consequence of ownership of the
Common Stock whether any such swap or transaction is to be settled by delivery
of Common Stock or other securities, in cash or otherwise, without the prior
written consent of the lead Underwriter on behalf of the Underwriters for a
period of 180 days after the date of this Prospectus; provided, however, that
the Company may issue and sell Common Stock pursuant to the 1998 Stock Plan.
See "Shares Eligible for Future Sale."
The U.S. Underwriters and the International Managers will enter into an
intersyndicate agreement (the "Intersyndicate Agreement") that provides for
the coordination of their activities. Pursuant to the Intersyndicate
Agreement, the U.S. Underwriters and the International Managers will be
permitted to sell shares of Common Stock to each other for purposes of resale
at the initial public offering price, less an amount not greater than the
selling concession. Under the terms of the Intersyndicate Agreement, the U.S.
Underwriters and any dealer to whom they sell shares of Common Stock will not
offer to sell or sell shares of Common Stock to persons who are non-U.S. or
non-Canadian persons or to persons they believe intend to resell to persons
who are non-U.S. or non-Canadian persons, and the International Managers and
any dealer to whom they sell shares of Common Stock will not offer to sell or
sell shares of Common Stock to U.S. persons or to Canadian persons or to
persons they believe intend to resell to U.S. or Canadian persons, except in
the case of transactions pursuant to the Intersyndicate Agreement.
Prior to the Offering, there has been no public market for the Common Stock
of the Company. The initial public offering price will be determined through
negotiations among the Company, the U.S. Representatives and the Lead
Managers. The factors considered in determining the initial public offering
price, in addition to prevailing market conditions, are price-earnings ratios
of publicly traded companies that the U.S. Representatives believe to be
comparable to the Company, certain financial information of the Company, the
history of, and the prospects for, the Company and the industry in which it
competes, and an assessment of the Company's management, its past and present
operations, the prospects for, and timing of, future revenues of the Company,
the present state of the Company's development, and the above factors in
relation to market value and various valuation measures of other companies
engaged in activities similar to the Company. There can be no assurance that
an active trading market will develop for the Common Stock or that the Common
Stock will trade in the public market subsequent to the Offering at or above
the initial public offering price. See "Risk Factors--Absence of Public
Market; Determination of Offering Price and Fluctuations in Market Price."
The Company expects to apply to list the Common Stock on the New York Stock
Exchange under the symbol "MKR." In order to meet the requirements for listing
of the Common Stock on that exchange, the U.S. Underwriters and the
International Managers will undertake to sell lots of 100 or more shares to a
minimum of 2,000 beneficial owners.
Sales of Common Stock to any accounts over which the Underwriters exercise
discretionary authority will not exceed 5% of the number of shares being
offered hereby.
53
<PAGE>
The Company will agree to indemnify the U.S. Underwriters and the
International Managers against certain liabilities, including certain
liabilities under the Securities Act, or to contribute to payments the U.S.
Underwriters and International Managers may be required to make in respect
thereof.
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters
and certain selling group members to bid for and purchase the Common Stock. As
an exception to these rules, the U.S. Representatives are permitted to engage
in certain transactions that stabilize the price of the Common Stock. Such
transactions consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the Offering, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the U.S.
Representatives may reduce that short position by purchasing Common Stock in
the open market. The U.S. Representatives may also elect to reduce any short
position by exercising all or part of the over-allotment option described
above.
The U.S. Representatives may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the U.S.
Representatives purchase shares of Common Stock in the open market to reduce
the Underwriters' short position or to stabilize the price of the Common
Stock, they may reclaim the amount of the selling concession from the
Underwriters and selling group members who sold those shares as part of the
Offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of the Common Stock to the extent
that it discourages resales of the Common Stock.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Common Stock. In
addition, neither the Company nor any of the Underwriters makes any
representation that the U.S. Representatives will engage in such transactions
or that such transactions, once commenced, will not be discontinued without
notice.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Common Stock
offered hereby will be passed upon for the Company by Goodwin, Procter & Hoar
LLP, Boston, Massachusetts. Certain legal matters relating to the Offering
will be passed upon for the Underwriters by counsel to the Underwriters.
EXPERTS
The financial statements included in this Prospectus and elsewhere in the
Registration Statement, to the extent of and for the periods indicated in the
reports, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said reports. Their report on the financial statements of Merkert
Enterprises, Inc. and subsidiary as of and for the three years ended December
31, 1997, dated May 22, 1998 and included herein, includes a qualification
stating that there exists a substantial doubt about Merkert's ability to
continue as a going concern.
54
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain portions of which are omitted as permitted by
the rules and regulations of the Commission. For further information
pertaining to the Company and the Common Stock offered hereby, reference is
made to the Registration Statement, including the exhibits thereto and the
financial statements, notes and schedules filed as a part thereof. Statements
contained in this Prospectus regarding the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement or such other documents,
each such statement being qualified in all respects by such reference.
Upon completion of the Offering, the Company will be subject to the
informational requirements of the Securities Exchange Act of 1934, as amended,
and, in accordance therewith, will file reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information, as well as the Registration Statement and the exhibits and
schedules thereto, may be inspected, without charge, at the public reference
facility maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
located at Seven World Trade Center, New York, New York 10048 and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511. Copies of such material may also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. Such materials can also be inspected at the offices of
the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005
or on the Commission's site on the Internet at http://www.sec.gov.
55
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Basis of Presentation................................................... F-2
Notes to Unaudited Pro Forma Combined Financial Statements.............. F-3
Pro Forma Combined Balance Sheet as of March 31, 1998 and notes thereto
(unaudited)............................................................ F-4
Pro Forma Combined Statement of Operations for the Year Ended December
31, 1997 and notes thereto (unaudited)................................. F-6
Pro Forma Combined Statement of Operations for the Three Months Ended
March 31, 1998 and notes thereto (unaudited)........................... F-8
HISTORICAL FINANCIAL STATEMENTS
MERKERT AMERICAN CORPORATION
Report of Independent Public Accountants................................ F-10
Balance Sheet........................................................... F-11
Notes to Financial Statement............................................ F-12
MERKERT ENTERPRISES, INC. AND SUBSIDIARY
Report of Independent Public Accountants................................ F-15
Consolidated Balance Sheets............................................. F-16
Consolidated Statements of Operations................................... F-17
Consolidated Statements of Stockholders' Deficit........................ F-18
Consolidated Statements of Cash Flows................................... F-19
Notes to Consolidated Financial Statements.............................. F-20
ROGERS-AMERICAN COMPANY, INC.
Report of Independent Public Accountants................................ F-30
Consolidated Balance Sheets............................................. F-31
Consolidated Statements of Operations................................... F-32
Consolidated Statements of Stockholders' Equity......................... F-33
Consolidated Statements of Cash Flows................................... F-34
Notes to Consolidated Financial Statements.............................. F-35
</TABLE>
F-1
<PAGE>
MERKERT AMERICAN CORPORATION, MERKERT AND ROGERS
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The following unaudited pro forma combined financial statements give effect
to the acquisitions by Merkert American Corporation (the "Company") of the
outstanding capital stock of Merkert Enterprises, Inc. ("Merkert") and Rogers
American Company, Inc. ("Rogers"). These acquisitions will occur
simultaneously with the closing of the Company's initial public Offering (the
"Offering") and will be accounted for using the purchase method of accounting.
Merkert American Corporation has been designated as the accounting acquiror.
The unaudited pro forma combined balance sheet gives effect to the
Combination and the Offering as if they had occurred on March 31, 1998. The
unaudited pro forma combined statement of operations for the year ended
December 31, 1997 and the three months ended March 31, 1998 give effect to
these transactions as if they had occurred on January 1, 1997.
The pro forma adjustments discussed herein are based on estimates, available
information and certain assumptions and may be revised as additional
information becomes available. The pro forma financial data do not purport to
represent what the Company's financial position or results of operations would
actually have been if such transactions had in fact occurred on those dates
and are not necessarily representative of the Company's financial position or
results of operations of the Company for any future period. The unaudited pro
forma combined financial statements should be read in conjunction with the
other financial statements and notes thereto included elsewhere in this
Prospectus. See "Risk Factors" included elsewhere herein.
F-2
<PAGE>
MERKERT AMERICAN CORPORATION, MERKERT AND ROGERS
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. GENERAL
Merkert American Corporation was founded to become a leading national food
broker. The Company has conducted no operations to date and will acquire
Merkert and Rogers concurrently with and as a condition of this Offering.
The historical financial statements reflect the financial position and
results of operations of Merkert and Rogers and were derived from the Merkert
and Rogers financial statements where indicated. The periods included in these
financial statements are as of March 31, 1998 and for the twelve months ended
December 31, 1997 and for the three months ended March 31, 1998. The audited
historical financial statements are included elsewhere herein.
2. ACQUISITION OF FOUNDING COMPANIES
Concurrently with and as a condition to the consummation of this Offering,
the Company will acquire all of the outstanding capital stock of Merkert and
Rogers. The Combination will be accounted for using the purchase method of
accounting.
Upon the consummation of the Combination, the Company plans to integrate the
two companies. As part of this integration, the Company will consolidate
several offices in geographic locations in which both Merkert and Rogers
currently operate. The Company anticipates achieving significant savings
associated with these consolidations including payroll and other operating
costs associated with reduced headcount and office expenses. In addition, the
Company expects to eliminate several executive, selling and general
administrative personnel that the management of the Company believe will no
longer be required upon the integration.
The estimated results of the Company's plans of integration are directly
attributable to the Combination and accordingly are included in the
accompanying Pro forma Combined Financial Statements, assuming each of the
described events occurs in conjunction with the Offering.
Prior to the Combination, Rogers intends to distribute certain non-operating
assets including the cash surrender value of life insurance policies and the
Rogers' corporate headquarters building to certain selling shareholders of
Rogers. In addition, these shareholders will assume the mortgage note on the
building. Also, the principal shareholders of Rogers have agreed to transfer a
portion of their shares of common stock and Rogers will reissue those shares
to certain minority shareholders to compensate those employees for valuable
prior services. Rogers will record a compensation charge for each of these
events in their financial statements at the date of these events.
Upon the Combination, Merkert intends to settle the employment contracts of
two executives which requires a cash payment of approximately $1,500. Merkert
will record a compensation charge for this amount in their financial
statements at that date.
The consideration to be paid in cash and in shares of Common Stock to the
common stockholders of Merkert and Rogers is as follows: Merkert: cash of
$27,550 and Common Stock of $23,631; Rogers, cash of $25,635 and Common Stock
of $9,450. For purposes of computing the estimated purchase price for
accounting purposes, the fair value of the shares is determined by applying a
15% discount to the expected market value of the shares issued in connection
with the Offering due to restrictions on the sale and transferability of the
shares issued. The shares issued in the Combination will be unregistered
shares. Accordingly, unless registered, these shares cannot be sold except
under Rule 144 or another applicable exemption from registration under the
Securities Act of 1933, as amended (the "1933 Act"). Additionally, the shares
are subject to a six-month contractual lock-up in favor of the Underwriters.
Allocations of the purchase prices are preliminary and subject to change. The
excess of the purchase price over the fair value of the net liabilities
assumed has been assigned to goodwill, subject to an appraisal of the assets.
F-3
<PAGE>
PRO FORMA COMBINED BALANCE SHEET
MARCH 31, 1998
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS FOR PRO FORMA ADJUSTMENTS FOR AS
MERKERT ROGERS COMPANY THE COMBINATION COMBINED THE OFFERING ADJUSTED
------- ------ ------- --------------- --------- --------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents............ 334 494 500 1,328 12,715 (e) 14,043
Restricted cash......... 639 682 1,321 1,321
Accounts Receivable,
net.................... 16,018 10,301 26,319 26,319
Inventories............. 1,659 -- 1,659 1,659
Deferred Income taxes... -- 639 639 639
Prepaid expenses and
other.................. 2,108 240 289 2,637 (289) (e) 2,348
------- ------ --- ------- ------- ------- -------
Total current as-
sets................ 20,758 12,356 789 -- 33,903 12,551 46,329
Plant and equipment,
net.................... 12,094 5,966 (3,800) (a) 14,260 14,260
Goodwill and other
Intangibles, net....... 23,031 17,907 91,565 (b) 132,503 132,503
Deferred income taxes... -- 149 149 149
Other assets............ 765 3,258 (3,239) (a) 784 784
--
------- ------ --- ------- ------- ------- -------
Total assets......... 56,648 39,636 789 84,526 181,599 12,426 194,025
======= ====== === ======= ======= ======= =======
LIABILITIES AND
STOCKHOLDERS' EQUITY
Accounts payable and
accrued liabilities.... 33,341 5,380 789 1,500 (a) 35,510 (2,289) (e) 33,221
(5,500) (b)
Current maturities of
long term debt......... 10,195 11,509 12,125 (d) 33,829 (29,600) (e) 4,229
Payable to
Stockholders........... 53,185 (b) 53,185 (53,185) (e) --
------- ------ --- ------- ------- ------- -------
Total current liabil-
ities............... 43,536 16,889 789 61,310 122,524 (85,074) 37,450
Long term debt, net of
current portion........ 24,193 22,209 (3,800) (a) 30,477 30,477
(12,125) (d)
Other................... 479 479 479
------- ------ --- ------- ------- ------- -------
Total liabilities.... 67,729 39,577 789 45,385 153,480 (85,074) 68,406
Redeemable Preferred
Stock.................. 5,720 (5,720) (c) -- --
Common stock subject to
redemption............. 894 (894) -- --
Stockholders' equity
Common Stock........... 14 1 4 (c) 19 (e) 19
Additional paid in
capital............... 3,126 37 24,937 (b) 28,100 97,500 (e) 125,600
Retained earnings (Ac-
cumulated deficit).... (17,657) 21 17,636 (c) -- --
Treasury stock......... (3,178) 3,178 (c) -- --
------- ------ --- ------- ------- ------- -------
Total stockholders'
equity
(deficit)........... (17,695) 59 -- 45,755 28,119 97,500 125,619
--
------- ------ --- ------- ------- ------- -------
Total liabilities and
stockholders equity.... 56,648 39,636 789 84,526 181,599 12,426 194,025
======= ====== === ======= ======= ======= =======
</TABLE>
F-4
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED
BALANCE SHEET ADJUSTMENTS
AS OF MARCH 31, 1998
(a) Records the distribution, to certain selling shareholders of Rogers, of
real estate with a net book value of $3,800 and cash surrender value of
life insurance with a net book value of $3,239 and the assumption of a
mortgage note of $3,800 on the real estate. Also records a liability for
the cash settlement for $1,500 of employment contracts to be paid to
certain selling shareholders of Merkert who are departing the Company.
(b) Records the goodwill resulting from the Combination of Merkert and Rogers
by the Company. The goodwill is calculated as follows:
<TABLE>
<S> <C>
Cash paid.................................................... $ 53,185
Fair value of shares of common stock issued.................. 28,119
Transaction costs............................................ 250
--------
81,554
Plus: fair value of net liabilities assumed.................. 15,761
Plus: severance and other costs associated with the closure
of certain offices and operations........................... 10,000
Less: income tax liability assumed by certain selling share-
holders..................................................... (15,750)
--------
Goodwill..................................................... $ 91,565
========
</TABLE>
The pro forma combined balance sheet does not reflect the income tax
liability assumed by certain selling shareholders which is to be paid in
full to the applicable tax authorities at the closing date.
(c) Records the increase in additional paid-in capital for the shares issued
to the selling shareholders of Merkert and Rogers of $28,119. Also records
the elimination of the historical equity accounts of Merkert and Rogers.
(d) Records the current portion of the estimated amount of obligations at
Merkert and Rogers assumed by the Company to be settled in full and paid
within the next twelve months. The Company intends to use approximately
$14,000 of the net proceeds from the Offering.
(e) Records the net proceeds from the Offering, net of Underwriters' discount,
of $100,000. Also allocates to paid-in capital $2,500 of deferred Offering
costs, including $289 of costs deferred as of March 31, 1998 and records
the anticipated use of proceeds from the Offering as follows:
<TABLE>
<S> <C>
Net Proceeds................................................... $100,000
Transaction costs.............................................. (2,500)
Cash paid to selling shareholders.............................. (53,185)
Repayment of bank debt and other notes payable................. (14,600)
Repayment of other notes payable............................... (1,000)
Repayment of acquisition obligations........................... (14,000)
Severance and other amounts.................................... (2,000)
--------
$ 12,715
</TABLE>
F-5
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
(G)
PRO FORMA ADJUSTMENTS: PRO FORMA
MERKERT ROGERS COMPANY (A) (B) (C) (D) (E) (F) COMBINED
-------- ------- ------- -------- -------- ----- ------ ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales................... $ 43,105 $ -- $-- $ -- $ -- $ -- $ -- $ -- $ -- $ 43,105
Commissions............. 104,274 82,985 -- -- (2,500) -- -- -- -- 184,759
-------- ------- ---- -------- -------- ----- ------ ------- ------- --------
Revenues................ 147,379 82,985 -- -- (2,500) -- -- -- -- 227,864
Cost of sales........... 39,027 -- -- -- -- -- -- -- -- 39,027
Selling, general and
administrative
expense................ 102,495 76,384 -- (7,009) (9,367) 650 -- -- -- 163,153
Depreciation and
amortization........... 4,484 2,516 -- -- -- (84) -- (1,022) -- 5,894
-------- ------- ---- -------- -------- ----- ------ ------- ------- --------
Operating income........ 1,373 4,085 -- 7,009 6,867 (566) -- 1,022 -- 19,790
Interest expense........ 5,010 2,536 -- -- -- -- (4,517) -- -- 3,029
Other (income) expense,
net.................... (79) -- -- -- -- -- -- -- -- (79)
-------- ------- ---- -------- -------- ----- ------ ------- ------- --------
Income (loss) before
income taxes........... (3,558) 1,549 -- 7,009 6,867 (566) 4,517 1,022 -- 16,840
Provision (benefit) for
income taxes........... (109) 804 -- -- -- -- -- -- 6,969 7,664
-------- ------- ---- -------- -------- ----- ------ ------- ------- --------
Net income (loss)....... $ (3,449) $ 745 $-- $ 7,009 $ 6,867 $(566) $4,517 $ 1,022 $(6,969) $ 9,176
======== ======= ==== ======== ======== ===== ====== ======= ======= ========
Basic net income per
share..................
========
Shares used in computing
basic net income per
share(h)...............
========
Diluted net income per
share..................
========
Shares and potential
dilutive shares used in
computing diluted
earnings per share(h)..
</TABLE>
F-6
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS ADJUSTMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
(a) Represents the elimination of certain executive, selling and general and
administrative salaries, benefits and bonuses of $7,009 for positions to
be eliminated upon the Combination and for which no replacement is
required.
(b) Represents the impact of closing duplicate offices as a result of
overlapping geographic operations, including: (1) the elimination of
salaries, benefits and bonuses of $8,517 for positions to be eliminated;
(2) the elimination of rental and other office expenses of $850 for
offices to be closed; and (3) the loss of revenue resulting from
manufacturer conflicts of $2,500.
(c) Represents the increase in lease expense and the reduction in depreciation
as a result of the distribution of the Rogers corporate headquarters to
certain selling shareholders and the related lease back of the facility to
the Company pursuant to an operating lease.
(d) Represents the reduction of interest expense as a result of the Company's
intention to pay down $14,600 of bank debt; $18,000 of acquisition
obligations of Merkert and Rogers, $14,000 at the time of closing and
$4,000 within the next twelve months. Also includes the reduction of
interest expense associated with the mortgage note assumed by certain
selling shareholders of Rogers and the interest expense associated with
the income tax liability assumed by certain selling shareholders of
Merkert and paid to the applicable tax authorities at the closing.
(e) Represents the net decrease of amortization of goodwill and other
intangibles as a result of the acquisition of Merkert and Rogers. The
Company is in the process of allocating the excess purchase price to
certain intangibles and goodwill and has preliminarily assigned a weighted
average life for all intangibles of 35 years.
(f) Represents the adjustment to record the income tax provision to reflect
the Company's estimated consolidated effective tax rate, after considering
non-deductible goodwill amortization.
(g) The pro forma combined statement of operations excludes $ of aggregate
compensation charges recorded in the second quarter of 1998 by Merkert and
Rogers prior to the acquisition. These compensation charges relate to; (1)
employment contract settlements of $1,500 paid to certain executives of
Merkert who are departing the Company; (2) the fair value of the net
assets, distributed to certain shareholders of Rogers; (3) the
reallocation of shares of common stock of Rogers by the principal
shareholders to certain minority shareholders; and (4) any reassessment of
the deferred tax asset valuation reserves as a result of the pro forma
adjustments.
(h) Includes (1) shares to be issued to the shareholders of Merkert and
Rogers, (2) shares issued to the management of and consultants to the
Company, and (3) shares sold in this Offering necessary to pay the cash
portion of the Combination consideration, retire certain indebtedness
relating to outside bank debt and acquisition obligations of Merkert and
Rogers and pay the expenses of the Offering. In addition, shares and
potential dilutive shares used in computing diluted earnings per share
include the dilutive effect of the outstanding options to purchase shares
to be granted upon consummation of this Offering.
F-7
<PAGE>
COMBINED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 1998
(IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
(G)
PRO FORMA ADJUSTMENTS: PRO FORMA
MERKERT ROGERS COMPANY (A) (B) (C) (D) (E) (F) COMBINED
------- ------- ------- ------- ------- ----- ------- ----- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales................... $12,424 $ -- $-- $ -- $ -- $ -- $ -- $ -- $ -- $12,424
Commissions............. 24,168 20,831 -- -- (500) -- -- -- -- 44,499
------- ------- ---- ------- ------- ----- ------- ----- ------- -------
Total revenue........... 36,592 20,831 -- -- (500) -- -- -- -- 56,923
Cost of sales........... 11,420 -- -- -- -- -- -- -- -- 11,420
Selling, general and
administrative
expense................ 24,318 19,006 -- (1,750) (2,241) 163 -- -- -- 39,496
Depreciation and
amortization........... 1,137 635 -- -- -- (21) -- (280) -- 1,471
------- ------- ---- ------- ------- ----- ------- ----- ------- -------
Operating income (283) 1,190 -- 1,750 1,741 (142) -- 280 -- 4,536
Interest expense........ 1,129 650 -- -- -- -- (1,175) -- -- 604
Other (income) expense,
net.................... 103 -- -- -- -- -- -- -- -- 103
------- ------- ---- ------- ------- ----- ------- ----- ------- -------
Income (loss) before
income taxes........... (1,515) 540 -- 1,750 1,741 (142) 1,175 280 -- 3,829
Provision (benefit) for
income taxes........... 100 308 -- -- -- -- -- -- 1,358 1,766
------- ------- ---- ------- ------- ----- ------- ----- ------- -------
Net income.............. $(1,615) $ 232 $-- $ 1,750 $ 1,741 $(142) $ 1,175 $ 280 $(1,358) $ 2,063
======= ======= ==== ======= ======= ===== ======= ===== ======= =======
Basic net income per
share .................
=======
Shares used in computing
basic net income per
share(h)...............
=======
Diluted net income per
share .................
=======
Shares and potential
dilutive shares used in
computing diluted
earnings per share(h)..
=======
</TABLE>
F-8
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS ADJUSTMENTS
FOR THE QUARTER ENDED MARCH 31, 1998:
(a) Represents the elimination of certain executive, selling and general and
administrative salaries, benefits and bonuses of $1,750 for positions to
be eliminated upon the Combination of Merkert and Rogers and for which no
replacement is required.
(b) Represents the impact of closing duplicate offices as a result of
overlapping geographic operations, including: (1) the elimination of
salaries, benefits and bonuses of $2,028 for positions to be eliminated;
(2) the elimination of rental and other office expenses of $213 for
offices to be closed; and (3) the loss of revenue resulting from
manufacturer conflicts of $500.
(c) Represents the increase in lease expense and the reduction in depreciation
as a result of the distribution of the Rogers corporate headquarters to
certain selling shareholders and the related lease back of the facility to
the Company pursuant to an operating lease.
(d) Represents the reduction of interest expense as a result of the Company's
intention to pay down $14,600 of bank debt; $18,000 of acquisition
obligations of Merkert and Rogers, $14,000 at the time of closing and
$4,000 within the next twelve months. Also includes the reduction of
interest expense associated with the mortgage note assumed by certain
selling shareholders of Rogers and the interest expense associated with
the income tax liability assumed by certain selling shareholders of
Merkert and paid to the applicable tax authorities at the closing.
(e) Represents the adjustment to record the income tax provision to reflect
the Company's estimated consolidated effective tax rate, after considering
non-deductible goodwill amortization.
(f) The pro forma combined statement of operations excludes in the aggregate
$ of compensation charges recorded in the second quarter of 1998 by
Merkert and Rogers prior to the acquisition. These compensation charges
relate to; (1) employment contract settlements of $1,500 paid to certain
executives of Merkert who are departing the Company; (2) the fair value of
the net assets, distributed to certain shareholders of Rogers; and (3) the
shares of common stock of Rogers by the principal shareholders to certain
minority shareholders; and (4) any reassessment of the deferred tax asset
valuation reserves as a result of the pro forma adjustments.
(g) Includes (i) shares to be issued to owners of Merkert and Rogers, (ii)
shares issued to the management of and consultants to the Company, and
(iii) shares sold in this Offering necessary to pay the cash portion of
the Combination consideration, retire certain indebtedness relating to
outside bank debt and acquisition obligations of Merkert and Rogers and
pay the expenses of the Offering. In addition, shares and potential
dilutive shares used in computing diluted earnings per share include the
dilutive effect of the outstanding options to purchase shares to be
granted upon consummation of this Offering.
F-9
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Merkert American Corporation:
We have audited the accompanying balance sheet of Merkert American
Corporation (the "Company") as of March 31, 1998. This balance sheet is the
responsibility of the Company's management. Our responsibility is to express
an opinion on the balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Merkert American Corporation, as
of March 31, 1998, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Boston, Massachusetts
May 22, 1998
F-10
<PAGE>
MERKERT AMERICAN CORPORATION
BALANCE SHEET
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31,
1998
ASSETS ---------
<S> <C>
Cash................................................................. $500
Deferred Offering and Combination Costs.............................. 289
----
Total Assets....................................................... $789
====
LIABILITIES AND STOCKHOLDER'S EQUITY
Accrued Expenses..................................................... $289
Notes Payable........................................................ 500
----
Preferred Stock, 0 shares issued and outstanding..................... --
Common Stock, $.01 par value--1,500 shares issued and outstanding.... --
----
Total Liabilities and Stockholder's Equity......................... $789
====
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-11
<PAGE>
MERKERT AMERICAN CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
Merkert American Corporation (the "Company") was incorporated on March 4,
1998 in order to create a leading national food broker through the acquisition
of Merkert Enterprises, Inc. and Subsidiary ("Merkert") and Rogers-American
Company, Inc. and Subsidiary ("Rogers"). These acquisitions (hereinafter
referred to as the "Combination") will occur concurrently with and as a
condition of an initial public offering (the "Offering"). The Company intends
to complete the Offering of its common stock and subsequent to the Offering
continue to acquire, through merger or purchase, similar companies in order to
expand its regional and national operations.
The Company's primary assets at March 31, 1998 are cash and deferred
Offering and Combination costs. The Company's only operations to date have
related to the Offering and the Combination. Funding for the deferred offering
and Combination costs has been provided by Monroe & Company II, LLC (See Note
3).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed in
the preparation of these financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
Stock Based Compensation Plans
The Company intends to account for its stock-based compensation plans under
Accounting Principles Board Opinion No. 25. It will adopt the disclosure only
provisions of Statement of Financial Accounting Standards ("SFAS") No. 123
Accounting for Stock-Based Compensation that requires stock-based compensation
to be disclosed at its fair value.
Earnings Per Share
In February, 1997 the Financial Accounting Standard Board issued SFAS No.
128 Earnings per Share. SFAS No. 128 requires the presentation of basic
earnings per share ("EPS") and diluted earnings per share. Basic EPS excludes
dilution and is calculated using the weighted average number of common shares
outstanding for the period. Diluted EPS is calculated using the weighted
average number of common shares and dilutive potential common shares
outstanding for the period. Dilutive potential shares consist of stock options
and are calculated using the treasury stock method.
Deferred Offering and Combination costs
Deferred Offering and Combination costs consist primarily of legal,
accounting and other professional fees incurred in connection with the
Combination and the Offering. All costs associated with the Combination will
be included as a component of purchase price pursuant to the purchase method
of accounting. All costs associated with the Offering will be charged to
Stockholder's Equity as a reduction to the proceeds when the Offering closes.
3. RELATED PARTY TRANSACTIONS
In connection with the founding and organization of the Company, Monroe &
Company II, LLC purchased shares of Common Stock for an aggregate purchase
price of approximately $150. As a result of such purchase, Monroe & Company
II, LLC beneficially owns 1,500 shares of the Common Stock. On May 11, 1998,
Monroe & Company II, LLC entered into a consulting agreement with the Company
pursuant to which Monroe & Company II, LLC was engaged to render certain
business consulting, financial advisory and investment banking services to
F-12
<PAGE>
MERKERT AMERICAN CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
the Company on an exclusive basis for three years. Pursuant to the consulting
agreement, Monroe & Company II, LLC will be paid a financial advisory fee
equal to (i) 5% of any consideration paid by the Company in connection with
any acquisition by the Company ("Consideration") up to $1 million, plus (ii)
4% of the Consideration paid in excess of $1 million and up to $2 million,
plus (iii) 3% of the Consideration paid in excess of $2 million and up to $3
million, plus (iv) 2% of the Consideration paid in excess of $3 million and up
to $4 million, plus (v) 1% of the Consideration paid in excess of $4 million.
Monroe & Company II, LLC will also be paid a fee equal to 0.75% of any
principal amount committed under a senior credit facility for the Company from
a lending institution. An additional fee shall be payable to Monroe & Company
II, LLC upon increases in such amount or upon refinancings with a new lender
during the term of the consulting agreement. Monroe & Company II, LLC will
also be entitled to consulting fees based on projects and fee schedules to be
mutually agreed upon by Monroe & Company II, LLC and the independent directors
of the Company (the "Board") All fees related to financial advisory services
and private placement will be paid to Monroe & Company II, LLC in cash at the
closing of the respective transaction. Consulting fees are paid on a monthly
basis as services are rendered.
In April 1998, Gerald R. Leonard purchased shares of Common Stock from the
Company for an aggregate purchase price of $1,500,000, the estimated fair
market value as determined by the Board. The purchase price for such stock was
paid by a promissory note from Mr. Leonard to the Company in the principal
amount of $1,500,000 (the "Leonard Note"). The Leonard Note provides that
amounts outstanding thereunder will bear interest at a rate of 6% per annum,
and that the entire principal amount and accrued interest will be due and
payable on April 8, 2003. Mr. Leonard's obligations under the Leonard Note are
secured by the shares of Common Stock purchased thereby pursuant to a stock
pledge agreement. The Leonard Note is a recourse obligation of Mr. Leonard
with respect to the sum of (i) the outstanding principal amount from time to
time less $750,000 (but not less that $0) and (ii) one-half of the accrued and
unpaid interest at such time.
4. CAPITAL STOCK
Following a split of the initial capitalization shares, the Company's
authorized capital stock consists of 50,000,000 shares of Common Stock, $.01
par value per share, and 1,000,000 shares of undesignated preferred stock,
$.01 par value per share.
Common Stock
At March 31, 1998, there were 1,500 shares of Common Stock outstanding.
Holders of Common Stock are entitled to one vote for each share held of record
on all matters to be submitted to a vote of the stockholders.
In the event of any liquidation, dissolution or winding-up of the affairs of
the Company, holders of Common Stock will be entitled to share ratably in the
assets of the Company remaining after payment or provision for payment of all
of the Company's debts and obligations and after liquidation payments to
holders of the outstanding shares of undesignated preferred stock, if any.
Undesignated Preferred Stock
At March 31, 1998, there were no shares of undesignated preferred stock
outstanding. Holders of undesignated preferred stock would have priority over
the holders of Common Stock with respect to dividends, and to other
distributions, including the distribution of assets upon liquidation. The
Board has the authority, without stockholder authorization, to issue shares of
undesignated preferred stock in one or more series and to fix the terms,
limitations, relative rights and preferences and variations.
5. STOCK OPTION PLAN
The Company has adopted the Merkert American Corporation 1998 Stock Option
and Incentive Plan (the "1998 Stock Plan"), which provides for the award of
incentive stock options ("ISOs"), non-qualified stock options ("NQSOs"), stock
appreciation rights, deferred stock awards, restricted and unrestricted stock
awards, performance share awards and dividend equivalent rights to all
directors and employees of and consultants to the
F-13
<PAGE>
MERKERT AMERICAN CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Company. The number of shares authorized for issuance under the 1998 Stock
Plan is . In general, the terms of the awards granted will be established
by either the Board of Directors or a committee established by the Board of
Directors, which will consist of no less than two non-employee directors. As
of May , 1998, the Company had awarded options to purchase shares of
Common Stock under the 1998 Stock Plan effective as of the date of the final
Prospectus used in connection with the Offering. Of this amount, options to
purchase shares were granted pursuant to employment agreements. Each option
will have a per-share exercise price equal to the Offering price. ISOs are
granted at an exercise price equal to the fair market value of the underlying
common stock. NQSOs are granted at an exercise price equal to 85% of the fair
market value of the underlying common stock. Upon the occurrence of a change
in control, each outstanding stock option and stock appreciation right will
become fully exercisable.
In May 1998, the Company granted Non-Qualified Options under the 1998
Stock Plan to persons who will be officers of the Company following the
consummation of the Offering.These options were issued at an exercise price of
$ . One-fourth of these options become exercisable upon consummation of the
Offering, and one-fourth become exercisable on each of the first, second and
third anniversaries of the date of grant. See "Certain Transactions." In
addition, in connection with the Offering, the Company will grant to employees
of the Company options under the 1998 Stock Plan to purchase an aggregate of
shares of Common Stock. Each such option will have a per share price equal
to the Offering price, will expire ten years from the date of grant and
generally will become exercisable in .
6. SUBSEQUENT EVENTS
On May 22, 1998, Rogers entered into a stock purchase agreement with the
Company and the stockholders of Rogers (the "Purchase Agreement"). Pursuant to
the Purchase Agreement, the Company will purchase all of the outstanding
shares of common stock of Rogers for approximately $35 million in cash and
stock of the Company. The consummation of the purchase is subject to a number
of conditions, including the successful completion of an initial public
offering of the common stock of the Company. There can be no assurances that
the Purchase Agreement will be consummated.
On May 22, 1998, Merkert entered into a Stock Purchase Agreement with
Monroe, Inc. and the stockholders of Merkert. Pursuant to this stock purchase
agreement the Company will purchase all of the outstanding shares of common
and convertible redeemable preferred stock of Merkert for approximately $46
million in cash and stock of the Company. The consideration shall be reduced
by the amount payable by Merkert as a result of the current examination of
Merkert's federal and state tax filings for 1992, 1993 and 1994. The
consummation of the purchase is subject to a number of conditions, including
the successful completion of an initial public offering of the common stock of
the Company. In addition, Merkert has agreed to settle the employment
contracts of two executives upon the consummation of this stock purchase
agreement and will record a compensation charge of $1,500 at that time. There
can be no assurances that the stock purchase agreement will be consummated.
The Company and Messrs. Monroe and Leonard are parties to a Registration
Rights Agreement dated May 18, 1998, pursuant to which Messrs. Monroe and
Leonard have the right, subject to certain restrictions, beginning on the date
that is 180 days following the completion of the Offering, to cause the
Company to effect a registration of their shares of Common Stock under the
Securities Act of 1933, as amended (the "1933 Act"), on not more than two
occasions. Messrs. Monroe and Leonard also have certain "piggy back"
registration rights in the event the Company registers any of its securities
for either itself or for security holders exercising their registration
rights.
In connection with the Combination the Company will enter into Registration
Rights Agreements with the former stockholders of Merkert and Rogers,
respectively, pursuant to which such former stockholders will have the right,
subject to certain restrictions, to include their shares of Common Stock
received in the Combination in a registration statement filed by the Company
under the 1933 Act.
F-14
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Merkert Enterprises, Inc. and Subsidiary:
We have audited the accompanying consolidated balance sheets of Merkert
Enterprises, Inc. and Subsidiary ("Merkert") as of December 31, 1996 and 1997,
and the related consolidated statements of operations, stockholders' deficit
and cash flows for each of the three years in the period ended December 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Merkert
Enterprises, Inc. and subsidiary as of December 31, 1996 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered net losses in 1996 and 1997 and
has a net working capital deficiency at December 31, 1997 that raises
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 2.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Arthur Andersen LLP
Boston, Massachusetts
May 22, 1998
F-15
<PAGE>
MERKERT ENTERPRISES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31,
1996 1997 1998
------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash.......................................... $ 730 $ 566 $ 334
Restricted cash............................... 368 595 639
Accounts receivable, less allowance for
doubtful accounts of $225, $575 and $575,
respectively................................. 16,708 18,437 16,018
Inventories................................... 1,834 1,911 1,659
Prepaid expenses and advances................. 240 318 2,108
------- -------- --------
Total current assets........................ 19,880 21,827 20,758
------- -------- --------
Property, plant and equipment, net.............. 8,155 12,628 12,094
------- -------- --------
Intangibles, net of amortization................ 18,027 23,613 23,031
------- -------- --------
Other assets.................................... 1,360 631 765
------- -------- --------
Total assets................................ $47,422 $ 58,699 $ 56,648
======= ======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-term debt.......... $ 651 $ 693 $ 948
Revolving line of credit...................... 1,430 5,883 5,923
Current maturities of notes payable and
lease........................................ 2,746 4,085 3,324
Accounts payable.............................. 8,611 8,184 3,054
Accrued expenses.............................. 23,844 27,942 30,287
------- -------- --------
Total current liabilities................... 37,282 46,787 43,536
------- -------- --------
Long-term debt and notes payable, less current
maturities..................................... 15,590 21,278 24,193
------- -------- --------
Commitments and contingencies...................
Convertible redeemable preferred stock:
$.01 par value, at redemption value--
Authorized--500,000 shares
Issued and outstanding--237,446 shares in
1996 and 213,566 shares in 1997............. 6,360 5,720 5,720
Common Stock, subject to redemption $.01 par
value
Issued and outstanding--370,753 and 411,853
shares, respectively........................... 805 894 894
Stockholders' deficit:
Common stock, $.01 par value--
Authorized--3,500,000 shares
Issued and outstanding--1,232,582 and
1,224,582 shares, respectively.............. 14 14 14
Additional paid-in capital.................... 3,126 3,126 3,126
Accumulated deficit........................... (12,048) (15,942) (17,657)
Treasury stock--at cost....................... (3,707) (3,178) (3,178)
------- -------- --------
(12,615) (15,980) (17,695)
------- -------- --------
Total liabilities and stockholders'
deficit.................................... $47,422 $ 58,699 $ 56,648
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-16
<PAGE>
MERKERT ENTERPRISES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------- ----------------
1995 1996 1997 1997 1998
------- -------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Commissions.................. $73,336 $ 80,661 $104,274 $26,201 $24,168
Sales........................ 49,233 44,916 43,105 11,257 12,424
------- -------- -------- ------- -------
122,569 125,577 147,379 37,458 36,592
Operating expenses:
Selling expenses............. 45,717 52,510 69,913 19,181 16,144
Cost of sales................ 45,615 41,890 39,027 10,467 11,420
General and administrative... 26,671 28,097 32,582 8,366 8,174
Depreciation and
amortization................ 2,132 2,447 4,484 1,149 1,137
------- -------- -------- ------- -------
Operating income (loss).... 2,434 633 1,373 (1,705) (283)
------- -------- -------- ------- -------
Other income (expense):
Interest income.............. 155 133 56 13 --
Interest expense............. (1,660) (2,283) (5,010) (1,222) (1,129)
Other income (expense)....... (122) 247 23 (40) (103)
------- -------- -------- ------- -------
Total other income
(expense)................. (1,627) (1,903) (4,931) (1,249) (1,232)
------- -------- -------- ------- -------
Income (loss) before provision
for income taxes.............. 807 (1,270) (3,558) (2,954) (1,515)
Provision (benefit) for income
taxes......................... 1,268 804 (109) 40 100
------- -------- -------- ------- -------
Net loss................... (461) (2,074) (3,449) (2,994) (1,615)
Preferred stock dividends...... 445 445 445 111 100
------- -------- -------- ------- -------
Net loss applicable to common
stockholders.................. $ (906) $ (2,519) $ (3,894) $(3,105) $(1,715)
======= ======== ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-17
<PAGE>
MERKERT ENTERPRISES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK,
$.01 PAR VALUE TREASURY STOCK ADDITIONAL
---------------- ---------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- ------ ------- ------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1994................... 1,447,582 $ 14 -- $ -- $3,126 $ (8,623) $ (5,483)
Net income............ -- -- -- -- -- (461) (461)
Preferred dividend
declared............. -- -- -- -- -- (445) (445)
Purchase of treasury
stock................ -- -- 123,000 2,042 -- -- (2,042)
--------- ---- ------- ------- ------ -------- ---------
Balance, December 31,
1995................... 1,447,582 14 123,000 2,042 3,126 (9,529) (8,431)
Net loss.............. -- -- -- -- -- (2,074) (2,074)
Preferred dividend
declared............. -- -- -- -- -- (445) (445)
Purchase of treasury
stock................ -- -- 92,000 1,665 -- -- (1,665)
--------- ---- ------- ------- ------ -------- ---------
Balance, December 31,
1996................... 1,447,582 14 215,000 3,707 3,126 (12,048) (12,615)
Net loss.............. -- -- -- -- -- (3,449) (3,449)
Preferred dividend
declared............. -- -- -- -- -- (445) (445)
Issuance of stock--
401(k)............... -- -- (10,500) (899) -- -- 899
Purchase of treasury
stock................ -- -- 18,500 370 -- -- (370)
--------- ---- ------- ------- ------ -------- ---------
Balance, December 31,
1997................... 1,447,582 14 223,000 3,178 3,126 (15,942) (15,980)
Net loss (unaudited).. (1,615) (1,615)
Preferred dividend
declared
(unaudited).......... -- -- -- -- -- (100) (100)
--------- ---- ------- ------- ------ -------- ---------
Balance, March 31, 1998
(unaudited)............ 1,447,582 $ 14 223,000 $ 3,178 $3,126 $(17,657) $ (17,695)
========= ==== ======= ======= ====== ======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-18
<PAGE>
MERKERT ENTERPRISES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------- ----------------
1995 1996 1997 1997 1998
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss.......................... $ (461) $(2,074) $(3,449) $(2,994) $(1,615)
Adjustments to reconcile net
loss to net cash provided by
(used in) operating
activities--
Depreciation and amortization... 2,132 2,447 4,484 1,149 1,137
Loss (gain) on disposal of fixed
assets......................... (31) 45 115 6 (224)
Changes in assets and
liabilities, exclusive of
acquisitions--
(Increase) decrease in--
Accounts receivable, net...... (1,269) (1,565) (1,729) (1,538) 2,419
Inventories, prepaid expenses
and advances................. 189 718 (155) 399 (1,537)
Other assets.................. 86 (348) 527 3 (131)
Accounts payable.............. 2,868 2,266 (427) (2,772) (5,130)
Accrued expenses.............. 2,664 2,584 4,098 7,177 2,345
------- ------- ------- ------- -------
Net cash provided by (used in)
operating activities......... 6,178 4,073 3,464 1,430 (2,736)
------- ------- ------- ------- -------
Cash flows from investing
activities:
Additions to property, plant and
equipment...................... (1,435) (3,356) (7,273) (2,030) (410)
Net proceeds from sale of
property, plant and equipment.. 149 117 530 24 512
Acquisitions, net of cash
acquired....................... -- (1,421) (748) (748) --
(Increase) decrease in cash
surrender value, net of
increase in policy loans....... (19) (26) 202 (17) (3)
------- ------- ------- ------- -------
Net cash (used in) provided by
investing activities......... (1,305) (4,686) (7,289) (2,771) 99
------- ------- ------- ------- -------
Cash flows from financing
activities:
Dividends paid.................. (445) (445) (445) -- --
Borrowings under revolving line
of credit...................... -- 1,430 4,453 4,348 40
Issuance (repayment) of long-
term debt...................... -- 1,473 3,419 (4,113) 3,170
Net (repayment) issuance of
notes payable.................. (275) (1,292) (2,529) 876 (761)
Redemption of convertible
preferred stock................ -- -- (640) -- --
Repurchase of treasury stock.... (2,042) (1,665) (370) -- --
------- ------- ------- ------- -------
Net cash (used in) provided by
financing activities......... (2,762) (499) 3,888 1,111 2,449
------- ------- ------- ------- -------
Net increase (decrease) in
cash......................... 2,111 (1,112) 63 (230) (188)
Cash:
Beginning of year............... 99 2,210 1,098 1,098 1,161
------- ------- ------- ------- -------
End of period................... $ 2,210 $ 1,098 $ 1,161 $ 868 $ 973
======= ======= ======= ======= =======
Supplemental disclosures of:
Cash flow information--
Cash payments for--
Interest...................... $ 563 $ 934 $ 3,501 $ -- $ --
======= ======= ======= ======= =======
Income taxes.................. $ 822 $ 1,825 $ 21 $ 6 $ 1,756
======= ======= ======= ======= =======
Non-cash flow information--
Purchase price financed by
seller....................... $ 1,158 $13,947 $ 6,292 $ 6,292 $ --
======= ======= ======= ======= =======
Liabilities assumed........... $ -- $ 724 $ 560 $ 560 $ --
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-19
<PAGE>
MERKERT ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(INCLUDING CERTAIN DATA APPLICABLE TO UNAUDITED PERIODS)
1. NATURE OF BUSINESS
Merkert Enterprises, Inc. ("Merkert") is a broker of food and various food-
related products. Merkert provides sales, marketing and merchandising services
to manufacturers (Manufacturer's) of consumer goods and serves as an
intermediary between the principals and retailers and wholesalers of the
consumer goods. Merkert also provides development, inventory management and
procurement and packaging services of private label frozen fruit and vegetable
products for several retailers. Merkert primarily operates throughout the
northeast and mid-Atlantic regions of the United States.
2. LIQUIDITY
Merkert incurred net losses in 1996 and 1997 and has a net working capital
deficiency of $24,960 as of December 31, 1997, which results in a substantial
doubt about Merkert's ability to continue as a going concern. Management's
plans to alleviate the net working capital deficiency include the sale of all
of the outstanding shares of Merkert's common and convertible redeemable
preferred stock to another entity (see Note 12). This new entity intends to
finance the acquisition through an initial public offering of equity
(offering). The proceeds from a successful offering will also be used to repay
certain indebtedness of Merkert. Also, Merkert plans to seek to obtain a new
revolving credit facility sufficient to meet Merkert's working capital
requirements. The accompanying consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Merkert and
its wholly owned subsidiary Merkert Laboratories, Inc. ("Merkert Labs"). All
intercompany accounts and transactions have been eliminated in consolidation.
Unaudited Interim Financial Information
The financial statements as of March 31, 1998 and for the three months ended
March 31, 1997 and 1998 are unaudited. Merkert believes these financial
statements include all adjustments, consisting of normal recurring
adjustments, that Merkert considers necessary for a fair presentation of the
financial position and of the results of operations for the respective
periods.
It should also be noted that the results for the interim periods are not
necessarily indicative of the results expected for any other interim period or
full year.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-20
<PAGE>
MERKERT ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(INCLUDING CERTAIN DATA APPLICABLE TO UNAUDITED PERIODS)
Revenue Recognition
Commissions are earned and recognized upon shipment by the principal to the
retailer or wholesaler; product sales revenue is recognized upon shipment by
Merkert.
Marketable Securities
Merkert accounts for its marketable securities in accordance with Statement
of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities. Merkert's investments were
classified as available-for-sale and are recorded at market value. During
1995, all investments were sold and the resulting gain of $567 was included in
other income in the consolidated statement of operations.
Inventories
Inventories are primarily finished goods and consist of price marking guns
and labels as well as other supplies purchased by retailers. Inventories are
stated at the lower of cost or market and are valued on a first-in, first-out
(FIFO) basis.
Fair Value
Effective December 31, 1995, Merkert adopted SFAS No. 107, Disclosures About
Fair Value of Financial Instruments. SFAS No. 107 requires that Merkert
disclose estimated fair values for certain of its financial instruments.
Merkert's financial instruments consist of cash, accounts receivable, notes
payable, accounts payable and long-term debt. The carrying value of Merkert's
financial instruments approximates fair value at December 31, 1995, 1996 and
1997.
Concentration of Credit Risk
Financial instruments that potentially subject Merkert to concentrations of
credit risk principally consist of trade receivables. Merkert's trade
receivables result primarily from commission sales. Merkert maintains reserves
for potential credit losses and such losses have been immaterial.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed
principally by accelerated methods over the estimated useful lives of the
assets.
Intangibles
Intangibles consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------- -------
<S> <C> <C>
Goodwill................................................... $17,160 $20,595
Noncompete agreements...................................... 1,857 5,883
------- -------
19,017 26,478
Accumulated amortization................................... (990) (2,865)
------- -------
$18,027 $23,613
======= =======
</TABLE>
F-21
<PAGE>
MERKERT ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(INCLUDING CERTAIN DATA APPLICABLE TO UNAUDITED PERIODS)
Goodwill, the excess of the acquired business purchase price over the fair
value of the acquired assets, is amortized on a straight-line basis over
estimated useful lives which range from 10 to 20 years. Noncompete agreements
are amortized on a straight-line basis over the life of the respective
agreement. Amortization expense was $467, $861 and $2,615 for the years ended
December 31, 1995, 1996 and 1997, respectively.
Income Taxes
Merkert provides for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. SFAS No. 109 recognizes tax assets and
liabilities for the cumulative effect of all temporary differences between the
financial statement carrying amounts and the tax basis of assets and
liabilities and are measured using the enacted tax rates which will be in
effect when these differences are expected to reverse.
Impairment of Long-Lived Assets
Merkert evaluates the carrying value of its long-lived assets in accordance
with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to Be Disposed Of. Accordingly, Merkert evaluates the
carrying value of its long-lived assets including equipment and goodwill
whenever events or changes in circumstances indicate that the carrying value
may not be recoverable. Under SFAS No. 121, an assessment is made to determine
whether the sum of the expected future undiscounted cash flows from the use of
the assets and eventual disposition is less than the carrying value. If the
sum of the expected undiscounted cash flows is less than the carrying value,
an impairment loss is recognized by measuring the excess of carrying value
over fair value (generally estimated by projected future discounted cash flows
for the applicable operation or independent appraisal). At December 31, 1996
and 1997, management believes no such impairment of assets was indicated.
Accrued Expenses
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1996 1997
------- -------
<S> <C> <C>
Accrued compensation......................................... $ 3,125 $ 3,589
Taxes........................................................ 14,353 16,972
Other........................................................ 6,366 7,381
------- -------
$23,844 $27,942
======= =======
</TABLE>
4. ACQUISITIONS
Merkert completed acquisitions of several food brokerage businesses during
1995, 1996 and 1997.
The acquisitions are accounted for using the purchase method of accounting;
accordingly, the results of operations are included in the accompanying
consolidated financial statements from their respective dates of acquisition.
The purchase price has been allocated to assets acquired and liabilities
assumed based upon their estimated fair values at the date of acquisition. A
portion of the purchase price in certain acquisitions is payable contingent
upon achieving defined performance criteria. Merkert's policy is to estimate
the net present value of the expected payments and record that amount as part
of the purchase price. Merkert records any ultimate changes to the estimate as
an adjustment to the goodwill. Purchase price in excess of net identified
F-22
<PAGE>
MERKERT ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(INCLUDING CERTAIN DATA APPLICABLE TO UNAUDITED PERIODS)
tangible and intangible assets is recorded as goodwill and amortized on a
straight-line basis over periods ranging from 10 to 20 years. The following is
a summary of the acquisitions which were consummated in 1995, 1996 and 1997:
<TABLE>
<CAPTION>
PURCHASE PRICE NET
---------------- TANGIBLE
CASH FINANCED ASSETS OTHER
ACQUISITION DATE PAID BY SELLER ACQUIRED GOODWILL INTANGIBLES
----------- ------------ ------ --------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Food Service Sales...... January 1995 $ -- $(1,158) $ -- $ 1,158 $ --
ABD Sales, Inc.......... October 1996 1,121 (9,275) (63) 10,147 312
DelGrosso, Richardson-
Morrison, Inc.......... October 1996 300 (4,672) 88 3,554 1,330
Toomey-Delong, Inc. .... January 1997 635 (5,144) 593 1,160 4,026
Luciano................. January 1997 113 (1,148) (405) 1,666 --
</TABLE>
Had each of these acquisitions been consummated on January 1, 1996, the
unaudited pro forma revenues and net loss for Merkert for the year ended
December 31, 1996 would have been $164,877 and $1,787, respectively.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are comprised of the following at December 31,
1996 and 1997:
<TABLE>
<CAPTION>
DEPRECIABLE
1996 1997 LIFE IN YEARS
------- ------- -------------
<S> <C> <C> <C>
Land........................................... $ 693 $ 693 --
Buildings...................................... 5,780 10,113 25-39
Furniture and equipment........................ 4,744 5,590 5
Data processing................................ 4,010 5,497 3
Motor vehicles................................. 1,061 354 5
Leasehold improvements......................... 1,036 217 5
------- -------
17,324 22,464
Less--Accumulated depreciation................. 9,169 9,836
------- -------
$ 8,155 $12,628
======= =======
</TABLE>
Depreciation expense for the years ended December 31, 1995, 1996 and 1997
was $1,665, $1,586 and $1,869, respectively.
6. EMPLOYEE BENEFIT PLANS
Merkert sponsors the Merkert Enterprises, Inc. Employee Stock Ownership Plan
and Trust ("ESOP"). On January 1, 1997, Merkert amended its ESOP to provide
for a contributory plan under the provisions of Section 401(k) (the"401(k)
Plan") of the Internal Revenue Code. As of January 1, 1997, eligible employees
can make voluntary contributions to the 401(k) Plan.
Under the provisions of the 401(k) Plan, Merkert currently matches 100% of
an eligible employee's contribution up to certain limits determined by Merkert
(currently 4%) of the employee's salary. Prior to the adoption of the 401(k)
Plan, Merkert's contributions were made at the discretion of the Board.
F-23
<PAGE>
MERKERT ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(INCLUDING CERTAIN DATA APPLICABLE TO UNAUDITED PERIODS)
For the years ended December 31, 1995, 1996 and 1997, Merkert expensed
approximately $2,275, $1,249 and $988, respectively, under the terms of the
ESOP and 401(k) Plans. On December 23, 1997, the Board authorized the issuance
to the ESOP of 51,600 shares, held as treasury stock to satisfy the fiscal
1997 obligation. The value of the common stock issued to the 401(k) was at
fair value based on an independent appraisal.
At December 31, 1997, the ESOP owned 25% of the common stock and 100% of the
redeemable convertible preferred stock outstanding. Furthermore, under the
terms of the ESOP, Merkert may be required to repurchase both common and
preferred stock issued to either the ESOP or an employee upon the occurrence
of certain events.
7. CONVERTIBLE REDEEMABLE PREFERRED STOCK
The convertible redeemable preferred stock was issued in September 1991.
Each share is convertible into one share of common stock under certain
circumstances. The convertible redeemable preferred stock is subject to a
cumulative annual dividend of $1.875 per share and has pro rata participation
rights in any common stock dividends. The convertible redeemable preferred
stock is redeemable by the holder at any time; only to the extent necessary
for such holder to provide for distributions to participants in the ESOP. The
preferred stock is redeemable at a price equal to the greater of the appraised
value per share or $26.785 per share plus any unpaid dividends. All shares of
common and convertible redeemable preferred stock have equal voting rights.
8. CONTINGENCIES
Merkert is involved in various legal proceedings which have arisen in the
ordinary course of business. Management believes the outcome of such legal
proceedings will not have a material adverse impact on Merkert's consolidated
financial position or results of operations.
9. COMMITMENTS
Promotional Funds
Certain of Merkert's principals provide Merkert with funds to be used solely
for advertising and other promotional activities. At December 31, 1996 and
1997, Merkert had cash of $368 and $595, respectively, whose use was
restricted to payment for promotional activities on behalf of its principals.
The offsetting liability is included in accrued liabilities in the balance
sheet at December 31, 1996 and 1997.
LEGAL PROCEEDINGS
Merkert has received written notice from the seller of a food brokerage
business acquired by Merkert alleging that Merkert has breached certain
covenants contained in an agreement with such seller, claiming that such
breaches have caused the acceleration of certain obligations of Merkert to
such seller and threatening litigation in connection with such claims. The
Company believes that this matter, if determined adversely to the Company,
would not have a material adverse effect on the Company. The Company is from
time to time a party to litigation arising in the ordinary course of business.
There can be no assurance that the Company's insurance coverage will be
adequate to cover all liabilities occurring out of such claims. In the opinion
of management, any liability that the Company might incur upon the resolution
of this litigation will not, in the aggregate, have a material adverse effect
on the financial condition or results of operations of the Company.
F-24
<PAGE>
MERKERT ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(INCLUDING CERTAIN DATA APPLICABLE TO UNAUDITED PERIODS)
Leases
Merkert leases certain office and warehouse facilities under operating
leases expiring on various dates through 2005.
Rental costs, including real estate taxes, amounted to approximately $3,273,
$3,469 and $4,386 in 1995, 1996 and 1997, respectively.
The following is a schedule of future minimum rental payments exclusive of
real estate taxes required under operating leases that have initial or
remaining noncancelable lease terms in excess of one year as of December 31,
1997:
<TABLE>
<CAPTION>
RENT
PAYMENTS
--------
<S> <C>
Year ending December 31,
1998............................................................... $ 2,559
1999............................................................... 2,232
2000............................................................... 1,740
2001............................................................... 1,458
2002............................................................... 1,462
Thereafter......................................................... 3,094
-------
Total............................................................. $12,545
=======
</TABLE>
(10) INCOME TAXES
The provision (benefit) for income taxes for the years ended December 31, is
as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------ ---- -----
<S> <C> <C> <C>
Federal--
Current.................................................. $ 632 $603 $ (82)
Deferred................................................. 320 -- --
------ ---- -----
952 603 (82)
------ ---- -----
State--
Current.................................................. 210 201 (27)
Deferred................................................. 106 -- --
------ ---- -----
316 201 (27)
------ ---- -----
$1,268 $804 $(109)
====== ==== =====
</TABLE>
A reconciliation between the provision for income taxes computed at U.S.
federal statutory rates and the effective rates reflected in the accompanying
consolidated statements of income are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
---------------------
1995 1996 1997
------ ----- -------
<S> <C> <C> <C>
U.S. federal statutory provision.................... $ 274 $(432) $(1,210)
State income taxes, net of federal income tax
effect............................................. 48 (76) (213)
Change in valuation allowance....................... 4 1,137 1,613
Permanent items..................................... 282 314 459
Other............................................... 660 (139) (758)
------ ----- -------
Effective tax provision........................... $1,268 $ 804 $ (109)
====== ===== =======
</TABLE>
F-25
<PAGE>
MERKERT ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(INCLUDING CERTAIN DATA APPLICABLE TO UNAUDITED PERIODS)
The tax effect of temporary differences which give rise to deferred income
tax assets (liabilities) are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------- -------
<S> <C> <C>
Assets--
Accrued interest......................................... $ 1,900 $ 2,487
Intangibles.............................................. 244 1,737
Receivable reserves...................................... 90 230
Health insurance......................................... 15 240
Net operating loss....................................... -- 164
Alternative minimum tax credit........................... -- 157
Other.................................................... 1,255 1,062
------- -------
Total assets........................................... 3,504 6,077
------- -------
Valuation allowance...................................... (3,390) (5,003)
------- -------
Total assets, net of valuation allowance............... 114 1,074
------- -------
Liabilities--
Property basis differences............................... -- (264)
Prepaid expenses......................................... (114) (164)
Other.................................................... -- (646)
------- -------
Total liabilities...................................... (114) (1,074)
------- -------
Net assets (liabilities)............................... $ -- $ --
======= =======
</TABLE>
Merkert has provided a valuation allowance on the portion of the net
deferred tax assets that are not likely to be realized. The valuation
allowance increased in fiscal 1997 and fiscal 1996 by approximately $1,613 and
$1,137, respectively.
Merkert's federal and state tax filings for 1992, 1993 and 1994 are
currently under examination by tax authorities. The examinations are not
complete and Merkert expects to challenge certain preliminary conclusions of
the examinations. Merkert has established reserves in various years which it
believes will be adequate to cover the range of potential liability; however,
the ultimate outcome of the matter is uncertain (see Note 12).
F-26
<PAGE>
MERKERT ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(INCLUDING CERTAIN DATA APPLICABLE TO UNAUDITED PERIODS)
11. LONG-TERM DEBT
As of December 31, debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1996 1997
------- -------
<S> <C> <C>
Revolving line of credit....................................... $ 1,430 $ 5,883
Bank--mortgage and term loans.................................. 2,834 6,253
Commercial promissory notes.................................... 1,951 1,242
Leases......................................................... -- 186
Acquisition Agreement--DRM..................................... 4,577 3,532
Acquisition Agreement--ABD..................................... 8,723 8,513
Acquisition Agreement--FSS..................................... 625 327
Acquisition Agreement--Luciano................................. -- 1,345
Acquisition Agreement--Toomey Delong........................... -- 4,509
Other.......................................................... 277 149
------- -------
20,417 31,939
Less--Current maturities....................................... 4,827 10,661
------- -------
Net long-term debt........................................... $15,590 $21,278
======= =======
</TABLE>
The amounts due under the acquisition agreements represent the total
estimated payments to be made pursuant to these agreements. The total
estimated payments have been discounted using a rate of approximately 10%. The
amounts due under these notes are unsecured and extend through 2009. They are
payable in either monthly or quarterly payments.
On October 31, 1996, Merkert entered into an $8,500 secured revolving line-
of-credit agreement with a bank. The revolving line-of-credit bears interest
at the bank's base rate (8.5% at December 31, 1997). On December 23, 1997, the
revolving line-of-credit agreement was amended to extend the term of the
agreement through February 1, 1999. Amounts outstanding under the revolving
line-of-credit are secured by eligible accounts receivables. The agreement
contains restrictive covenants customary in this type of financing
arrangement.
On September 5, 1996, a bank mortgage secured by a building was refinanced
and Merkert entered into a new loan agreement with a bank. The agreement
provided for a $4,335 mortgage loan and amended the existing term loan to
increase the availability under the loan to $2,765. Proceeds from these
borrowings were used to refinance the old bank mortgage note, existing
commercial promissory note, and to fund construction of Merkert's new office
space. The mortgage loan required monthly interest payments only, beginning
October 5, 1996 through July 5, 1997. Effective July 5, 1997, both principal
and interest are due monthly. The mortgage loan matures September 5, 2006, at
which time a balloon payment of the remaining balance would have been due. The
interest rates will float at the bank's base rate, or may be fixed at rates
tied to the London Interbank Offered Rate or U.S. Treasury Rates, at Merkert's
option. The term loan required monthly principal payments of $50, plus
interest and matures September 2, 2001.
The September 5, 1996 loan agreement and the revolving line of credit
agreement contain restrictive covenants customary in these types of financing
arrangements, including limitations on obtaining additional indebtedness and
certain financial covenants including a maximum leverage ratio and minimum
tangible net worth requirements. During 1997, Merkert was in default with
respect to the leverage ratios and the minimum tangible net worth covenant. On
December 23, 1997, Merkert obtained a waiver of these defaults.
F-27
<PAGE>
MERKERT ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(INCLUDING CERTAIN DATA APPLICABLE TO UNAUDITED PERIODS)
On February 13, 1998, Merkert entered into a $9,500 secured mortgage
agreement, effective April 1, 1998, with a real estate lender which replaced
their existing mortgage and term loans. The mortgage note bears interest at
8.56%. The loan requires monthly payments of $82, beginning April 1, 1998 and
matures March 1, 2018.
In September 1995, Merkert repurchased 115,000 shares of common stock for an
aggregate purchase price of $1,909 Merkert paid $581 in cash and delivered an
unsecured promissory note in the amount of $1,328. The note requires three
annual principal payments of $443 and bears interest at 8.75%.
In February 1996, Merkert repurchased 92,000 shares of common stock for an
aggregate purchase price of $1,665. Merkert paid $333 and delivered an
unsecured subordinated promissory note in the amount of $1,332. The note
requires five annual principal payments of $266 and bears interest at 8.25%.
In July 1997, Merkert elected to repurchase 8,000 shares of common stock for
an aggregate purchase price of $160. At December 31, 1997, Merkert had
delivered an unsecured subordinated promissory note in settlement of this
obligation.
In conjunction with the acquisitions discussed in Note 4, elements of the
purchase price were financed by the sellers. These amounts are included in the
following table.
Future principal payments on long-term debt for the years ending December
31, are as follows:
<TABLE>
<S> <C>
1998................................................................. $ 4,778
1999................................................................. 3,049
2000................................................................. 2,726
2001................................................................. 1,899
2002................................................................. 2,084
Thereafter........................................................... 11,520
-------
Total.............................................................. $26,056
=======
</TABLE>
12. SUBSEQUENT EVENTS
On May 22, 1998, Merkert entered into a stock purchase agreement with
Monroe, Inc. and the stockholders of Merkert." Pursuant to this stock purchase
agreement Monroe, Inc. will purchase all of the outstanding shares of common
and convertible redeemable preferred stock of Merkert for approximately $46
million in cash and stock of Monroe, Inc. The consideration shall be reduced
by the amount payable by Merkert as a result of the current examination of
Merkert's federal and state tax filings for 1992, 1993 and 1994. The
consummation of the purchase is subject to a number of conditions, including
the successful completion of an initial public offering of the common stock of
Monroe, Inc. In addition, Merkert has agreed to settle the employment
contracts of two executives upon the consummation of the Purchase Agreement
and will record a compensation charge of $1,500 at that time. There can be no
assurances that the stock purchase agreement will be consummated.
On May 22, 1998, Merkert entered into agreements with certain former
shareholders of businesses previously acquired by Merkert. These agreements
provide Merkert with an option to settle, for a predetermined cash payment,
the outstanding obligation due from Merkert to the respective former
shareholder. The cash payouts per these options approximate the amounts
recorded as liabilities in the accompanying consolidated financial statements.
These options expire December 31, 1998. If and when the option is exercised,
any differences between the option amount and the carrying amount in the
accompanying financial statements will be recorded as an adjustment to
purchase price.
F-28
<PAGE>
MERKERT ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(INCLUDING CERTAIN DATA APPLICABLE TO UNAUDITED PERIODS)
On May 18, 1998, Merkert entered into a settlement with the Internal Revenue
Service ("IRS") which will close out the Merkert's tax filings for 1992, 1993
and 1994. As part of this settlement, Merkert has agreed to pay approximately
$15.3 million, in aggregate, to both the IRS and the applicable state tax
authorities. The amount of the settlement did not differ materially from
recorded reserves. Pursuant to the stock purchase agreement among Monroe,
Inc., Merkert and the stockholders of Merkert, the former shareholders of
Merkert will use a portion of the cash proceeds received to pay the tax
settlement.
F-29
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Rogers-American Company, Inc. and Subsidiary:
We have audited the accompanying consolidated balance sheets of Rogers-
American Company, Inc. ("Rogers") and subsidiary as of December 31, 1996 and
1997, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1997. These financial statements are the responsibility of Rogers'
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Rogers and
subsidiary as of December 31, 1996 and 1997, and the consolidated results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1997, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
May 22, 1998
F-30
<PAGE>
ROGERS-AMERICAN COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- MARCH 31,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash........................................... $ 730 $ 556 $ 494
Restricted cash................................ 220 505 682
Accounts receivable, less allowance for
doubtful accounts of $484, $799 and $799 in
1996, 1997 and 1998, respectively............. 6,413 9,072 10,301
Prepaid expenses and advances.................. 292 218 240
Income taxes receivable........................ 512 -- --
Deferred tax asset............................. 546 639 639
------- ------- -------
Total current assets......................... 8,713 10,990 12,356
------- ------- -------
Property, plant and equipment, net............... 5,953 5,931 5,966
------- ------- -------
Intangibles, net of amortization................. 20,519 18,671 17,907
------- ------- -------
Other assets:
Cash value of life insurance, net.............. 2,449 3,239 3,239
Deferred tax asset............................. 117 149 149
Other noncurrent assets........................ 10 19 19
------- ------- -------
Total other assets........................... 2,576 3,407 3,407
------- ------- -------
Total assets................................. $37,761 $38,999 $39,636
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt........... $ 6,344 $ 1,949 $11,509
Accounts payable............................... 3,087 2,034 1,732
Accrued expenses............................... 3,971 3,880 3,648
------- ------- -------
Total current liabilities.................... 13,402 7,863 16,889
------- ------- -------
Long-term debt, less current maturities.......... 24,849 30,830 22,209
------- ------- -------
Other noncurrent liabilities..................... 316 479 479
------- ------- -------
Commitments and contingencies
Stockholders' equity:
Common stock, $1.00 par value--
Authorized--100,000 shares
Issued--955 shares............................ 1 1 1
Additional paid-in capital..................... 149 37 37
Retained earnings (accumulated deficit)........ (956) (211) 21
------- ------- -------
Total stockholders' equity (deficit)......... (806) (173) 59
------- ------- -------
Total liabilities and stockholders' equity... $37,761 $38,999 $39,636
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-31
<PAGE>
ROGERS-AMERICAN COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------- --------------------
1995 1996 1997 1997 1998
------- ------- ------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Commissions................ $47,496 $63,311 $82,985 $ 20,025 $ 20,831
------- ------- ------- --------- ---------
Operating Expenses:
Selling expenses........... 35,817 50,614 63,361 16,625 15,785
General and
administrative............ 7,457 10,944 13,023 3,189 3,221
Depreciation and
amortization.............. 1,073 1,646 2,516 636 635
------- ------- ------- --------- ---------
Operating income (loss).. 3,149 107 4,085 (425) 1,190
Interest Expense............. (1,176) (1,656) (2,536) (660) (650)
------- ------- ------- --------- ---------
Income (loss) before
Provision for Income Taxes.. 1,973 (1,549) 1,549 (1,085) 540
Income Tax Provision
(benefit)................... 939 (460) 804 (576) 308
------- ------- ------- --------- ---------
Net income (loss)........ $ 1,034 $(1,089) $ 745 $ (509) $ 232
======= ======= ======= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-32
<PAGE>
ROGERS-AMERICAN COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK,
$1.00 PAR VALUE ADDITIONAL
------------------ PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
-------- ------- ---------- -------- -------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994...... 1,120 $ 1 $ 258 $ (901) $ (642)
Net income.................... -- -- -- 1,034 1,034
Issuance of 40 shares at
$1,151.85 per share.......... 40 -- 46 -- 46
Redemption of 69 shares at
$1,151.85 per share.......... (69) -- (79) -- (79)
-------- ------ ----- ------- -------
Balance, December 31, 1995...... 1,091 1 225 133 359
Net loss...................... -- -- -- (1,089) (1,089)
Redemption of 59 shares at
$1,292.16 per share.......... (59) -- (76) -- (76)
-------- ------ ----- ------- -------
Balance, December 31, 1996...... 1,032 1 149 (956) (806)
Net income.................... -- -- -- 745 745
Redemption of 76.4 shares at
$1,470.80 per share.......... (77) -- (112) -- (112)
-------- ------ ----- ------- -------
Balance, December 31, 1997...... 955 1 37 (211) (173)
Net income (unaudited)........ -- -- -- 232 232
-------- ------ ----- ------- -------
Balance, March 31, 1998 (unau-
dited)......................... 955 $ 1 $ 37 $ 21 $ 59
======== ====== ===== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE>
ROGERS-AMERICAN COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------- ----------------
1995 1996 1997 1997 1998
-------- -------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)............. $ 1,034 $ (1,089) $ 745 $ (509) $ 232
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities--
Depreciation and
amortization............... 1,073 1,646 2,516 636 635
Loss on disposal of fixed
assets..................... 85 -- -- -- --
Deferred income taxes....... 72 (500) (126) -- --
Changes in assets and
liabilities exclusive of
acquisitions (increase)
decrease in--
Restricted cash............. 218 (20) (285) -- (177)
Accounts receivable, net.... (1,106) (1,707) (2,659) (2,731) (1,229)
Income taxes receivable..... -- (512) 512 512 --
Prepaid expenses and
advances................... 414 (77) 74 (139) (22)
Accounts payable............ 484 1,588 (1,053) (720) (302)
Accrued expenses............ 2,212 129 (91) (961) (231)
Other liabilities........... 891 711 (572) 77 --
Other assets................ (39) 29 (9) (2) --
-------- -------- ------- ------- -------
Net cash provided by (used
in) operating
activities............... 5,338 198 (948) (3,837) (1,094)
-------- -------- ------- ------- -------
Cash flows from investing activ-
ities:
Additions to property, plant
and equipment................ (387) (1,045) (453) (146) (66)
Acquisition of businesses, net
of cash acquired............. (11,594) (11,230) (192) (199) 159
Increase in cash surrender
value, net of increase in
policy loans................. (478) (487) (789) -- --
-------- -------- ------- ------- -------
Net cash provided by (used
in) investing
activities............... (12,459) (12,762) (1,434) (345) 93
-------- -------- ------- ------- -------
Cash flows from financing activ-
ities:
Borrowings on revolving line
of credit.................... -- 3,024 8,370 3,825 9,560
Principal payments on line of
credit....................... (660) -- (3,824) -- (8,369)
Issuance of long-term debt.... 7,916 10,157 -- -- --
Repayment of long-term debt... -- -- (2,226) (350) (252)
Redemption of common stock.... (33) (77) (112) -- --
-------- -------- ------- ------- -------
Net cash provided by
financing activities..... 7,223 13,104 2,208 3,475 939
-------- -------- ------- ------- -------
Net increase (decrease) in
unrestricted cash........ 102 540 (174) (707) (62)
-------- -------- ------- ------- -------
Unrestricted cash:
Beginning of year............. 88 190 730 730 556
-------- -------- ------- ------- -------
End of year................... $ 190 $ 730 $ 556 $ 23 $ 494
-------- -------- ------- ------- -------
Supplemental disclosures of cash
flow information:
Cash payments for--
Interest.................... $ 1,172 $ 1,635 $ 2,486 $ 610 $ 569
-------- -------- ------- ------- -------
Income taxes................ $ 488 $ 722 $ 180 $ 113 $ 582
-------- -------- ------- ------- -------
Noncash flow information:
Purchase price financed by
seller....................... $ 5,519 $ 10,626 $ 48 $ 48 $ --
-------- -------- ------- ------- -------
Liabilities assumed........... $ 682 $ 1,227 $ -- $ -- $ --
-------- -------- ------- ------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-34
<PAGE>
ROGERS-AMERICAN COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INCLUDES CERTAIN DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS)
1. NATURE OF BUSINESS
Rogers-American Company, Inc. ("Rogers") is a broker of food and various
food-related products. Rogers provides sales, marketing and merchandising
services to manufacturers (Manufacturers) of consumer goods and serves as an
intermediary between the Manufacturers and retailers and wholesalers of the
consumer goods. Rogers primarily operates throughout the southeast and mid-
Atlantic regions of the United States.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of Rogers' significant accounting policies follows:
Principles of Consolidation
The consolidated financial statements include the accounts of Rogers and its
wholly owned subsidiary Rogers-American Company of Florida, Inc. All
intercompany accounts and transactions have been eliminated in consolidation.
Unaudited Interim Financial Information
The financial statements as of March 31, 1998 and for the three months ended
March 31, 1997 and 1998 are unaudited. Rogers believes these financial
statements include all adjustments, consisting of normal recurring
adjustments, that Rogers considers necessary for a fair presentation of the
financial position and of the results of operations for the respective
periods. It should also be noted that the results for the interim periods are
not necessarily indicative of the results expected for any other interim
period or the full year.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates and
assumptions.
Revenue Recognition
Commissions are earned and recognized upon shipment by the principals to the
retailer or wholesaler.
Fair Value of Financial Instruments
Effective December 31, 1995, Rogers adopted Statement of Financial
Accounting Standards (SFAS) No. 107, Disclosures About Fair Value of Financial
Instruments. SFAS No. 107 requires that Rogers disclose estimated fair values
for certain of its financial instruments. Rogers' financial instruments
consist of cash and cash equivalents, accounts and notes receivable, notes
payable, accounts payable and long-term debt. Each of these instruments' fair
value approximates carrying value at December 31, 1995, 1996 and 1997.
Concentration of Credit Risk
Financial instruments that potentially subject Rogers to concentrations of
credit risk consist principally of trade receivables. Rogers' trade
receivables result from commission sales. Rogers maintains reserves for
potential credit losses and such losses have been immaterial.
F-35
<PAGE>
ROGERS-AMERICAN COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING CERTAIN DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS)
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method based upon the following estimated useful lives of
the assets:
<TABLE>
<CAPTION>
ESTIMATED
ASSET CLASSIFICATION USEFUL LIVES
-------------------- ------------
<S> <C>
Building........................................................ 40 years
Leasehold improvements.......................................... 20 years
Furniture and office equipment.................................. 5-7 years
Motor vehicles.................................................. 3-5 years
</TABLE>
Intangibles
Intangibles for the years ended December 31, 1996 and 1997 consist of the
following:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Goodwill................................................... $17,283 $17,460
Noncompete agreements...................................... 6,589 6,604
------- -------
Accumulated amortization................................... (3,353) (5,393)
------- -------
$20,519 $18,671
======= =======
</TABLE>
Goodwill, the excess of the acquired business purchase price over the fair
value of the acquired assets, is amortized on a straight-line basis over its
estimated useful life which ranges from 5 to 20 years. Noncompete agreements
are amortized on a straight-line basis over the life of the respective
agreement. Amortization expense was $831, $1,285 and $2,040 for the years
ended December 31, 1995, 1996 and 1997, respectively.
Cash Surrender Value of Life Insurance
Included within other noncurrent assets is the cash surrender value of life
insurance, net of policy loans. Rogers maintains these life insurance policies
with a face amount of $32,266 on certain officers and key employees. The cash
surrender value of the policies amounted to $3,727 and $4,305, against which
Rogers has loans of $1,278 and $1,066 on December 31, 1996 and December 31,
1997, respectively.
Income Taxes
Rogers provides for income taxes in accordance with SFAS No. 109, Accounting
for Income Taxes. SFAS No. 109 recognizes tax assets and liabilities for the
cumulative effect of all temporary differences between the financial statement
carrying amounts and the tax basis of assets and liabilities and are measured
using the enacted tax rates expected to be in effect when these differences
are expected to reverse.
Impairment of Long-Lived Assets
Rogers evaluates the carrying value of its long-lived assets in accordance
with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets To Be Disposed Of. Accordingly, Rogers evaluates the
carrying value of its long-lived assets, including equipment and goodwill,
whenever events or changes in circumstances indicate that the carrying value
may not be recoverable. Under SFAS No. 121, an assessment is made to determine
whether the sum of the expected future undiscounted cash flows from
F-36
<PAGE>
ROGERS-AMERICAN COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING CERTAIN DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS)
the use of the assets and eventual disposition is less than the carrying
value. If the sum of the expected undiscounted cash flows is less than the
carrying value, an impairment loss is recognized by measuring the excess of
carrying value over fair value (generally estimated by projected future
discounted cash flows for the applicable operation or independent appraisal).
At December 31, 1996 and 1997, management believes no such impairment of
assets was indicated.
Accrued Expenses
Accrued expenses for the years ended December 31, 1996 and 1997 consist of
the following:
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Payroll and employee benefits................................. $1,361 $ 535
Promotional funds............................................. 220 505
Income taxes.................................................. 996 1,270
Health insurance.............................................. 351 476
Interest...................................................... 49 99
Other......................................................... 994 995
------ ------
$3,971 $3,880
====== ======
</TABLE>
3. ACQUISITIONS
Rogers completed acquisitions of several food brokerage businesses during
1995, 1996 and 1997.
The acquisitions are accounted for using the purchase method of accounting;
accordingly, the results of operations are included in the accompanying
consolidated financial statements from their respective dates of acquisition.
The purchase price has been allocated to assets acquired and liabilities
assumed based upon their estimated fair values at the date of acquisition. A
portion of the purchase price in certain acquisitions is payable contingent
upon achieving defined performance criteria. Rogers' policy is to estimate the
net present value of the expected payments and record that amount as part of
the purchase price. Rogers records any ultimate changes to the estimate as an
adjustment to goodwill. Purchase price in excess of identified tangible and
intangible assets is recorded as goodwill and amortized on a straight-line
basis over periods ranging from 5 to 20 years. The following is a summary of
the acquisitions which were consummated in 1995, 1996 and 1997.
<TABLE>
<CAPTION>
PURCHASE PRICE NET
------------------- TANGIBLE
FINANCED ASSETS
ACQUISITION DATE CASH PAID BY SELLER ACQUIRED GOODWILL OTHER INTANGIBLES
----------- ------------- --------- --------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Clarke & Wittekind March 1995 $ -- $(1,403) $282 $ 897 $ 224
A.A. Green October 1995 -- (1,374) -- 1,099 275
Dopson-Hicks October 1995 (206) (3,142) 606 2,194 548
G.B.S. October 1996 -- (982) 288 555 139
Fitzwater November 1996 (800) (5,924) 800 4,739 1,185
Sales Support Inc. November 1996 -- (997) -- -- 997
Tinney & Associates November 1996 -- (1,377) 218 927 232
Brown & Stagner November 1996 -- (1,905) 97 1,446 362
Others Various -- (1,001) 36 486 479
</TABLE>
F-37
<PAGE>
ROGERS-AMERICAN COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING CERTAIN DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS)
Had each of these acquisitions been consummated on January 1, 1996, the
unaudited pro forma revenues and net income (loss) for Rogers would have been
$81,328 and $(1,033), respectively, for the year ended December 31, 1996, and
$83,100 and $(771), respectively, for the year ended December 31, 1997.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are comprised of the following at December 31:
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Land.......................................................... $ 500 $ 500
Buildings..................................................... 3,500 3,500
Furniture and equipment....................................... 3,117 3,476
Motor vehicles................................................ 79 79
Leasehold improvements........................................ 694 789
------ ------
7,890 8,344
Less--Accumulated depreciation................................ 1,937 2,413
------ ------
$5,953 $5,931
====== ======
</TABLE>
Depreciation expense for the years ended December 31, 1995, 1996 and 1997
was $242, $361 and $476, respectively.
5. EMPLOYEE BENEFIT PLANS
Rogers sponsors the Rogers-American Company, Inc. 401(k) Profit Sharing Plan
(the "401(k) Plan") under the provisions of Section 401(k) of the Internal
Revenue Code. The 401(k) Plan covers all employees, except flexible part-time
employees, who are at least 21 years of age with at least six months of
employment service. These eligible employees can make voluntary contributions
to the 401(k) Plan.
Under the provisions of the 401(k) Plan, Rogers currently matches 25% of an
eligible employee's contribution up to certain limits determined by Rogers
(currently 6%) of the employee's salary. On an annual basis, Rogers may make a
discretionary contribution into the profit sharing component of the 401(k)
Plan. For the years ended December 31, 1995, 1996 and 1997, Rogers expensed
approximately $738, $615 and $403, respectively, under the terms of the 401(k)
Plan.
6. CONTINGENCIES
Rogers is subject to various legal proceedings that arise in the ordinary
course of business. Based on the opinion of Rogers' external legal counsel,
management believes the outcome of such legal proceedings will not have a
material adverse impact on Rogers' consolidated financial position or results
of operations.
7. COMMITMENTS
Commitments
Certain of Rogers' principals provide Rogers with funds to be used solely
for marketing, advertising and other promotional activities. At December 31,
1997, Rogers had cash of $505 which use was restricted to payment of
promotional funds on behalf of its principals. The offsetting liability was
recorded as promotional funds in the balance sheet at December 31, 1997. At
December 31, 1996, Rogers had $220 of restricted cash and promotional funds
liability on the balance sheet.
F-38
<PAGE>
ROGERS-AMERICAN COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING CERTAIN DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS)
Several key employees of Rogers have employment agreements that contain
incentive bonus awards. The awards are discretionary in nature and are in
effect for the period from 1999 to 2007. As of December 31, 1997, Rogers has
not accrued a liability for these awards and no amount is due for the year
ended December 31, 1997. Rogers may terminate any of the employment agreements
for just cause without incurring any liability.
Rogers has various supplemental pension agreements with individual
employees. These agreements provide benefits to those individuals at age 65 or
upon the termination of their employment with Rogers, whichever is later. The
estimated liability under the agreement is being accrued over the expected
remaining years of employment on a present value basis. At December 31, 1996
and 1997, Rogers had accrued approximately $316 and $479, respectively. The
vested benefits are payable in 120 equal monthly installments subsequent to
the employee's separation or retirement from Rogers. There were no required
expenses in 1995 and 1996 and $163 was expensed in 1997 under these
agreements.
Rogers has an agreement with its stockholders whereas in the event of death,
disability or retirement of the stockholder, Rogers shall purchase all of the
stock owned by each respective stockholder or his or her estate, payable over
a 10-year period. This agreement is partially funded by insurance.
Rogers has an agreement with a stockholder for the redemption of 584 shares
of common stock owned by the stockholder evenly over a 10 year period from
January 1, 1993 through January 1, 2002. Rogers shall redeem the shares at the
book value per share on the last day of the preceding fiscal year applicable
to the option exercise date or October 31 1992, whichever is higher.
Leases
Rogers leases certain office and warehouse facilities and automobiles under
operating leases expiring on various dates through 2003.
Rental costs, including real estate taxes, amounted to approximately $3,871,
$5,773 and $7,985 in 1995, 1996 and 1997, respectively.
The following is a schedule of future minimum rental payments, exclusive of
real estate taxes, required under operating leases that have initial or
remaining noncancelable lease terms in excess of one year as of December 31,
1997:
<TABLE>
<CAPTION>
RENT
PAYMENTS
--------
<S> <C>
Year ending December 31,
1998............................................................... $3,258
1999............................................................... 2,688
2000............................................................... 1,884
2001............................................................... 1,201
2002............................................................... 91
Thereafter......................................................... 17
------
Total............................................................. $9,139
======
</TABLE>
(8) RELATED PARTY TRANSACTIONS
Rogers provides office space to an affiliated merchandising entity which
began operations in 1997. Rogers owns 49% of the outstanding voting common
stock of this entity. In addition, Rogers has guaranteed a $500 line of credit
with a bank to this affiliate. At December 31, 1997, approximately $75 was
outstanding under the line of credit. Sales and net income of the affiliate
for 1997 were $922 and $(1). Total assets at December 31, 1997 were $218.
Rogers had no trade receivables outstanding at December 31, 1997 from this
affiliate. During 1997, Rogers had no sales to this affiliate.
F-39
<PAGE>
ROGERS-AMERICAN COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING CERTAIN DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS)
Rogers is a co-guarantor on a $750 line of credit with a bank for another
affiliated entity. Certain of Rogers' shareholders, as a group, own 49% of the
voting common stock of this entity. At December 31, 1997, approximately $644
was outstanding under the line of credit. During 1996 and 1997, Rogers
recorded commission revenues of approximately $230 and $183 from this
affiliate. Trade receivables at December 31, 1996 and 1997 were $48 and $56,
respectively.
9. INCOME TAXES
The (benefit) provision for income taxes for the years ended December 31
1995, 1996 and 1997 is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---- ----- ----
<S> <C> <C> <C>
Income taxes (credits)--
Current................................................. $950 $ 40 $930
Deferred................................................ (11) (500) (126)
---- ----- ----
$939 $(460) $804
==== ===== ====
</TABLE>
A reconciliation between the provision for income taxes computed at U.S.
federal statutory rates and the effective rates reflected in the accompanying
consolidated statements of income are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
-----------------
1995 1996 1997
---- ----- ----
<S> <C> <C> <C>
Computed expected tax provision (benefit)................. $671 $(527) $527
State income taxes, net of federal benefit................ 115 (74) 87
Permanent items........................................... 178 171 140
Other..................................................... (25) (30) 50
---- ----- ----
$939 $(460) $804
==== ===== ====
</TABLE>
The tax effect of temporary differences which give rise to deferred income
tax assets (liabilities) are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1997
------ ------
<S> <C> <C>
Assets--
Net operating loss carryforwards........................... $ 362 $ --
Tax credit carryforwards................................... 24 --
Receivable reserves........................................ 189 312
Other...................................................... 170 585
------ ------
Total assets............................................. 745 897
------ ------
Valuation allowance........................................ -- --
------ ------
Total assets, net of valuation allowance................. 745 897
------ ------
Liabilities--
Property basis differences................................. (35) (53)
Other...................................................... (47) (56)
------ ------
Total liabilities........................................ (82) (109)
------ ------
Net assets............................................... $ 663 $ 788
====== ======
</TABLE>
F-40
<PAGE>
ROGERS-AMERICAN COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING CERTAIN DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS)
10. LONG-TERM DEBT
As of December 31, long-term debt consists of:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Revolving line of credit................................... $ 3,824 $ 8,370
Mortgage loan.............................................. 3,871 3,794
Acquisition Agreement--Clarke & Wittekind.................. 1,224 1,147
Acquisition Agreement--A.A. Green.......................... 1,050 930
Acquisition Agreement--Dopson-Hicks........................ 2,659 2,396
Acquisition Agreement--G.B.S............................... 972 823
Acquisition Agreement--Fitzwater........................... 6,812 5,193
Acquisition Agreement--Sales Support Inc................... 997 1,002
Acquisition Agreement--Tinney & Associates................. 1,098 990
Acquisition Agreement--Brown & Stagner..................... 1,790 1,806
Other acquisitions......................................... 6,800 6,268
Bank--Notes payable........................................ 96 60
------- -------
31,193 32,779
Less--Current maturities................................... (6,344) (1,949)
------- -------
$24,849 $30,830
======= =======
</TABLE>
On November 8, 1996, Rogers entered into a $10,000 secured revolving credit
facility with a bank. The revolving line of credit bears interest at a
variable rate based on the lesser of the bank's prime rate or LIBOR plus 2.7%,
(8.67% at December 31, 1997). Interest is payable monthly. In April 1998, the
revolving line-of-credit agreement was amended to extend the term of the
agreement through January 31, 1999. Rogers' borrowings under the agreement are
limited to certain percentages of eligible receivables and cash surrender
value of life insurance. The line is collateralized by commission receivables,
cash value of life insurance, intangible assets and proceeds thereof. At
December 31, 1997, Rogers had available to it, unused borrowing capacity of
$1,630 under the line of credit. The agreement contains certain restrictive
covenants. At December 31, 1997, Rogers was in compliance with these
covenants.
A mortgage note was entered into in February 1991 and refinanced in February
1995. The note is secured by land, building and fixtures. The note bears
interest at 8.5% with monthly payments of $34 including interest through
December 1999 and a balloon payment of $3,646 on January 2000.
The amounts due under the acquisition agreements represent the total
estimated payments to be made pursuant to these agreements. The total
estimated payments have been discounted using a rate of approximately 8%. The
amounts due under these notes payable are unsecured and extend through 2011.
These amounts are payable in either monthly or quarterly installments.
Rogers has the following debt resulting from business acquisitions:
Bay Brokerage--Unsecured notes payables bearing interest at 10% per annum
with monthly payments of $4 through June 2007 and various other assumed
liabilities with various payments through September 2007.
T&M--Unsecured notes payable bearing interest at 8% per annum, with monthly
payments of $2 through September 1999 and $6 through September 2004.
F-41
<PAGE>
ROGERS-AMERICAN COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING CERTAIN DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS)
G.B.S.--Unsecured note payable bearing interest at 7% per annum with monthly
payments of $1 starting October 1998 through January 2000. Unsecured note
payable bearing interest at 7% per annum with monthly payments of $8 starting
October 1997 through September 1998, $7 through September 2005, $5 through
August 2006, and one final payment of $7 due on September 2006. Unsecured note
payable bearing interest at 7% per annum with monthly payments of $1 starting
October 1999 through September 2009.
Tinney & Associates--Unsecured note payable with imputed interest at 10% per
annum, with monthly payments of $6 through July 2000.
Brown & Stagner--Unsecured note payable with imputed interest of 8% per
annum and monthly payments of $3 through July 2000.
Clarke & Wittekind--Unsecured note payable with imputed interest of 7.8% per
annum and monthly payments of $1 through March 2005.
Dopson-Hicks--Note payable secured by certain tangible assets and stock of
the subsidiary bearing interest at 8% per annum and monthly payments of $13
through October 2000, $33 through October 2005 and $21 through October 2010.
Rogers has unsecured notes payable to various banks bearing interest at 10%
and 8.5% with monthly payments of $3 and $1 through June 1999 and through
February 2000, respectively.
Notes Payable
Future principal payments on long-term debt for the years ending December
31, are as follows:
<TABLE>
<S> <C>
1998............................................................. $ 1,949
1999............................................................. 10,593
2000............................................................. 5,688
2001............................................................. 2,207
2002............................................................. 2,144
Thereafter....................................................... 10,198
-------
Total.......................................................... $32,779
=======
</TABLE>
11. SUBSEQUENT EVENTS
On May 22, 1998, Rogers entered into a stock purchase agreement with Monroe,
Inc. and the stockholders of Rogers ("the Purchase Agreement"). Pursuant to
the Purchase Agreement, Monroe Inc. will purchase all of the outstanding
shares of common stock of Rogers for approximately $35 million in cash and
stock of Monroe, Inc. The consummation of the purchase is subject to a number
of conditions, including the successful completion of an initial public
offering of the common stock of Monroe, Inc. There can be no assurances that
the Purchase Agreement will be consummated.
Upon the consummation of the Purchase Agreement, Rogers intends to
distribute certain non-operating assets including the cash surrender value of
life insurance policies and Rogers' corporate headquarters building to certain
selling shareholders of Rogers. In addition, these shareholders will assume
the mortgage note on the
F-42
<PAGE>
ROGERS-AMERICAN COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING CERTAIN DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS)
building. In addition, the principal stockholders of Rogers have agreed to
transfer a portion of their shares of common stock to Rogers and Rogers will
reissue those shares to certain minority shareholders to compensate those
employees for valuable prior services. Rogers will record a compensation
charge for each of these events in their financial statements at the date of
consummation.
On May 22, 1998, Rogers entered into agreements with certain sellers of
businesses acquired by Rogers. These agreements provide Rogers with the option
to settle, for a predetermined cash payment, any outstanding obligation due
from Rogers to the respective seller as a result of the acquisition. The cash
payouts per these options approximate the amounts recorded as liabilities in
the accompanying consolidated financial statements. These options expire on
September 30, 1998.
F-43
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PRO-
SPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PRO-
SPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OR OFFER TO
BUY, THE COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IT IS UNLAWFUL TO MAKE SUCH SOLICI-
TATION.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 11
The Combination.......................................................... 15
Use of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Capitalization........................................................... 17
Dilution................................................................. 18
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 19
Business................................................................. 29
Management............................................................... 37
Certain Transactions..................................................... 44
Principal Stockholders................................................... 46
Description of Capital Stock............................................. 47
Shares Eligible for Future Sale.......................................... 50
Underwriting............................................................. 52
Legal Matters............................................................ 54
Experts.................................................................. 54
Additional Information................................................... 55
Index to Financial Statements............................................ F-1
</TABLE>
-----------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR NOT PAR-
TICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOT-
MENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SHARES
MONROE, INC.
COMMON STOCK
-----------------
PROSPECTUS
-----------------
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED , 1998
PROSPECTUS
SHARES
MONROE, INC.
COMMON STOCK
------------
All of the shares of Common Stock offered hereby are being sold by Merkert
American Corporation (the "Company"). Of the shares of Common Stock offered
hereby, are being offered for sale initially outside the United States and
Canada by International Managers to be selected by the Company and shares
are being offered for sale in a concurrent offering in the United States and
Canada by U.S. Underwriters to be selected by the Company. The initial public
offering price and the underwriting discount per share will be identical for
both offerings. See "Underwriting."
Prior to the Offering, there has been no public market for the Common Stock.
It is currently estimated that the initial public offering price will be
between $ and $ per share. For a discussion relating to factors to be
considered in determining the initial public offering price, see
"Underwriting." Application will be made to list the Common Stock on the New
York Stock Exchange under the symbol "MKR", subject to official notice of
issuance.
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share................................ $ $ $
- --------------------------------------------------------------------------------
Total(3)................................. $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company will agree to indemnify the several Underwriters against
certain liabilities, including certain liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $ .
(3) The Company will grant the International Managers and the U.S. Underwriters
options to purchase up to an additional and shares of Common
Stock, respectively, in each case exercisable within 30 days after the date
hereof, solely to cover over-allotments, if any. If such options are
exercised in full, the total Price to Public, Underwriting Discount and
Proceeds to Company will be $ , $ and $ , respectively. See
"Underwriting."
------------
The date of this Prospectus is , 1998.
<PAGE>
UNDERWRITING
Certain international underwriters will act as lead managers (the "Lead
Managers") of each of the International Managers named below (the
"International Managers"). Subject to the terms and conditions set forth in an
international purchase agreement (the "International Purchase Agreement")
among the Company and the International Managers, and concurrently with the
sale of shares of Common Stock to the U.S. Underwriters (as defined
below), the Company agreed to sell to the International Managers, and each of
the International Managers, severally and not jointly has agreed to purchase
from the Company the number of shares of Common Stock set forth opposite its
name below.
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITER SHARES
---------------- ---------
<S> <C>
Total............................................................
===
</TABLE>
The Company will also enter into a U.S. purchase agreement (the "U.S.
Purchase Agreement") with certain underwriters in the United States and Canada
(the "U.S. Underwriters" and, together with the International Managers, the
"Underwriters") for whom Underwriters selected by the Company will act as
representatives (the "U.S. Representatives"). Subject to the terms and
conditions set forth in the U.S. Purchase Agreement, and concurrently with the
sale of shares of Common Stock to the International Managers pursuant to the
International Purchase Agreement, the Company will agree to sell to the U.S.
Underwriters, and the U.S. Underwriters severally will agree to purchase from
the Company, an aggregate of shares of Common Stock. The initial public
offering price per share and the total underwriting discount per share of
Common Stock will be identical under the International Purchase Agreement and
the U.S. Purchase Agreement.
In the International Purchase Agreement and the U.S. Purchase Agreement, the
several International Managers and the several U.S. Underwriters,
respectively, will agree, subject to the terms and conditions set forth
therein, to purchase all of the shares of Common Stock being sold pursuant to
each such agreement if any of the shares of Common Stock being sold pursuant
to such agreement are purchased. Under certain circumstances, under the
International Purchase Agreement and the U.S. Purchase Agreement, the
commitments of non-defaulting Underwriters may be increased. The closings with
respect to the sale of shares of Common Stock to be purchased by the
International Managers and the U.S. Underwriters will be conditioned upon one
another.
The Company expects that the Lead Managers will advise the Company that the
International Managers propose initially to offer the shares of Common Stock
to the public at the initial public offering price set forth on the cover page
of this Prospectus, and to certain dealers at such price less a concession not
in excess of $ per share of Common Stock. The International Managers may
allow, and such dealers may reallow, a discount not in excess of $ per share
of Common Stock on sales to certain other dealers. After the initial public
offering, the public offering price, concession and discount may be changed.
The Company will grant options to the International Managers, exercisable
for 30 days after the date of this Prospectus, to purchase up to an aggregate
of additional shares of Common Stock at the initial public offering price
set forth on the cover page of this Prospectus, less the underwriting
discount. The International Managers may exercise these options solely to
cover over-allotments, if any, made on the sale of the Common Stock offered
hereby. To the extent that the International Managers exercise these options,
each International Manager will be obligated, subject to certain conditions,
to purchase a number of additional shares of Common Stock proportionate to
such International Manager's initial amount reflected in the foregoing table.
The Company also will grant options to the U.S. Underwriters, exercisable for
30 days after the date of this Prospectus, to
1
<PAGE>
purchase up to an aggregate of additional shares of Common Stock to cover
over-allotments, if any, on terms similar to those granted to the
International Managers.
At the request of the Company, the Underwriters will reserve for sale, at
the initial public offering price, up to 5% of the shares offered hereby to be
sold to certain directors, officers, and employees of the Company and certain
business associates of the Company. The number of shares of Common Stock
available for sale to the general public will be reduced to the extent such
persons purchase such reserved shares. Any reserved shares which are not
orally confirmed for purchase within one day of the pricing of the Offering
will be offered by the Underwriters to the general public on the same terms as
the other shares offered hereby.
The Company and holders of all shares of Common Stock outstanding prior to
the Offering, including the Company's executive officers and directors and the
holders of shares of Common Stock issued in connection with the Combination
will agree, subject to certain exceptions, not to directly or indirectly (i)
offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant for the sale of or otherwise dispose of or transfer any shares of
Common Stock or securities convertible into or exchangeable or exercisable for
Common Stock, whether now owned or thereafter acquired by the person executing
the agreement or registration statement under the Securities Act with respect
to the foregoing or (ii) enter into any swap or other agreement that
transfers, in whole or in part, the economic consequence of ownership of the
Common Stock whether any such swap or transaction is to be settled by delivery
of Common Stock or other securities, in cash or otherwise, without the prior
written consent of the lead underwriter on behalf of the Underwriters for a
period of 180 days after the date of this Prospectus; provided, however, that
the Company may issue and sell Common Stock pursuant to the 1998 Stock Plan.
See "Shares Eligible for Future Sale."
The International Managers and the U.S. Underwriters will enter into an
intersyndicate agreement (the "Intersyndicate Agreement") that provides for
the coordination of their activities. Pursuant to the Intersyndicate
Agreement, the International Managers and the U.S. Underwriters will be
permitted to sell shares of Common Stock to each other for purposes of resale
at the initial public offering price, less an amount not greater than the
selling concession. Under the terms of the Intersyndicate Agreement, the U.S.
Underwriters and any dealer to whom they sell shares of Common Stock will not
offer to sell or sell shares of Common Stock to persons who are non-U.S. or
non-Canadian persons or to persons they believe intend to resell to persons
who are non-U.S. or non-Canadian persons, and the International Managers and
any dealer to whom they sell shares of Common Stock will not offer to sell or
sell shares of Common Stock to U.S. persons or to Canadian persons or to
persons they believe intend to resell to U.S. or Canadian persons, except in
the case of transactions pursuant to the Intersyndicate Agreement.
Prior to the Offering, there has been no public market for the Common Stock
of the Company. The initial public offering price will be determined through
negotiations among the Company, the U.S. Representatives and the Lead
Managers. The factors considered in determining the initial public offering
price, in addition to prevailing market conditions, are price-earnings ratios
of publicly traded companies that the U.S. Representatives believe to be
comparable to the Company, certain financial information of the Company, the
history of, and the prospects for, the Company and the industry in which it
competes, and an assessment of the Company's management, its past and present
operations, the prospects for, and timing of, future revenues of the Company,
the present state of the Company's development, and the above factors in
relation to market value; and various valuation measures of other companies
engaged in activities similar to the Company. There can be no assurance that
an active trading market will develop for the Common Stock or that the Common
Stock will trade in the public market subsequent to the Offering at or above
the initial public offering price. See "Risk Factors--Absence of Public
Market; Determination of Offering Price and Fluctuations in Market Price."
The Company expects to apply to list the Common Stock on the New York Stock
Exchange, subject to notice of issuance, under the symbol "MKR." In order to
meet the requirements for listing of the Common Stock on that exchange, the
U.S. Underwriters and the International Managers have undertaken to sell lots
of 100 or more shares to a minimum of 2,000 beneficial owners.
2
<PAGE>
Sales of Common Stock to any accounts over which the Underwriters exercise
discretionary authority to exceed 5% of the number of shares being offered
hereby.
The Company will agree to indemnify the International Managers and the U.S.
Underwriters against certain liabilities, including certain liabilities under
the Securities Act, or to contribute to payments the International Managers
and the U.S. Underwriters may be required to make in respect thereof.
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters
and certain selling group members to bid for and purchase the Common Stock. As
an exception to these rules, the U.S. Representatives are permitted to engage
in certain transactions that stabilize the price of the Common Stock. Such
transactions consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the Offering, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the U.S.
Representatives may reduce that short position by purchasing Common Stock in
the open market. The U.S. Representatives may also elect to reduce any short
position by exercising all or part of the over-allotment option described
above.
The U.S. Representatives may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the U.S.
Representatives purchase shares of Common Stock in the open market to reduce
the Underwriters' short position or to stabilize the price of the Common
Stock, they may reclaim the amount of the selling concession from the
Underwriters and selling group members who sold those shares as part of the
Offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of the Common Stock to the extent
that it discourages resales of the Common Stock.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Common Stock. In
addition, neither the Company nor any of the Underwriters makes any
representation that the U.S. Representatives will engage in such transactions
or that such transactions, once commenced, will not be discontinued without
notice.
Each International Manager has agreed that (i) it has not offered or sold
and, prior to the expiration of the period of six months from the Closing
Date, will not offer or sell any shares of Common Stock to persons in the
United Kingdom, except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in circumstances
which do not constitute an offer to the public in the United Kingdom within
the meaning of the Public Offers of Securities Regulations of 1995; (ii) it
has complied and will comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to the
Common Stock in, form or otherwise involving the United Kingdom; and (iii) it
has only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issuance of Common
Stock to a person who is of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a
person to whom such document may otherwise lawfully be issued or passed on.
No action has been or will be taken in any jurisdiction (except in the
United States) that would permit a public offering of the shares of Common
Stock, or the possession, circulation or distribution of this Prospectus or
any other material relating to the Company or shares of Common Stock in any
jurisdiction where action for that purpose is required. Accordingly, the
shares of Common Stock may not be offered or sold, directly or
3
<PAGE>
indirectly, and neither this Prospectus nor any other offering material or
advertisements in connection with the shares of Common Stock may be
distributed or published, in or from any country or jurisdiction except in
compliance with any applicable rules and regulations of any such country or
jurisdiction.
Purchasers of the shares offered hereby may be required to pay stamp taxes
and other charges in accordance with the laws and practices of the country of
purchase in addition to the offering price set forth on the cover page hereof.
4
<PAGE>
CERTAIN UNITED STATES TAX CONSEQUENCES
TO NON-U.S. HOLDERS OF COMMON STOCK
The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Common
Stock by a person that, for United States federal income tax purposes, is a
non-resident alien individual, a foreign corporation, a foreign partnership or
a foreign estate or foreign trust (a "non-U.S. holder"). This discussion does
not consider the specific facts and circumstances that may be relevant to
particular holders and does not address the treatment of non-U.S. holders of
Common Stock under the laws of any state, local or foreign taxing
jurisdiction. Further, the discussion is based on provisions of the United
States Internal Revenue Code of 1986, as amended (the "Code"), Treasury
regulations thereunder, and administrative and judicial interpretations
thereof, all as in effect on the date hereof and all of which are subject to
change on a possibly retroactive basis. Each prospective holder is urged to
consult a tax advisor with respect to the United States federal tax
consequences of acquiring, holding and disposing of Common Stock, as well as
any tax consequences that may arise under the laws of any state, local or
foreign taxing jurisdiction.
An individual may, subject to certain exceptions, be deemed to be a resident
alien (as opposed to non-resident alien) by virtue of being present in the
United States for (i) at least 31 days in the current calendar year and (ii)
for an aggregate of at least 183 days during a three-year period ending in the
current calendar year (counting for the purposes of such 183 days all of the
days present in the current year, one-third of the days present in the
immediately preceding year, and one-sixth of the days present in the second
preceding year). U.S. resident aliens are subject to U.S. federal income
taxation as if they were U.S. citizens.
DIVIDENDS
Dividends paid to a non-U.S. holder of Common Stock will be subject to
withholding of United States federal income tax at a 30% rate or such lower
rate as may be specified by an applicable income tax treaty, unless the
dividends are effectively connected with the conduct of a trade or business of
the non-U.S. holder within the United States (and are attributable to a United
States permanent establishment of such holder, if an applicable income tax
treaty so requires as a condition for the non-U.S. holder to be subject to
United States income tax on a net income basis in respect of such dividends).
Certain certification and disclosure requirements must be complied with in
order to be exempt from withholding under the effectively connected income
exemption or to claim the benefit of an applicable treaty rate. Such
"effectively connected" dividends are subject to tax at rates applicable to
United States citizens, resident aliens and domestic United States
corporations, and generally are not subject to withholding. Any such
effectively connected dividends received by a non-United States corporation
may also, under certain circumstances, be subject to an additional "branch
profits tax" at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty.
Under current United States Treasury regulations, dividends paid to an
address in a foreign country are presumed to be paid to a resident of that
country (unless the payor has knowledge to the contrary) for purposes of the
withholding discussed above and, under the current interpretation of United
States Treasury regulations, for purposes of determining the applicability of
a tax treaty rate. Under recently finalized United States Treasury regulations
(the "Final Withholding Regulations") effective for payments made after
December 31, 1999, however, generally backup withholding at a rate of 31% will
apply unless a non-U.S. holder of Common Stock satisfies applicable
certification requirements.
A non-U.S. holder of Common Stock that is eligible for a reduced rate of
United States withholding tax pursuant to a tax treaty may obtain a refund of
any excess amounts currently withheld by filing an appropriate claim for
refund with the United States Internal Revenue Service.
GAIN ON DISPOSITION OF COMMON STOCK
A non-U.S. holder generally will not be subject to United States federal
income tax in respect of gain recognized on a disposition of Common Stock
except in the following circumstances: (i) the gain is effectively connected
with a trade or business conducted by the non-U.S. holder in the United States
(and is attributable to a permanent establishment maintained in the United
States by such non-U.S. holder if an applicable income tax
5
<PAGE>
treaty so requires as a condition for such non-U.S. holder to be subject to
United States taxation on a net income basis in respect of gain from the sale
or other disposition of the Common Stock); (ii) in the case of a non-U.S.
holder who is an individual and holds the Common Stock as a capital asset,
such holder is present in the United States for 183 or more days in the
taxable year of the sale and certain other conditions exist; or (iii) the
Company is or has been a "United States real property holding corporation" for
federal income tax purposes and assuming that the Common Stock is "regularly
traded on an established securities market" for such purposes, the non- U.S.
holder held, directly or indirectly at any time during the five-year period
ending on the date of disposition, more than 5% of the Common Stock (and is
not eligible for any treaty exemption). Effectively connected gains realized
by a corporate non-U.S. Holder may also, under certain circumstances, be
subject to an additional "branch profits tax" at a 30% rate or such lower rate
as may be specified by an applicable income tax treaty.
The Company has not been, is not, and does not anticipate becoming a "United
States real property holding corporation" for federal income tax purposes.
FEDERAL ESTATE TAXES
Common Stock held by a non-U.S. holder at the time of death will be included
in such holder's gross estate for United States federal estate tax purposes,
unless an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company must report annually to the Internal Revenue Service and to each
non-U.S. holder the amount of dividends paid to such holder and the tax
withheld with respect to such dividends. Under current law, United States
information reporting requirements (other than reporting of dividend payments
for purposes of the withholding tax noted above) and backup withholding tax
generally will not apply to dividends paid to non-U.S. holders that are either
subject to the 30% withholding discussed above or that are not so subject
because an applicable tax treaty reduces such withholding. Otherwise, backup
withholding of United States federal income tax at a rate of 31% generally
will apply to dividends paid with respect to Common Stock to holders that are
not "exempt recipients" and that fail to provide certain information
(including the holder's United States taxpayer identification number).
Generally, unless the payor of dividends has definite knowledge that the payee
is a United States person, the payor may treat dividend payments to a payee
with a foreign address as exempt from information reporting and backup
withholding. However, under the Final Withholding Regulations, dividend
payments generally will be subject to information reporting and backup
withholding unless applicable certification requirements are satisfied. See
"--Dividends".
In general, United States information reporting and backup withholding
requirements also will not apply to a payment made outside the United States
of the proceeds of a sale of Common Stock through an office outside the United
States of a non-United States broker. However, United States information
reporting (but not backup withholding) requirements will apply to a payment
made outside the United States of the proceeds of a sale of Common Stock
through an office outside the United States of a broker that is a United
States person, that derives 50% or more of its gross income for certain
periods from the conduct of a trade or business in the United States, or that
is a "controlled foreign corporation" as to the United States, unless the
broker has documentary evidence in its records that the holder or beneficial
owner is a non-United States person or the holder or beneficial owner
otherwise establishes an exemption. Payment of the proceeds of the sale of
Common Stock to or through a United States office of a broker is currently
subject to both United States backup withholding and information reporting
unless the holder certifies its non-United States status under penalties of
perjury or otherwise establishes an exemption.
A non-United States holder generally may obtain a refund of any excess
amounts withheld under the backup withholding rules by filing the appropriate
claim for refund with the United States Internal Revenue Service.
THE FOREGOING DISCUSSION IS A SUMMARY OF THE PRINCIPAL UNITED STATES FEDERAL
INCOME AND ESTATE TAX CONSEQUENCES OF THE OWNERSHIP, SALE OR OTHER DISPOSITION
OF COMMON STOCK BY NON-U.S. HOLDERS. ACCORDINGLY, INVESTORS ARE URGED TO
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE UNITED STATES FEDERAL INCOME
TAX CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF COMMON STOCK, INCLUDING
THE APPLICATION AND EFFECT OF THE LAWS OF ANY STATE, LOCAL, FOREIGN OR OTHER
TAXING JURISDICTION.
6
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHO-
RIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATED HEREOF.
IN THE PROSPECTUS, REFERENCES TO "DOLLARS" AND "$" ARE TO UNITED STATES DOL-
LARS.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 10
The Combination.......................................................... 14
Use of Proceeds.......................................................... 15
Dividend Policy.......................................................... 15
Capitalization........................................................... 16
Dilution................................................................. 17
Selected Unaudited Pro Forma Combined Financial Data..................... 18
Selected Financial Data..................................................
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 19
Business................................................................. 29
Management............................................................... 37
Certain Transactions..................................................... 44
Principal Stockholders................................................... 46
Description of Capital Stock............................................. 47
Shares Eligible for Future Sale.......................................... 50
Certain United States Tax Consequences for Non-U.S. Holders of Common
Stock...................................................................
Underwriting............................................................. 52
Legal Matters............................................................ 54
Experts.................................................................. 54
Additional Information................................................... 55
Index to Financial Statements............................................ F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES
MONROE, INC.
COMMON STOCK
---------------
PROSPECTUS
---------------
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than the
underwriting discounts and commissions. All amounts shown are estimates except
for the Securities and Exchange Commission registration fee, the NASD filing
fee and the New York Stock Exchange listing fee:
<TABLE>
<CAPTION>
NATURE OF EXPENSE AMOUNT
----------------- ------
<S> <C>
SEC registration fee.................................................. $
NASD filing fee.......................................................
NYSE listing fee......................................................
Legal fees and expenses...............................................
Accounting fees and expenses..........................................
Printing expenses.....................................................
Transfer agent fee....................................................
Premium for directors' and officers' insurance........................
Miscellaneous.........................................................
----
Total............................................................... $
====
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
In accordance with Section 145 of the General Corporation Law of the State
of Delaware, Article VII of the Registrant's Amended and Restated Certificate
of Incorporation (the "Certificate") provides that no director of the
Registrant shall be personally liable to the Registrant or its stockholders
for monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the
Registrant or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
in respect of certain unlawful dividend payments or stock redemptions or
repurchases, or (iv) for any transaction from which the director derived an
improper personal benefit. In addition, the Certificate provides that if the
Delaware General Corporation Law is amended to authorize the further
elimination or limitation of the liability of directors, then the liability of
a director of the Registrant shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended.
Article V of the Registrant's By-laws provides for indemnification by the
Registrant of its directors and officers and certain non-officer employees
under certain circumstances against expenses (including attorneys' fees,
judgments, penalties, fines and amounts paid in settlement) reasonably
incurred in connection with the defense or settlement of any threatened,
pending or completed legal proceeding in which any such person is involved by
reason of the fact that such person is or was an officer or employee of the
Registrant unless it is determined that such person did not act in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the Registrant, and, with respect to criminal actions or
proceedings, such person had no reasonable cause to believe his or her conduct
was unlawful.
The Registrant intends to enter into indemnification agreements with each of
its directors reflecting the foregoing provisions of the By-laws and requiring
the advancement of expenses in proceedings involving directors in most
circumstances and also intends to purchase directors' and officers' insurance
to provide additional protections to the directors and officers of the
Registrant in certain circumstances.
Under the U.S. Purchase Agreement filed as Exhibit 1.1 hereto and the
International Purchase Agreement filed as Exhibit 1.2 hereto, the Underwriters
will agree to indemnify, under certain conditions, the Registrant, its
directors and certain officers and persons who control the Registrant within
the meaning of the Securities Act of 1933, as amended (the "Act"), against
certain liabilities.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In March 1998, the Registrant issued and sold 1,500 shares of Common Stock
to Monroe & Company II, LLC at a purchase price of $.10 per share. No
underwriters or underwriting discounts or commissions were involved.
In April 1998, the Company issued and sold shares of Common Stock to
Gerald R. Leonard for an aggregate purchase price of $1,500,000. No
underwriters or underwriting discounts or commissions were involved. See
"Certain Transactions."
The Company entered into stock purchase agreements with the stockholders of
Merkert and Rogers pursuant to which the Company agreed to issue to such
stockholders shares of Common Stock in the Combination, as described under
"The Combination."
There was no public offering in such transactions, and the Registrant
believes that such transactions were exempt from registration requirements of
the Act, by reason of Section 4(2) thereof.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits. The following is a complete list of exhibits filed or
incorporated by reference as part of this Registration Statement.
<TABLE>
<C> <S>
1.1* Form of U.S. Purchase Agreement.
1.2* Form of International Purchase Agreement.
3.1 Form of Amended and Restated Certificate of Incorporation.
3.2 Form of Amended and Restated By-laws.
4.1* Specimen certificate for shares of Common Stock, $.01 par value, of the
Registrant.
5.1* Opinion of Goodwin, Procter & Hoar LLP as to the legality of the
securities being offered.
10.1 Stock Purchase Agreement, dated May 20, 1998, among the Registrant and
the stockholders of Merkert Enterprises, Inc.
10.2 Stock Purchase Agreement, dated May 22, 1998, among the Registrant and
the stockholders of Rogers.
10.3 Form of Employment and Non-Competition Agreement to be entered into by
the Registrant and Gerald R. Leonard, Sidney D. Rogers, Jr. and Glenn
F. Gillian.
10.4 Form of Employment and Non-Competition Agreement to be entered into by
the Registrant and Douglas H. Holstein and Marty D. Carter.
10.5 Form of Tax Escrow Agreement to be entered into by the Registrant and
Robert Q. Crane, as Stockholders' Representative.
10.6 Form of Indemnification Escrow Agreement to be entered into by the
Registrant and Robert Q. Crane, as Stockholders' Representative.
10.7 Form of General Release to be executed by the stockholders of Merkert
Enterprises, Inc.
10.8 Agreement, dated May 11, 1998, between the Registrant and Monroe &
Company, LLC.
10.9* Agreement for the purchase of Common Stock between the Registrant and
Gerald R. Leonard, dated April 8, 1998.
10.10* Promissory Note of Gerald R. Leonard dated April 8, 1998.
10.11* Stock Pledge Agreement between the Registrant and Gerald R. Leonard,
dated April 8, 1998.
10.12 Distributor's Agreement, dated January 1, 1982, between Merkert
Enterprises, Inc. and Monarch Marking Systems, Inc.
10.13 Agreement, dated October 30, 1997, between Merkert Laboratories, Inc.
and Misco Products Corporation.
10.14 Registration Rights Agreement, dated May 18, 1998, among the
Registrant, Monroe & Company II, LLC and Gerald R. Leonard.
10.15 Form of Registration Rights Agreement to be entered into by the
Registrant and the stockholders of Merkert Enterprises, Inc.
10.16 Form of Registration Rights Agreement to be entered into by the
Registrant and the stockholders of Rogers-American Company, Inc.
10.17 Monroe, Inc. 1998 Stock Option and Incentive Plan.
10.18 Form of Non-Qualified Stock Option Agreement.
</TABLE>
2
<PAGE>
<TABLE>
<C> <S>
10.19 Form of General Release to be executed by the stockholders, directors and officers
of Roger-American Company, Inc.
10.20 Form of Indemnification Escrow Agreement to be entered into by the Registrant and
Curtis L. Rogers, Jr as Stockholders' Representative.
21.1* Subsidiaries of the Registrant.
23.1* Consent of Counsel (included in Exhibit 5.1 hereto).
23.2 Consent of Arthur Andersen LLP.
27.1 Financial Data Schedule.
99.1 Consent of Edward P. Grace, III to be named as a person to be appointed a Director
of the Registrant in this Registration Statement.
99.2 Consent of James A. Schlindwein to be named as a person to be appointed a Director
of the Registrant in this Registration Statement.
99.3 Consent of Gerald R. Leonard to be named as a person to be appointed a Director of
the Registrant in this Registration Statement.
99.4 Consent of Douglas H. Holstein to be named as a person to be appointed a Director of
the Registrant in this Registration Statement.
</TABLE>
- --------
* To be filed by amendment
(b) The Financial Statement Schedule filed as part of this Registration
Statement is as follows:
Information required by the requested schedules is not applicable or the
required information is included in the financial statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF WOBURN, COMMONWEALTH OF
MASSACHUSETTS, ON MAY 22, 1998.
Monroe, Inc.
/s/ James L. Monroe,
By: _________________________________
JAMES L. MONROE, PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ James L. Monroe President and May 22, 1998
- ------------------------------------- Director (principal
JAMES L. MONROE executive and
financial officer,
sole director)
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1* Form of U.S. Purchase Agreement.
1.2* Form of International Purchase Agreement.
3.1 Form of Amended and Restated Certificate of Incorporation.
3.2 Form of Amended and Restated By-laws.
4.1* Specimen certificate for shares of Common Stock, $.01 par value, of the Registrant.
5.1* Opinion of Goodwin, Procter & Hoar LLP as to the legality of the securities being
offered.
10.1 Stock Purchase Agreement, dated May 20, 1998, among the Company and the stockholders
of Merkert.
10.2 Stock Purchase Agreement, dated May 22, 1998, among the Company and the stockholders
of Rogers.
10.3 Form of Employment and Non-Competition Agreement to be entered into by the Company
and Gerald R. Leonard, Sidney D. Rogers, Jr. and Glenn F. Gillian.
10.4 Form of Employment and Non-Competition Agreement to be entered into by the Company
and Douglas H. Holstein and Marty D. Carter.
10.5 Form of Tax Escrow Agreement to be entered into by the Company and Robert Q. Crane,
as Stock Holders' Representative.
10.6 Form of Indemnification Escrow Agreement to be entered into by the Company and
Robert Q. Crane, as Stockholders' Representative.
10.7 Form of General Release to be executed by the stockholders of Merkert.
10.8 Agreement, dated May 11, 1998, between Monroe, Inc. and Monroe & Company, LLC.
10.9* Agreement for the purchase of Common Stock between the Company and Gerald R.
Leonard, dated April 8, 1998.
10.10* Promissory Note of Gerald R. Leonard dated April 8, 1998.
10.11* Stock Pledge Agreement between the Company and Gerald R. Leonard, dated April 8,
1998.
10.12 Distributor's Agreement, dated January 1, 1982, between Merkert and Monarch Marking
Systems, Inc.
10.13 Agreement, dated October 30, 1997, between Merkert Laboratories, Inc. and Misco
Products Corporation.
10.14 Registration Rights Agreement, dated May 18, 1998, among Monroe, Inc., Monroe &
Company II, LLC and Gerald R. Leonard.
10.15 Form of Registration Rights Agreement to be entered into by the Company and the
stockholders of Merkert.
10.16* Form of Registration Rights Agreement to be entered into by the Company and the
stockholders of Rogers,
10.17 Monroe, Inc. 1998 Stock Option and Incentive Plan.
10.18 Form of Non-Qualified Stock Option Agreement.
10.19 Form of General Release to be executed by the Stockholders, Directors and Officers
of Roger-American.
10.20 Form of Indemnification Escrow Agreement to be entered into by the Company and
Curtis L. Rogers.
21.1* Subsidiaries of the Registrant.
23.1* Consent of Counsel (included in Exhibit 5.1 hereto).
23.2 Consent of Arthur Andersen LLP.
27.1 Financial Data Schedule.
99.1 Consent of Edward P. Grace, III to be named as a person to be appointed a Director
of the Registrant in this Registration Statement.
99.2 Consent of James A. Schlindwein to be named as a person to be appointed a Director
of the Registrant in this Registration Statement.
99.3 Consent of Gerald R. Leonard to be named as a person to be appointed a Director of
the Registrant in this Registration Statement.
99.4 Consent of Douglas H. Holstein to be named as a person to be appointed a Director of
the Registrant in this Registration Statement.
</TABLE>
- --------
* To be filed by amendment
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
MERKERT AMERICAN CORPORATION
Merkert American Corporation, a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
1. The Certificate of Incorporation of Monroe, Inc. was filed in the
Office of the Secretary of State of the State of Delaware on March 4, 1998.
2. This Amended and Restated Certificate of Incorporation amends and
restates the provisions of the Certificate of Incorporation of the Corporation
filed with the Secretary of State of the State of Delaware on March 4, 1998, as
heretofore amended (the "Amended and Restated Certificate of Incorporation"),
and (i) was duly adopted by the Board of Directors in accordance with the
provisions of Sections 141(f), 242 and 245 of the General Corporation Law of the
State of Delaware (the "DGCL"), (ii) was declared by the Board of Directors to
be advisable and in the best interests of the Corporation and was directed by
the Board of Directors to be submitted to and be considered by the stockholders
of the Corporation entitled to vote thereon for approval by the affirmative vote
of such stockholders in accordance with Section 242 of the DGCL and (iii) was
duly adopted by a stockholder consent in lieu of a meeting of the stockholders,
with the holders of a majority of the outstanding shares of the Company's Common
Stock consenting to the adoption of this Amended and Restated Certificate of
Incorporation in accordance with the provisions of Sections 228 and 242 of the
DGCL such holders being all of the holders of the Corporation's capital stock
entitled to vote thereon.
3. The text of the Certificate of Incorporation is hereby amended and
restated in its entirety to provide as herein set forth in full.
ARTICLE I
NAME
----
The name of the Corporation is Merkert American Corporation.
<PAGE>
ARTICLE II
REGISTERED OFFICE
-----------------
The address of the registered office of the Corporation in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
ARTICLE III
PURPOSES
--------
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the DGCL.
ARTICLE IV
CAPITAL STOCK
-------------
Section 1. Number of Shares.
----------------------------
The total number of shares of capital stock which the Corporation shall
have the authority to issue is Fifty-One Million (51,000,000) shares, of which
(i) Fifty Million (50,000,000) shares shall be Common Stock, par value $.01 per
share (the "Common Stock") and (ii) One Million (1,000,000) shares shall be
Undesignated Preferred Stock, par value $.01 per share (the "Undesignated
Preferred Stock"). As set forth in this Article IV, the Board of Directors or
any authorized committee thereof is authorized from time to time to establish
and designate one or more series of Undesignated Preferred Stock, to fix and
determine the variations in the relative rights and preferences as between the
different series of Undesignated Preferred Stock in the manner hereinafter set
forth in this Article IV, and to fix or alter the number of shares comprising
any such series and the designation thereof to the extent permitted by law.
The number of authorized shares of the class of Undesignated Preferred
Stock may be increased or decreased (but not below the number of shares
outstanding) by the affirmative vote of the holders of a majority of the Common
Stock, without a vote of the holders of the Undesignated Preferred Stock,
pursuant to the resolution or resolutions establishing the class of Undesignated
Preferred Stock or this Amended and Restated Certificate of Incorporation, as it
may be amended from time to time.
2
<PAGE>
Section 2. General.
-------------------
The designations, powers, preferences and rights of, and the
qualifications, limitations and restrictions upon, each class or series of stock
shall be determined in accordance with, or as set forth below in, Sections 3 and
4 of this Article IV.
Section 3. Common Stock.
------------------------
Subject to all of the rights, powers and preferences of the Undesignated
Preferred Stock, and except as provided by law or in this Article IV (or in any
certificate of designation of any series of Undesignated Preferred Stock) or by
the Board of Directors or any authorized committee thereof pursuant to this
Article IV:
(a) the holders of the Common Stock shall be entitled to one vote for
each share of Common Stock standing in such holder's name on the books of the
Corporation;
(b) dividends may be declared and paid or set apart for payment upon
the Common Stock out of any assets or funds of the Corporation legally available
for the payment of dividends, but only when and as declared by the Board of
Directors or any authorized committee thereof; and
(c) upon the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, after the distribution or payment to the holders
of shares of any class or series of Undesignated Preferred Stock as provided by
the Board of Directors with respect to any such class or series of Undesignated
Preferred Stock, the remaining assets of the Corporation available for
distribution to stockholders shall be distributed among and paid to the holders
of Common Stock ratably in proportion to the number of shares of Common Stock
held by them.
Section 4. Undesignated Preferred Stock.
----------------------------------------
Subject to any limitations prescribed by law, the Board of Directors or any
authorized committee thereof is expressly authorized to provide for the issuance
of the shares of Undesignated Preferred Stock in one or more series of such
stock, and by filing a certificate pursuant to applicable law of the State of
Delaware, to establish or change from time to time the number of shares to be
included in each such series, and to fix the designations, powers, preferences
and the relative, participating, optional or other special rights of the shares
of each series and any qualifications, limitations and restrictions thereof.
Any action by the Board of Directors or any authorized committee thereof under
this Article IV.4 shall require the affirmative vote of a majority of the
Directors then in office or a majority of the members of such committee. The
Board of Directors or any authorized committee thereof shall have the right to
determine or fix one or more of the following with respect to each series of
Undesignated Preferred Stock to the extent permitted by law:
(a) The distinctive serial designation and the number of shares
constituting such series;
3
<PAGE>
(b) The dividend rates or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so, from
which date or dates, the payment date or dates for dividends, and the
participating and other rights, if any, with respect to dividends;
(c) The voting powers, full or limited, if any, of the shares of such
series;
(d) Whether the shares of such series shall be redeemable and, if so,
the price or prices at which, and the terms and conditions on which, such shares
may be redeemed;
(e) The amount or amounts payable upon the shares of such series and
any preferences applicable thereto in the event of voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
(f) Whether the shares of such series shall be entitled to the benefit
of a sinking or retirement fund to be applied to the purchase or redemption of
such shares, and if so entitled, the amount of such fund and the manner of its
application, including the price or prices at which such shares may be redeemed
or purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or of any other series of
the same or any other class or classes of stock of the Corporation and, if so
convertible or exchangeable, the conversion price or prices, or the rate or
rates of exchange, and the adjustments thereof, if any, at which such conversion
or exchange may be made, and any other terms and conditions of such conversion
or exchange;
(h) The price or other consideration for which the shares of such
series shall be issued;
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of Undesignated
Preferred Stock (or series thereof) and whether such shares may be reissued as
shares of the same or any other class or series of stock; and
(j) Such other powers, preferences, rights, qualifications,
limitations and restrictions thereof as the Board of Directors or any authorized
committee thereof may deem advisable.
ARTICLE V
STOCKHOLDER ACTION
------------------
4
<PAGE>
Any action required or permitted to be taken by the stockholders of the
Corporation at any annual or special meeting of stockholders of the Corporation
must be effected at a duly called annual or special meeting of stockholders and
may not be taken or effected by a written consent of stockholders in lieu
thereof.
ARTICLE VI
DIRECTORS
---------
Section 1. General.
-------------------
The business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors except as otherwise provided herein or
required by law.
Section 2. Election of Directors.
---------------------------------
Election of Directors need not be by written ballot unless the By-laws of
the Corporation shall so provide.
Section 3. Terms of Directors.
------------------------------
The number of Directors of the Corporation shall be fixed by resolution
duly adopted from time to time by the Board of Directors. The Directors, other
than those who may be elected by the holders of any series of Undesignated
Preferred Stock of the Corporation, shall be classified, with respect to the
term for which they severally hold office, into three classes, as nearly equal
in number as possible. The initial Class I Director of the Corporation shall be
James A. Schlindwein; the initial Class II Directors of the Corporation shall be
Edward P. Grace, III and Douglas H. Holstein; and the initial Class III
Directors of the Corporation shall be Gerald R. Leonard and James L. Monroe.
The initial Class I Director shall serve for a term expiring at the annual
meeting of stockholders to be held in 1999, the initial Class II Directors shall
serve for a term expiring at the annual meeting of stockholders to be held in
2000, and the initial Class III Directors shall serve for a term expiring at the
annual meeting of stockholders to be held in 2001. At each annual meeting of
stockholders, the successor or successors of the class of Directors whose term
expires at that meeting shall be elected by a plurality of the votes cast at
such meeting and shall hold office for a term expiring at the annual meeting of
stockholders held in the third year following the year of their election. The
Directors elected to each class shall hold office until their successors are
duly elected and qualified or until their earlier resignation or removal.
Notwithstanding the foregoing, whenever, pursuant to the provisions of
Article IV of this the holders of any one or more series of Undesignated
Preferred Stock shall have the right, voting separately as a series or together
with holders of other such series, to elect Directors at an annual or special
meeting of stockholders, the election, term of office, filling of
5
<PAGE>
vacancies and other features of such directorships shall be governed by the
terms of this Amended and Restated Certificate of Incorporation and any
certificate of designations applicable thereto, and such Directors so elected
shall not be divided into classes pursuant to this Article VI.3.
During any period when the holders of any series of Undesignated Preferred
Stock have the right to elect additional Directors as provided for or fixed
pursuant to the provisions of Article IV hereof, then upon commencement and for
the duration of the period during which such right continues: (i) the then
otherwise total authorized number of Directors of the Corporation shall
automatically be increased by such specified number of Directors, and the
holders of such Undesignated Preferred Stock shall be entitled to elect the
additional Directors so provided for or fixed pursuant to said provisions, and
(ii) each such additional Director shall serve until such Director's successor
shall have been duly elected and qualified, or until such Director's right to
hold such office terminates pursuant to said provisions, whichever occurs
earlier, subject to such Director's earlier death, disqualification, resignation
or removal. Except as otherwise provided by the Board in the resolution or
resolutions establishing such series, whenever the holders of any series of
Undesignated Preferred Stock having such right to elect additional Directors are
divested of such right pursuant to the provisions of such stock, the terms of
office of all such additional Directors elected by the holders of such stock, or
elected to fill any vacancies resulting from the death, resignation,
disqualification or removal of such additional Directors, shall forthwith
terminate and the total and authorized number of Directors of the Corporation
shall be reduced accordingly.
Section 4. Vacancies.
---------------------
Subject to the rights, if any, of the holders of any series of Undesignated
Preferred Stock to elect Directors and to fill vacancies in the Board of
Directors relating thereto, any and all vacancies in the Board of Directors,
however occurring, including, without limitation, by reason of an increase in
size of the Board of Directors, or the death, resignation, disqualification or
removal of a Director, shall be filled solely by the affirmative vote of a
majority of the remaining Directors then in office, even if less than a quorum
of the Board of Directors. Any Director appointed in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
class of Directors in which the new directorship was created or the vacancy
occurred and until such Director's successor shall have been duly elected and
qualified or until his or her earlier resignation or removal. Subject to the
rights, if any, of the holders of any series of Undesignated Preferred Stock to
elect Directors, when the number of Directors is increased or decreased, the
Board of Directors shall determine the class or classes to which the increased
or decreased number of Directors shall be apportioned; provided, however, that
no decrease in the number of Directors shall shorten the term of any incumbent
Director. In the event of a vacancy in the Board of Directors, the remaining
Directors, except as otherwise provided by law, may exercise the powers of the
full Board of Directors until the vacancy is filled.
6
<PAGE>
Section 5. Removal.
-------------------
Subject to the rights, if any, of any series of Undesignated Preferred
Stock to elect Directors and to remove any Director whom the holders of any such
stock have the right to elect, any Director (including persons elected by
Directors to fill vacancies in the Board of Directors) may be removed from
office (i) only with cause and (ii) only by the affirmative vote of at least
two-thirds of the total votes which would be eligible to be cast by stockholders
in the election of such Director. At least 30 days prior to any meeting of
stockholders at which it is proposed that any Director be removed from office,
written notice of such proposed removal shall be sent to the Director whose
removal will be considered at the meeting. For purposes of this Amended and
Restated Certificate of Incorporation, "cause," with respect to the removal of
any Director shall mean only (i) conviction of a felony, (ii) declaration of
unsound mind by order of court, (iii) gross dereliction of duty, (iv) commission
of any action involving moral turpitude, or (v) commission of an action which
constitutes intentional misconduct or a knowing violation of law if such action
in either event results both in an improper substantial personal benefit and a
material injury to the Corporation.
ARTICLE VII
LIMITATION OF LIABILITY
-----------------------
A Director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (i) for any breach of the Director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL or (iv) for any
transaction from which the Director derived an improper personal benefit. If
the DGCL is amended after the effective date of this Amended and Restated
Certificate of Incorporation to authorize corporate action further eliminating
or limiting the personal liability of Directors, then the liability of a
Director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the DGCL, as so amended.
Any repeal or modification of this Article VII by either of (i) the
stockholders of the Corporation or (ii) an amendment to the DGCL, shall not
adversely affect any right or protection existing at the time of such repeal or
modification with respect to any acts or omissions occurring before such repeal
or modification of a person serving as a Director at the time of such repeal or
modification.
7
<PAGE>
ARTICLE VIII
AMENDMENT OF BY-LAWS
--------------------
Section 1. Amendment by Directors
----------------------------------
Except as otherwise provided by law, the By-laws of the Corporation may be
amended or repealed by the Board of Directors.
Section 2. Amendment by Stockholders
-------------------------------------
The By-laws of the Corporation may be amended or repealed at any annual
meeting of stockholders, or special meeting of stockholders called for such
purpose, by the affirmative vote of at least two-thirds of the total votes
eligible to be cast on such amendment or repeal by holders of voting stock,
voting together as a single class; provided, however, that if the Board of
Directors recommends that stockholders approve such amendment or repeal at such
meeting of stockholders, such amendment or repeal shall only require the
affirmative vote of a majority of the total votes eligible to be cast on such
amendment or repeal by holders of voting stock, voting together as a single
class.
ARTICLE IX
AMENDMENT OF CERTIFICATE OF INCORPORATION
-----------------------------------------
The Corporation reserves the right to amend or repeal this Amended and
Restated Certificate of Incorporation in the manner now or hereafter prescribed
by statute and this Amended and Restated Certificate of Incorporation, and all
rights conferred upon stockholders herein are granted subject to this
reservation. No amendment or repeal of this Amended and Restated Certificate of
Incorporation shall be made unless the same is first approved by the Board of
Directors pursuant to a resolution adopted by the Board of Directors in
accordance with Section 242 of the DGCL, and, except as otherwise provided by
law, thereafter approved by the stockholders. Whenever any vote of the holders
of voting stock is required, and in addition to any other vote of holders of
voting stock that is required by this Amended and Restated Certificate of
Incorporation or by law, the affirmative vote of a majority of the total votes
eligible to be cast by holders of voting stock with respect to such amendment or
repeal, voting together as a single class, at a duly constituted meeting of
stockholders called expressly for such purpose shall be required to amend or
repeal any provisions of this Amended and Restated Certificate of Incorporation;
provided, however, that the affirmative vote of not less than two-thirds of the
total votes eligible to be cast by holders of voting stock, voting together as a
single class, shall be required to amend or repeal any of the provisions of
Article VI or Article IX of this Amended and Restated Certificate of
Incorporation.
8
<PAGE>
I, James L. Monroe, President of the Corporation, for the purpose of
amending and restating the Corporation's Certificate of Incorporation pursuant
to the General Corporation Law of the State of Delaware, do make this
certificate, hereby declaring and certifying that this is my act and deed on
behalf of the Corporation this ____ day of May, 1998.
____________________________________
James L. Monroe, President
9
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BY-LAWS
OF
MERKERT AMERICAN CORPORATION
ARTICLE I
---------
Stockholders
------------
SECTION 1. Annual Meeting. The annual meeting of stockholders shall be
--------------
held at the hour, date and place within or without the United States which is
fixed by the majority of the Board of Directors, the Chairman of the Board, if
one is elected, or the Chief Executive Officer, which time, date and place may
subsequently be changed at any time by vote of the Board of Directors. If no
annual meeting has been held for a period of thirteen months after the
Corporation's last annual meeting of stockholders, a special meeting in lieu
thereof may be held, and such special meeting shall have, for the purposes of
these By-laws or otherwise, all the force and effect of an annual meeting. Any
and all references hereafter in these By-laws to an annual meeting or annual
meetings also shall be deemed to refer to any special meeting(s) in lieu
thereof.
SECTION 2. Matters to be Considered at Annual Meetings. At any annual
-------------------------------------------
meeting of stockholders or any special meeting in lieu of annual meeting of
stockholders (the "Annual Meeting"), only such business shall be conducted, and
only such proposals shall be acted upon, as shall have been properly brought
before such Annual Meeting. To be considered as properly brought before an
Annual Meeting, business must be: (a) specified in the notice of meeting, (b)
otherwise properly brought before the meeting by, or at the direction of, the
Board of Directors, or (c) otherwise properly brought before the meeting by any
holder of record (both as of the time notice of such proposal is given by the
stockholder as set forth below and as of the record date for the Annual Meeting
in question) of any shares of capital stock of the Corporation entitled to vote
at such Annual Meeting who complies with the requirements set forth in this
Section 2.
In addition to any other applicable requirements, for business to be
properly brought before an Annual Meeting by a stockholder of record of any
shares of capital stock entitled to vote at such Annual Meeting, such
stockholder shall: (i) give timely notice as required by this Section 2 to the
Secretary of the Corporation and (ii) be present at such meeting, either in
person or by a representative. For the first Annual Meeting following the
initial public offering of common stock of the Corporation, a stockholder's
notice shall be timely if delivered to, or mailed to and received by, the
Corporation at its principal executive office not later than the close of
business on the later of (x) the 75th day prior to the scheduled date of such
Annual Meeting or (y) the 15th day following the day on which public
announcement of the date of such Annual Meeting is first made by the
Corporation. For all subsequent Annual Meetings, a stockholder's notice shall
be timely if delivered to, or mailed to and received by,
<PAGE>
the Corporation at its principal executive office not less than 75 days nor more
than 120 days prior to the anniversary date of the immediately preceding Annual
Meeting (the "Anniversary Date"); provided, however, that in the event the
Annual Meeting is scheduled to be held on a date more than 30 days before the
Anniversary Date or more than 60 days after the Anniversary Date, a
stockholder's notice shall be timely if delivered to, or mailed to and received
by, the Corporation at its principal executive office not later than the close
of business on the later of (1) the 75th day prior to the scheduled date of such
Annual Meeting or (2) the 15th day following the day on which public
announcement of the date of such Annual Meeting is first made by the
Corporation.
For purposes of these By-laws, "public announcement" shall mean: (a)
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service, (b) a report or other document filed
publicly with the Securities and Exchange Commission (including, without
limitation, a Form 8-K), or (c) a letter or report sent to stockholders of
record of the Corporation at the time of the mailing of such letter or report.
A stockholder's notice to the Secretary shall set forth as to each matter
proposed to be brought before an Annual Meeting: (i) a brief description of the
business the stockholder desires to bring before such Annual Meeting and the
reasons for conducting such business at such Annual Meeting, (ii) the name and
address, as they appear on the Corporation's stock transfer books, of the
stockholder proposing such business, (iii) the class and number of shares of the
Corporation's capital stock beneficially owned by the stockholder proposing such
business, (iv) the names and addresses of the beneficial owners, if any, of any
capital stock of the Corporation registered in such stockholder's name on such
books, and the class and number of shares of the Corporation's capital stock
beneficially owned by such beneficial owners, (v) the names and addresses of
other stockholders known by the stockholder proposing such business to support
such proposal, and the class and number of shares of the Corporation's capital
stock beneficially owned by such other stockholders, and (vi) any material
interest of the stockholder proposing to bring such business before such meeting
(or any other stockholders known to be supporting such proposal) in such
proposal.
If the Board of Directors or a designated committee thereof determines that
any stockholder proposal was not made in a timely fashion in accordance with the
provisions of this Section 2 or that the information provided in a stockholder's
notice does not satisfy the information requirements of this Section 2 in any
material respect, such proposal shall not be presented for action at the Annual
Meeting in question. If neither the Board of Directors nor such committee makes
a determination as to the validity of any stockholder proposal in the manner set
forth above, the presiding officer of the Annual Meeting shall determine whether
the stockholder proposal was made in accordance with the terms of this Section
2. If the presiding officer determines that any stockholder proposal was not
made in a timely fashion in accordance with the provisions of this Section 2 or
that the information provided in a stockholder's notice does not satisfy the
information requirements of this Section 2 in any material respect, such
proposal shall not be presented for action at the Annual Meeting in
2
<PAGE>
question. If the Board of Directors, a designated committee thereof or the
presiding officer determines that a stockholder proposal was made in accordance
with the requirements of this Section 2, the presiding officer shall so declare
at the Annual Meeting and ballots shall be provided for use at the meeting with
respect to such proposal.
Notwithstanding the foregoing provisions of this By-Law, a stockholder
shall also comply with all applicable requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and regulations
thereunder with respect to the matters set forth in this Section 2, and nothing
in this Section 2 shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the Corporation's proxy statement pursuant to
Rule 14a-8 under the Exchange Act.
SECTION 3. Special Meetings. Except as otherwise required by law and
----------------
subject to the rights, if any, of the holders of any series of preferred stock,
special meetings of the stockholders of the Corporation may be called only by
the Board of Directors pursuant to a resolution approved by the affirmative vote
of a majority of the directors then in office.
SECTION 4. Matters to be Considered at Special Meetings. Only those
--------------------------------------------
matters set forth in the notice of the special meeting may be considered or
acted upon at a special meeting of stockholders of the Corporation, unless
otherwise provided by law.
SECTION 5. Notice of Meetings; Adjournments. A written notice of each
--------------------------------
Annual Meeting stating the hour, date and place of such Annual Meeting shall be
given by the Secretary or an Assistant Secretary (or other person authorized by
these By-laws or by law) not less than 10 days nor more than 60 days before the
Annual Meeting, to each stockholder entitled to vote thereat and to each
stockholder who, by law or under the Certificate of Incorporation of the
Corporation (as the same may hereafter be amended and/or restated, the
"Certificate") or under these By-laws, is entitled to such notice, by delivering
such notice to him or by mailing it, postage prepaid, addressed to such
stockholder at the address of such stockholder as it appears on the
Corporation's stock transfer books. Such notice shall be deemed to be delivered
when hand delivered to such address or deposited in the mail so addressed, with
postage prepaid.
Notice of all special meetings of stockholders shall be given in the same
manner as provided for Annual Meetings, except that the written notice of all
special meetings shall state the purpose or purposes for which the meeting has
been called.
Notice of an Annual Meeting or special meeting of stockholders need not be
given to a stockholder if a written waiver of notice is signed before or after
such meeting by such stockholder or if such stockholder attends such meeting,
unless such attendance was for the express purpose of objecting at the beginning
of the meeting to the transaction of any business because the meeting was not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any Annual Meeting or special meeting of stockholders need be
specified in any written waiver of notice.
3
<PAGE>
The Board of Directors may postpone and reschedule any previously scheduled
Annual Meeting or special meeting of stockholders and any record date with
respect thereto, regardless of whether any notice or public disclosure with
respect to any such meeting has been sent or made pursuant to Section 2 of this
Article I or Section 3 of Article II hereof or otherwise. In no event shall
the public announcement of an adjournment, postponement or rescheduling of any
previously scheduled meeting of stockholders commence a new time period for the
giving of a stockholder's notice under Section 2 of Article I and Section 3 of
Article II of these By-laws.
When any meeting is convened, the presiding officer may adjourn the meeting
if (a) no quorum is present for the transaction of business, (b) the Board of
Directors determines that adjournment is necessary or appropriate to enable the
stockholders to consider fully information which the Board of Directors
determines has not been made sufficiently or timely available to stockholders,
or (c) the Board of Directors determines that adjournment is otherwise in the
best interests of the Corporation. When any Annual Meeting or special meeting
of stockholders is adjourned to another hour, date or place, notice need not be
given of the adjourned meeting other than an announcement at the meeting at
which the adjournment is taken of the hour, date and place to which the meeting
is adjourned; provided, however, that if the adjournment is for more than 30
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote thereat and each stockholder who, by law or under the
Certificate or these By-laws, is entitled to such notice.
SECTION 6. Quorum. A majority of the shares entitled to vote, present in
------
person or represented by proxy, shall constitute a quorum at any meeting of
stockholders. If less than a quorum is present at a meeting, the holders of
voting stock representing a majority of the voting power present at the meeting
or the presiding officer may adjourn the meeting from time to time, and the
meeting may be held as adjourned without further notice, except as provided in
Section 5 of this Article I. At such adjourned meeting at which a quorum is
present, any business may be transacted which might have been transacted at the
meeting as originally noticed. The stockholders present at a duly constituted
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
SECTION 7. Voting and Proxies. Stockholders shall have one vote for each
------------------
share of stock entitled to vote owned by them of record according to the books
of the Corporation, unless otherwise provided by law or by the Certificate.
Stockholders may vote either in person or by written proxy, but no proxy shall
be voted or acted upon after three years from its date, unless the proxy
provides for a longer period. Proxies shall be filed with the Secretary of the
meeting before being voted. Except as otherwise limited therein or as otherwise
provided by law, proxies shall entitle the persons authorized thereby to vote at
any adjournment of such meeting, but they shall not be valid after final
adjournment of such meeting. A proxy with respect to stock held in the name of
two or more persons shall be valid if executed by or on behalf of any one of
them unless at or prior to the exercise of the proxy the Corporation
4
<PAGE>
receives a specific written notice to the contrary from any one of them. A proxy
purporting to be executed by or on behalf of a stockholder shall be deemed
valid, and the burden of proving invalidity shall rest on the challenger.
SECTION 8. Action at Meeting. When a quorum is present, any matter
-----------------
before any meeting of stockholders shall be decided by the affirmative vote of
the majority of shares present in person or represented by proxy at such meeting
and entitled to vote on such matter, except where a larger vote is required by
law, by the Certificate or by these By-laws. Any election by stockholders shall
be determined by a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote on the election of
directors, except where a larger vote is required by law, by the Certificate or
by these By-laws. The Corporation shall not directly or indirectly vote any
shares of its own stock; provided, however, that the Corporation may vote shares
which it holds in a fiduciary capacity to the extent permitted by law.
SECTION 9. Stockholder Lists. The Secretary or an Assistant Secretary
-----------------
(or the Corporation's transfer agent or other person authorized by these By-laws
or by law) shall prepare and make, at least 10 days before every Annual Meeting
or special meeting of stockholders, a complete list of the stockholders entitled
to vote at the meeting, arranged in alphabetical order, and showing the address
of each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least 10 days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the hour, date and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 10. Presiding Officer. The Chairman of the Board, if one is
-----------------
elected, or if not elected or in his or her absence, the Chief Executive
Officer, shall preside at all Annual Meetings or special meetings of
stockholders and shall have the power, among other things, to adjourn such
meeting at any time and from time to time, subject to Sections 5 and 6 of this
Article I. The order of business and all other matters of procedure at any
meeting of the stockholders shall be determined by the presiding officer.
SECTION 11. Voting Procedures and Inspectors of Elections. The
---------------------------------------------
Corporation shall, in advance of any meeting of stockholders, appoint one or
more inspectors to act at the meeting and make a written report thereof. The
Corporation may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate is able to act at a
meeting of stockholders, the presiding officer shall appoint one or more
inspectors to act at the meeting. Any inspector may, but need not, be an
officer, employee or agent of the Corporation. Each inspector, before entering
upon the discharge of his or her duties, shall take and sign an oath faithfully
to execute the duties of inspector with strict impartiality and according to the
best of his or her ability. The inspectors shall perform such
5
<PAGE>
duties as are required by the General Corporation Law of the State of Delaware,
as amended from time to time (the "DGCL"), including the counting of all votes
and ballots. The inspectors may appoint or retain other persons or entities to
assist the inspectors in the performance of the duties of the inspectors. The
presiding officer may review all determinations made by the inspectors, and in
so doing the presiding officer shall be entitled to exercise his or her sole
judgment and discretion and he or she shall not be bound by any determinations
made by the inspectors. All determinations by the inspectors and, if applicable,
the presiding officer, shall be subject to further review by any court of
competent jurisdiction.
ARTICLE II
----------
Directors
---------
SECTION 1. Powers. The business and affairs of the Corporation shall be
------
managed by or under the direction of the Board of Directors except as otherwise
provided by the Certificate or required by law.
SECTION 2. Number and Terms. The number of directors of the Corporation
----------------
shall be fixed by resolution duly adopted from time to time by the Board of
Directors. The directors shall hold office in the manner provided in the
Certificate.
SECTION 3. Director Nominations. Nominations of candidates for election
--------------------
as directors of the Corporation at any Annual Meeting may be made only (a) by,
or at the direction of, a majority of the Board of Directors or (b) by any
holder of record (both as of the time notice of such nomination is given by the
stockholder as set forth below and as of the record date for the Annual Meeting
in question) of any shares of the capital stock of the Corporation entitled to
vote at such Annual Meeting who complies with the timing, informational and
other requirements set forth in this Section 3. Any stockholder who has
complied with the timing, informational and other requirements set forth in this
Section 3 and who seeks to make such a nomination, or his, her or its
representative, must be present in person at the Annual Meeting. Only persons
nominated in accordance with the procedures set forth in this Section 3 shall be
eligible for election as directors at an Annual Meeting.
Nominations, other than those made by, or at the direction of, the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation as set forth in this Section 3. For the first Annual Meeting
following the initial public offering of common stock of the Corporation, a
stockholder's notice shall be timely if delivered to, or mailed to and received
by, the Corporation at its principal executive office not later than the close
of business on the later of (i) the 75th day prior to the scheduled date of such
Annual Meeting or (ii) the 15th day following the day on which public
announcement of the date of such Annual Meeting is first made by the
Corporation. For all subsequent Annual Meetings, a stockholder's notice shall
be timely if delivered to, or mailed to and received by, the Corporation at its
principal executive office not less than 75 days nor more than 120 days prior
6
<PAGE>
to the Anniversary Date; provided, however, that in the event the Annual Meeting
is scheduled to be held on a date more than 30 days before the Anniversary Date
or more than 60 days after the Anniversary Date, a stockholder's notice shall be
timely if delivered to, or mailed and received by, the Corporation at its
principal executive office not later than the close of business on the later of
(x) the 75th day prior to the scheduled date of such Annual Meeting or (y) the
15th day following the day on which public announcement of the date of such
Annual Meeting is first made by the Corporation.
A stockholder's notice to the Secretary shall set forth as to each person
whom the stockholder proposes to nominate for election or re-election as a
director: (1) the name, age, business address and residence address of such
person, (2) the principal occupation or employment of such person, (3) the class
and number of shares of the Corporation's capital stock which are beneficially
owned by such person on the date of such stockholder notice, and (4) the consent
of each nominee to serve as a director if elected. A stockholder's notice to
the Secretary shall further set forth as to the stockholder giving such notice:
(a) the name and address, as they appear on the Corporation's stock transfer
books, of such stockholder and of the beneficial owners (if any) of the
Corporation's capital stock registered in such stockholder's name and the name
and address of other stockholders known by such stockholder to be supporting
such nominee(s), (b) the class and number of shares of the Corporation's capital
stock which are held of record, beneficially owned or represented by proxy by
such stockholder and by any other stockholders known by such stockholder to be
supporting such nominee(s) on the record date for the Annual Meeting in question
(if such date shall then have been made publicly available) and on the date of
such stockholder's notice, and (c) a description of all arrangements or
understandings between such stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by such stockholder.
If the Board of Directors or a designated committee thereof determines that
any stockholder nomination was not made in accordance with the terms of this
Section 3 or that the information provided in a stockholder's notice does not
satisfy the informational requirements of this Section 3 in any material
respect, then such nomination shall not be considered at the Annual Meeting in
question. If neither the Board of Directors nor such committee makes a
determination as to whether a nomination was made in accordance with the
provisions of this Section 3, the presiding officer of the Annual Meeting shall
determine whether a nomination was made in accordance with such provisions. If
the presiding officer determines that any stockholder nomination was not made in
accordance with the terms of this Section 3 or that the information provided in
a stockholder's notice does not satisfy the informational requirements of this
Section 3 in any material respect, then such nomination shall not be considered
at the Annual Meeting in question. If the Board of Directors, a designated
committee thereof or the presiding officer determines that a nomination was made
in accordance with the terms of this Section 3, the presiding officer shall so
declare at the Annual Meeting and ballots shall be provided for use at the
meeting with respect to such nominee.
7
<PAGE>
Notwithstanding anything to the contrary in the second paragraph of this
Section 3, in the event that the number of directors to be elected to the Board
of Directors of the Corporation is increased and there is no public announcement
by the Corporation naming all of the nominees for director or specifying the
size of the increased Board of Directors at least 75 days prior to the
Anniversary Date, a stockholder's notice required by this Section 3 shall also
be considered timely, but only with respect to nominees for any new positions
created by such increase, if such notice shall be delivered to, or mailed to and
received by, the Corporation at its principal executive office not later than
the close of business on the 15th day following the day on which such public
announcement is first made by the Corporation.
No person shall be elected by the stockholders as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section. Election of directors at an Annual Meeting need not be by written
ballot, unless otherwise provided by the Board of Directors or presiding officer
at such Annual Meeting. If written ballots are to be used, ballots bearing the
names of all the persons who have been nominated for election as directors at
the Annual Meeting in accordance with the procedures set forth in this Section
shall be provided for use at the Annual Meeting.
SECTION 4. Qualification. No director need be a stockholder of the
-------------
Corporation.
SECTION 5. Vacancies. Subject to the rights, if any, of the holders of
---------
any series of preferred stock to elect directors and to fill vacancies in the
Board of Directors relating thereto, any and all vacancies in the Board of
Directors, however occurring, including, without limitation, by reason of an
increase in size of the Board of Directors, or the death, resignation,
disqualification or removal of a director, shall be filled solely by the
affirmative vote of a majority of the remaining directors then in office, even
if less than a quorum of the Board of Directors. Any director appointed in
accordance with the preceding sentence shall hold office until the next Annual
Meeting of stockholders and until such director's successor shall have been duly
elected and qualified or until his or her earlier resignation or removal. No
decrease in the number of directors shall shorten the term of any incumbent
director. In the event of a vacancy in the Board of Directors, the remaining
directors, except as otherwise provided by law, may exercise the powers of the
full Board of Directors until the vacancy is filled.
SECTION 6. Removal. Directors may be removed from office in the manner
-------
provided in the Certificate.
SECTION 7. Resignation. A director may resign at any time by giving
-----------
written notice to the Chairman of the Board, if one is elected, the Chief
Executive Officer or the Secretary. A resignation shall be effective upon
receipt, unless the resignation otherwise provides.
SECTION 8. Regular Meetings. The regular annual meeting of the Board of
----------------
Directors shall be held, without notice other than this Section 8, on the same
date and at the same place as the Annual Meeting following the close of such
meeting of stockholders. Other regular meetings of the Board of Directors may
be held at such hour, date and place as the Board of
8
<PAGE>
Directors may by resolution from time to time determine without notice other
than such resolution.
SECTION 9. Special Meetings. Special meetings of the Board of Directors
----------------
may be called, orally or in writing, by or at the request of a majority of the
directors, the Chairman of the Board, if one is elected, or the Chief Executive
Officer. The person calling any such special meeting of the Board of Directors
may fix the hour, date and place thereof.
SECTION 10. Notice of Meetings. Notice of the hour, date and place of all
------------------
special meetings of the Board of Directors shall be given to each director by
the Secretary or an Assistant Secretary, or in case of the death, absence,
incapacity or refusal of such persons, by the Chairman of the Board, if one is
elected, or the Chief Executive Officer or such other officer designated by the
Chairman of the Board, if one is elected, or the Chief Executive Officer.
Notice of any special meeting of the Board of Directors shall be given to each
director in person, by telephone, or by facsimile, telex, telecopy, telegram, or
other written form of electronic communication, sent to his or her business or
home address, at least 24 hours in advance of the meeting, or by written notice
mailed to his or her business or home address, at least 48 hours in advance of
the meeting. Such notice shall be deemed to be delivered when hand delivered to
such address, read to such director by telephone, deposited in the mail so
addressed, with postage thereon prepaid if mailed, dispatched or transmitted if
faxed, telexed or telecopied, or when delivered to the telegraph company if sent
by telegram.
When any Board of Directors meeting, either regular or special, is
adjourned for 30 days or more, notice of the adjourned meeting shall be given as
in the case of an original meeting. It shall not be necessary to give any notice
of the hour, date or place of any meeting adjourned for less than 30 days or of
the business to be transacted thereat, other than an announcement at the meeting
at which such adjournment is taken of the hour, date and place to which the
meeting is adjourned.
A written waiver of notice signed before or after a meeting by a director
and filed with the records of the meeting shall be deemed to be equivalent to
notice of the meeting. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting at the beginning of the meeting to
the transaction of any business because such meeting is not lawfully called or
convened. Except as otherwise required by law, by the Certificate or by these
By-laws, neither the business to be transacted at, nor the purpose of, any
meeting of the Board of Directors need be specified in the notice or waiver of
notice of such meeting.
SECTION 11. Quorum. At any meeting of the Board of Directors, a majority
------
of the directors then in office shall constitute a quorum for the transaction of
business, but if less than a quorum is present at a meeting, a majority of the
directors present may adjourn the meeting from time to time, and the meeting may
be held as adjourned without further notice, except as provided in Section 10 of
this Article II. Any business which might have been transacted at
9
<PAGE>
the meeting as originally noticed may be transacted at such adjourned meeting at
which a quorum is present.
SECTION 12. Action at Meeting. At any meeting of the Board of Directors
-----------------
at which a quorum is present, a majority of the directors present may take any
action on behalf of the Board of Directors, unless otherwise required by law, by
the Certificate or by these By-laws.
SECTION 13. Action by Consent. Any action required or permitted to be
-----------------
taken at any meeting of the Board of Directors may be taken without a meeting if
all members of the Board of Directors consent thereto in writing. Such written
consent shall be filed with the records of the meetings of the Board of
Directors and shall be treated for all purposes as a vote at a meeting of the
Board of Directors.
SECTION 14. Manner of Participation. Directors may participate in
-----------------------
meetings of the Board of Directors by means of conference telephone or similar
communications equipment by means of which all directors participating in the
meeting can hear each other, and participation in a meeting in accordance
herewith shall constitute presence in person at such meeting for purposes of
these By-laws.
SECTION 15. Committees. The Board of Directors, by vote of a majority of
----------
the directors then in office, may elect from its number one or more committees,
including, without limitation, an Executive Committee, a Compensation Committee,
a Stock Option Committee and an Audit Committee, and may delegate thereto some
or all of its powers except those which by law, by the Certificate or by these
By-laws may not be delegated. Except as the Board of Directors may otherwise
determine, any such committee may make rules for the conduct of its business,
but unless otherwise provided by the Board of Directors or in such rules, its
business shall be conducted so far as possible in the same manner as is provided
by these By-laws for the Board of Directors. All members of such committees
shall hold such offices at the pleasure of the Board of Directors. The Board of
Directors may abolish any such committee at any time. Any committee to which
the Board of Directors delegates any of its powers or duties shall keep records
of its meetings and shall report its action to the Board of Directors. The
Board of Directors shall have power to rescind any action of any committee, to
the extent permitted by law, but no such rescission shall have retroactive
effect.
SECTION 16. Compensation of Directors. Directors shall receive such
-------------------------
compensation for their services as shall be determined by a majority of the
Board of Directors provided that directors who are serving the Corporation as
employees and who receive compensation for their services as such, shall not
receive any salary or other compensation for their services as directors of the
Corporation.
ARTICLE III
-----------
Officers
--------
10
<PAGE>
SECTION 1. Enumeration. The officers of the Corporation shall consist of
-----------
a Chief Executive Officer, a Treasurer, a Secretary and such other officers,
including, without limitation, a Chairman of the Board of Directors, a
President, a Chief Financial Officer, a Chief Operating Officer and one or more
Vice Presidents (including Executive Vice Presidents or Senior Vice Presidents),
Assistant Vice Presidents, Assistant Treasurers and Assistant Secretaries, as
the Board of Directors may determine.
SECTION 2. Election. At the regular annual meeting of the Board following
--------
the Annual Meeting of stockholders, the Board of Directors shall elect the Chief
Executive Officer, the Treasurer and the Secretary. Other officers may be
elected by the Board of Directors at such regular annual meeting of the Board of
Directors or at any other regular or special meeting.
SECTION 3. Qualification. No officer need be a stockholder or a director.
-------------
Any person may occupy more than one office of the Corporation at any time. Any
officer may be required by the Board of Directors to give bond for the faithful
performance of his or her duties in such amount and with such sureties as the
Board of Directors may determine.
SECTION 4. Tenure. Except as otherwise provided by the Certificate or by
------
these By-laws, each of the officers of the Corporation shall hold office until
the regular annual meeting of the Board of Directors following the next Annual
Meeting of stockholders and until his or her successor is elected and qualified
or until his or her earlier resignation or removal.
SECTION 5. Resignation. Any officer may resign by delivering his or her
-----------
written resignation to the Corporation addressed to the Chief Executive Officer
or the Secretary, and such resignation shall be effective upon receipt unless it
is specified to be effective at some other time or upon the happening of some
other event.
SECTION 6. Removal. Except as otherwise provided by law, the Board of
-------
Directors may remove any officer with or without cause by the affirmative vote
of a majority of the directors then in office.
SECTION 7. Absence or Disability. In the event of the absence or
---------------------
disability of any officer, the Board of Directors may designate another officer
to act temporarily in place of such absent or disabled officer.
SECTION 8. Vacancies. Any vacancy in any office may be filled for the
---------
unexpired portion of the term by the Board of Directors.
SECTION 9. Chief Executive Officer. The Chief Executive Officer shall,
-----------------------
subject to the direction of the Board of Directors, have general supervision and
control of the Corporation's business. If there is no Chairman of the Board or
if he or she is absent, the Chief Executive Officer shall preside, when present,
at all meetings of stockholders and of the
11
<PAGE>
Board of Directors. The Chief Executive Officer shall have such other powers and
perform such other duties as the Board of Directors may from time to time
designate.
SECTION 10. Chairman of the Board. The Chairman of the Board, if one is
---------------------
elected, shall preside, when present, at all meetings of the stockholders and of
the Board of Directors. The Chairman of the Board shall have such other powers
and shall perform such other duties as the Board of Directors may from time to
time designate.
SECTION 11. President. The President, if one is elected, shall have such
---------
powers and shall perform such duties as the Board of Directors may from time to
time designate.
SECTION 12. Vice Presidents and Assistant Vice Presidents. Any Vice
---------------------------------------------
President (including any Executive Vice President or Senior Vice President) and
any Assistant Vice President shall have such powers and shall perform such
duties as the Board of Directors or the Chief Executive Officer may from time to
time designate.
SECTION 13. Treasurer and Assistant Treasurers. The Treasurer shall,
----------------------------------
subject to the direction of the Board of Directors and except as the Board of
Directors or the Chief Executive Officer may otherwise provide, have general
charge of the financial affairs of the Corporation and shall cause to be kept
accurate books of account. The Treasurer shall have custody of all funds,
securities, and valuable documents of the Corporation. He or she shall have
such other duties and powers as may be designated from time to time by the Board
of Directors or the Chief Executive Officer.
Any Assistant Treasurer shall have such powers and perform such duties as
the Board of Directors or the Chief Executive Officer may from time to time
designate.
SECTION 14. Secretary and Assistant Secretaries. The Secretary shall
-----------------------------------
record all the proceedings of the meetings of the stockholders and the Board of
Directors (including committees of the Board) in books kept for that purpose.
In his or her absence from any such meeting, a temporary secretary chosen at the
meeting shall record the proceedings thereof. The Secretary shall have charge of
the stock ledger (which may, however, be kept by any transfer or other agent of
the Corporation). The Secretary shall have custody of the seal of the
Corporation, and the Secretary, or an Assistant Secretary, shall have authority
to affix it to any instrument requiring it, and, when so affixed, the seal may
be attested by his or her signature or that of an Assistant Secretary. The
Secretary shall have such other duties and powers as may be designated from time
to time by the Board of Directors or the Chief Executive Officer. In the absence
of the Secretary, any Assistant Secretary may perform his or her duties and
responsibilities.
Any Assistant Secretary shall have such powers and perform such duties as
the Board of Directors or the Chief Executive Officer may from time to time
designate.
12
<PAGE>
SECTION 15. Other Powers and Duties. Subject to these By-laws and to such
-----------------------
limitations as the Board of Directors may from time to time prescribe, the
officers of the Corporation shall each have such powers and duties as generally
pertain to their respective offices, as well as such powers and duties as from
time to time may be conferred by the Board of Directors or the Chief Executive
Officer.
ARTICLE IV
----------
Capital Stock
-------------
SECTION 1. Certificates of Stock. Each stockholder shall be entitled to a
---------------------
certificate of the capital stock of the Corporation in such form as may from
time to time be prescribed by the Board of Directors. Such certificate shall be
signed by the Chairman of the Board of Directors, the President or a Vice
President and by the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary. The Corporation seal and the signatures by the
Corporation's officers, the transfer agent or the registrar may be facsimiles.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed on such certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he or she were such
officer, transfer agent or registrar at the time of its issue. Every
certificate for shares of stock which are subject to any restriction on transfer
and every certificate issued when the Corporation is authorized to issue more
than one class or series of stock shall contain such legend with respect thereto
as is required by law.
SECTION 2. Transfers. Subject to any restrictions on transfer and unless
---------
otherwise provided by the Board of Directors, shares of stock may be transferred
only on the books of the Corporation by the surrender to the Corporation or its
transfer agent of the certificate theretofore properly endorsed or accompanied
by a written assignment or power of attorney properly executed, with transfer
stamps (if necessary) affixed, and with such proof of the authenticity of
signature as the Corporation or its transfer agent may reasonably require.
SECTION 3. Record Holders. Except as may otherwise be required by law, by
--------------
the Certificate or by these By-laws, the Corporation shall be entitled to treat
the record holder of stock as shown on its books as the owner of such stock for
all purposes, including the payment of dividends and the right to vote with
respect thereto, regardless of any transfer, pledge or other disposition of such
stock, until the shares have been transferred on the books of the Corporation in
accordance with the requirements of these By-laws.
It shall be the duty of each stockholder to notify the Corporation of his
or her post office address and any changes thereto.
SECTION 4. Record Date. In order that the Corporation may determine the
-----------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment
13
<PAGE>
thereof or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the Board of Directors, and which record date: (a) in the case of
determination of stockholders entitled to vote at any meeting of stockholders,
shall, unless otherwise required by law, not be more than sixty nor less than
ten days before the date of such meeting and (b) in the case of any other
action, shall not be more than sixty days prior to such other action. If no
record date is fixed: (i) the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held and (ii) the record date for determining stockholders
for any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
SECTION 5. Replacement of Certificates. In case of the alleged loss,
---------------------------
destruction or mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon such terms as the Board of Directors may
prescribe.
ARTICLE V
---------
Indemnification
---------------
SECTION 1. Definitions. For purposes of this Article:
-----------
(a) "Director" means any person who serves or has served the Corporation as
a director on the Board of Directors of the Corporation.
(b) "Officer" means any person who serves or has served the Corporation as
an officer appointed by the Board of Directors of the Corporation;
(c) "Non-Officer Employee" means any person who serves or has served as an
employee of the Corporation, but who is not or was not a Director or Officer;
(d) "Proceeding" means any threatened, pending or completed action, suit,
arbitration, alternate dispute resolution mechanism, inquiry, investigation,
administrative hearing or other proceeding, whether civil, criminal,
administrative, arbitrative or investigative;
(e) "Expenses" means all reasonable attorneys' fees, retainers, court
costs, transcript costs, fees of expert witnesses, private investigators and
professional advisors (including, without limitation, accountants and investment
bankers), travel expenses, duplicating costs, printing and binding costs, costs
of preparation of demonstrative evidence and other courtroom presentation aids
and devices, costs incurred in connection with document review,
14
<PAGE>
organization, imaging and computerization, telephone charges, postage, delivery
service fees, and all other disbursements, costs or expenses of the type
customarily incurred in connection with prosecuting, defending, preparing to
prosecute or defend, investigating, being or preparing to be a witness in,
settling or otherwise participating in, a Proceeding;
(f) "Corporate Status" describes the status of a person who (i) in the case
of a Director, is or was a director of the Corporation and is or was acting in
such capacity, (ii) in the case of an Officer, is or was an officer, employee or
agent of the Corporation or is or was a director, officer, employee, trustee or
agent of any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise which such Officer is or was serving at the
request of the Corporation, and (iii) in the case of a Non-Officer Employee, is
or was an employee of the Corporation or is or was a director, officer,
employee, trustee or agent of any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise which such Non-Officer Employee
is or was serving at the request of the Corporation; and
(g) "Disinterested Director" means, with respect to each Proceeding in
respect of which indemnification is sought hereunder, a Director of the
Corporation who is not and was not a party to such Proceeding.
SECTION 2. Indemnification of Directors and Officers. Subject to the
-----------------------------------------
operation of Section 4 of this Article V, each Director and Officer shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the DGCL, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than such law
permitted the Corporation to provide prior to such amendment) against any and
all Expenses, judgments, penalties, fines and amounts reasonably paid in
settlement that are incurred by such Director or Officer or on such Director or
Officer's behalf in connection with any threatened, pending or completed
Proceeding or any claim, issue or matter therein, which such Director or Officer
is, or is threatened to be made, a party to or participant in by reason of such
Director \or Officer's Corporate Status, if such Director or Officer acted in
good faith and in a manner such Director or Officer reasonably believed to be in
or not opposed to the best interests of the Corporation and, with respect to any
criminal proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The rights of indemnification provided by this Section 2 shall
continue as to a Director or Officer after he or she has ceased to be a Director
or Officer and shall inure to the benefit of his or her heirs, executors,
administrators and personal representatives. Notwithstanding the foregoing, the
Corporation shall indemnify any Director or Officer seeking indemnification in
connection with a Proceeding initiated by such Director or Officer only if such
Proceeding was authorized by the Board of Directors of the Corporation.
SECTION 3. Indemnification of Non-Officer Employees. Subject to the
----------------------------------------
operation of Section 4 of this Article V, each Non-Officer Employee may, in the
discretion of the Board of Directors of the Corporation, be indemnified by the
Corporation to the fullest extent authorized by the DGCL, as the same exists or
may hereafter be amended, against any or all Expenses,
15
<PAGE>
judgments, penalties, fines and amounts reasonably paid in settlement that are
incurred by such Non-Officer Employee or on such Non-Officer Employee's behalf
in connection with any threatened, pending or completed Proceeding, or any
claim, issue or matter therein, which such Non-Officer Employee is, or is
threatened to be made, a party to or participant in by reason of such Non-
Officer Employee's Corporate Status, if such Non-Officer Employee acted in good
faith and in a manner such Non-Officer Employee reasonably believed to be in or
not opposed to the best interests of the Corporation and, with respect to any
criminal proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The rights of indemnification provided by this Section 3 shall
continue as to a Non-Officer Employee after he or she has ceased to be a Non-
Officer Employee and shall inure to the benefit of his or her heirs, personal
representatives, executors and administrators. Notwithstanding the foregoing,
the Corporation may indemnify any Non-Officer Employee seeking indemnification
in connection with a Proceeding initiated by such Non-Officer Employee only if
such Proceeding was authorized by the Board of Directors of the Corporation.
SECTION 4. Good Faith. No indemnification shall be provided pursuant to
----------
this Article V to a Director, to an Officer or to a Non-Officer Employee with
respect to a matter as to which such person shall have been finally adjudicated
in any Proceeding (i) not to have acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
Corporation and (ii) with respect to any criminal Proceeding, to have had
reasonable cause to believe his or her conduct was unlawful. In the event that
a Proceeding is compromised or settled prior to final adjudication so as to
impose any liability or obligation upon a Director, an Officer or a Non-Officer
Employee, no indemnification shall be provided pursuant to this Article V to
said Director, Officer or Non-Officer Employee with respect to a matter if there
be a reasonable good faith determination that with respect to such matter such
person did not act in good faith and in a manner such person reasonably believed
to be in, or not opposed to, the best interests of the Corporation, and, with
respect to any criminal Proceeding, had reasonable cause to believe his or her
conduct was unlawful. The determination contemplated by the preceding sentence
shall be made (a) by a majority vote of the Disinterested Directors, even though
less than a quorum of the Board of Directors, (b) by a committee of
Disinterested Directors designated by a majority vote of Disinterested
Directors, even though less than a quorum of the Board of Directors, (c) if
there are no such Disinterested Directors, or if a majority of Disinterested
Directors so direct, by independent legal counsel in a written opinion, or (d)
by the stockholders of the Corporation.
SECTION 5. Advancement of Expenses to Directors Prior to Final
---------------------------------------------------
Disposition. The Corporation shall advance all Expenses incurred by or on
- -----------
behalf of any Director in connection with any Proceeding in which such Director
is involved by reason of such Director's Corporate Status within ten days after
the receipt by the Corporation of a written statement from such Director
requesting such advance or advances from time to time, whether prior to or after
final disposition of such Proceeding. Such statement or statements shall
reasonably evidence the Expenses incurred by such Director and shall be preceded
or accompanied by an undertaking by or on behalf of such Director to repay any
Expenses so advanced if it shall ultimately be determined that such Director is
not entitled to be indemnified against such Expenses.
16
<PAGE>
SECTION 6. Advancement of Expenses to Officers and Non-Officer Employees
-------------------------------------------------------------
Prior to Final Disposition. The Corporation may, in the discretion of the Board
- --------------------------
of Directors of the Corporation, advance any or all Expenses incurred by or on
behalf of any Officer or Non-Officer Employee in connection with any Proceeding
in which such Officer or Non-Officer Employee is involved by reason of such
Officer or Non-Officer Employee's Corporate Status upon the receipt by the
Corporation of a statement or statements from such Officer or Non-Officer
Employee requesting such advance or advances from time to time, whether prior to
or after final disposition of such Proceeding. Such statement or statements
shall reasonably evidence the Expenses incurred by such Officer or Non-Officer
Employee and shall be preceded or accompanied by an undertaking by or on behalf
of such Officer or Non-Officer Employee to repay any Expenses so advanced if it
shall ultimately be determined that such Officer or Non-Officer Employee is not
entitled to be indemnified against such Expenses.
SECTION 7. Contractual Nature of Rights. The foregoing provisions of this
----------------------------
Article V shall be deemed to be a contract between the Corporation and each
Director and Officer who serves in such capacity at any time while this Article
V is in effect, and any repeal or modification thereof shall not affect any
rights or obligations then existing with respect to any state of facts then or
theretofore existing or any Proceeding theretofore or thereafter brought based
in whole or in part upon any such state of facts. If a claim for
indemnification or advancement of Expenses hereunder by a Director or Officer is
not paid in full by the Corporation within (a) 60 days after the Corporation's
receipt of a written claim for indemnification, or (b) in the case of a
Director, 10 days after the Corporation's receipt of documentation of Expenses
and the required undertaking, such Director or Officer may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim, and if successful in whole or in part, such Director or Officer shall
also be entitled to be paid the expenses of prosecuting such claim. The failure
of the Corporation (including its Board of Directors or any committee thereof,
independent legal counsel, or stockholders) to make a determination concerning
the permissibility of such indemnification or, in the case of a Director,
advancement of Expenses, under this Article V shall not be a defense to the
action and shall not create a presumption that such indemnification or
advancement is not permissible.
SECTION 8. Non-Exclusivity of Rights. The rights to indemnification and
-------------------------
advancement of Expenses set forth in this Article V shall not be exclusive of
any other right which any Director, Officer or Non-Officer Employee may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
or these By-laws, agreement, vote of stockholders or Disinterested Directors or
otherwise.
SECTION 9. Insurance. The Corporation may maintain insurance, at its
---------
expense, to protect itself and any Director, Officer or Non-Officer Employee
against any liability of any character asserted against or incurred by the
Corporation or any such Director, Officer or Non-Officer Employee, or arising
out of any such person's Corporate Status, whether or not the Corporation would
have the power to indemnify such person against such liability under the DGCL or
the provisions of this Article V.
17
<PAGE>
ARTICLE VI
----------
Miscellaneous Provisions
------------------------
SECTION 1. Fiscal Year. Except as otherwise determined by the Board of
-----------
Directors, the fiscal year of the Corporation shall end on the last day of
December of each year.
SECTION 2. Seal. The Board of Directors shall have power to adopt and
----
alter the seal of the Corporation.
SECTION 3. Execution of Instruments. All deeds, leases, transfers,
------------------------
contracts, bonds, notes and other obligations to be entered into by the
Corporation in the ordinary course of its business without director action may
be executed on behalf of the Corporation by the Chairman of the Board, if one is
elected, the Chief Executive Officer or the Treasurer or any other officer,
employee or agent of the Corporation as the Board of Directors or Executive
Committee, if one is elected, may authorize.
SECTION 4. Voting of Securities. Unless the Board of Directors otherwise
--------------------
provides, the Chairman of the Board, if one is elected, the Chief Executive
Officer or the Treasurer may waive notice of and act on behalf of this
Corporation, or appoint another person or persons to act as proxy or attorney in
fact for this Corporation with or without discretionary power and/or power of
substitution, at any meeting of stockholders or shareholders of any other
corporation or organization, any of whose securities are held by this
Corporation.
SECTION 5. Resident Agent. The Board of Directors may appoint a resident
--------------
agent upon whom legal process may be served in any action or proceeding against
the Corporation.
SECTION 6. Corporate Records. The original or attested copies of the
-----------------
Certificate, By-laws and records of all meetings of the incorporators,
stockholders and the Board of Directors and the stock transfer books, which
shall contain the names of all stockholders, their record addresses and the
amount of stock held by each, may be kept outside the State of Delaware and
shall be kept at the principal office of the Corporation, at the office of its
counsel or at an office of its transfer agent or at such other place or places
as may be designated from time to time by the Board of Directors.
SECTION 7. Amendment of By-laws.
--------------------
(a) Amendment by Directors. Except as provided otherwise by law, these
----------------------
By-laws may be amended or repealed by the Board of Directors by the affirmative
vote of a majority of the directors then in office.
(b) Amendment by Stockholders. These By-laws may be amended or repealed
-------------------------
at any Annual Meeting of stockholders, or special meeting of stockholders called
for such
18
<PAGE>
purpose, by the affirmative vote of at least three-fourths of the shares present
in person or represented by proxy at such meeting and entitled to vote on such
amendment or repeal, voting together as a single class; provided, however, that
if the Board of Directors recommends that stockholders approve such amendment or
repeal at such meeting of stockholders, such amendment or repeal shall only
require the affirmative vote of the majority of the shares present in person or
represented by proxy at such meeting and entitled to vote on such amendment or
repeal, voting together as a single class.
Adopted ________, 1998 and effective as of ________, 1998.
19
<PAGE>
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
by and among
MONROE, INC.
("Buyer"),
-----
MERKERT ENTERPRISES, INC.
("Company")
-------
and
THE STOCKHOLDERS OF THE COMPANY
Dated as of May 20, 1998
<PAGE>
STOCK PURCHASE AGREEMENT
<TABLE>
<CAPTION>
INDEX
-----
Page
----
<S> <C>
SECTION 1. TRANSFER OF SHARES; CONSIDERATION.......................................................... 1
1.1 Transfer of Company Shares........................................................... 1
1.2 Total Consideration.................................................................. 2
1.3 Closing.............................................................................. 2
1.4 Tax Escrow........................................................................... 2
1.5 Further Assurances................................................................... 3
1.6 Transfer Taxes....................................................................... 3
1.7 Income Tax Treatment of the Transactions............................................. 3
1.8 Stockholders' Representative......................................................... 4
1.9 Escrow of Shares..................................................................... 5
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS......................... 5
2.1 Making of Representations and Warranties............................................. 5
2.2 Organization and Qualifications of the Company....................................... 5
2.3 Capital Stock of the Company; Beneficial Ownership................................... 6
2.4 Subsidiaries......................................................................... 6
2.5 Authority of the Company............................................................. 7
2.6 Real and Personal Property........................................................... 8
2.7 Financial Statements................................................................. 10
2.8 Taxes................................................................................ 11
2.9 Collectibility of Accounts Receivable................................................ 12
2.10 [Intentionally Omitted].............................................................. 13
2.11 Absence of Certain Changes........................................................... 13
2.12 Ordinary Course...................................................................... 15
2.13 Banking Relations.................................................................... 15
2.14 Intellectual Property................................................................ 15
2.15 Contracts............................................................................ 16
2.16 Litigation........................................................................... 18
2.17 Compliance with Laws................................................................. 18
2.18 Insurance............................................................................ 18
2.19 Warranty or Other Claims............................................................. 19
2.20 Powers of Attorney................................................................... 19
2.21 Finder's Fee......................................................................... 19
2.22 Permits; Burdensome Agreements....................................................... 19
2.23 Corporate Records; Copies of Documents............................................... 19
2.24 Transactions with Interested Persons................................................. 20
2.25 Employee Benefit Programs............................................................ 20
2.26 Environmental Matters................................................................ 22
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
2.27 List of Directors and Officers....................................................... 24
2.28 Non-Foreign Status................................................................... 24
2.29 Employees; Labor Matters............................................................. 24
2.30 Principals........................................................................... 25
2.31 Transfer of Shares................................................................... 26
2.32 Stock Repurchase..................................................................... 26
2.33 Absence of Improper Payments......................................................... 26
2.34 Inventories.......................................................................... 26
2.35 Net Operating Loss................................................................... 27
2.36 [Intentionally Omitted].............................................................. 27
2.37 Disclosure........................................................................... 27
SECTION 3. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.............................. 28
3.1 Company Shares....................................................................... 28
3.2 Authority............................................................................ 28
3.3 Agreements........................................................................... 29
3.4 Investment Representations........................................................... 30
SECTION 4. COVENANTS OF THE COMPANY AND THE STOCKHOLDERS.............................................. 31
4.1 Making of Covenants and Agreements................................................... 31
4.2 Conduct of Business.................................................................. 31
4.3 Authorization from Others............................................................ 33
4.4 Notification of Certain Matters...................................................... 33
4.5 Consummation of Agreement............................................................ 34
4.6 Cooperation of the Company and Stockholders.......................................... 34
4.7 No Solicitation of Other Offers...................................................... 34
4.8 Confidentiality...................................................................... 35
4.9 Tax-Free Treatment................................................................... 35
4.10 Tax Returns.......................................................................... 35
4.11 Bank Signatories..................................................................... 36
4.12 Buyouts.............................................................................. 36
4.13 No Transfer of Company Shares........................................................ 36
4.14 Affiliate Transactions............................................................... 36
4.15 Canton Conservation Commission Matter................................................ 36
4.16 Termination of Certain Agreements.................................................... 36
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER.................................................... 37
5.1 Making of Representations and Warranties............................................. 37
5.2 Organization and Qualifications of Buyer............................................. 37
5.3 Capital Stock of Buyer............................................................... 37
5.4 Authority of Buyer................................................................... 37
5.5 Operations and Financial Condition; Absence of Undisclosed Liabilities............... 38
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
5.6 Buyer Common Stock................................................................... 38
5.7 Finder's Fee......................................................................... 39
5.8 Conformity With Law.................................................................. 39
5.9 Private Offering..................................................................... 39
5.10 Tax-Free Transaction................................................................. 39
SECTION 6. COVENANTS OF BUYER......................................................................... 40
6.1 Making of Covenants and Agreements................................................... 40
6.2 Confidentiality...................................................................... 40
6.3 Tax-Free Treatment................................................................... 40
6.4 Listing of Buyer Common Stock........................................................ 40
6.5 Consummation of Agreement and Other Agreement........................................ 40
6.6 Authorization from Others............................................................ 40
6.7 Form of Tax Opinion.................................................................. 41
6.8 Continuing Indemnification and Liability Insurance Coverage.......................... 41
SECTION 7. ADDITIONAL AGREEMENTS...................................................................... 41
7.1 S-1 Registration Statement........................................................... 41
7.2 Filings Under Hart-Scott-Rodino Act.................................................. 41
7.3 Securities Filings by Stockholders................................................... 42
SECTION 8. CONDITIONS................................................................................. 42
8.1 Conditions to the Obligations of Certain of the Parties.............................. 42
8.2 Conditions to the Obligations of Buyer............................................... 43
8.3 Conditions to the Obligations of the Company and the Stockholders.................... 45
SECTION 9. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED................................................ 45
9.1 Termination.......................................................................... 45
9.2 Effect of Termination................................................................ 46
9.3 Right to Proceed..................................................................... 46
SECTION 10. INDEMNIFICATION............................................................................ 47
10.1 Survival............................................................................. 47
10.2 Indemnification by the Stockholders.................................................. 47
10.3 Limitations on Indemnification by the Stockholders................................... 48
10.4 Indemnification by Buyer............................................................. 49
10.5 Limitations on Indemnification by Buyer.............................................. 50
10.6 Notice; Defense of Claims............................................................ 51
10.7 Sole Remedy.......................................................................... 52
10.8 No Offset............................................................................ 53
SECTION 11. MISCELLANEOUS.............................................................................. 55
11.1 Alternative Structure................................................................ 55
11.2 Fees and Expenses.................................................................... 55
</TABLE>
(iii)
<PAGE>
<TABLE>
<S> <C>
11.3 Governing Law....................................................................... 55
11.4 Notices............................................................................. 55
11.5 Entire Agreement.................................................................... 57
11.6 Assignability; Binding Effect....................................................... 57
11.7 Captions and Gender................................................................. 57
11.8 Execution in Counterparts........................................................... 57
11.9 Amendments.......................................................................... 57
11.10 Publicity and Disclosures........................................................... 57
11.11 Consent to Jurisdiction............................................................. 58
11.12 Specific Performance................................................................ 58
11.13 Schedules........................................................................... 58
11.14 Defined Terms....................................................................... 58
</TABLE>
(iv)
<PAGE>
List of Exhibits and Schedules
------------------------------
Exhibit A: List of Stockholders
B: Allocation of Total Consideration
C: Form of Tax Escrow Agreement
D: Form of Indemnification Escrow Agreement
E: Form of Registration Rights Agreement
F: Form of Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C.
G: Form of Opinion of Zack Kosnitzky, P.A.
H: Form of Employment and Non-Competition Agreement
I: Form of General Release
J: Form of Opinion of Goodwin, Procter & Hoar LLP
Schedule 1.4 Audit Amount
2.3 Voting Agreements, etc.
2.4 Subsidiaries; Investments
2.5 Conflicts, Violations and Encumbrances
2.6(a) Real Property
2.6(b) Personal Property
2.7 Financial Statements
2.8 Tax Disclosures
2.9 Accounts Receivable
2.11 Absence of Changes
2.13 Banking Arrangements
2.14 Intellectual Property
2.15 Contracts, etc.
2.16 Litigation
2.17 Compliance with Laws
2.18 Insurance
2.20 Powers of Attorney
2.22 Permits; Burdensome Agreements
2.24 Transactions with Interested Persons
2.25 Employee Benefit Programs
2.26 Environmental Matters
2.27 Officers and Directors
2.29 Labor Matters
2.30 Principals
2.32 Stock Repurchase
2.34 Inventories
3.2 Violations and Defaults
4.2 Conduct of Business
4.11 Bank Signatories
4.16 Agreements to be Terminated
8.3(c) Buyout Terms
(v)
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
This STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into as
---------
of May 20, 1998 by and among Monroe, Inc., a Delaware corporation ("Buyer"),
-----
Merkert Enterprises, Inc., a Massachusetts corporation (the "Company"), Eugene
-------
F. Merkert (solely for purposes of Section 10 hereof), those individuals and
entities identified as Stockholders on the signature pages to this Agreement
(each, individually a "Stockholder" and collectively the "Stockholders").
----------- ------------
WHEREAS, the Stockholders are the record owners of all of the issued and
outstanding capital stock of the Company, which consists entirely of an
aggregate of one million six hundred thirty-six thousand four hundred sixty-
three (1,636,463) shares of common stock, par value $.01 per share (the "Common
------
Shares"), and two hundred fourteen thousand five hundred forty-four (214,544)
- ------
shares of Class A preferred stock, par value $.01 per share (the "Preferred
---------
Shares" and, together with the Common Shares, the "Company Shares");
- ------ --------------
WHEREAS, subject to the terms and conditions set forth herein, the
Stockholders desire to transfer all of the Company Shares to Buyer, and Buyer
desires to purchase all of the Company Shares;
WHEREAS, Buyer is entering into a separate stock purchase agreement (the
"Other Agreement") with Rogers-American Company, Inc., a North Carolina
- ----------------
corporation ("Rogers-American"), pursuant to which it will acquire all of the
---------------
outstanding capital stock of Rogers-American; and
WHEREAS, the parties intend that the transfer and sale of capital stock
pursuant to this Agreement, the Other Agreement and the initial underwritten
public offering by Buyer of shares of Buyer Common Stock (the "IPO")
---
(collectively the "Plan of Organization") will be treated as exchanges
--------------------
qualifying under Section 351 of the Internal Revenue Code of 1986, as amended
(the "Code").
----
NOW, THEREFORE, in consideration of the mutual representations, warranties
and agreements, and upon the terms and subject to the conditions, herein set
forth, the parties hereto hereby agree as follows:
SECTION 1. TRANSFER OF SHARES; CONSIDERATION
1.1 Transfer of Company Shares. At the Closing (as hereinafter defined),
--------------------------
each Stockholder shall deliver or cause to be delivered to Buyer certificates
representing all of the Company Shares owned by such Stockholder as set forth on
Exhibit A hereto, which collectively shall represent all of the issued and
- ---------
outstanding capital stock of the Company. Such stock certificates shall be duly
endorsed in blank for transfer or shall be presented with stock powers duly
executed in blank, with such other documents as may be reasonably required
<PAGE>
by Buyer to effect a valid transfer of such Company Shares by such Stockholder
to Buyer, free and clear of any and all liens, encumbrances, pledges, security
interests, charges and claims.
1.2 Total Consideration. In consideration of the transfer by the
-------------------
Stockholders to Buyer of the Company Shares, Buyer agrees to pay to the
Stockholders aggregate consideration of $51,181,240, subject to reduction as
provided in Section 1.4 below (the "Total Consideration"), comprised of (a) cash
-------------------
in the aggregate amount of $27,550,000 (subject to reduction as provided in
Section 1.4) and (b) a number of shares of common stock of Buyer, $.01 par value
per share ("Buyer Common Stock") equal to (i) $23,631,240 divided by (ii) the
------------------
price (the "IPO Price") at which shares of Buyer Common Stock will be sold to
---------
the public in the IPO, as set forth in the final prospectus (the "Prospectus")
----------
contained in the registration statement on Form S-1 (the "Registration
------------
Statement") to be filed with the Securities and Exchange Commission (the "SEC")
---
in connection with the IPO. The Total Consideration shall be allocated among
the Stockholders in the manner set forth in Exhibit B hereto. The cash portion
---------
of the Total Consideration, reduced as provided in Section 1.4, shall be paid by
Buyer at the Closing by wire transfer of immediately available funds to an
account which shall be specified by each Stockholder at least three business
days prior to the Closing, or, if not so specified, by certified check. The
portion of the Total Consideration consisting of shares of Buyer Common Stock
shall, subject to the deposit by Buyer into escrow of certain shares as
contemplated by Section 1.9, be transferred by Buyer at the Closing by delivery
to each Stockholder of a certificate representing the number of shares of Buyer
Common Stock (rounded to the nearest whole share) to which such Stockholder is
entitled hereunder.
1.3 Closing. Unless this Agreement shall have been terminated in
-------
accordance with Section 9 hereof, the closing of the transfer of the Company
Shares in exchange for the Total Consideration, subject to the escrows provided
in Sections 1.4 and 1.9, all as provided for in this Agreement (the "Closing")
-------
shall take place at the offices of Goodwin, Procter & Hoar LLP at Exchange
Place, 53 State Street, Boston, Massachusetts 02109 commencing at 10:00 a.m.
local time on the date on which the conditions to closing set forth in Section 8
hereof are satisfied or, if applicable, waived, or at such other time, date and
place as may be otherwise mutually agreed upon by the Company and Buyer (the
"Closing Date").
- -------------
1.4 Tax Escrow. On the Closing Date, Buyer shall deposit the amount of
----------
cash set forth on Schedule 1.4 attached hereto (the "Audit Amount") in escrow
------------ ------------
(the "Tax Escrow") with an escrow agent mutually acceptable to Buyer and the
----------
Stockholders' Representative (the "Escrow Agent") to be held, invested and
------------
distributed by the Escrow Agent in accordance with the terms of an escrow
agreement in substantially the form attached hereto as Exhibit C (the "Tax
--------- ---
Escrow Agreement"). The cash portion of the Total Consideration otherwise
- ----------------
payable to each Stockholder shall be reduced by the Audit Amount on a pro rata
basis based upon the ratio that the number of Common Shares held by such
Stockholder bears to the total number of Common Shares held by all Stockholders.
Exhibit B hereto sets forth such pro rata interest of each Stockholder,
- ---------
expressed as a percentage (each a "Common Proportionate Share"). Notwithstanding
--------------------------
the foregoing, the cash portion of the Total Consideration payable in respect of
Preferred Shares shall not be reduced and shall not participate in the Tax
Escrow. The Tax
2
<PAGE>
Escrow will be available to pay obligations and liabilities of the Company
(including, without limitation, federal and state Taxes, the "Audit
-----
Liabilities") in connection with and resulting from the audits (collectively,
- -----------
the "Audits" and each individually, an "Audit") by (i) the Internal Revenue
------ -----
Service (the "IRS") of the federal income tax returns filed by the Company with
---
respect to the Company's fiscal years ended August 31, 1992, 1993, 1994, 1995,
1996 and 1997 and the employment tax returns filed by the Company with respect
to calendar years 1993 and 1994 and (ii) the Massachusetts Department of Revenue
(the "DOR") of the Massachusetts state income tax returns filed by the Company
---
with respect to the Company's fiscal years ended August 31, 1994, 1995 and 1996.
The parties hereto agree and acknowledge that the Company has entered into (i)
an Agreement to Assessment and Collection of Additional Tax and Acceptance of
Overassessment (the "Payroll Tax Agreement") and (ii) a Consent to Assessment
---------------------
and Collection (the "Income Tax Agreement," together with the Payroll Tax
--------------------
Agreement, the "Tax Settlement Agreements," copies of which are attached to
-------------------------
Schedule 1.4), with the IRS with respect to the Audits relating to the Company's
- ------------
federal income tax returns for the Company's fiscal years ended August 31, 1992,
1993 and 1994 and the Company's employment tax returns for calendar years 1993
and 1994 (the "Settled Audits"). The parties hereto agree that the Company
--------------
shall, at least three (3) business days prior to the Closing, pay to the IRS
under the Payroll Tax Agreement the $1,145,844 agreed to be paid thereunder. In
addition, the parties agree that Buyer currently intends to deliver to the
Escrow Agent, promptly after the Closing, the appropriate notice required under
the Tax Escrow Agreement to instruct the Escrow Agent to pay to the IRS some or
all amounts payable under the Income Tax Agreement and/or to pay to the DOR some
or all of the amount that Buyer reasonably believes is payable to the DOR as a
result of the Audits. Each of the Stockholders' Representative and the
Stockholders agree not to dispute such notice or resulting payments from the
Tax Escrow and shall, at the Buyer's request, execute joint written instructions
to the Escrow Agent to effect such payments.
1.5 Further Assurances. Each of the parties hereto from time to time
------------------
after the Closing at the request of any other party hereto and without further
consideration shall execute and deliver further instruments of transfer and
assignment and take such other action as such other party may reasonably require
to more effectively transfer and assign to, and vest in, Buyer the Company
Shares and all rights thereto, and to otherwise fully implement the provisions
of this Agreement.
1.6 Transfer Taxes. All sales and transfer taxes, fees and duties, if
--------------
any, under applicable law incurred in connection with the sale and transfer of
the Company Shares pursuant to this Agreement will be borne and paid by the
Stockholders, and the Stockholders shall promptly reimburse each of Buyer and
the Company for any such tax, fee or duty which it is required to pay under
applicable law.
1.7 Income Tax Treatment of the Transactions. It is intended that the
----------------------------------------
following transactions, which are occurring simultaneously, will be treated as
exchanges qualifying under (S)351 of the Code: (i) the transfer of the Company
Shares by the Stockholders in exchange for Buyer Common Stock and cash pursuant
to this Agreement, (ii) the acquisition by Buyer of all
3
<PAGE>
of the issued and outstanding capital stock of Rogers-American pursuant to the
Other Agreement (such acquisition, the "Rogers-American Acquisition") and (iii)
---------------------------
the sale of Buyer Common Stock for cash in the IPO. All of the parties to this
Agreement agree to report the aforementioned transactions, for all purposes,
consistently with the foregoing.
1.8 Stockholders' Representative.
----------------------------
(a) In order to administer efficiently the implementation of this
Agreement by the Stockholders, the Stockholders hereby designate Robert Q. Crane
as their representative (the "Stockholders' Representative").
----------------------------
(b) The Stockholders hereby authorize the Stockholders' Representative
(i) to take all action necessary in connection with the implementation of
Sections 1.4 and 10 of this Agreement on behalf of the Stockholders, (ii) to
take all actions necessary under the Tax Escrow Agreement, the Indemnification
Escrow Agreement (as hereinafter defined) and the Tax Matters Agreement and
(iii) to give and receive all notices required to be given under this Agreement,
the Tax Escrow Agreement and the Indemnification Escrow Agreement.
(c) The Stockholders' Representative may be removed and a successor
named by the trustee(s) of the Eugene F. Merkert 1984 Revocable Trust (the
"Merkert Trust") upon written notice to the Stockholders' Representative, Buyer
- --------------
and the Stockholders, and such successor shall be deemed to be the Stockholders'
Representative for all purposes of this Agreement; however, no change in the
Stockholders' Representative shall be effective until Buyer is given notice of
such change by the Stockholders.
(d) By their execution of this Agreement, the Stockholders agree that:
(i) Buyer shall be able to rely conclusively on the written
instructions and decisions of the Stockholders' Representative as to any actions
required or permitted to be taken by the Stockholders or the Stockholders'
Representative under Sections 1.4 and 10 of this Agreement and under the Tax
Escrow Agreement, the Indemnification Escrow Agreement and the Tax Matters
Agreement, and no party hereunder shall have any cause of action against Buyer
for any action taken by Buyer in reliance upon such written instructions or
written decisions of the Stockholders' Representative;
(ii) all written decisions and instructions of the Stockholders'
Representative in relation to Sections 1.4 and 10 of this Agreement and under
the Tax Escrow Agreement, the Indemnification Escrow Agreement and the Tax
Matters Agreement shall be conclusive and binding upon all of the Stockholders
and no Stockholder shall have the right to object, dissent, protest or otherwise
contest the same or any cause of action against the Stockholders' Representative
for any action taken, decision made or instruction given by the Stockholders'
Representative under Sections 1.4 and 10 of this Agreement, except for gross
negligence, fraud or willful breach of this Agreement by the Stockholders'
Representative;
4
<PAGE>
(iii) remedies available at law for any breach of the provisions
of this Section 1.8 are inadequate; therefore, Buyer shall be entitled to
temporary and permanent injunctive relief without the necessity of proving
damages if Buyer brings an action to enforce the provisions of this Section 1.8;
and
(iv) the provisions of this Section 1.8 are independent and
severable, shall constitute an irrevocable power of attorney, coupled with an
interest and surviving death, granted by the Stockholders to the Stockholders'
Representative and shall be binding upon the executors, heirs, legal and
personal representatives and successors of each Stockholder.
(e) The Stockholders' Representative shall not have any duties,
responsibilities or authority except those expressly set forth herein, and no
implied covenants, duties, obligations, authority or liabilities shall be
implied by the appointment hereunder.
1.9 Escrow of Shares. On the Closing Date, Buyer shall deposit with the
----------------
Escrow Agent a number of shares of Buyer Common Stock (rounded to the nearest
whole share) equal to (i) $3,583,124 divided by (ii) the IPO Price (the
"Escrowed Shares"), to be held by the Escrow Agent for the benefit of the
- ----------------
Stockholders in accordance with the terms of an indemnification escrow agreement
in substantially the form attached hereto as Exhibit D (the "Indemnification
--------- ---------------
Escrow Agreement"). The number of shares of Buyer Common Stock to be delivered
- ----------------
to each Stockholder at the Closing pursuant to Section 1.2 shall be reduced by
such Stockholder's Common Proportionate Share of the number of Escrowed Shares;
provided that shares of Buyer Common Stock deliverable in respect of Preferred
Shares shall not be subject to the escrow contemplated hereby.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS.
2.1 Making of Representations and Warranties. As a material inducement to
----------------------------------------
Buyer to enter into this Agreement and consummate the transactions contemplated
hereby, the Company and each of the Stockholders, severally, hereby make to
Buyer the representations and warranties contained in this Section 2. For
purposes of this Agreement, references to "knowledge" or words of similar import
of the Company and the Stockholders shall mean, to and including the Closing
Date, the actual knowledge of Gerald R. Leonard, Sidney D. Rogers, Jr., Murray
C. Rosen, Glenn F. Gillam, Robert Q. Crane, Kenneth D. Chipman and Edward
Cassorla.
2.2 Organization and Qualifications of the Company. The Company is a
----------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Massachusetts with full corporate power and authority to
own or lease its properties and to conduct its business in the manner and in the
places where such properties are owned or leased or such business is currently
conducted. The copies of the Company's Articles of Organization as amended to
date, certified by the Massachusetts Secretary of State
5
<PAGE>
(the "Company Articles of Organization"), and of the Company's by-laws, as
--------------------------------
amended to date, certified by the Company's Clerk, and heretofore delivered to
Buyer's counsel, are complete and correct at the date hereof, and no amendments
thereto are pending. The Company is not in violation of any term of the Company
Articles of Organization or by-laws. The Company is duly qualified to do
business as a foreign corporation in each jurisdiction where the nature of its
properties or the conduct of its business makes its qualification so necessary,
except where the failure to be so qualified could not reasonably be expected to
have a material adverse effect on the business, assets, properties, results of
operations or financial condition (a "Material Adverse Effect") of the Company
-----------------------
and its Subsidiaries (as defined herein) taken as a whole.
2.3 Capital Stock of the Company; Beneficial Ownership.
--------------------------------------------------
(a) The authorized capital stock of the Company consists of 3,500,000
shares of common stock, par value $.01 per share, 1,636,463 shares of which are
issued, outstanding, fully paid and non assessable and 181,900 shares of which
are held in treasury, and 500,000 shares of Class A preferred stock, par value
$.01 per share (the "Preferred Stock"), 214,544 shares of which are issued,
---------------
outstanding, fully paid and non assessable and 23,900 shares of which are held
in treasury. There are no outstanding options, warrants, rights, commitments,
preemptive rights or agreements of any kind for the issuance or sale of any
additional shares of capital stock of the Company, and, except for the Preferred
Stock, there are no outstanding securities convertible into such shares or
outstanding warrants, options or other rights to acquire any such convertible
securities. No capital stock of the Company has been issued in violation of any
federal or state law or in violation of any preemptive rights or any other
rights of any other person. Except as set forth on Schedule 2.3 attached
------------
hereto, there are no voting trusts, voting agreements, proxies or other
agreements, instruments or undertakings with respect to the voting of any
capital stock of the Company to which the Company or any of the Stockholders is
a party.
(b) The Stockholders own of record and, except for (i) the trust fund
(the "ESOP Trust Fund") referred to in Article 2.17 of the Merkert Enterprises,
---------------
Inc. Employee Stock Ownership Plan as amended and restated by the Ninth
Amendment, effective as of January 1, 1997 (the "ESOP"), (ii) the Merkert Trust
----
and (iii) the Eugene F. Merkert 1991 Charitable Remainder Unitrust (the "Merkert
CRUT"), beneficially, all of the issued and outstanding shares of capital stock
of the Company as set forth on Exhibit A hereto.
---------
2.4 Subsidiaries. The Company's Subsidiaries (as defined in Rule 405
------------
promulgated under the Securities Act of 1933, as amended (the "Securities Act"))
--------------
are listed in Schedule 2.4 (collectively, the "Subsidiaries" or individually, a
------------ ------------
"Subsidiary"). Schedule 2.4 also includes a description of any investment by
---------- ------------
the Company or any of its Subsidiaries in any other entity or business
organization. Except as set forth in Schedule 2.4, each Subsidiary of the
------------
Company is a duly organized, validly existing corporation in good standing under
the laws of the state of its incorporation with full corporate power and
authority to own or lease its properties and to conduct its business in the
manner and in the places where such properties are owned or leased or such
business is currently conducted. Except as disclosed in Schedule 2.4, all of
------------
the
6
<PAGE>
outstanding shares of capital stock of each Subsidiary are owned beneficially
and of record by the Company free of any lien, restriction or encumbrance and
said shares have been duly and validly issued and are outstanding, fully paid
and non-assessable. The copies of each of the Subsidiaries' Articles of
Organization (or comparable document), as amended to date, certified by the
Secretary of State of each jurisdiction in which such Subsidiaries are organized
and of each of the Subsidiaries' by-laws (or comparable document), as amended to
date, certified by the Company's Secretary, and heretofore delivered to Buyer's
counsel, are complete and correct at the date hereof, and no amendments thereto
are pending. None of the Subsidiaries is in violation of any term of its
Articles of Organization (or comparable document) or by-laws (or comparable
document). Each Subsidiary is duly qualified to do business as a foreign
corporation in each jurisdiction where the nature of its properties or the
conduct of its business makes its qualification so necessary, except where the
failure to be so qualified could not reasonably be expected to have a Material
Adverse Effect on the Company and its Subsidiaries taken as a whole. Except as
disclosed in Schedule 2.4, there are no outstanding warrants, options or other
------------
rights to purchase or acquire any of the shares of capital stock of any
Subsidiary, or any outstanding securities convertible into such shares or
outstanding warrants, options or other rights to acquire any such convertible
securities.
2.5 Authority of the Company. The Company has full right, authority and
------------------------
power to enter into this Agreement and each agreement, document and instrument
to be executed and delivered by the Company pursuant to this Agreement and to
carry out the transactions contemplated to be carried out by it hereby and
thereby. The execution, delivery and performance by the Company of this
Agreement and each such other agreement, document and instrument have been duly
authorized by all necessary action of the Company and no other action on the
part of the Company is required in connection therewith.
This Agreement and each agreement, document and instrument executed and
delivered by the Company pursuant to this Agreement constitutes, or when
executed and delivered will constitute, valid and binding obligations of the
Company enforceable in accordance with their respective terms except as such
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or affecting generally the enforcement of creditors'
rights and except as the remedy of specific performance and other injunctive
relief may be unavailable in certain cases. The execution, delivery and
performance by the Company of this Agreement and each such agreement, document
and instrument:
(i) does not and will not violate any provision of the Company's
Articles of Organization or by-laws;
(ii) does not and will not violate in any material respect any
laws of the United States, or any state or other jurisdiction applicable to
the Company or require the Company to obtain any material approval, consent
or waiver of, or make any material filing with, any person or entity
(governmental or otherwise) that has not been obtained or made except as
will be obtained or made prior to the Closing; and
7
<PAGE>
(iii) does not and will not result in a breach of, constitute a
default under, accelerate any obligation under, or give rise to a right of
termination of any indenture or loan or credit agreement or any other
material agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award to which the Company is a party or by which the property
of the Company is bound or affected, or result in the creation or
imposition of any mortgage, pledge, lien, security interest or other charge
or encumbrance on any of the Company's assets or capital stock, except as
specifically identified on Schedule 2.5 and except as could not,
------------
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company and its Subsidiaries taken as a whole.
2.6 Real and Personal Property.
--------------------------
(a) Real Property. All of the real property owned or leased by the
-------------
Company or any of its Subsidiaries is identified on Schedule 2.6(a) (herein
---------------
referred to as the "Owned Real Property" or the "Leased Real Property," as the
----- ------------- --------------------
case may be, or collectively as the "Real Property.")
---- --------
(i) Title. Each of the Company and its Subsidiaries has good,
-----
clear, record and marketable title to all Owned Real Property, free and
clear of all easements, covenants, restrictions, leases, mortgages, liens,
assessments, claims, rights, judgments, encroachments or other matters
affecting title (collectively, "Encumbrances"), other than:
------------
(x) easements, covenants, restrictions and similar encumbrances
that do not and could not reasonably be expected to
materially interfere with the use of the Owned Real Property
as currently used and improved,
(y) minor encroachments that do not and could not reasonably be
expected to materially adversely affect the value or use of
the Owned Real Property as currently used and improved and
that could be removed without material cost, and
(z) the Encumbrances described on Schedule 2.6(a)
---------------
((x), (y) and (z) are collectively referred to as "Permitted
---------
Encumbrances"). Except as set forth on Schedule 2.6(a), the Company has
------------ ---------------
not received any written notice or other documentation to the effect that
any lessor of Leased Real Property does not have good, clear, record and
marketable title to such Leased Real Property. To the knowledge of the
Company and the Stockholders, the Company and its Subsidiaries have good,
clear, record and marketable title to enforceable leasehold interests in
the Leased Real Property, in each case free and clear of all Encumbrances
other than Permitted
8
<PAGE>
Encumbrances, subject only to the right of reversion of the lessor, except
as set forth in Schedule 2.6(a).
---------------
(ii) Status of Leases. All leases of Leased Real Property or of
----------------
Owned Real Property are identified on Schedule 2.6(a), and true and
---------------
complete copies thereof have been delivered to Buyer or made available to
its counsel. Each of said leases has been duly authorized and executed by
the Company and is in full force and effect. Neither the Company nor any
of its Subsidiaries is in default under any material provision of any such
said lease, nor has any event occurred which, with notice or the passage of
time, or both, would give rise to such a default except as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company and its Subsidiaries taken as a whole. To
the Company's knowledge, the other party to each of said leases is not in
default under any material provision of any such lease.
(iii) Consents. Except as set forth in Schedule 2.6(a), (a) no
-------- ---------------
consent or approval is required with respect to the transactions
contemplated by this Agreement from the other parties to any lease of
Leased Real Property or of Owned Real Property, or from the holder of any
Encumbrance on any Owned Real Property, and (b) no material filing with any
regulatory authority is required in connection therewith, and to the extent
that any such consents, approvals or filings are required, the Company will
obtain or complete them before the Closing.
(iv) Condition of Real Property. Except as set forth in
--------------------------
Schedule 2.6(a), there are no defects in the physical condition of any
---------------
land, buildings or improvements constituting part of the Owned Real
Property, or, to the knowledge of the Company and the Stockholders, any
Leased Real Property, which are material to the use of such Real Property,
including without limitation, structural elements, mechanical systems,
parking and loading areas, and all such buildings and improvements are in
good operating condition and repair, ordinary wear and tear excepted.
(v) Compliance with the Law. Except for matters relating to
-----------------------
Taxes, employee benefits and Environmental Laws, which are addressed in
Sections 2.8, 2.25 and 2.26, respectively, and to which this Section
2.6(a)(v) does not apply, or as set forth on Schedules 2.6(a), 2.8, 2.25
---------------- --- ----
and 2.26, (i) neither the Company nor any Subsidiary has received any
----
notice from any governmental authority of any violation of any law,
ordinance, regulation, license, permit or authorization issued with respect
to any Real Property that has not been heretofore corrected and no such
violation exists which could have a material adverse effect on the
operation or value of any Real Property, (ii) the use and operation by the
Company and its Subsidiaries of all improvements located on or constituting
part of the Real Property are now in compliance in all material respects
with all applicable laws, ordinances, regulations, licenses, permits and
authorizations, and (iii) no approval or consent to the transactions
9
<PAGE>
contemplated by this Agreement is required of any governmental authority
with jurisdiction over any aspect of the Real Property or its use or
operations, except where the failure to obtain such approval or consent
would not have a material adverse effect on the operation or value of the
Real Property. Neither the Company nor any Subsidiary has received any
notice of any material real estate tax deficiency or assessment which has
not been satisfied or is aware of any proposed material deficiency, claim
or assessment with respect to any of the Real Property, or is aware of any
pending or threatened condemnation thereof.
(b) Personal Property. A complete list of the machinery and equipment
-----------------
owned by or leased to the Company and each of its Subsidiaries as of March 31,
1998 and material to the Company's operations as of such date is contained in
Schedule 2.6(b) hereto. Except as specifically disclosed in said Schedule or in
- ---------------
the Base Balance Sheet (as hereinafter defined), the Company and each of its
Subsidiaries has good and marketable title to all of such personal property
owned by it. None of such owned personal property or assets is subject to any
mortgage, pledge, lien, conditional sale agreement, security title, encumbrance
or other charge except as specifically disclosed in said Schedule or in the Base
Balance Sheet and except as could not reasonably be expected to materially
adversely affect the value of or interfere with the use of such owned personal
property or assets. The Base Balance Sheet reflects all personal property of
the Company and each of its Subsidiaries required to be reflected in accordance
with generally accepted accounting principles. Except as otherwise specified in
Schedule 2.6(b) hereto, all leasehold improvements, furnishings, machinery and
- ---------------
equipment of the Company and each of its Subsidiaries that are material to the
Company's operation are in good repair, have been well maintained, and
substantially comply with all applicable laws, ordinances and regulations, and
such machinery and equipment is in good working order, ordinary wear and tear
excepted.
2.7 Financial Statements.
--------------------
(a) The Company has delivered to Buyer audited consolidated balance
sheets of the Company and its Subsidiaries as of August 31, 1995, 1996 and 1997
and consolidated statements of income, stockholders' equity and cash flows for
the fiscal years then ended, certified by Deloitte & Touche LLP, independent
public accountants. The Company has delivered to Buyer an unaudited
consolidated balance sheet of the Company and its Subsidiaries as of March 31,
1998 and statements of income, stockholders' equity and cash flows for the
three-month period then ended. All of such financial statements are attached
hereto as Schedule 2.7 and have been prepared in accordance with generally
------------
accepted accounting principles applied consistently (except as disclosed
therein) during the periods covered thereby, except that the March 31, 1998
unaudited consolidated balance sheet lacks footnotes, is subject to normal year-
end adjustments and includes adjustments and changes requested by Arthur
Andersen in connection with the preparation of the Registration Statement. All
of the financial statements attached as Schedule 2.7, are complete and correct
------------
in all material respects and present fairly in all material respects the
financial condition of the Company and each of its Subsidiaries at the dates of
said statements and the results of its operations for the periods
10
<PAGE>
covered thereby, subject to the Audits. The Company's audited balance sheet as
of August 31, 1997 is referred to herein as the "Base Balance Sheet" and the
------------------
Company's unaudited balance sheet as of March 31, 1998 is referred to herein as
the "Interim Balance Sheet."
---------------------
(b) Except as set forth on Schedule 2.7, and except for liabilities
------------
associated with the Audits, neither the Company nor any Subsidiary has any
liabilities (which liabilities, when taken individually or in the aggregate, are
material) of any nature, whether accrued, absolute, contingent or otherwise,
asserted or unasserted, known or unknown (including without limitation,
liabilities as guarantor or otherwise with respect to obligations of others, or
liabilities for taxes due or then accrued or to become due or contingent or
potential liabilities relating to activities of the Company or any Subsidiary or
the conduct of their business prior to the date hereof regardless of whether
claims in respect thereof had been asserted as of the date hereof), except
liabilities (i) stated or adequately reserved against on the Base Balance Sheet,
(ii) reflected in Schedules furnished to Buyer hereunder on the date hereof,
(iii) incurred in the ordinary course of business of the Company and its
Subsidiaries consistent with past practice or (iv) incurred by the Company in
connection with the transactions contemplated by and consistent with the terms
of this Agreement.
2.8 Taxes.
-----
(a) Except for the Audits and except as set forth on Schedule 2.8
------------
attached hereto, the Company and each of its Subsidiaries has timely paid or
caused to be paid all federal, state, local, foreign, and other taxes, including
without limitation, income taxes, estimated taxes, alternative minimum taxes,
excise taxes, sales taxes, use taxes, value-added taxes, gross receipts taxes,
franchise taxes, capital stock taxes, employment and payroll-related taxes,
withholding taxes, stamp taxes, transfer taxes, windfall profit taxes,
environmental taxes and property taxes, whether or not measured in whole or in
part by net income, and all deficiencies, or other additions to tax, interest,
fines and penalties owed by it (collectively, "Taxes"), required to be paid by
-----
it through the date hereof whether disputed or not.
(b) The Company and each of its Subsidiaries has timely filed all
federal, state, local and foreign tax returns required to be filed by it through
the date hereof, has paid all Taxes shown as due on such returns and, except as
set forth on Schedule 2.8, all such returns correctly and accurately set forth
------------
the amount of any Taxes relating to the applicable period. A list of all
federal, state, local and foreign income tax returns filed with respect to the
Company and its Subsidiaries on or after January 1, 1992 is set forth in
Schedule 2.8 attached hereto, and said Schedule indicates those returns that
- ------------
have been audited or currently are the subject of an audit. The Company has
made available to Buyer correct and complete copies of all federal, state, local
and foreign income tax returns, examination reports and statements of
deficiencies assessed against or agreed to by the Company or any of its
Subsidiaries which were filed or received by the Company or any of its
Subsidiaries on or after January 1, 1992.
(c) Other than with respect to the Audits, neither the IRS nor any
other governmental authority is now asserting or, to the knowledge of the
Company and the
11
<PAGE>
Stockholders, threatening to assert against the Company or any Subsidiary any
deficiency or claim for additional Taxes. No claim which remains unresolved has
ever been made by an authority in a jurisdiction where the Company or any
Subsidiary does not file reports and returns that the Company or such Subsidiary
is or may be subject to taxation by that jurisdiction. Except with respect to
any general lien resulting solely from the Audits, there are no security
interests on any of the material assets of the Company or any Subsidiary that
arose in connection with any failure (or alleged failure) to pay any Taxes.
Neither the Company nor any Subsidiary has ever entered into a closing agreement
pursuant to Section 7121 of the Code.
(d) Except as set forth in Schedule 2.8 attached hereto, there has not
------------
been any audit of any tax return filed by the Company or any Subsidiary after
August 31, 1991, no such audit is in progress, and neither the Company nor any
Subsidiary has been notified by any tax authority that any such audit is
contemplated or pending. Except as set forth in Schedule 2.8, no extension of
------------
time with respect to any date on which a tax return was or is to be filed by the
Company or any Subsidiary is in force, and no waiver or agreement by the Company
or any Subsidiary is in force for the extension of time for the assessment or
payment of any Taxes.
(e) Since December 31, 1974, neither the Company nor any Subsidiary
has ever been (or has ever had any liability for unpaid Taxes because it once
was) a member of an "affiliated group" (as defined in Section 1504(a) of the
Code) except as a member of an "affiliated group" of which the Company is
parent. Except as set forth in Schedule 2.8, neither the Company nor any
------------
Subsidiary has ever filed, and has ever been required to file, a consolidated,
combined or unitary tax return with any other entity. Except as set forth in
Schedule 2.8, neither the Company nor any Subsidiary owns and has ever owned a
- ------------
direct or indirect interest in any trust, partnership, corporation or other
entity. Except as set forth in Schedule 2.8 attached hereto, neither the
------------
Company nor any Subsidiary is a party to any tax sharing agreement.
(f) For purposes of this Agreement, all references to Sections of the
Code shall include any predecessor provisions to such Sections and any similar
provisions of federal, state, local or foreign law.
2.9 Collectibility of Accounts Receivable. Except as set forth on
-------------------------------------
Schedule 2.9, all of the accounts receivable of the Company or any Subsidiary
- ------------
shown or reflected on the Interim Balance Sheet or existing at the date hereof
(less the reserve for bad debts set forth on the Interim Balance Sheet) have
been collected or are or will be at the Closing valid and enforceable claims,
fully collectible and subject to no setoff or counterclaim. Neither the Company
nor any Subsidiary has any accounts or loans receivable from any person, firm or
corporation which is affiliated with the Company or any Subsidiary or from any
director, officer or employee of the Company or any Subsidiary, except as
disclosed on Schedule 2.9 hereto.
------------
2.1 [Intentionally Omitted].
12
<PAGE>
2.11 Absence of Certain Changes. Except as disclosed in Schedule 2.11
-------------------------- -------------
attached hereto, since the date of the Base Balance Sheet there has not been:
(a) Any change in the financial condition, properties, assets,
liabilities, business or operations of the Company or any of its Subsidiaries,
which change by itself or in conjunction with all other such changes, whether or
not arising in the ordinary course of business, has had a Material Adverse
Effect on the Company and its Subsidiaries taken as a whole;
(b) Any material contingent liability incurred by the Company or any
of its Subsidiaries as guarantor or otherwise with respect to the obligations of
others or any cancellation of any material debt or claim owing to, or waiver of
any material right of, the Company or any of its Subsidiaries;
(c) Any mortgage, encumbrance or lien (other than Permitted
Encumbrances) placed on any of the properties of the Company or any of its
Subsidiaries which remains in existence on the date hereof or will remain on the
Closing Date;
(d) Any obligation or liability of any nature, whether accrued,
absolute, contingent or otherwise, asserted or unasserted, known or unknown
(including without limitation liabilities for Taxes due or to become due (other
than with respect to the Audits) or contingent or potential liabilities relating
to products or services provided by the Company or any of its Subsidiaries or
the conduct of the business of the Company or any of its Subsidiaries since the
date of the Base Balance Sheet regardless of whether claims in respect thereof
have been asserted), incurred by the Company or any of its Subsidiaries other
than obligations and liabilities which, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect on the Company and
its Subsidiaries taken as a whole;
(e) Any purchase, sale or other disposition, or any agreement or other
arrangement for the purchase, sale or other disposition, of any of the
properties or assets of the Company or any of its Subsidiaries other than in the
ordinary course of business or except as would not in the aggregate be material;
(f) Any damage, destruction or loss, whether or not covered by
insurance, having a Material Adverse Effect on the Company and its Subsidiaries
taken as a whole;
(g) Any declaration, setting aside or payment of any dividend by the
Company or any of its Subsidiaries, or the making of any other distribution in
respect of the capital stock of the Company or any of its Subsidiaries, or any
direct or indirect redemption, purchase or other acquisition by the Company or
any of its Subsidiaries of its own capital stock;
(h) Any labor trouble or claim of unfair labor practices involving the
Company or any of its Subsidiaries; any change in the compensation payable or to
become
13
<PAGE>
payable by the Company or any of its Subsidiaries to any of its officers,
employees, agents or independent contractors other than normal increases in
accordance with its usual practices; or any bonus payment or arrangement made to
or with any of such officers, employees, agents or independent contractors;
(i) Any change with respect to the corporate officers or senior
management of the Company or any of its Subsidiaries;
(j) Any payment or discharge of a material lien or liability of the
Company or any of its Subsidiaries which was not shown on the Base Balance Sheet
or incurred in the ordinary course of business thereafter;
(k) Any obligation or liability incurred by the Company or any of its
Subsidiaries to any of its officers, directors, stockholders or employees, or
any loans or advances made by the Company or any of its Subsidiaries to any of
its officers, directors, stockholders or employees, except normal compensation,
benefits and expense allowances payable to officers or employees;
(l) Except as required by law or in connection with the preparation of
the financial statements for the Registration Statement, any material change in
accounting methods or practices, credit practices or collection policies used by
the Company or any of its Subsidiaries;
(m) Any resignation or termination of the Company's representation of
any Principal representing commission revenues in excess of $1,500,000 for the
calendar year ended December 31, 1997 (a "Key Principal") (with respect to all
-------------
or any of the products of such Key Principal or with respect to any Customers),
or any change in commission rate paid by any Key Principal, or any notice of
same (for purposes of this Agreement, "Principal" shall mean any manufacturer,
---------
grower, processor, producer, distributor or other wholesaler, or any supplier
whose goods, products or lines are offered for sale or for retail merchandising
by the Company, and "Customer" shall mean any individual, firm, corporation or
--------
other business entity from which the Company obtains product orders on behalf of
its Principals);
(n) Any capital expenditure by the Company or any of its Subsidiaries
exceeding $500,000; or
(o) Any agreement or understanding whether in writing or otherwise,
for the Company or any of its Subsidiaries to take any of the actions specified
in paragraphs (a) through (n) above.
2.12 Ordinary Course. Since the date of the Base Balance Sheet, the
---------------
Company and each of its Subsidiaries has conducted its business only in the
ordinary course and consistently with its prior practices except as contemplated
by this Agreement or as disclosed on any Schedule hereto.
14
<PAGE>
2.13 Banking Relations. All of the arrangements which the Company or any
-----------------
of its Subsidiaries has with any banking institution are described in Schedule
--------
2.13 attached hereto, indicating with respect to each of such arrangements the
- ----
type of arrangement maintained (such as checking account, borrowing
arrangements, safe deposit box, etc.) and the person or persons authorized in
respect thereof.
2.14 Intellectual Property.
---------------------
(a) Except as described in Schedule 2.14, the Company and each of its
-------------
Subsidiaries has exclusive ownership of, or sufficient rights to use, all
material patent, copyright, trade secret, trademark, or other proprietary rights
(collectively, "Intellectual Property") used in the business of the Company or
------------ --------
such Subsidiary as presently conducted. Except as set forth on Schedule 2.14,
-------------
all of the rights of the Company and each Subsidiary in any such Intellectual
Property are freely transferable. There are no claims or demands of any other
person pertaining to any of such Intellectual Property and no proceedings have
been instituted, or are pending or, to the knowledge of the Company and the
Stockholders, threatened, which challenge the rights of the Company or any
Subsidiary in respect thereof. Except as described in Schedule 2.14, to the
-------------
knowledge of the Company and the Stockholders the Company and each of its
Subsidiaries has the right to use, free and clear of valid claims or rights of
other persons, all customer lists, designs, manufacturing or other processes,
computer software, systems, data compilations, research results and other
information required for its products or its business as presently conducted.
(b) All patents, patent applications, trademarks, trademark
applications and registrations and registered copyrights which are owned by or
licensed to the Company or any of its Subsidiaries and all other items of
Intellectual Property used by the Company or any of its Subsidiaries and
material to their businesses as presently conducted, are listed in Schedule
--------
2.14. All of such patents, patent applications, trademark registrations,
- ----
trademark applications and registered copyrights have been duly registered in,
filed in or issued by the United States Patent and Trademark Office, the United
States Register of Copyrights, or the corresponding offices of other
jurisdictions as identified on said Schedule, and have been properly maintained
and renewed in accordance with all applicable provisions of law and
administrative regulations of the United States and each such jurisdiction.
(c) All licenses or other agreements under which the Company or any of
its Subsidiaries is granted rights in Intellectual Property are listed in
Schedule 2.14. All said licenses or other agreements are in full force and
- -------------
effect, neither the Company nor, to the knowledge of the Company and the
Stockholders, any other party thereto is in material default thereunder and,
except as set forth on Schedule 2.14, all of the rights of the Company or any
-------------
Subsidiary thereunder will continue in full force and effect upon consummation
of the transactions contemplated hereby. True and complete copies of all such
licenses or other agreements, and any amendments thereto, have been provided to
Buyer.
15
<PAGE>
(d) All licenses or other agreements under which the Company or any of
its Subsidiaries has granted rights to others in Intellectual Property owned or
licensed by the Company or such Subsidiary are listed in Schedule 2.14. All of
-------------
said licenses or other agreements are in full force and effect, neither the
Company nor, to the knowledge of the Company and the Stockholders, any other
party thereto is in material default thereunder, and, except as set forth on
Schedule 2.14, all of the rights of Company or any Subsidiary thereunder will
- -------------
continue in full force and effect upon consummation of the transactions
contemplated hereby. True and complete copies of all such licenses or other
agreements, and any amendments thereto, have been provided to Buyer or made
available to Buyer or Buyer's counsel.
(e) The Company and each of its Subsidiaries has taken all reasonably
prudent action to establish and preserve its ownership of all material
Intellectual Property rights with respect to its products, services and
technology. The Company and its Subsidiaries have taken reasonably prudent
action to ensure that valuable non-public information of the Company and its
Subsidiaries has not become available to any person other than employees and
agents of the Company and its Subsidiaries except pursuant to written agreements
requiring the recipients to maintain the confidentiality of such information and
appropriately restricting the use thereof. The Company has no knowledge of any
infringement by others of any material Intellectual Property rights of the
Company or any Subsidiary.
(f) To the knowledge of the Company and the Stockholders, the present
business, activities and products of the Company and its Subsidiaries do not
infringe any Intellectual Property of any other person. No proceeding charging
the Company or any of its Subsidiaries with infringement of any adversely held
Intellectual Property has been filed or, to the knowledge of the Company and the
Stockholders, is threatened to be filed. To the knowledge of the Company and
the Stockholders, there exists no unexpired patent or patent application which
includes claims that would be infringed by or otherwise adversely affect the
products, activities or business of the Company or any Subsidiary which
infringement, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect on the Company and its Subsidiaries taken as a
whole. To the knowledge of the Company and the Stockholders, neither the
Company nor any of its Subsidiaries is making unauthorized use of any
confidential information or trade secrets of any person.
2.15 Contracts. Except for contracts, commitments, plans, agreements and
---------
licenses listed in Schedule 2.15 or on any other Schedule hereto (true and
-------------
complete copies of which have been delivered or made available to Buyer or its
counsel), neither the Company nor any of its Subsidiaries is a party to or
subject to:
(a) any plan or contract providing for bonuses, pensions, options,
stock purchases, deferred compensation, retirement payments, profit sharing,
collective bargaining or the like, or any contract or agreement with any labor
union;
16
<PAGE>
(b) any employment contract, consulting agreement or similar agreement
for services which is not terminable within 30 days by the Company or a
Subsidiary without liability for any penalty or severance payment;
(c) any contract or agreement for the purchase of any commodity,
material or equipment except purchase orders in the ordinary course;
(d) any other contracts or agreements creating any obligations of the
Company or any of its Subsidiaries of $100,000 or more with respect to any such
contract or agreement not specifically disclosed elsewhere under this Agreement;
(e) any contract or agreement providing for the purchase of all or
substantially all of its requirements of a particular product from a supplier;
(f) any contract or agreement involving more than $100,000 which by
its terms does not terminate or is not terminable without penalty by the Company
or a Subsidiary or their successors within one year after the date hereof;
(g) any contract or agreement for the sale or lease of its products or
services not made in the ordinary course of business;
(h) any contract containing covenants limiting the freedom of the
Company or any of its Subsidiaries to compete in any line of business or with
any person or entity;
(i) any contract or agreement for the purchase of any fixed asset for
a price in excess of $100,000 whether or not such purchase is in the ordinary
course of business;
(j) any license agreement not disclosed elsewhere in this Agreement or
any Schedule hereto and excluding licenses for off the shelf products (as
licensor or licensee);
(k) any indenture, mortgage, promissory note, loan agreement, guaranty
or other agreement or commitment for the borrowing of money (including in such
Schedule, if applicable, a description on any prepayment penalties or similar
obligations); or
(l) any contract or agreement with any officer, employee, director or
stockholder of the Company or any of its Subsidiaries or with any persons or
organizations controlled by or affiliated with any of them.
Except as set forth in Schedule 2.15, neither the Company nor any of its
-------------
Subsidiaries is in default in any material respect under any such contracts,
commitments, plans, agreements or licenses described in said Schedule or has any
knowledge of conditions or facts which with notice or passage of time, or both,
would constitute a default. To the knowledge of the Company and the
Stockholders, no third party under any contract, commitment, plan, agreement or
license listed on Schedule 2.15 is in default thereunder. Except as set forth
-------------
in
17
<PAGE>
Schedule 2.15, each contract, commitment, plan, agreement or license listed
- -------------
on such Schedule has been duly authorized and executed by the Company or its
Subsidiaries, is in full force and effect and is enforceable by the Company or
its Subsidiaries in accordance with its terms.
2.16 Litigation. Schedule 2.16 hereto lists all currently pending
---------- -------------
litigation and governmental or administrative proceedings or investigations to
which the Company or any of its Subsidiaries is a party. Except for matters
described in Schedule 2.16, there is no litigation or governmental or
-------------
administrative proceeding or investigation pending or, to the knowledge of the
Company or the Stockholders, threatened against the Company or any of its
Subsidiaries or their affiliates which could reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect on the
Company and its Subsidiaries taken as a whole, or which would prevent or hinder
the consummation of the transactions contemplated by this Agreement. With
respect to each matter set forth on Schedule 2.16 which involves a claim for
-------------
money damages in excess of $50,000 or seeks to enjoin the Company from
conducting its business in any respect, Schedule 2.16 sets forth a description
-------------
of the matter, the forum (if any) in which it is being conducted, the parties
thereto and the type and amount of relief sought.
2.17 Compliance with Laws. Except for matters relating to Taxes, employee
--------------------
benefits and Environmental Laws, which are addressed in Sections 2.8, 2.25 and
2.26,, respectively, and to which this Section 2.17 does not apply, and except
as set forth in Schedules 2.17, 2.8, 2.25 and 2.26 hereto, the Company and each
-------------- --- ---- ----
of its Subsidiaries is in compliance in all material respects with all
applicable statutes, ordinances, orders, judgments, decrees, rules and
regulations promulgated by any federal, state, municipal entity, agency, court
or other governmental authority which apply to the Company or any Subsidiary or
to the conduct of its business, except where the failure to be in such
compliance could not reasonably be expected to have, either individually or in
the aggregate, a Material Adverse Effect on the Company and its Subsidiaries
taken as a whole, and neither the Company nor any of its Subsidiaries has
received notice of a material violation or alleged material violation of any
such statute, ordinance, order, rule or regulation.
2.18 Insurance. The physical properties and assets of the Company and each
---------
of its Subsidiaries are insured to the extent disclosed in Schedule 2.18
-------------
attached hereto and all such insurance policies and arrangements are disclosed
in said Schedule. Said insurance policies and arrangements are in full force
and effect, all premiums with respect thereto are currently paid, and the
Company and each of its Subsidiaries is in compliance in all material respects
with the terms thereof. Said insurance, is sufficient for compliance by the
Company and each Subsidiary with all requirements of law and all agreements and
leases to which the Company or any Subsidiary is a party. The consummation of
the transactions contemplated hereby will not cause such insurance to cease to
be in full force and effect.
2.19 Warranty or Other Claims. There are no existing or, to the knowledge
------------------------
of the Company and the Stockholders, threatened product liability, warranty or
other similar claims, or to the knowledge of the Company and the Stockholders
any facts upon which a valid material claim of such nature could be based,
against the Company or any of its Subsidiaries
18
<PAGE>
for products or services which are defective or fail to meet any product or
service warranties. No claim has been asserted against the Company or any of its
Subsidiaries for renegotiation or price redetermination of any business
transaction, and, to the knowledge of the Company and the Stockholders, there
are no facts upon which any valid claim therefor could be based.
2.20 Powers of Attorney. Neither the Company, any Subsidiary or any
------------------
Stockholder has any outstanding power of attorney relating to the Company Shares
or not in the ordinary course of business, except as provided in Section 1.8
hereof and as set forth on Schedule 2.20.
-------------
2.21 Finder's Fee. Neither the Company nor any of its Subsidiaries nor any
------------
Stockholder has taken any action or entered into any agreement pursuant to which
the Company has incurred or will become liable for any broker's commission or
finder's fee relating to or in connection with the transactions contemplated by
this Agreement.
2.22 Permits; Burdensome Agreements. Schedule 2.22 lists all material
------------------------------ -------------
permits, registrations, licenses, franchises, certifications and other approvals
(collectively, the "Approvals") required from federal, state and local
---------
authorities in order for the Company and each of its Subsidiaries to conduct its
business as presently conducted. The Company and each of its Subsidiaries has
obtained all such Approvals, which are valid and in full force and effect, and
is operating in material compliance therewith. Except as disclosed in Schedule
--------
2.22, neither the Company nor any of its Subsidiaries is subject to or bound by
- ----
any agreement, judgment, decree or order which could, if performed in accordance
with its terms, reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect on the Company and its Subsidiaries taken
as a whole. Schedule 2.22 lists all registrations, certifications and similar
-------------
approvals used by the Company in the manufacture, marketing, sales and
distribution of the products and services of the Company and its Subsidiaries.
To the knowledge of the Company and the Stockholders, Schedule 2.22 is a
-------------
complete list of all registrations, certifications and similar approvals
necessary in the manufacture, marketing, sales and distribution of the products
and services of the Company and its Subsidiaries.
2.23 Corporate Records; Copies of Documents. The corporate record books of
--------------------------------------
the Company and each of its Subsidiaries accurately record all corporate action
taken by their respective stockholders and boards of directors and committees.
The copies of the corporate records of the Company and each of its Subsidiaries,
as made available to Buyer for review, are true and complete copies of the
originals of such documents. The Company has made available for inspection and
copying by Buyer and its counsel true and correct copies of all documents
referred to in this Section or in the Schedules delivered to Buyer pursuant to
this Agreement.
2.24 Transactions with Interested Persons. Except as set forth in Schedule
------------------------------------ --------
2.24 hereto, neither the Company, any of its Subsidiaries, any Stockholder,
- ----
officer, supervisory employee or director of the Company or any of its
Subsidiaries or, to the knowledge of Company, any of their respective spouses or
family members, owns directly or indirectly on an individual or joint basis any
material interest in, or serves as an officer or director or in
19
<PAGE>
another similar capacity of, any competitor or supplier of Company or any of its
Subsidiaries, or any organization which has a material contract or arrangement
with the Company or any of its Subsidiaries or (ii) has directly or indirectly
engaged in any transaction involving any lease or other transaction of the
transfer of any material (measured at the time of such transaction or as of the
date hereof) cash, property or rights to or from the Company or any of its
Subsidiaries from, to or for the benefit of any affiliate or former affiliate of
the Company or any of its Subsidiaries.
2.25 Employee Benefit Programs
-------------------------
(a) Schedule 2.25 sets forth a list of every Employee Program that
-------------
has been maintained by the Company or an Affiliate at any time during the
six-year period ending on the Closing Date.
(b) Each Employee Program which has ever been maintained by the
Company or an Affiliate and which has been intended to qualify under Section
401(a) or 501(c)(9) of the Code has received a favorable determination or
approval letter from the IRS regarding its qualification under such section or
an application for a favorable determination letter or an approval letter has
been filed with the IRS within the remedial amendment period for such plan as
described in Treasury Regulation (S)11.401(b)-1 and has in form and operation
met the requirements in order to be qualified under the applicable section of
the Code from the effective date of such Employee Program through and including
the Closing Date (or, if earlier, the date that all of such Employee Program's
assets were distributed). No event or omission has occurred which would cause
any such Employee Program to no longer meet the requirements for qualification
under the applicable Code section and each asset held under any such Employee
Program may be liquidated or terminated without the imposition of any redemption
or surrender charge or comparable liability.
(c) Neither the Company nor any Affiliate knows of any failure by
the Company, any Affiliate or any Stockholder to comply with any laws applicable
with respect to the Employee Programs that have ever been maintained by the
Company or any Affiliate. With respect to any Employee Program ever maintained
by the Company or any Affiliate, there has been no (i) "prohibited transaction,"
as defined in Section 406 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") or Code Section 4975, (ii) failure to comply with any
-----
provision of ERISA, other applicable law, or any agreement, or (iii) any failure
to meet the applicable limits on deductible contribution, which, in the case of
any of (i), (ii), or (iii), could subject the Company or any Affiliate to
liability either directly or indirectly (including, without limitation, through
any obligation of indemnification or contribution) for any damages, penalties,
or taxes, or any other loss or expense. No litigation or governmental
administrative proceeding (or investigation) or other proceeding (other than
those relating to routine claims for benefits and applications to the IRS for a
favorable determination or approval letter) is pending or threatened with
respect to any such Employee Program.
20
<PAGE>
(d) Neither the Company nor any Affiliate (i) has ever maintained
any Employee Program which has been subject to title IV of ERISA or Code Section
412, including, but not limited to, any Multiemployer Plan or (ii) has ever
provided health care or any other non-pension benefits to any employees after
their employment is terminated or has ever become obligated to provide such
post-termination benefits (other than as required by part 6 of subtitle B of
title I of ERISA or other applicable law).
(e) With respect to each Employee Program maintained by the Company
within the six years preceding the date hereof, complete and correct copies of
the following documents (if applicable to such Employee Program) have previously
been delivered or made available to Buyer or its counsel: (i) the currently
effective plan documents embodying or governing such Employee Program, and any
funding medium for the Employee Program (including, without limitation, trust
agreements) as they may have been amended to the date hereof; (ii) the most
recent IRS determination or approval letter with respect to such Employee
Program under Code Section 401(a) or 501(c)(9), and any applications for
determination or approval subsequently filed with the IRS; (iii) the six most
recently filed IRS Forms 5500, with all applicable schedules and accountants'
opinions attached thereto; (iv) the six most recent actuarial valuation reports
completed with respect to such Employee Program; (v) the most recent summary
plan description for such Employee Program (or other description of such
Employee Program provided to employees) and all modifications thereto; (vi) the
currently effective document for any insurance policy (including any fiduciary
liability insurance policy or fidelity bond) related to such Employee Program;
and (vii) any registration statement or other filing made pursuant to any
federal or state securities law.
(f) With respect to each Employee Program required to be listed on
Schedule 2.25, no employee communications issued by the Company or any Affiliate
- -------------
or, except to the extent required by law, provision of any Employee Program
document has ever purported to limit the right of the Company or the Affiliate
to amend, terminate or otherwise modify (including the elimination of any and
all future benefit accruals under any Employee Program) such Employee Program.
(g) [Intentionally Omitted].
(h) Each Employee Program ever maintained by the Company or an
Affiliate has complied with the applicable notification and other applicable
requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985,
Health Insurance Portability and Accountability Act of 1996, the Newborns' and
Mothers' Health Protection Act of 1996, and the Mental Health Parity Act of
1996.
(i) For purposes of this section:
(i) "Employee Program" means (A) all employee benefit plans
----------------
within the meaning of ERISA Section 3(3), including, but not limited to,
multiple employer welfare arrangements (within the meaning of ERISA Section
3(40)), plans to which more than
21
<PAGE>
one unaffiliated employer contributes and employee benefit plans (such as
foreign or excess benefit plans) which are not subject to ERISA; and (B) all
stock option plans, bonus or incentive award plans, severance pay policies or
agreements, deferred compensation agreements, supplemental income arrangements,
vacation plans, and all other employee benefit plans, agreements, and
arrangements (including any informal arrangements) not described in (A) above,
including without limitation, any arrangement intended to comply with Section
120, 125, 127 or 129 of the Code. In the case of an Employee Program funded
through a trust described in Code Section 401(a) or an organization described in
Code Section 501(c)(9), each reference to such Employee Program shall include a
reference to such trust or organization.
(ii) An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides benefits under such Employee Program, or
has any obligation (by agreement or under applicable law) to contribute to or
provide benefits under such Employee Program, or if such Employee Program
provides benefits to or otherwise covers employees of such entity (or their
spouses, dependents, or beneficiaries).
(iii) An entity is an "Affiliate" of the Company if it would
---------
have ever been considered a single employer with the Company under ERISA Section
4001(b) or part of the same "controlled group" as the Company for purposes of
ERISA Section 302(d)(8)(C).
(iv) "Multiemployer Plan" means a (pension or non-pension)
------------------
employee benefit plan to which more than one unaffiliated employer contributes
and which is maintained pursuant to one or more collective bargaining
agreements.
(j) Notwithstanding anything to the contrary in this Section 2.25,
the representations and warranties made in the foregoing subsections (a) to (i)
exclude the following: (i) any failure to comply with any applicable provision
of law with respect to, or any failure to provide benefits under, any Employee
Program as to which all the applicable statutes of limitations has expired, and
(ii) any failure to comply with any applicable provision of law with respect to
any Employee Program or any failure to provide coverage or benefits in
accordance with the provisions of any Employee Program, unless such failure
individually or all such failures in the aggregate could reasonably be expected
to have a Material Adverse Effect on the Company and its Subsidiaries taken as a
whole.
2.26 Environmental Matters.
---------------------
(a) Except as set forth in Schedule 2.26 hereto, to the knowledge
-------------
of the Company and the Stockholders (i) neither the Company nor any of its
Subsidiaries has ever generated, transported, used, stored, treated, disposed
of, or managed any Hazardous Waste (as defined below) except in compliance with
applicable law; (ii) no Hazardous Material (as defined below) has ever been
spilled, released, or disposed of at any site presently or formerly owned or
leased by the Company or any of its Subsidiaries, and neither the Company nor
any of its Subsidiaries has received written notice that any Hazardous Material
has ever been located in the soil or groundwater at any such site; (iii) no
Hazardous Material has ever been
22
<PAGE>
transported from any site presently or formerly owned or leased by the Company
or any of its Subsidiaries for treatment, storage, or disposal at any other
place; (iv) neither the Company nor any of its Subsidiaries presently owns or
leases nor has it previously owned or leased any site on which underground
storage tanks were located at the time such premises were owned or leased by the
Company; and (v) no lien has ever been imposed by any governmental agency on any
property, facility, machinery, or equipment owned or leased by the Company or
any of its Subsidiaries in connection with the presence of any Hazardous
Material.
(b) Except as set forth in Schedule 2.26 hereto, (i) neither the
-------------
Company nor any of its Subsidiaries has any material liability under, nor has it
ever violated in any material respect, any Environmental Law (as defined below);
(ii) the Company and each of its Subsidiaries, any property owned, operated,
leased, or used by any of them, and any facilities and operations of the Company
thereon, are presently in compliance in all material respects with all
applicable Environmental Laws; (iii) neither the Company or any of its
Subsidiaries has ever entered into or been subject to any judgment, consent
decree, compliance order, or administrative order with respect to any
environmental or health and safety matter or received any request for
information, notice, demand letter, administrative inquiry, or complaint or
claim with respect to any environmental or health and safety matter or the
enforcement of any Environmental Law; and (iv) neither the Company nor any of
its Subsidiaries has any reason to believe that any of the items enumerated in
clause (iii) of this subsection are likely to be forthcoming.
(c) Except as set forth in Schedule 2.26 hereto, to the knowledge
-------------
of the Company and the Stockholders, no site owned or leased by the Company or
any of its Subsidiaries contains any asbestos or asbestos-containing material,
any polychlorinated biphenyls ("PCBs") or equipment containing PCBs, or any urea
----
formaldehyde foam insulation.
(d) The Company has provided to Buyer or made available to its
counsel copies of all documents, records, and information in the possession of
the Company or any of its Subsidiaries concerning any environmental or health
and safety matter involving and naming the Company or any of its Subsidiaries,
whether generated by the Company, its Subsidiaries, or others, including without
limitation, environmental audits, environmental risk assessments, site
assessments, documentation regarding off-site disposal of Hazardous Materials,
spill control plans, and reports, correspondence, permits, licenses, approvals,
consents, and other authorizations related to environmental or health and safety
matters issued by any governmental agency.
(e) For purposes of this Section 2.26, (i) "Hazardous Material"
------------------
shall mean and include any hazardous waste, hazardous material, hazardous
substance, petroleum product, oil, toxic substance, pollutant, contaminant, or
other substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental Law; (ii) "Hazardous
---------
Waste" shall mean and include any hazardous waste as defined or regulated under
- -----
any Environmental Law; (iii) "Environmental Law" shall mean any environmental or
-----------------
health and safety-related law, statute, regulation, rule, ordinance, or by-law
23
<PAGE>
at the federal, state, or local level, whether existing as of the date hereof,
or previously applicable to the Company and its Subsidiaries; and (iv) "Company"
-------
shall mean and include Company and each of its Subsidiaries.
2.27 List of Directors and Officers. Schedule 2.27 hereto contains a true
------------------------------ -------------
and complete list of all directors and officers of the Company and each of its
Subsidiaries as of the date hereof. A schedule has been delivered to Buyer's
counsel prior to the date hereof which lists each employee and consultant of the
Company and any Subsidiary who, individually, has received or is scheduled to
receive base compensation in excess of $75,000 from the Company or any of its
Subsidiaries for the calendar year ending December 31, 1998 and the amount of
compensation and current job title for each such individual. Notwithstanding
the fact that such schedule is not attached as a Schedule hereto, such schedule
shall be deemed a "Schedule" hereto for purposes of this Agreement.
2.28 Non-Foreign Status. Neither the Company nor any of its Subsidiaries
------------------
is a "foreign person" within the meaning of Section 1445 of the Code and
Treasury Regulations Section 1.1445-2.
2.29 Employees; Labor Matters. As of April 30, 1998, the Company and its
------------------------
Subsidiaries employ a total of approximately 1,165 full-time employees and 398
part-time employees. Neither the Company nor any of its Subsidiaries is
delinquent in payments to any of its employees for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed for
it to the date hereof or amounts required to be reimbursed to such employees.
Upon termination of the employment of any of said employees, neither the
Company, any Subsidiary nor Buyer will by reason of the transactions
contemplated under this Agreement or anything done prior to the Closing by the
Company be liable to any of said employees for so-called "severance pay" or any
other payments, except as set forth in Schedule 2.29. Neither the Company nor
-------------
any Subsidiary has any policy, practice, plan or program of paying severance pay
or any form of severance compensation in connection with the termination of
employment, except as set forth in said Schedule. Except as set forth in
Schedule 2.29, and except with respect to the Audits, the Company and each of
- -------------
its Subsidiaries are in compliance in all material respects with all applicable
laws and regulations respecting labor, employment, fair employment practices,
work place safety and health, terms and conditions of employment, wages and
hours, and withholding of taxes and reporting of income. Except as set forth in
Schedule 2.29, there are no charges of employment discrimination or unfair labor
- -------------
practices, nor are there any strikes, slowdowns, stoppages of work, or any other
concerted interference with normal operations which are existing, pending or, to
the knowledge of the Company and the Stockholders, threatened against or
involving the Company or any of its Subsidiaries. Except as set forth in
Schedule 2.29, there are no grievances, complaints or charges that have been
- -------------
filed against the Company or any of its Subsidiaries under any dispute
resolution procedure (including, but not limited to, any proceedings under any
dispute resolution procedure under any collective bargaining agreement) that
could reasonably be expected to have a Material Adverse Effect on the Company or
Subsidiaries taken as a whole, and there is no pending arbitration or similar
proceeding or
24
<PAGE>
claim. No collective bargaining agreement is in effect or is currently being or,
to the knowledge of the Company and the Stockholders, is about to be negotiated
by the Company or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries has received any information indicating that any of its employment
policies or practices is currently being audited or investigated by any federal,
state or local government agency. The Company and each of its Subsidiaries is,
and has been, in compliance with the requirements of the Immigration Reform
Control Act of 1986 at all times since the enactment of said Act. No one has
demanded recognition as or otherwise made a claim to be the exclusive
representative for purposes of collective bargaining of all or any group of
employees of the Company or any of its Subsidiaries. To the knowledge of the
Company and the Stockholders, there are no attempts to organize for purposes of
collective bargaining any of the employees of the Company or any of its
Subsidiaries.
2.30 Principals.
----------
(a) The list of the Key Principals (as defined in Section 2.11(m)
hereof) and the aggregate brokerage commission revenues accrued by the Company
during the fiscal year ended August 31, 1997 from each such Key Principal,
attached hereto as Schedule 2.30, is true, correct and complete in all material
-------------
respects. The Company has delivered to Buyer or made available to its counsel
true and complete copies of all written brokerage agreements and/or letters of
appointment with or from Key Principals in effect as of the date of this
Agreement. Set forth on Schedule 2.30 is a list or summary of all other
-------------
agreements and documents with or involving any person or entity and relating to
financial obligations of the Company with respect to commissions or other
payments received by the Company (or an affiliate of the Company) from
Principals. Except as set forth on Schedule 2.30, since December 31, 1997, the
-------------
Company has had no commitment, understanding or agreement with any Principal or
any other person or entity relating to payments to be made by the Company to any
person or entity computed in whole or in part with respect to sales of or
commissions paid or to be paid by any Principal.
(b) Except as set forth on Schedule 2.30, the Company is not
-------------
currently, and since December 31, 1997 has not been, subject to any notice of
probation from any Key Principal. Except as set forth on Schedule 2.30, since
-------------
December 31, 1997, the Company has not received any oral or written
communication from any Key Principal which places the Company on probation or
otherwise suggests, threatens or implies (i) possible termination of the
Company's appointment as broker for such Key Principal, or (ii) that such Key
Principal intends to amend the terms of the Company's brokerage agreement with
such Key Principal in order to reappoint, or continue the appointment of, the
Company as broker with respect to a lesser portion of the applicable territory
than the greatest portion of such area in which, or with respect to fewer than
the greatest number of product items or Customers than, the Company acted as
broker for such Key Principal during the twelve-month period ended March 31,
1998, or at a lower commission rate than the highest rate paid by such Key
Principal to the Company with respect to sales during such period. To the
knowledge of the Company and the
25
<PAGE>
Stockholders, the relationships of the Company with its Principals are good
commercial working relationships.
(c) Except as set forth on Schedule 2.30, there are, and since
-------------
December 31, 1997 there have been, no disputes or claims involving individually
in excess of $25,000 or in the aggregate in excess of $100,000, (i) between the
Company and any Principal, (ii) between the Company and any Customer, or (iii)
to the knowledge of the Company and the Stockholders, between any Principal and
any Customer. As used in this Section 2.30(c), the terms "disputes" or "claims"
shall mean (A) matters which, to the knowledge of the Company and the
Stockholders, have been referred to counsel or are the subject of litigation, or
(B) matters as to which a Principal has informed the Company that it intends to
seek recourse against the Company, if such matter is not resolved to the
satisfaction of such Principal.
2.31 Transfer of Shares. Other than in connection with the formation and
------------------
operation of the ESOP Trust Fund and the ESOP, no holder of stock of the Company
or any Subsidiary has at any time transferred any of such stock to any employee
of the Company or any Subsidiary, which transfer constituted or could be viewed
as compensation for services rendered to the Company or any Subsidiary by said
employee.
2.32 Stock Repurchase. Except as set forth on Schedule 2.32, since the
---------------- -------------
date of the Base Balance Sheet, neither the Company nor any Subsidiary has
redeemed or repurchased any of its capital stock.
2.33 Absence of Improper Payments. Since December 31, 1994, the Company:
----------------------------
(a) has not made any contributions, payments or gifts of its property to or for
the private use of any governmental official, employee or agent where either the
payment or the purpose of such contribution, payments or gift is illegal under
the laws of the United States, any state thereof or any other jurisdiction
(foreign or domestic), (b) has not established or maintained any unrecorded fund
or asset for any purpose other than promotional funds, or intentionally made any
false or artificial entries on its books or records for any reason, (c) has not
made any payments to any person where the Company intended or understood that
any part of such payment was to be used for any other purpose other than that
described in the documents supporting the payment, or (d) has not made any
contribution, or reimbursed any political gift or contribution made by any other
person, to candidates for public office, whether federal, state or local, where
such contribution would be in violation of applicable law.
2.34 Inventories. Except as disclosed in Schedule 2.34, all items in the
----------- -------------
inventories of the Company or any Subsidiary shown on the Base Balance Sheet and
existing at the date hereof are of a quality and quantity saleable in the
ordinary course of business of the Company and its Subsidiaries at profit
margins substantially consistent with their experience during the fiscal year
ended August 31, 1997. Except as disclosed in Schedule 2.34, said inventories
-------------
reflect write-downs to realizable values in the case of items which are below
standard quality or have become obsolete or unsaleable (except at prices less
than cost) through regular distribution channels in the ordinary course of the
business of the Company and its
26
<PAGE>
Subsidiaries. No such write-downs since December 31, 1997 have had a Material
Adverse Effect on the consolidated financial condition or results of operations
of the Company and its Subsidiaries. The values of the inventories stated in the
Base Balance Sheet and any subsequent financial statements of the Company or any
Subsidiary reflect the normal inventory valuation policies of the Company and
its Subsidiaries and were determined at the lower of cost or market in
accordance with generally accepted accounting principles, practices and methods
consistently applied. Purchase commitments for raw materials and parts are not
in excess of normal requirements and none are at prices materially in excess of
current market prices. Except as disclosed in Schedule 2.34, all inventory items
-------------
are located on the Owned Real Property or the Leased Real Property. Since the
date of the Base Balance Sheet, no inventory items have been sold or disposed of
except through sales in the ordinary course of business at profit margins
consistent with the experience of the Company and its Subsidiaries during the
fiscal year ended August 31, 1997, and all sales commitments for the products of
the Company and its Subsidiaries are at prices not less than inventory values
plus selling expenses and said profit margins.
2.35 Net Operating Loss. Other than as a result of this Agreement, there
------------------
has been no change in ownership of the Company that would limit Buyer's ability
to utilize the net operating losses of the Company.
2.36 [Intentionally Omitted].
2.37 Disclosure.
----------
(a) The representations, warranties and statements contained in this
Agreement and in the certificates, Exhibits and Schedules delivered by the
Company pursuant to this Agreement to Buyer do not contain any untrue statement
of a material fact, and, when taken together, do not omit to state a material
fact required to be stated therein or necessary in order to make such
representations, warranties or statements not misleading in light of the
circumstances under which they were made.
(b) Provided that Buyer has accurately incorporated all information
furnished in writing by the Company to Buyer specifically for inclusion in the
Registration Statement or the Prospectus (as applicable) in connection with the
IPO and has deleted from the Registration Statement or the Prospectus (as
applicable) all statements that the Company has specifically requested in
writing be so deleted, and provided that the Company, the Stockholders and their
respective counsel have received and had a reasonable opportunity to review all
written correspondence between Buyer and the SEC and the final form of
Registration Statement and Prospectus and have been informed of the substance of
any material oral correspondence relating to the Company between Buyer, its
counsel and the SEC, the Company (and not the Stockholders) represents and
warrants that (i) at the time the Registration Statement becomes effective under
the Securities Act, the Registration Statement will not contain an 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 not misleading, and
(ii) at the
27
<PAGE>
time of the closing of the IPO, the Prospectus will not include an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. The representations and warranties in this
Section 2.37(b) shall apply only to historical statements and shall not apply to
(A) any financial statements contained in the Registration Statement or (B)
statements in or omissions from the Registration Statement and Prospectus
relating to any person or entity other than the Company and its officers,
directors and stockholders.
SECTION 3. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.
As a material inducement to Buyer to enter into this Agreement and
consummate the transactions contemplated hereby, each Stockholder hereby
severally makes to Buyer each of the representations and warranties set forth in
this Section 3 with respect to such Stockholder. No Stockholder shall have any
right of indemnity or contribution from the Company or any Subsidiary with
respect to the breach of any representation or warranty hereunder.
3.1 Company Shares. Such Stockholder owns of record and beneficially the
--------------
Company Shares set forth opposite such Stockholder's name in Exhibit A, except
---------
that shares owned of record by the ESOP Trust Fund are for the benefit of
participants in the ESOP in accordance with its terms and shares owned of record
by the Merkert Trust and the Merkert CRUT are owned beneficially by the
beneficiaries of such trusts. Such Company Shares are, and when delivered by
such Stockholder to Buyer pursuant to this Agreement will be duly authorized,
validly issued, fully paid, non-assessable and free and clear of any and all
liens, encumbrances, charges or claims, under Article 8 of any applicable state
version of the Uniform Commercial Code or otherwise.
3.2 Authority. Such Stockholder has full right, authority, power and
---------
capacity to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by or on behalf of such Stockholder
pursuant to this Agreement and to carry out the transactions contemplated hereby
and thereby. This Agreement and each agreement, document and instrument
executed and delivered by such Stockholder pursuant to this Agreement constitute
valid and binding obligations of such Stockholder, enforceable in accordance
with their respective terms except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting generally
the enforcement of creditors' rights and except as the remedy of specific
performance and other injunctive relief may be unavailable in certain cases, and
such Stockholder has full power and authority to transfer, sell and deliver the
Company Shares to Buyer pursuant to this Agreement. The execution, delivery and
performance by such Stockholder of this Agreement and each such agreement,
document and instrument:
(i) does not and will not violate any provision of the
organizational documents (including any trust documents) of any Stockholder
which is not a natural
28
<PAGE>
person, or violate in any material respect any laws of the United States or
any state or other jurisdiction applicable to such Stockholder, or require
such Stockholder to obtain any material approval, consent or waiver from,
or make any filing with, any person or entity (governmental or otherwise)
that has not been obtained or made or that will be obtained or made prior
to the Closing as provided herein, except where the failure to do so could
not reasonably be expected to have an adverse effect on (A) the
transactions contemplated hereby, including without limitation, such
Stockholder's ability to transfer its Company Shares, or (B) the IPO; and
(ii) does not and will not result in a breach of, constitute a
default under, accelerate any obligation under, or give rise to a right of
termination of, any indenture or loan or credit agreement or any other
agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award to which such Stockholder is a party or by which the
property of such Stockholder is bound or affected, or result in the
creation or imposition of any mortgage, pledge, lien, security interest or
other charge or encumbrance on any assets of the Company or any Subsidiary
or Company Shares owned by such Stockholder, except as identified in
Schedule 3.2 or where such consequence could not reasonably be expected to
------------
have a Material Adverse Effect on the Company and its Subsidiaries taken as
a whole or affect such Stockholder's ability to transfer its Company
Shares.
3.3 Agreements. Each such Stockholder who is employed by, or retained as
----------
a consultant to, the Company or any Subsidiary is not a party to any non-
competition, trade secret or confidentiality agreement with any party other than
the Company or a Subsidiary. There are no agreements or arrangements not
contained herein or disclosed in a Schedule hereto, to which such Stockholder is
a party relating to the business of the Company or any Subsidiary or to such
Stockholder's rights and obligations as a stockholder, director or officer of
the Company or any Subsidiary. Such Stockholder does not own, directly or
indirectly, on an individual or joint basis, any material interest in, or serve
as an officer or director of, any customer, competitor or supplier of the
Company or any Subsidiary, or any organization which has a contract or
arrangement with the Company or any Subsidiary. Such Stockholder has not at any
time transferred any of the stock of the Company or any Subsidiary held by or
for such holder to any employee of the Company or any Subsidiary, which transfer
constituted or could be viewed as compensation for services rendered to the
Company or any Subsidiary by said employee. Except as set forth on Schedule 3.2
------------
hereto, the execution, delivery and performance of this Agreement by such
Stockholder will not violate or result in a default or acceleration of any
obligation under any contract, agreement, indenture or other instrument
involving the Company or any Subsidiary to which such Stockholder is a party.
3.4 Investment Representations. Such Stockholder hereby represents and
--------------------------
warrants to and agrees with Buyer as follows, and such Stockholder acknowledges
that Buyer intends to rely on such representations, warranties and agreements in
connection with the transactions contemplated by this Agreement:
29
<PAGE>
(a) All of the shares of Buyer Common Stock to be acquired by the
Stockholder hereunder (the "Buyer Shares") will be acquired for investment for
------------
the Stockholder's own account, not as a nominee or agent, and not with a view
toward distribution of any part thereof, and the Stockholder has no present plan
or intention of selling, granting participation in, or otherwise disposing of or
distributing such Buyer Shares, provided that (i) the ESOP Trust Fund will
acquire the Buyer Shares in a fiduciary capacity for the benefit of the ESOP
participants and the Buyer Shares may be distributed to such participants or
otherwise dealt with in accordance with the terms of the ESOP as in effect on
the date hereof and (ii) the Merkert CRUT and the Merkert Trust will acquire the
Buyer Shares in a fiduciary capacity for the benefit of the beneficiaries of the
Merkert CRUT and the Merkert Trust, respectively. The Stockholder is not
currently negotiating with any party to pledge, exchange, sell or otherwise
dispose of the Buyer Shares, has not entered into any contract or binding
commitment to pledge, exchange, sell or otherwise dispose of the Buyer Shares,
and will not enter into any such contract or commitment prior to the transfer of
the Buyer Shares to the Stockholders, provided that (i) the ESOP Trust Fund will
acquire the Buyer Shares in a fiduciary capacity for the benefit of the ESOP
participants and the Buyer Shares may be distributed to such participants or
otherwise dealt with in accordance with the terms of the ESOP as in effect on
the date hereof and (ii) the Merkert CRUT and the Merkert Trust, respectively
will acquire the Buyer Shares in a fiduciary capacity for the benefit of the
beneficiaries of the Merkert CRUT and the Merkert Trust, respectively.
(b) The Stockholder acknowledges and understands that the Buyer Shares
will not be registered under the Securities Act in reliance on an exemption from
registration under the Securities Act, and that the reliance by Buyer on such
exemption is predicated on the representations of the Stockholder set forth
herein.
(c) The Stockholder understands that the Buyer Shares may not be sold,
transferred or otherwise disposed of without registration under the Securities
Act or an exemption therefrom, and that in the absence of an effective
registration statement covering the Buyer Shares or an available exemption from
registration under the Securities Act, the Buyer Shares must be held
indefinitely. The Stockholder is aware that current information about Buyer is
not now publicly available. The Stockholder agrees that, in addition to any
other applicable limitations on the transfer of the Buyer Shares, in no event
will he make a transfer, pledge or other disposition of any of the Buyer Shares
other than (i) pursuant to an effective registration statement under the
Securities Act or (ii) pursuant to an exemption from registration provided for
under the Securities Act. At the expense of the Stockholder or his transferee,
the Stockholder shall furnish to Buyer an opinion of counsel reasonably
satisfactory to Buyer to the effect that such transfer, pledge or other
disposition may be made without registration under the Securities Act.
(d) The Stockholder (i) by reason of his business and financial
experience, has such knowledge, sophistication and experience in business and
financial matters as to be capable of evaluating the merits and risks of his
investment in the Buyer Shares, and (ii) believes his financial condition and
investments are such that he is able to bear the economic
30
<PAGE>
risk of a complete loss of the Buyer Shares. The Stockholder has had the
opportunity to consult with his own advisers with respect to his proposed
investment in Buyer. Nothing in this Section 3.4 shall limit Buyer's liability
to the Stockholders for any breach by Buyer of any of its representations,
warranties, covenants or agreements contained herein.
(e) The Stockholder agrees that any certificate(s) representing the
Buyer Shares shall carry substantially the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or the
securities laws of any State. The shares represented by this
certificate may not be sold or transferred in the absence of such
registration or an exemption from registration."
SECTION 4. COVENANTS OF THE COMPANY AND THE STOCKHOLDERS.
4.1 Making of Covenants and Agreements. The Company and the Stockholders
----------------------------------
severally hereby make the covenants and agreements set forth in this Section 4
and the Stockholders agree to use all commercially reasonable efforts or to vote
appropriately to cause the Company and its Subsidiaries to comply with such
agreements and covenants. Following the Closing, no Stockholder shall have any
right of indemnity or contribution from the Company or any Subsidiary with
respect to the breach of any covenant or agreement hereunder.
4.2 Conduct of Business. Between the date of this Agreement and the
-------------------
Closing Date, except as set forth in Schedule 4.2 attached hereto or as
------------
specifically consented to by Buyer in writing, which consent shall not be
unreasonably withheld, the Company and each of its Subsidiaries will:
(a) Conduct its business only in the ordinary course and refrain from
changing or introducing any method of management or operations except in the
ordinary course of business and consistent with prior practices;
(b) Refrain from making any purchase, sale or disposition of any asset
or property other than in the ordinary course of business, from making any
capital expenditures (including capitalized lease obligations) in excess of
$100,000 in the aggregate without prior written approval of Buyer and from
mortgaging, pledging, subjecting to a lien or otherwise encumbering any of its
properties or assets other than in the ordinary course of business; except as
contemplated by the terms of the buyouts set forth in Schedule 8.3(c);
---------------
(c) Refrain from incurring any contingent liability as a guarantor or
otherwise with respect to the obligations of others, and from incurring any
other contingent or fixed obligations or liabilities except in the ordinary
course of business;
31
<PAGE>
(d) Refrain from making any change or incurring any obligation to make
a change in its Articles of Organization, by-laws, capital structure or
authorized or issued capital stock, including but not limited to the issuance of
any option, warrant, call, conversion right or commitment of any kind with
respect to the Company's capital stock;
(e) Other than (i) a cash dividend with respect to the Preferred Stock
in an aggregate amount not exceeding the accrued and unpaid dividends on the
Preferred Stock as of the Closing Date and (ii) with respect to redemptions by
the Company from the ESOP Trust Fund in accordance with the terms of the ESOP,
refrain from declaring, setting aside or paying any dividend, making any other
distribution in respect of its capital stock or making any direct or indirect
redemption, purchase or other acquisition of its stock;
(f) Refrain from making any material increase in (i) present
compensation for any officers or directors or (ii) in the aggregate, salaries
and commission levels for other employees or agents, or making any unusual
distributions, to any of its officers, directors, employees, agents or
independent contractors;
(g) Refrain from prepaying any loans (if any) from its stockholders,
officers or directors or making any change in its borrowing arrangements;
(h) Use all commercially reasonable efforts to prevent any change with
respect to its banking arrangements;
(i) Use all commercially reasonable efforts to keep intact its
business organization, to prevent any change with respect to its present
officers and employees and to preserve the goodwill of all Principals,
Customers, independent contractors and others having business relations with it
except to the extent that the Company reasonably determines that the failure to
do any of the foregoing is in the best interest of the Company and could not
reasonably be expected to have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole;
(j) Have in effect and maintain at all times all insurance of the
kind, in the amount and with the insurers set forth in the Schedule 2.18 hereto
-------------
or equivalent insurance with any substitute insurers approved in writing by
Buyer if available on commercially reasonable terms;
(k) Furnish Buyer with unaudited monthly balance sheets and statements
of income of the Company and each of its Subsidiaries on a consolidated basis
within twenty (20) days after each month end for each month ending more than
twenty (20) days before the Closing;
(l) Permit Buyer, the managing underwriters of the IPO and their
respective authorized representatives to have full access during regular
business hours to all its properties, assets, records, tax returns, contracts
and documents and furnish to Buyer, the managing
32
<PAGE>
underwriters of the IPO and their respective authorized representatives such
financial and other information with respect to its business or properties as
they may from time to time reasonably request;
(m) Use all commercially reasonable efforts to maintain its
properties, facilities, equipment and other assets in as good working order and
condition as of the date of this Agreement, ordinary wear and tear excepted;
(n) Perform all its material obligations under debt and lease
instruments and all other agreements relating to or affecting its assets,
properties, equipment and rights;
(o) Refrain from entering into any new lease agreements other than in
the ordinary course of business; and
(p) Maintain compliance in all material respects with all applicable
permits, rules, laws, regulations, consent orders and the like.
4.3 Authorization from Others. Prior to the Closing Date, the
-------------------------
Stockholders, the Company and each Subsidiary will use all commercially
reasonable efforts to obtain all authorizations, consents and permits of others
including, without limitation, the mortgagee of the Company's Canton,
Massachusetts facility, required to permit the consummation by the Stockholders,
the Company and its Subsidiaries of the transactions contemplated by this
Agreement.
4.4 Notification of Certain Matters. Prior to the Closing, the Company
-------------------------------
and each of the Stockholders (each a "Notifying Party") shall give prompt notice
---------------
to Buyer of (a) the occurrence or non-occurrence of any event of which they are
aware that would be likely to cause any representation or warranty of the
Notifying Party contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Closing and (b) any material failure of the
Notifying Party to comply with or satisfy any covenant, condition, or agreement
to be complied with or satisfied by it hereunder and of which they are aware and
the Company and the Stockholders shall use all commercially reasonable efforts
to prevent or promptly remedy the same. Without limiting the foregoing, from
time to time prior to the Closing the Company will promptly supplement or amend
the Schedules hereto both to correct any inaccuracy in such Schedules when
delivered and to reflect any development which, if existing at the date of this
Agreement, would have been required to be set forth in the Schedules or which
has rendered inaccurate the information contained in such Schedules (each notice
furnishing such information being called a "Company Disclosure Supplement"), and
-----------------------------
at least five (5) business days prior to the Closing the Company will deliver to
Buyer a final Company Disclosure Supplement consisting of a complete update of
the Schedules hereto as though all representations and warranties contained in
Section 2 and Section 3 hereof were to be made as of the date of the Closing
(the "Closing Disclosure Supplement"). In addition, the Company and each of the
-----------------------------
Stockholders shall promptly notify Buyer in writing if at any time prior to a
closing in connection with the IPO it shall obtain knowledge that its
representation and
33
<PAGE>
warranty contained in Section 2.37(b) was not true and correct in all respects.
Except as expressly provided in the next sentence, the delivery of any Company
Disclosure Supplement or other notice pursuant to this Section 4.4 shall not
render correct any representation or warranty that was incorrect when made or
limit or otherwise affect the remedies available hereunder to the party
receiving such Company Disclosure Supplement or notice. It is expressly agreed
that, for the purpose of determining whether or not the representations and
warranties contained in the first sentence of Section 2.6(a), the first sentence
of Section 2.6(a)(ii), Section 2.11, the last sentence of Section 2.15 and
Section 2.30(b) are true, correct or accurate at any time after the date hereof,
such representations or warranties shall be modified by information set forth in
the Closing Disclosure Supplement and any remedies (including, without
limitation, the remedies set forth in Section 10) available to the party
receiving the Closing Disclosure Supplement based upon the accuracy of such
representations and warranties after the date hereof shall be affected by the
Closing Disclosure Supplement.
4.5 Consummation of Agreement. The Company and each of the Stockholders
-------------------------
shall use all commercially reasonable efforts to perform and fulfill all
conditions and obligations on their parts to be performed and fulfilled under
this Agreement, to the end that the transactions contemplated by this Agreement
shall be fully carried out. To this end, the Company will use all commercially
reasonable efforts to obtain prior to the Closing all necessary authorizations
or approvals of its stockholders and Board of Directors.
4.6 Cooperation of the Company and Stockholders. The Company and each of
-------------------------------------------
the Stockholders shall (a) cooperate with all reasonable requests of Buyer,
Buyer's counsel and accountants in connection with the consummation of the
transactions contemplated hereby and (b) execute and deliver such other
instruments and take such other actions as may be reasonably required by Buyer
or the managing underwriters of the IPO in order to carry out the intent of this
Agreement and to close the IPO, including without limitation the execution and
delivery of customary director and officer questionnaires, S-1 questionnaires
and lock-up agreements (provided that the ESOP Trust Fund shall not be
prohibited under any such lock-up agreement from distributing shares of Buyer
Common Stock to ESOP participants in accordance with the terms of the ESOP)
subject to the other terms of this Agreement.
4.7 No Solicitation of Other Offers. Unless and until this Agreement
-------------------------------
shall have been terminated, neither the Company nor any of the Stockholders
shall, nor shall the Company permit any of its directors, officers, employees or
agents to, directly or indirectly, (i) take any action to solicit, initiate
submission of or encourage, proposals or offers from any person relating to any
acquisition or purchase of all or (other than in the ordinary course of
business) a portion of the assets of, or any equity interest in, the Company,
any merger or business combination with the Company or any public or private
offering of interests in the Company (an "Acquisition Proposal"), (ii)
--------------------
participate in any discussions or negotiations regarding an Acquisition Proposal
with any person or entity other than Buyer and its representatives, (iii)
furnish any information or afford access to the properties, books or records of
the Company to any person or entity that may consider making or has made an
offer with respect to an Acquisition Proposal other than Buyer and its
representatives, or
34
<PAGE>
(iv) otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other person to do any of
the foregoing. The Company will promptly notify Buyer upon receipt of any offer
or indication that any person is considering making an offer with respect to an
Acquisition Proposal or any request for information relative to the Company or
for access to the properties, books and records of the Company, and will
promptly reject any such offer or request.
4.8 Confidentiality. The Company and the Stockholders agree that, unless
---------------
and until the Closing has been consummated or until the second anniversary of
any termination of this Agreement and unless otherwise required by law, each of
the Company, its Subsidiaries, the Stockholders and their officers, directors,
agents and representatives will hold in strict confidence, and will not use, any
confidential or proprietary data or information obtained from Buyer with respect
to its business or financial condition except for the purpose of evaluating,
negotiating and completing the transaction contemplated hereby. Information
generally known in Buyer's industry or which has been disclosed to the Company,
any Subsidiary or the Stockholders by third parties which have a right to do so
or independently developed or acquired by the Company or the Stockholders shall
not be deemed confidential or proprietary information for purposes of this
Agreement. If the transaction contemplated by this Agreement is not
consummated, the Company, its Subsidiaries and the Stockholders will return to
Buyer (or certify that they have destroyed) all copies of such data and
information, including but not limited to financial information, customer lists,
business and corporate records, worksheets, test reports, tax returns, lists,
memoranda, and other documents prepared by or made available to the Company, its
Subsidiaries or the Stockholders in connection with the transaction.
4.9 Tax-Free Treatment. Neither the Company nor the Stockholders shall
------------------
intentionally take or cause to be taken any action, whether before or after
Closing, which would cause the Plan of Organization to fail to qualify as an
exchange under (S)351 of the Code.
4.10 Tax Returns. The Company and the Stockholders shall cooperate with
-----------
Buyer to permit the Company and its Subsidiaries in accordance with applicable
law to promptly prepare and file on or before the due date or any extension
thereof all federal, state and local tax returns required to be filed by the
Company and its Subsidiaries with respect to taxable periods ending on or before
the Closing.
4.11 Bank Signatories. Within ten (10) business days following the date
----------------
hereof, the Company shall change the authorized signatories on each of its bank
and other accounts listed on Schedule 4.11 attached hereto such that Sidney D.
-------------
Rogers and Thomas P. Maher the sole authorized signatories on each such account
and shall thereafter not change the authorized signatories on any such account
through the Closing.
4.12 Buyouts. At Buyer's request, the Company will take all reasonable
-------
steps to enter into agreements with certain entities previously acquired by the
Company (which agreements shall be reasonably satisfactory to Buyer) pursuant to
which the Company shall obtain an option to buy out the remaining obligations of
the Company with respect to each such
35
<PAGE>
entity for a price to be agreed upon by Buyer, the Company and the respective
entity; provided that, the Company shall not be required to enter into any such
agreements unless (i) such agreement is not consummated until and will be
subject to, the consummation of the transaction contemplated hereby and (ii)
such agreement either (A) may be terminated by the Company upon termination of
this Agreement or (B) expires pursuant to its terms no later than December 31,
1998 without any payment by or penalty to the Company.
4.13 No Transfer of Company Shares. Unless and until this Agreement shall
-----------------------------
have been terminated in accordance with its terms, except for transfers of
securities by the ESOP Trust Fund to certain participants or the Company as
required or permitted by the ESOP as in effect on the date hereof or by
applicable law, no Stockholder shall directly or indirectly enter into any
contract or binding commitment to sell, exchange, deliver, assign, pledge,
encumber or otherwise transfer or dispose of any Company Shares, nor shall any
Stockholder directly or indirectly enter into any contract or binding commitment
or grant any right of any kind to acquire, dispose of, vote or otherwise control
in any manner any Company Shares.
4.14 Affiliate Transactions. All accounts and loans receivable of the
----------------------
Company or any Subsidiary from any Stockholder or any director of the Company or
any Subsidiary shall have been paid in full prior to the Closing.
4.15 Canton Conservation Commission Matter. The Company shall use all
-------------------------------------
commercially reasonable efforts to (i) complete any and all work required by the
Canton Conservation Commission (the "CCC") to comply with the Order of
---
Conditions issued by the CCC on May 2, 1996, and (ii) obtain from the CCC a
Certificate of Compliance, indicating that the additional work was performed
satisfactorily.
4.16 Termination of Certain Agreements. Prior to the Closing Date, the
---------------------------------
Company and the Stockholders shall terminate, pursuant to documentation in form
and substance reasonably satisfactory to Buyer and its counsel and without any
liability to the Company, (a) any stockholders' agreements, voting trusts,
proxies, options or warrants between or among the Company and/or the
Stockholders and (b) each of the agreements listed on Schedule 4.16.
-------------
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER.
5.1 Making of Representations and Warranties. As a material inducement to
----------------------------------------
the Company and the Stockholders to enter into this Agreement and consummate the
transactions contemplated hereby, Buyer hereby makes the representations and
warranties to the Company and the Stockholders contained in this Section 5.
5.2 Organization and Qualifications of Buyer. Buyer is a corporation duly
----------------------------------------
organized, validly existing and in good standing under the laws of State of
Delaware with full corporate power and authority to own or lease its properties
and to conduct its business in the manner and in the places where such
properties are owned or leased or such business is
36
<PAGE>
currently conducted or proposed to be conducted. The copies of Buyer's
Certificate of Incorporation, certified by the Delaware Secretary of State, and
of Buyer's by-laws, certified by Buyer's Secretary, as heretofore delivered to
Company's counsel, are complete and correct at the date hereof, and no
amendments thereto are pending. Buyer is not in violation of any term of its
Certificate of Incorporation or by-laws. Buyer is duly qualified to do business
as a foreign corporation in each jurisdiction where the nature of its properties
or the conduct of its business makes its qualification so necessary, except
where the failure to be so qualified could not reasonably be expected to have a
Material Adverse Effect on Buyer.
5.3 Capital Stock of Buyer. As of the date hereof, the authorized capital
----------------------
stock of Buyer consists of 10,000 shares of Buyer Common Stock. As of the date
hereof, 1,800 shares of Buyer Common Stock are issued, outstanding, fully paid
and non assessable. As of the date hereof, no shares of Buyer Common Stock are
reserved for issuance upon exercise of outstanding stock options, warrants or
otherwise, except for shares of Buyer Common Stock reserved for issuance
pursuant to Buyer's 1998 Stock Option and Incentive Plan. Except for options
outstanding under Buyer's 1998 Stock Option and Incentive Plan, there are no
outstanding options, warrants, rights, commitments, preemptive rights or
agreements of any kind for the issuance or sale of, or outstanding securities
convertible into, any additional shares of capital stock of any class of Buyer.
No capital stock of Buyer has been issued in violation of any federal or state
law or in violation of any preemptive rights or any other rights of any person.
There are no voting trusts, voting agreements, proxies or other agreements,
instruments or undertakings with respect to the voting of any capital stock of
Buyer to which Buyer is a party. Buyer has no Subsidiaries.
5.4 Authority of Buyer. Buyer has full right, authority and power to
------------------
enter into this Agreement and each agreement, document and instrument to be
executed and delivered by Buyer pursuant to this Agreement and to carry out the
transactions contemplated hereby. The execution, delivery and performance by
Buyer of this Agreement and each such other agreement, document and instrument
have been duly authorized by all necessary action of Buyer and no other action
on the part of Buyer or its stockholders is required in connection therewith.
This Agreement and each agreement, document and instrument executed and
delivered by Buyer pursuant to this Agreement constitutes, or when executed and
delivered will constitute, valid and binding obligations of Buyer enforceable in
accordance with their respective terms except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or affecting
generally the enforcement of creditors' rights and except as the remedy of
specific performance and other injunctive relief may be unavailable in certain
cases. The execution, delivery and performance by Buyer of this Agreement and
each such agreement, document and instrument:
(i) does not and will not violate any provision of the
Certificate of Incorporation or by-laws of Buyer;
37
<PAGE>
(ii) does not and will not violate in any material respect any
laws of the United States, or any state or other jurisdiction applicable to
Buyer or require Buyer to obtain any approval, consent or waiver of, or
make any filing with, any person or entity (governmental or otherwise) that
has not been obtained or made or will be obtained or made prior to the
Closing; and
(iii) does not and will not result in a breach of, constitute a
default under, accelerate any obligation under, or give rise to a right of
termination of any indenture or loan or credit agreement or any other
material agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award to which Buyer is a party or by which the property of
Buyer is bound or affected, or result in the creation or imposition of any
mortgage, pledge, lien, security interest or other charge or encumbrance on
any of the Buyer's assets or its capital stock.
5.5 Operations and Financial Condition; Absence of Undisclosed
----------------------------------------------------------
Liabilities. Buyer has not conducted any material business operations other
- -----------
than in connection with the transactions contemplated hereby, the Rogers-
American Acquisition and the IPO or in preparation for operations to be
conducted after the Closing Date. Buyer does not have any material tangible
assets or material liabilities or obligations of any nature, whether accrued,
absolute, contingent, or otherwise and whether due or to become due, including
without limitation liabilities that may become known or arise after the date
hereof and which relate to transactions entered into or any state of facts
existing on or before the date hereof and which would be required under
generally accepted accounting principles to be shown in a balance sheet or
referenced in the notes thereto prepared as of the date hereof, other than those
incurred in connection with the transactions contemplated hereby, the Rogers-
American Acquisition and the IPO or in connection with Buyer's preparation for
future operations.
5.6 Buyer Common Stock. The shares of Buyer Common Stock to be delivered
------------------
to the Stockholders at the Closing, when delivered in accordance with the terms
of this Agreement, will be valid and legally issued shares of Buyer Common
Stock, fully paid and nonassessable.
5.7 Finder's Fee. Buyer has not incurred or become liable for any
------------
broker's commission or finder's fee relating to or in connection with the
transactions contemplated by this Agreement.
5.8 Conformity With Law. Buyer is not in violation in any material
-------------------
respect of any law or regulation or any order of any court or federal, state,
municipal or other governmental department, commission, board, bureau agency or
instrumentality having jurisdiction over it. There are no claims, actions, suits
or proceedings, pending or, to the knowledge of Buyer, threatened against or
affecting Buyer or that challenges or could prevent or delay the consummation of
the transactions contemplated hereby or contemplated by the Other Agreement, at
law or in equity, or before or by any federal, state, municipal or other
38
<PAGE>
governmental department, commission, board, bureau, agency or instrumentally
have jurisdiction over it and no notice of any claim, action, suit or
proceeding, whether pending or threatened, has been received.
5.9 Private Offering. Neither Buyer, any of its affiliates nor anyone on
----------------
its behalf, has issued, sold or offered any securities of Buyer to any person
under circumstances that would cause the issuance and sale of the Buyer Common
Stock pursuant to this Agreement or the Other Agreement to be subject to the
registration requirements of the Securities Act. Assuming that the
representations and warranties of (i) the Stockholders contained in Section 3.4
of this Agreement and (ii) the stockholders of Rogers-American contained in
Section 3.4 of the Other Agreement are true and correct as of the date hereof
and as of the Closing Date, the offering of shares of Buyer Common Stock
pursuant to the Plan of Organization will be made in compliance in all material
respects with applicable federal and state securities laws.
5.10 Tax-Free Transaction. Buyer has not intentionally taken or caused to
--------------------
be taken any action which would cause the Plan of Organization to fail to
qualify as an exchange under (S)351 of the Code.
5.11 No Selling Stockholders. The shares of Buyer Common Stock to be sold
-----------------------
in the IPO will consist solely of shares sold by Buyer and not for the account
of any selling stockholder.
5.12 Disclosure. Neither the Registration Statement, at the time it
----------
becomes effective under the Securities Act, nor the Prospectus, at the time of
the Closing of the IPO, will 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; provided, however, that the representations and warranties in
this Section 5.12 shall not apply to statements contained in or omitted from
such documents in reliance upon information provided by the Company or the
Stockholders.
SECTION 6. COVENANTS OF BUYER.
6.1 Making of Covenants and Agreements. Buyer hereby makes the covenants
----------------------------------
and agreements set forth in this Section 6.
6.2 Confidentiality. Buyer agrees that, unless and until the Closing has
---------------
been consummated or until the second anniversary of any termination of this
Agreement, Buyer and its officers, directors, agents and representatives will
hold in strict confidence, and will not use any confidential or proprietary data
or information obtained from the Company or the Stockholders with respect to the
business or financial condition of the Company and its Subsidiaries except for
the purpose of evaluating, negotiating and completing the transaction
contemplated hereby. Information generally known in the industries of the
Company or its Subsidiaries or which has been disclosed to Buyer by third
parties which have a right to do so
39
<PAGE>
or independently developed or acquired by Buyer shall not be deemed confidential
or proprietary information for purposes of this Agreement. If the transaction
contemplated by this Agreement is not consummated, Buyer will return to the
Company (or certify that it has destroyed) all copies of such data and
information, including but not limited to financial information, customer lists,
business and corporate records, worksheets, test reports, tax returns, lists,
memoranda, and other documents prepared by or made available to Buyer in
connection with the transaction. Notwithstanding the foregoing, Buyer shall be
permitted to disclose such information about the Company, its stockholders and
the transactions contemplated hereby as may be legally required, and otherwise
reasonably necessary, in the preparation, completion, filing and distribution of
such reports, filings and other documents required by the Securities Act or the
Securities Exchange Act of 1934, as amended.
6.3 Tax-Free Treatment. Buyer shall not intentionally take or cause to be
------------------
taken any action whether before or after the Closing, which would cause the Plan
of Organization to fail to qualify as an exchange under (S)351 of the Code.
6.4 Listing of Buyer Common Stock. Buyer covenants that it will take all
-----------------------------
actions commercially reasonably necessary to cause the Buyer Common Stock to be
listed on The New York Stock Exchange or quoted on the Nasdaq National Market on
or prior to the Closing Date.
6.5 Consummation of Agreement and Other Agreement. Buyer shall use all
---------------------------------------------
commercially reasonable efforts to perform and fulfill all conditions and
obligations on its part to be performed and fulfilled under this Agreement and
the Other Agreement, to the end that the transactions contemplated by this
Agreement and the Other Agreement shall be carried out.
6.6 Authorization from Others. Prior to the Closing, Buyer will use all
-------------------------
commercially reasonable efforts to obtain all authorizations and permits of
others required to permit the consummation by Buyer of the transactions
contemplated by this Agreement.
6.7 Form of Tax Opinion. Within a reasonable period of time after the
-------------------
date hereof, counsel to Buyer will deliver a reasonable form of tax opinion
consistent with Section 8.3(e) to counsel for the Company and the Stockholders
for their review.
6.8 Continuing Indemnification and Liability Insurance Coverage. From and
-----------------------------------------------------------
after the consummation of the transactions contemplated hereby, Buyer and the
Company shall, to the extent permitted by law, include in their respective
charter documents provisions for indemnification of the directors and officers
of the Company, with respect to matters occurring through the Closing Date, at
least to the extent provided in the Company's Articles of Organization or by-
laws as of the date hereof. Buyer also agrees to (A) use its best efforts to
continue in effect (or to cause the Company to continue in effect) policies of
directors' and officers' liability insurance, professional liability insurance
and employee benefit plan fiduciary liability insurance, which provide limits at
least equal to the limits provided under, and otherwise provide for terms and
conditions comparable to, such policies of the Company in
40
<PAGE>
effect as of the date hereof, which shall be kept in effect until at least the
fourth anniversary of the Closing Date, and (B) continue (or cause the Company
to continue) in effect the indemnification provided for under the terms of the
ESOP.
6.9 Notice of Breach. Prior to the Closing, Buyer shall give prompt
----------------
notice to the Company and the Stockholders' Representative of (a) the occurrence
or non-occurrence of any event of which they are aware that would be likely to
cause any representation or warranty of Buyer contained in this Agreement to be
untrue or inaccurate in any material respect at or prior to the Closing and (b)
any material failure of Buyer to comply with or satisfy any covenant, condition,
or agreement to be complied with or satisfied by it hereunder and of which Buyer
is aware and Buyer shall use all commercially reasonable efforts to prevent or
promptly remedy the same.
SECTION 7. ADDITIONAL AGREEMENTS.
7.1 S-1 Registration Statement. The parties shall cooperate in the
--------------------------
preparation and filing with the SECTION of the Registration Statement under the
Securities Act with respect to the IPO and will use all reasonable efforts to
have the Registration Statement declared effective by the SEC as promptly as
practicable.
7.2 Filings Under Hart-Scott-Rodino Act. As soon as practicable, each of
-----------------------------------
Buyer and the Company shall file with the Federal Trade Commission (the "FTC")
---
and the Antitrust Division of the Department of Justice (the "Antitrust
---------
Division") a premerger notification form and any supplemental information (other
- --------
than privileged information) which may be requested in connection therewith
pursuant to the Hart-Scott-Rodino Act, which filings and supplemental
information will comply in all material respects with the requirements of the
Hart-Scott-Rodino Act. Each of Buyer and the Company shall cooperate fully with
the other in connection with the preparation of such filings and shall use their
respective best efforts to respond to any requests for supplemental information
from the FTC or the Antitrust Division and to obtain early termination of any
waiting period applicable to the transfer of Company Shares pursuant to this
Agreement under the Hart-Scott-Rodino Act. Any and all filing fees required to
be paid in connection with the premerger notification form pursuant to the Hart-
Scott-Rodino Act shall be borne and paid by one half by Buyer and one half by
the Company.
7.3 Securities Filings by Stockholders. The Company, at its own expense,
----------------------------------
shall assist each Stockholder in preparing and timely filing any and all reports
on Form 13-D or 13-G, or Forms 3, 4 and 5 promulgated by the SEC with the
SEC with respect to each Stockholder's beneficial and/or legal ownership of
the Buyer Common Stock as may be applicable to such persons from time to time on
and after the Closing.
SECTION 8. CONDITIONS.
41
<PAGE>
8.1 Conditions to the Obligations of Certain of the Parties. The
-------------------------------------------------------
obligations of each of the Company, the Stockholders and Buyer to consummate
this Agreement and the transactions are subject to the fulfillment, prior to or
at the Closing, of the following conditions:
(a) No Litigation. There shall have been no determination by Buyer,
-------------
the Company or the Stockholders, as the case may be, acting in good faith, that
the consummation of the transactions contemplated by this Agreement has become
inadvisable or impracticable by reason of the institution or threat by any
person or any federal, state or other governmental authority of litigation,
proceedings or other action against Buyer, the Company or any Subsidiary or
Stockholder.
(b) Hart-Scott-Rodino. All required filings under the Hart-Scott-
-----------------
Rodino Act shall have been completed and all applicable time limitations under
such Act shall have expired without a request for further information by the
relevant federal authorities under such Act, or in the event of such a request
for further information, the expiration of all applicable time limitations under
the Act shall have occurred without the objection of such federal authorities.
(c) Registration Statement. The Registration Statement shall have
----------------------
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the
SEC.
(d) Listing of Buyer Common Stock. The shares of Buyer Common Stock
-----------------------------
which shall be issued to the stockholders of the Company upon the Closing shall
have been authorized for listing on the New York Stock Exchange or quoted on the
Nasdaq National Market, subject to official notice of issuance.
(e) Registration Rights Agreement. Buyer and the Stockholders shall
-----------------------------
have entered into a registration rights agreement (the "Registration Rights
-------------------
Agreement") in the form attached as Exhibit E hereto.
- --------- ---------
8.2 Conditions to the Obligations of Buyer. The obligation of Buyer to
--------------------------------------
consummate this Agreement and the transactions contemplated hereby are subject
to the fulfillment, prior to or at the Closing, of the following conditions
precedent:
(a) IPO and Rogers-American Acquisition. The IPO and the Rogers-
-----------------------------------
American Acquisition shall have been completed at the same time as the transfer
of the Company Shares hereunder.
(b) Representations; Warranties; Covenants. Each of the
--------------------------------------
representations and warranties of the Company and the Stockholders contained in
Section 2 and Section 3, respectively, (giving effect to the Schedules, but not
to any Company Disclosure Supplement or the Closing Disclosure Supplement) shall
(i) be true and correct as of the Closing Date as
42
<PAGE>
though made on and as of the Closing, except for such breaches of
representations and warranties which individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect; provided, however,
that (A) representations and warranties expressly made as of an earlier date
need only be true and correct in all material respects as of such earlier date,
(B) the representations and warranties contained in Section 2.7 shall each be
true and correct in all material respects as though made on and as of the
Closing Date and (C) the representations and warranties contained in Section
2.37 shall be true and correct as though made on and as of the Closing Date. The
Company and each of the Stockholders shall, on or before the Closing, have
performed in all material respects all of their obligations hereunder which by
the terms hereof are to be performed on or before the Closing.
(c) No Material Change. There shall have been no material adverse
------------------
change in the financial condition, properties, assets, liabilities, business or
operations of the Company or any Subsidiary since the date hereof, whether or
not in the ordinary course of business.
(d) Certificate from Officers. The Company shall have delivered to
-------------------------
Buyer a certificate of the Company's President and Chief Financial Officer dated
as of the Closing executed on behalf of the Company to the effect that, except
as set forth in such certificate, the statements set forth in paragraph (b) and
(c) above in this Section 8.2 are true and correct.
(e) Payroll Tax. The Company shall have paid to the IRS under the
-----------
Payroll Tax Agreement an amount in cash equal to $1,145,844, which payment shall
be made prior to the Closing Date.
(f) Opinion of Counsel. On the Closing Date, Buyer shall have
------------------
received from (i) Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. ("Mintz,
------
Levin"), counsel for the Company, an opinion as of said date, in the form
- -----
attached hereto as Exhibit F, and (ii) Zack Kosnitzky, P.A., counsel for the
---------
Merkert Trust, the Merkert CRUT and Robert Q. Crane, an opinion as of said date,
in the form attached hereto as Exhibit G, which opinions shall provide that they
---------
may be relied upon by the managing underwriters of the IPO.
(g) Federal Tax Opinion. Buyer shall have received an opinion of
-------------------
Goodwin, Procter & Hoar LLP, counsel to Buyer, in form and substance reasonably
satisfactory to Buyer, dated as of the Closing Date, substantially to the effect
that, on the basis of the facts, representations and assumptions set forth in
such opinion, the transfer of Company Shares and the receipt of Buyer Common
Stock by the Stockholders hereunder will be treated for federal income tax
purposes as an exchange qualifying under (S) 351 of the Code. In rendering such
an opinion, Goodwin, Procter & Hoar LLP may require and rely on representations
as to factual matters made in certificates of officers of Buyer, the Company and
others.
(h) Consents. The Company or the Stockholders shall have made all
--------
filings with and notifications of governmental authorities, regulatory agencies
and other entities required to be made by the Company, its Subsidiaries or the
Stockholders in connection with the execution and delivery of this Agreement,
the performance of the transactions contemplated
43
<PAGE>
hereby and the continued operation of the business of the Company and its
Subsidiaries by Buyer subsequent to the Closing, except where the failure to
make such filings, either individually or in the aggregate, would not adversely
affect the consummation of the transactions contemplated hereby and could not
reasonably be expected to have a Material Adverse Effect on the Company and its
Subsidiaries taken as a whole. The Company, the Stockholders and Buyer shall
have received all authorizations, waivers, consents and permits, in form and
substance reasonably satisfactory to Buyer, including any and all notices,
consents and waivers required by the terms of any securities that are
convertible or exercisable into Common Stock, from all third parties (other than
Principals), including, without limitation, applicable governmental authorities,
regulatory agencies, lessors, lenders and contract parties, required to permit
the continuation of the business of the Company and each Subsidiary and the
consummation of the transactions contemplated by this Agreement, and to avoid a
breach, default, termination, acceleration or modification of any indenture,
loan or credit agreement or any other material agreement, contract, instrument,
mortgage, lien, lease, permit, authorization, order, writ, judgment, injunction,
decree, determination or arbitration award as a result of, or in connection
with, the execution and performance of this Agreement, except where the failure
to obtain any such authorizations, waivers, consents or permits, either
individually or in the aggregate, would not adversely affect the consummation of
the transactions contemplated hereby and could not reasonably be expected to
have a Material Adverse Effect on the Company and its Subsidiaries taken as a
whole.
(i) Employment and Non-Competition Agreements. The existing
-----------------------------------------
Employment Agreements between each of Gerald R. Leonard, Glenn F. Gillam and
Murray C. Rosen and the Company shall have been terminated, and each of Gerald
R. Leonard, Glenn F. Gillam, Murray C. Rosen and Sidney D. Rogers, Jr. shall
have executed and delivered to Buyer an Employment and Non-Competition Agreement
in substantially the form of Exhibit H attached hereto.
---------
(j) Resignations. The Company shall have delivered to Buyer the
------------
resignations of all of the directors and executive officers of the Company and
each Subsidiary, such resignations to be effective at the Closing.
(k) Releases. The Company shall have delivered to Buyer general
--------
releases signed by each Stockholder in the form attached hereto as Exhibit I.
---------
8.3 Conditions to the Obligations of the Company and the Stockholders.
-----------------------------------------------------------------
The obligation of the Company and the Stockholders to consummate this Agreement
and the transactions contemplated hereby is subject to the fulfillment, prior to
or at the Closing, of the following conditions precedent:
(a) IPO and Rogers-American Acquisition. The IPO and the Rogers-
-----------------------------------
American Acquisition shall have been completed at the same time as the purchase
and sale of Company Shares hereunder.
44
<PAGE>
(b) Representations; Warranties; Covenants. Each of the
--------------------------------------
representations and warranties of Buyer contained in Section 5 shall be true and
correct in all material respects as though made on and as of the Closing; Buyer
shall, on or before the Closing, have performed in all material respects all of
its obligations hereunder which by the terms hereof are to be performed on or
before the Closing; and Buyer shall have delivered to the Company and the
Stockholders a certificate of the President of Buyer dated on the Closing and
executed on behalf of Buyer to such effect.
(c) Buyouts. Buyer and each of Eugene F. Merkert and Robert Q. Crane
-------
shall have executed and delivered mutually satisfactory documentation evidencing
the buyout of certain agreements with such individuals and the termination of
their employment with the Company, all pursuant to the terms set forth on
Schedule 8.3(c) attached hereto.
- ---------------
(d) Opinion of Counsel. On the Closing Date, the Company and the
------------------
Stockholders shall have received from Goodwin, Procter & Hoar LLP, counsel for
Buyer, an opinion as of said date, in form attached hereto as Exhibit J.
---------
(e) Federal Tax Opinion. The Company and the Stockholders shall have
-------------------
received an opinion of Goodwin, Procter & Hoar LLP, counsel to Buyer, in form
and substance reasonably satisfactory to the Company and the Stockholders, dated
as of the Closing Date, substantially to the effect that, on the basis of the
facts, representations and assumptions set forth in such opinion, the transfer
of Company Shares and the receipt of Buyer Common Stock by the Stockholders
hereunder will be treated for federal income tax purposes as an exchange
qualifying under (S) 351 of the Code. In rendering such an opinion, Goodwin,
Procter & Hoar LLP may require and rely on representations as to factual
matters made in certificates of officers of Buyer, the Company and others.
SECTION 9. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED.
9.1 Termination. At any time prior to the Closing, this Agreement may be
-----------
terminated as follows:
(a) by mutual written consent of all of the parties to this Agreement;
(b) by the Company or any Stockholder, provided that neither the
Company nor any of the Stockholders is in material breach of this
Agreement, (i) if Buyer is in material breach of this Agreement and such
breach shall remain uncured for a period of ten (10) business days after
the Company shall have given written notice of such breach to Buyer, or
(ii) if Buyer shall have explicitly or by conduct repudiated this Agreement
and such repudiation shall have remained uncured for a period of five (5)
business days after the Company shall have given written notice thereof to
Buyer, or (iii) if by November 30, 1998, any of the conditions in Section
8.1 or Section 8.3 shall not have been satisfied, complied with or
performed in all material respects (unless such failure
45
<PAGE>
of satisfaction, noncompliance or nonperformance is the result directly or
indirectly of any intentional or willful action or intentional or willful
failure to act on the part of the Company or any Stockholder) and the
Company and the Stockholders shall not have waived such failure of
satisfaction, noncompliance or nonperformance; or
(c) by Buyer, provided that Buyer is not in material breach of this
Agreement, (i) if the Company or any Stockholder is in material breach of
this Agreement and such breach shall remain uncured for a period of ten
(10) business days after Buyer shall have given written notice of such
breach to the Company and, if applicable, such Stockholder, (ii) if the
---
Company or any Stockholder shall have explicitly or by conduct repudiated
this Agreement and such repudiation shall have remained uncured for a
period of five (5) business days after Buyer shall have given written
notice thereof to such party, or (iii) if by November 30, 1998, any of the
conditions in Section 8.1 or Section 8.2 shall not have been satisfied,
complied with or performed in all material respects (unless such failure of
satisfaction, noncompliance or nonperformance is the result directly or
indirectly of any intentional or willful action or intentional or willful
failure to act on the part of Buyer) and Buyer shall not have waived such
failure of satisfaction, noncompliance or nonperformance.
9.2 Effect of Termination. All obligations of the parties hereunder shall
---------------------
cease upon any termination pursuant to Section 9.1, provided, however, that (i)
the provisions of this Section 9, Section 4.8, Section 6.2 and Section 11 hereof
shall survive any termination of this Agreement, (b) nothing herein shall
relieve any party from any liability for a material error or omission in any of
its representations or warranties contained herein or a material failure to
comply with any of its covenants, conditions or agreements contained herein and
(c) any party may proceed as further set forth in Section 9.3 below.
9.3 Right to Proceed. Anything in this Agreement to the contrary
----------------
notwithstanding (other than Section 4.5 of this Agreement), if any of the
conditions specified in Section 8.1 or Section 8.2 hereof have not been
satisfied, Buyer shall have the right to proceed with the transactions
contemplated hereby without waiving any of its rights hereunder, and if any of
the conditions specified in Section 8.1 or Section 8.3 hereof have not been
satisfied, the Company and the Stockholders shall have the right to proceed with
the transactions contemplated hereby without waiving any of their rights
hereunder.
SECTION 10. INDEMNIFICATION.
10.1 Survival. Each of the representations, warranties, agreements,
--------
covenants and obligations herein or in any Schedule, Exhibit or certificate
delivered by any party incident to the transactions contemplated hereby is
material, may be relied upon by the party receiving the same, shall (subject to
the provisions of Sections 10.3(d) and 10.5(d) hereof) survive the Closing
regardless of any investigation by or knowledge of such party and shall not
merge into the performance of any obligation by any party hereto.
46
<PAGE>
10.2 Indemnification by the Stockholders. Each of the Stockholders,
-----------------------------------
Eugene F. Merkert and their respective successors, executors, administrators,
estates, heirs and permitted assigns agree subsequent to the Closing, severally
but not jointly (except as provided below), to indemnify and hold harmless
Buyer, its subsidiaries and affiliates and their respective officers, directors,
employees and agents (individually, a "Buyer Indemnified Party" and
-----------------------
collectively, the "Buyer Indemnified Parties") from and against and in respect
-------------------------
of all losses, liabilities, obligations, damages, deficiencies, actions, suits,
proceedings, demands, assessments, orders, judgments, fines, penalties, costs
and expenses (including the reasonable fees, disbursements and expenses of
attorneys, accountants and consultants) of any kind or nature whatsoever
(whether or not arising out of third-party claims and including all amounts paid
in investigation, defense or settlement of the foregoing) (a "Loss" or "Losses")
---- ------
sustained, suffered or incurred by any Buyer Indemnified Party arising out of or
resulting from:
(a) fraud, intentional misrepresentation or a deliberate or willful
breach by the Company or any Stockholder of any of their representations or
warranties under this Agreement or in any Schedule, Exhibit or certificate
delivered under or in connection with this Agreement;
(b) conditions, circumstances or occurrences which constitute or
result in any breach (other than a breach described in Section 10.2(a) above) of
any representation or warranty made by the Company or any Stockholder in this
Agreement or in any Schedule, Exhibit or certificate delivered under or in
connection with this Agreement, or by reason of any claim, action or proceeding
asserted or instituted arising out of any such breach;
(c) any of the Audit Liabilities or any liability of the Company or
any Subsidiary for Taxes arising from an event or transaction occurring prior to
the Closing or as a result of the Closing, including, without limitation, any
increase in Taxes due to the unavailability of any loss or deduction claimed by
the Company or any Subsidiary, provided that the Buyer Indemnified Parties shall
not be entitled to indemnification hereunder for Losses resulting from the
Settled Audits beyond the Tax Escrow except to the extent that the Tax Escrow is
not sufficient to satisfy such Losses;
(d) any breach of any covenant or agreement made by the Company or any
Stockholder in this Agreement or in any Schedule, Exhibit or certificate
delivered under or in connection with this Agreement, or by reason of any claim,
action or proceeding asserted or instituted arising out of any such breach; and
(e) any liability of the Company or any Subsidiary for misuse,
misapplication or improper handling, administration or management of market
development or promotional funds or market development or promotional fund
accounts, in each case which arises from an event or transaction occurring prior
to the Closing.
47
<PAGE>
Claims under clauses (a) through (e) of this Section 10.2 are collectively
referred to herein as "Buyer Indemnifiable Claims," and Losses in respect of
--------------------------
such claims are collectively referred to herein as "Buyer Indemnifiable Losses."
--------------------------
For purposes of this Section 10.2, "severally" means each Stockholder shall
be liable only for such Stockholder's Common Proportionate Share of any Buyer
Indemnifiable Losses. Buyer Indemnifiable Losses resulting from or arising out
of the breach by a Stockholder of any representation or warranty contained in
Section 3 or any covenant or agreement made by such Stockholder in this
Agreement or in any Schedule, Exhibit or certificate delivered under or in
connection with this Agreement shall be satisfied solely by recourse to such
breaching Stockholder's Common Proportionate Share of the Escrowed Shares and
only to the extent of such breaching Stockholder's Common Proportionate Share of
the Escrowed Shares (subject to the option of such breaching Stockholder to pay
cash in accordance with the terms of the Indemnification Escrow Agreement).
Notwithstanding the fact that the indemnification provided in this Section
10.2 provides that the Stockholders shall be liable "severally and not jointly,"
it is understood and agreed that Eugene F. Merkert, individually, the Merkert
Trust and the Merkert CRUT shall be jointly and severally liable for any and all
Losses resulting, directly or indirectly, from claims made against the Merkert
Trust or the Merkert CRUT pursuant to the indemnification provided in this
Section 10.
10.3 Limitations on Indemnification by the Stockholders.
--------------------------------------------------
(a) Indemnification Escrow. Subject to the exceptions set forth in
----------------------
Section 10.3(c) below, all Buyer Indemnifiable Claims and Buyer Indemnifiable
Losses shall be satisfied solely by the Escrowed Shares or, at the option of
each Stockholder, cash pursuant to the terms of this Agreement and the
Indemnification Escrow Agreement, provided that Buyer Indemnifiable Claims and
Buyer Indemnifiable Losses relating to the Audit Liabilities may also be
satisfied by the Tax Escrow pursuant to the terms of this Agreement and the Tax
Escrow Agreement. To the extent any Buyer Indemnifiable Losses are paid by a
Stockholder in cash rather than Escrowed Shares pursuant to the Indemnification
Escrow Agreement, a number of Escrowed Shares (rounded to the nearest whole
share) equal to the amount of cash so paid divided by the IPO Price (subject to
appropriate adjustment after the Closing Date for any stock split or stock
dividend with respect to Buyer Common Stock, or any combination or
reclassification of the Buyer Common Stock into a greater or smaller number of
shares) shall be distributed to such Stockholder in accordance with the
Indemnification Escrow Agreement.
(b) Deductible. Subject to the exceptions set forth in Section
----------
10.3(c) below, no indemnification shall be payable by the Stockholders with
respect to Buyer Indemnifiable Losses except to the extent that the cumulative
amount of all Buyer Indemnifiable Losses exceed Four Hundred Thousand Dollars
($400,000) in the aggregate (the "Deductible Amount"), whereupon the amount by
-----------------
which such Buyer Indemnifiable Losses exceed the Deductible Amount shall be
recoverable in accordance with the terms hereof.
48
<PAGE>
(c) No Limitation on Certain Claims. Notwithstanding anything herein
-------------------------------
to the contrary, Buyer Indemnified Parties (i) shall be entitled to dollar-for-
dollar indemnification from the first dollar, (ii) shall not be subject to the
Deductible Amount, (iii) shall not be limited to recourse against the Escrowed
Shares, (iv) shall be entitled to claim directly against any Stockholder and (v)
shall not be subject to any limitation as to time (except as provided in Section
10.3(d)), in seeking indemnification from the Stockholders with respect to any
of the following:
(A) Losses involving a breach by the Company or any Stockholder
of any of the representations and warranties contained in Sections 2.3 and
3.1; or
(B) Buyer Indemnified Losses described in Sections 10.2(a).
(d) Time Limitation. No indemnification shall be payable to a Buyer
---------------
Indemnified Party with respect to any Buyer Indemnifiable Claim asserted after
the first anniversary of the Closing Date (the "Expiration Date"); provided that
---------------
(i) any Buyer Indemnifiable Claim as to which notice is given by a Buyer
Indemnified Party to the Stockholders prior to the Expiration Date shall survive
the Expiration Date until final resolution of such Buyer Indemnifiable Claim and
(ii) Buyer Indemnifiable Claims based upon or related to a breach of any
representation or warranty contained in Sections 2.3 and 3.1 and claims relating
to Buyer Indemnifiable Losses described in Sections 10.2(a) and 10.2(c) may be
asserted until the 60th day following expiration of the statute of limitations
(if any) applicable to such claim.
10.4 Indemnification by Buyer. Buyer and its successors and permitted
------------------------
assigns agree subsequent to the Closing to indemnify and hold harmless the
Stockholders and their respective successors, executors, administrators,
trustees, estates, heirs and permitted assigns (individually, a "Stockholder
-----------
Indemnified Party" and collectively, the "Stockholder Indemnified Parties") from
- ----------------- -------------------------------
and against and in respect of all Losses sustained, suffered or incurred by any
Stockholder Indemnified Party arising out of or resulting from:
(a) fraud, intentional misrepresentation or a deliberate or willful
breach by Buyer of any of its representations or warranties under this Agreement
or in any Schedule, Exhibit or certificate delivered under or in connection with
this Agreement;
(b) conditions, circumstances or occurrences which constitute or
result in any breach (other than a breach described in Section 10.4(a) above) of
any representation or warranty made by Buyer in this Agreement or in any
Schedule, Exhibit or certificate delivered under or in connection with this
Agreement, or by reason of any claim, action or proceeding asserted or
instituted arising out of any such breach; and
(c) any breach of any covenant or agreement made by Buyer in this
Agreement or in any Schedule, Exhibit or certificate delivered under or in
connection with this
49
<PAGE>
Agreement, or by reason of any claim, action or proceeding asserted or
instituted arising out of any such breach.
Claims under clauses (a) through (c) of this Section 10.4 are collectively
referred to herein as "Stockholder Indemnifiable Claims," and Losses in respect
--------------------------------
of such claims are collectively referred to as "Stockholder Indemnifiable
-------------------------
Losses."
- -------
10.5 Limitations on Indemnification by Buyer.
---------------------------------------
(a) Maximum Indemnification. Subject to the exceptions set forth in
-----------------------
Section 10.5(c) below, Buyer shall not be obligated to indemnify Stockholder
Indemnified Parties for any amount of Stockholder Indemnifiable Losses in excess
of $3,583,124.
(b) Deductible. Subject to the exceptions set forth in Section
----------
10.5(c) below, no indemnification shall be payable by Buyer with respect to
Stockholder Indemnifiable Losses except to the extent that the cumulative amount
of all Stockholder Indemnifiable Losses exceed the Deductible Amount, whereupon
the amount by which such Stockholder Indemnifiable Losses exceed the Deductible
Amount shall be recoverable in accordance with the terms hereof.
(c) No Limitation on Certain Claims. Notwithstanding anything herein
-------------------------------
to the contrary, Stockholder Indemnified Parties shall be entitled to dollar-
for-dollar indemnification from the first dollar and shall not be subject to the
Deductible Amount or maximum amount of claims, whether pursuant to this Section
10.5 or otherwise, or any limitation as to time (except as provided in Section
10.5(d)) in seeking indemnification from Buyer with respect to Stockholder
Indemnifiable Losses involving a breach by Buyer of any of the representations
and warranties contained in Sections 5.3, 5.6, 5.9 and 5.10 and Stockholder
Indemnifiable Losses described in Section 10.4(a).
(d) Time Limitation. No indemnification shall be payable to a
---------------
Stockholder Indemnified Party with respect to any Stockholder Indemnifiable
Claim asserted after the Expiration Date; provided that (i) any Stockholder
Indemnifiable Claim as to which notice is given by a Stockholder Indemnified
Party to Buyer prior to the Expiration Date shall survive the Expiration Date
until final resolution of such Stockholder Indemnifiable Claim and (ii)
Stockholder Indemnifiable Claims based upon or related to a breach of any
representation or warranty contained in Sections 5.3, 5.6, 5.9 and 5.10 and
claims relating to Stockholder Indemnifiable Losses described in Section 10.4(a)
may be asserted until the 60th day following expiration of the statute of
limitations (if any) applicable to such claim.
10.6 Notice; Defense of Claims.
-------------------------
(a) Notice of Claims. Promptly and no later than fifteen (15) days
----------------
after receipt by an indemnified party of notice of any claim, liability or
expense to which the indemnification obligations hereunder would apply, the
indemnified party shall give notice
50
<PAGE>
thereof in writing (a "Claim Notice") to the indemnifying party, but the
------------
omission to so notify the indemnifying party promptly will not relieve the
indemnifying party from any liability except to the extent that the indemnifying
party shall have been prejudiced as a result of the failure or delay in giving
such Claim Notice. Such Claim Notice shall state the information then available
regarding the amount and nature of such claim, liability or expense and shall
specify the provision or provisions of this Agreement under which the liability
or obligation is asserted.
(b) Third Party Claims. With respect to third party claims, if within
------------------
20 days after receiving the Claim Notice the indemnifying party gives written
notice (the "Defense Notice") to the indemnified party stating that it disputes
--------------
and intends to defend against such claim, liability or expense at its own cost
and expense, then counsel for the defense shall be selected by the indemnifying
party (subject to the consent of the indemnified party which consent shall not
be unreasonably withheld) and the indemnified party shall not be required to
make any payment with respect to such claim, liability or expense as long as the
indemnifying party is conducting a good faith and diligent defense at its own
expense; provided, however, that the assumption of defense of any such matters
by the indemnifying party shall relate solely to the claim, liability or expense
that is subject or potentially subject to indemnification.
The indemnifying party shall have the right, with the consent of the
indemnified party, which consent shall not be unreasonably withheld, to settle
all indemnifiable matters related to claims by third parties which are
susceptible to being settled provided the indemnifying parties' obligation to
indemnify the indemnified party therefor will be fully satisfied. The
indemnifying party shall at all times control the conduct of the defense,
provided that the indemnifying party shall keep the indemnified party apprised
of the status of the claim, liability or expense and any resulting suit,
proceeding or enforcement action, shall furnish the indemnified party with all
documents and information that the indemnified party shall reasonably request
and shall consult with the indemnified party prior to acting on major matters,
including settlement discussions. Notwithstanding anything herein stated, the
indemnified party shall at all times have the right to participate in such
defense at its own expense directly or through counsel.
If no Defense Notice is given by the indemnifying party, or if such
diligent good faith defense is not being or ceases to be conducted, the
indemnified party shall, at the expense of the indemnifying party, undertake the
defense of (with counsel selected by the indemnified party), and shall have the
right to compromise or settle (exercising reasonable business judgment), such
claim, liability or expense. If such claim, liability or expense is one that by
its nature cannot be defended solely by the indemnifying party, then the
indemnified party shall make available all information and assistance that the
indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense.
(c) Non-Third Party Claims. With respect to non-third party claims,
----------------------
if within 45 days after receiving the Claim Notice the indemnifying party does
not give written notice to the indemnified party that it contests such
indemnity, the amount of indemnity
51
<PAGE>
payable for such claim shall be as set forth in the Claim Notice. If the
indemnifying party provides written notice to the indemnified party within such
45-day period that it contests such indemnity, the parties shall attempt in good
faith to reach an agreement with regard thereto within 30 days of delivery of
the indemnifying party's notice.
(d) 1995-97 Audit. Notwithstanding Sections 10.6(a), 10.6(b) and
-------------
10.6(c), with respect to the Audit by the IRS of the Company's federal income
tax returns for the fiscal years ended 1995, 1996 and 1997 (the "1995-97
-------
Audit"), (i) Buyer shall direct, through advisers of its own choosing and at its
- -----
own expense, all administrative and judicial proceedings and shall conduct a
good faith and diligent defense of the 1995-97 Audit, and (ii) Buyer shall have
the right, with the consent of the Stockholders' Representative, which consent
shall not be unreasonably withheld, to compromise or settle all matters relating
to the 1995-97 Audit.
10.6 Sole Remedy. From and after the Closing, the sole and exclusive
-----------
remedy of the parties hereto with respect to any and all monetary claims (other
than fraud claims) relating to this Agreement and the transactions contemplated
hereby shall be the indemnification provisions set forth in this Section 10.
With respect to non-monetary damages or relief (such as breaches of covenants to
be performed after the Closing Date) or fraud, the remedies set forth in this
Section 10 are cumulative and shall not be construed to restrict or otherwise
affect any other remedies that may be available to the indemnified party under
any agreement, pursuant to law or otherwise. In determining Losses hereunder,
due account shall be taken of all relevant factors, including, without
limitation, the net present value of (i) any insurance proceeds (net of any
negative tax effects) and (ii) any deduction, credit, amortization, exclusion
from income or other tax benefit realized by the indemnified party on the
account of any Loss. For the purpose of determining the number of Escrowed
Shares deliverable to a Buyer Indemnified Party in connection with the
satisfaction of any Buyer Indemnifiable Claim which is not to be paid in cash,
each share of Buyer Common Stock shall be deemed to have a value equal to the
IPO Price, subject to appropriate adjustment after the Closing Date for any
stock split or stock dividend with respect to Buyer Common Stock, or any
combination or reclassification of the Buyer Common Stock into a greater or
smaller number of shares.
10.8 No Offset. The Buyer Indemnified Parties shall have no right of set-
---------
off with respect to amounts which may be owed from any Buyer Indemnified Party
to any Stockholder.
10.9 Continuing Indemnification of ESOP Trustee. To the fullest extent
------------------------------------------
permitted by ERISA and in accordance with the provisions of this Section 10.9,
James Schlindwein (the "Trustee") shall be indemnified with respect to all of
-------
his acts and omissions as a fiduciary of the ESOP jointly and severally by each
of the Buyer and the Company. Indemnification of the Trustee by the Company
shall be effective from and after the effective date that James Schlindwein
becomes a fiduciary of the ESOP and the indemnification of the Trustee by the
Buyer shall be effective from and after the Closing, provided that the Buyer's
obligation will cover actions or omissions prior to the Closing once the Buyer's
indemnification obligation hereunder becomes effective. For purposes of this
Section 10.9, the Buyer and the Company are collectively referred to as the
"Indemnitors" and individually referred to as an
-----------
52
<PAGE>
"Indemnitor" and the Trustee's indemnification by the Indemnitors shall be with
----------
respect to all Losses (as defined in Section 10.2) to which the Trustee may
become subject arising in any manner out of or in connection with the Trustee's
service as trustee of the ESOP, except that the Trustee will not be so
indemnified with respect to any Loss adjudged by a court of competent
jurisdiction (or as determined by any other legal proceeding mutually acceptable
to the Trustee and the Indemnitors) to have resulted from the Trustee's gross
negligence, bad faith, or willful misconduct. Payment by the Indemnitors for all
Losses of the Trustee shall be made promptly upon demand as each such Loss is
incurred by the Trustee. In addition, the Indemnitors waive any rights or claims
that any or all of them may have against the Trustee in connection with this
Agreement, except to the extent that such claims are based on the gross
negligence, bad faith or willful misconduct of the Trustee. In the event of a
determination that any Loss resulted from the Trustee's gross negligence, bad
faith or willful misconduct, the Indemnitors shall be entitled to recover from
the Trustee any amount paid on behalf of the Trustee pursuant to this Section
10.9.
For purposes of this Section 10.9, "gross negligence" shall be defined as
acts or omissions that constitute a gross departure from standards of ordinary
care.
If the Trustee receives notice of the assertion of any claim or of the
commencement of any action or proceeding against the Trustee by any person who
is not a party (or an affiliate of a party) to this Agreement (a "Third-Party
-----------
Claim"), the Trustee will give written notice thereof within seven (7) days of
- -----
the Trustee's receipt of such notice to each of the Indemnitors, provided that
failure to do so will not limit the Indemnitors' obligation to indemnify the
Trustee except to the extent (if any) of their actual prejudice. The
Indemnitors will each individually and jointly have the right to participate in,
or by giving written notice to the Trustee, to elect to assume the defense of
any Third-Party Claim at the Indemnitors' sole expense and by counsel of their
choice (provided such counsel is reasonably satisfactory to the Trustee), and
the Trustee will cooperate in good faith in such defense. Notwithstanding any
other provision to the contrary, to the extent Buyer becomes an Indemnitor
hereunder and elects to participate in or assume the defense of any Third Party
Claim, Buyer shall have the authority to take actions hereunder on behalf of all
the Indemnitors.
If within ten calendar days after giving notice of a Third-Party Claim to
any or all of the Indemnitors, the Trustee receives written notice from any
Indemnitor that one or more of the Indemnitors have elected to assume the
defense of the Third-Party Claim, the Indemnitors who have assumed such defense
will not be liable for any legal expenses subsequently incurred by the Trustee
in connection with the defense thereof; provided, however, that if such
Indemnitors fail to take reasonable steps necessary to defend diligently such
Third-Party Claim within ten calendar days after receiving written notice from
the Trustee that the Trustee believes the Indemnitors have failed to take such
steps or if the Trustee reasonably determines that the Trustee needs separate
counsel based on a conflict of interest, the Trustee may (upon written notice to
the Indemnitors setting forth the steps which were not taken or the conflict of
interest) assume his own defense, and the Indemnitors will be liable for all
reasonable legal, accounting, consulting and other professional fees, costs and
expenses paid or incurred in
53
<PAGE>
connection therewith in accordance with the terms of this Section 10.9. Without
the prior written consent of the Trustee, which will not be unreasonably
withheld, the Indemnitors will not enter into any settlement of any Third-Party
Claim which would lead to liability or create any financial or other obligation
on the part of the Trustee for which the Trustee is not entitled to
indemnification hereunder. Without the prior written consent of the Indemnitors,
which will not be unreasonably withheld, the Trustee will not enter into any
settlement of any Third-Party Claim which would create additional liability on
the part of the Indemnitors for indemnification hereunder.
If the Trustee is required to participate in any legal or other proceeding
as a result of the services provided to the ESOP in connection with the
transactions contemplated under this Agreement, the Indemnitors will jointly and
severally compensate the Trustee for his time required for such participation
(including, but not limited to, producing documents, answering interrogatories,
giving depositions, giving expert or other testimony, whether by agreement,
subpoena or otherwise, attending meetings or conferences in person or by
telephone, preparing for any of the above, and any travel required to facilitate
such participation) at a reasonable per diem rate, plus any reasonable legal,
accounting, consulting and other professional fees, fees and out-of-pocket
expenses incurred to the same extent and in the same manner as if such per diem
payments and expense reimbursements were Losses. Notwithstanding the foregoing,
no duplication shall result under this paragraph in the Trustee's
indemnification for Losses. The Indemnitors will pay the Trustee's per diem
payments and expense reimbursements due under this paragraph with thirty (30)
days of being billed therefor from time to time by the Trustee.
Notwithstanding any provision in this Agreement to the contrary (including,
without limitation, Section 10.5(d)), (i) each of the duties, obligations and
agreements of the Indemnitors shall survive the Closing and (ii) this Section
10.9 shall apply only to the extent any Loss is not paid for by a fiduciary
liability insurance policy.
SECTION 11. MISCELLANEOUS.
11.1 Alternative Structure. Notwithstanding anything to the contrary
---------------------
contained in this Agreement, prior the Closing, Buyer shall be entitled to
revise the structure of the purchase and sale of the Company Shares and related
transactions provided that each of the transactions describing such revised
structure shall (a) qualify as, or be treated as part of, an exchange under
(S)351 of the Code, and not subject any of the Stockholders to a material
increase in or earlier payment of federal income tax liability or change the
amount of or delay the receipt of consideration to be received by such
Stockholders, (b) be capable of consummation in as timely a manner as the
structure contemplated herein, (c) not otherwise be prejudicial to the interests
of Stockholders or employees of the Company or (d) require any additional
consents or authorizations from any other person or entity. This Agreement and
any related documents shall be appropriately amended in order to reflect any
such revised structure.
54
<PAGE>
11.2 Fees and Expenses. Each of Buyer, the Company, and the Stockholders
-----------------
shall bear its or his own expenses and costs in connection with the preparation
and negotiation of this Agreement and the consummation of the transactions
contemplated hereby, provided that solely in the event that the purchase and
sale of Company Shares is consummated hereunder, the reasonable expenses of the
Company and the Stockholders (including the legal and accounting expenses of the
Company and the Stockholders) in connection with such transaction, up to a
maximum of $400,000, shall be paid by Buyer or may be paid by or reflected in an
account of the Company, except that Buyer will not be required to pay (and the
Company will not pay or have reflected in any account) the fees and expenses of
more than one firm of legal counsel to the Company and one firm of legal counsel
for the ESOP Trust Fund. All expenses of the Company and the Stockholders that
are not payable by Buyer or reflected in an account of the Company pursuant to
the immediately preceding sentence shall be paid directly by the Stockholders.
11.3 Governing Law. This Agreement shall be construed under and governed
-------------
by the internal laws of The Commonwealth of Massachusetts without regard to its
conflict of laws provisions.
11.4 Notices. Any notice, request, demand or other communication required
-------
or permitted hereunder shall be in writing and shall be deemed to have been
given if delivered or sent by facsimile transmission or overnight courier of
national reputation, upon receipt, or if sent by registered or certified mail,
upon the sooner of the date on which receipt is acknowledged or the expiration
of three days after deposit in United States post office facilities properly
addressed with postage prepaid. All notices to a party will be sent to the
addresses set forth below or to such other address or person as such party may
designate by notice to each other party hereunder:
TO BUYER: Monroe, Inc.
- --------
8 Cedar Street, Suite 54A
Woburn, MA 01801
Fax: (781) 933-3680
Attn: President
With a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Fax: (617) 523-1231
Attn: Robert P. Whalen, Jr., Esq.
55
<PAGE>
TO COMPANY: Merkert Enterprises, Inc.
- ----------
500 Turnpike Street
Canton, MA 02021
Fax: (781) 828-7891
Attn: Chairman
With a copy to: Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C.
One Financial Center
Boston, MA 02111
Fax: (617) 542-2241
Attn: Douglas A. Zingale, Esq.
TO THE STOCKHOLDERS: c/o Stockholders' Representative
- -------------------
Robert Q. Crane
7 Mountview Road
Wellesley Hills, MA 02181
With a copy to: Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C.
One Financial Center
Boston, MA 02111
Fax: (617) 542-2241
Attn: Douglas A. Zingale, Esq.
and
Zack Kosnitzky, P.A.
One International Place, Suite 2800
Miami, FL 33131-2144
Fax: (305) 539-1307
Attn: Thomas O. Wells, Esq.
Any notice given hereunder may be given on behalf of any party by his counsel or
other authorized representatives.
11.5 Entire Agreement. This Agreement, including the Schedules and
----------------
Exhibits referred to herein and the other writings specifically identified
herein or contemplated hereby, is complete, reflects the entire agreement of the
parties with respect to its subject matter, and supersedes all previous written
or oral negotiations, commitments and writings, including without limitation the
letter of intent dated as of March 9, 1998 by and among Buyer, the Company and
the Stockholders, but other than the Confidentiality Agreement dated as of
January 8, 1998 by and between Monroe & Company, LLC and the Company.
56
<PAGE>
11.6 Assignability; Binding Effect. This Agreement shall only be
-----------------------------
assignable by Buyer to a corporation or partnership controlling, controlled by
or under common control with Buyer upon written notice to the Company and the
Stockholders, and such assignment shall not relieve Buyer of any liability
hereunder. This Agreement may not be assigned by the Stockholders or the
Company without the prior written consent of Buyer. This Agreement shall be
binding upon and enforceable by, and shall inure to the benefit of, the parties
hereto and their respective successors and permitted assigns.
11.7 Captions and Gender. The captions in this Agreement are for
-------------------
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter,
as the context may require.
11.8 Execution in Counterparts. For the convenience of the parties and to
-------------------------
facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
11.9 Amendments. This Agreement may not be amended or modified, nor may
----------
compliance with any condition or covenant set forth herein be waived, except by
a writing duly and validly executed by each party hereto, or in the case of a
waiver, the party waiving compliance.
11.10 Publicity and Disclosures. No press releases or public disclosure,
-------------------------
either written or oral, of the transactions contemplated by this Agreement,
shall be made by a party to this Agreement without the prior knowledge and
written consent of Buyer and the Company. Notwithstanding the foregoing, neither
the filing of the Registration Statement (or any other document filed with any
public official in connection with the IPO), nor the distribution of the related
prospectus (whether in preliminary or final form), nor any selling activity
conducted by Buyer or the underwriters in connection with the IPO, including
without limitation those conducted as part of the so-called road show, shall be
construed as press releases or public disclosure requiring the prior approval of
the Company.
11.11 Consent to Jurisdiction. Each of the parties hereby consents to
-----------------------
personal jurisdiction, service of process and venue in the federal or state
courts of Massachusetts for any claim, suit or proceeding arising under this
Agreement, or in the case of a third party claim subject to indemnification
hereunder, in the court where such claim is brought.
11.12 Specific Performance. The parties agree that it would be difficult
--------------------
to measure damages which might result from a breach of this Agreement by the
Company or the Stockholders and that money damages would be an inadequate remedy
for such a breach. Accordingly, if there is a breach or proposed breach of any
provision of this Agreement by the Company or the Stockholders, and Buyer does
not elect to terminate under Section 9, Buyer shall be entitled, in addition to
any other remedies which it may have, to an injunction or other
57
<PAGE>
appropriate equitable relief to restrain such breach without having to show or
prove actual damage to Buyer.
11.13 Schedules. Disclosure of any item listed on a Schedule hereto shall
---------
be sufficient disclosure of such item with respect to all other Schedules
hereto, whether or not such item is specifically disclosed on such other
Schedule.
11.14 Defined Terms. The following terms shall have the meanings assigned
-------------
to them in the provisions of this Agreement referred to below:
1995-97 Audit - Section 10.6(d)
Acquisition Proposal - Section 4.7
Affiliate (for purposes of Section 2.25) - Section 2.25(i)
Agreement - Preamble
Antitrust Division - Section 7.2
Approvals - Section 2.22
Audit - Section 1.4
Audit Amount - Section 1.4
Audit Liabilities - Section 1.4
Audits - Section 1.4
Base Balance Sheet - Section 2.7(a)
Buyer - Preamble
Buyer Common Stock - Section 1.2
Buyer Indemnifiable Claims - Section 10.2
Buyer Indemnifiable Losses - Section 10.2
Buyer Indemnified Party - Section 10.2
Buyer Indemnified Parties - Section 10.2
Buyer Shares - Section 3.4(a)
CCC - Section 4.15
Claim Notice - Section 10.6(a)
Closing - Section 1.3
Closing Date - Section 1.3
Closing Disclosure Supplement - - Section 4.4
Code - Preamble
Common Proportionate Share - Section 1.4
Common Shares - Preamble
Company - Preamble
Company (for the purposes of Section 2.26) - Section 2.26(e)
Company Articles of Organization - Section 2.2
Company Disclosure Supplement - Section 4.4
Company Shares - Preamble
Customer - Section 2.11(m)
Deductible Amount - Section 10.3(b)
Defense Notice - Section 10.9(b)
58
<PAGE>
DOR - Section 1.4
Employee Program - Section 2.25(i)
Encumbrances - Section 2.6(a)(i)
Environmental Law - Section 2.26(e)
ERISA - Section 2.25(c)
Escrow Agent - Section 1.4
Escrowed Shares - Section 1.9
ESOP - Section 2.3(b)
ESOP Trust Fund - Section 2.3(b)
Expiration Date - Section 10.3(d)
FTC - Section 7.2
Hazardous Material - Section 2.26(e)
Hazardous Waste - Section 2.26(e)
Income Tax Agreement - Section 1.4
Indemnification Escrow Agreement - Section 1.9
Indemnitor - Section 10.9
Indemnitors - Section 10.9
Intellectual Property - Section 2.14(a)
Interim Balance Sheet - Section 2.7(a)
IPO - Preamble
IPO Price - Section 1.2
IRS - Section 1.4
Key Principal - Section 2.11(m)
Leased Real Property - Section 2.6(a)
Loss - Section 10.2
Losses - Section 10.2
Material Adverse Effect - Section 2.2
Merkert CRUT - Section 2.3(b)
Merkert Trust - Section 1.8(c)
Mintz, Levin - Section 8.2(f)
Multiemployer Plan - Section 2.25(i)
Notifying Party - Section 4.4
Other Agreement - Preamble
Owned Real Property - Section 2.6(a)
Payroll Tax Agreement - Section 1.4
PCBs - Section 2.26(c)
Permitted Encumbrances - Section 2.6(a)
Plan of Organization - Preamble
Preferred Shares - Preamble
Preferred Stock - Section 2.3(a)
Principal - Section 2.11(m)
Prospectus - Section 1.2
Real Property - Section 2.6(a)
Registration Rights Agreement - Section 8.1(e)
59
<PAGE>
Registration Statement - Section 1.2
Rogers-American - Preamble
Rogers-American Acquisition - Section 1.7
SEC - Section 1.2
Securities Act - Section 2.4
Settled Audits - Section 1.4
Stockholder - Preamble
Stockholder Indemnifiable Claims - Section 10.4
Stockholder Indemnifiable Losses - Section 10.4
Stockholder Indemnified Party - Section 10.4
Stockholder Indemnified Parties - Section 10.4
Stockholders - Preamble
Stockholders' Representative - Section 1.8(a)
Subsidiary - Section 2.4
Subsidiaries - Section 2.4
Tax Escrow - Section 1.4
Tax Escrow Agreement - Section 1.4
Tax Matters Agreement - Section 1.4
Taxes - Section 2.8(a)
Third-Party Claim - Section 10.9
Total Consideration - Section 1.2
Trustee - Section 10.9
[Remainder of page left intentionally blank]
60
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date set forth above by their duly authorized
representatives.
MONROE, INC.
By: /s/ James L. Monroe
---------------------------
James L. Monroe
President
MERKERT ENTERPRISES, INC.
By: /s/ Gerald R. Leonard
----------------------------
Gerald R. Leonard
President
<PAGE>
STOCKHOLDERS
------------
/s/ Edward Cassorla
------------------------------------
Edward Cassorla
40 Bristol Road
West Newton, MA 02165
/s/ Kenneth D. Chipman
------------------------------------
Kenneth D. Chipman
31 Robin Road
Norfolk, MA 02056
/s/ Robert Q. Crane
------------------------------------
Robert Q. Crane
7 Mountview Road
Wellesley Hills, MA 02181
/s/ Manley J. Kiley, Jr.
------------------------------------
Manley J. Kiley, Jr.
35 Mill Pond Lane
Duxbury, MA 02332
/s/ Gerald R. Leonard
------------------------------------
Gerald R. Leonard
339 Far Reach Road
Westwood, MA 02090
/s/ Eugene F. Merkert
------------------------------------
Eugene F. Merkert
2359 South Ocean Boulevard
Highland Beach, FL 33487-1834
<PAGE>
Exhibit 10.2
STOCK PURCHASE AGREEMENT
by and among
MONROE, INC.
("Buyer"),
-----
ROGERS-AMERICAN COMPANY, INC.
("Company"),
-------
CURTIS L. ROGERS, JR.,
as Stockholders' Representative,
and
THE STOCKHOLDERS OF THE COMPANY
Dated as of May 22, 1998
<PAGE>
STOCK PURCHASE AGREEMENT
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 1. TRANSFER OF SHARES; CONSIDERATION........................................ 1
1.1 Transfer of Company Shares............................................... 1
1.2 Total Consideration...................................................... 1
1.3 Closing.................................................................. 2
1.4 Further Assurances....................................................... 2
1.5 Transfer Taxes........................................................... 2
1.6 Income Tax Treatment of the Transactions................................. 2
1.7 Stockholders' Representative............................................. 3
1.8 Indemnification Escrow................................................... 4
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE STOCKHOLDERS..................................................... 4
2.1 Making of Representations and Warranties................................. 4
2.2 Organization and Qualifications of the Company........................... 4
2.3 Capital Stock of the Company; Beneficial Ownership....................... 5
2.4 Subsidiaries............................................................. 5
2.5 Authority of the Company................................................. 6
2.6 Real and Personal Property............................................... 7
2.7 Financial Statements..................................................... 9
2.8 Taxes.................................................................... 10
2.9 Collectibility of Accounts Receivable.................................... 11
2.10 [Intentionally Omitted.]................................................. 11
2.11 Absence of Certain Changes............................................... 12
2.12 Ordinary Course.......................................................... 13
2.13 Banking Relations........................................................ 14
2.14 Intellectual Property.................................................... 14
2.15 Contracts................................................................ 15
2.16 Litigation............................................................... 16
2.17 Compliance with Laws..................................................... 16
2.18 Insurance................................................................ 16
2.19 Warranty or Other Claims................................................. 17
2.20 Powers of Attorney....................................................... 17
2.21 Finder's Fee............................................................. 17
2.22 Permits; Burdensome Agreements........................................... 17
2.23 Corporate Records; Copies of Documents................................... 17
2.24 Transactions with Interested Persons..................................... 18
2.25 Employee Benefit Programs................................................ 18
2.26 Environmental Matters.................................................... 20
2.27 List of Directors and Officers........................................... 22
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
2.28 Non-Foreign Status....................................................... 22
2.29 Employees; Labor Matters................................................. 22
2.30 Principals............................................................... 23
2.31 Transfer of Shares....................................................... 24
2.32 Stock Repurchase......................................................... 24
2.33 Absence of Improper Payments............................................. 24
2.34 Disclosure............................................................... 24
SECTION 3. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE
STOCKHOLDERS............................................................. 25
3.1 Company Shares........................................................... 25
3.2 Authority................................................................ 25
3.3 Agreements............................................................... 26
3.4 Investment Representations............................................... 26
SECTION 4. COVENANTS OF THE COMPANY AND THE STOCKHOLDERS............................ 28
4.1 Making of Covenants and Agreements....................................... 28
4.2 Conduct of Business...................................................... 28
4.3 Authorization from Others................................................ 30
4.4 Notification of Certain Matters.......................................... 30
4.5 Consummation of Agreement................................................ 31
4.6 Cooperation of the Company and Stockholders.............................. 31
4.7 No Solicitation of Other Offers.......................................... 31
4.8 Confidentiality.......................................................... 31
4.9 Tax-Free Treatment....................................................... 32
4.10 Tax Returns.............................................................. 32
4.11 Filing Cooperation....................................................... 32
4.12 Buyouts.................................................................. 32
4.13 No Transfer of Company Shares............................................ 32
4.14 Termination of Certain Agreements........................................ 33
4.15 Automobile Leases........................................................ 33
4.16 Foreign Qualifications................................................... 33
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER.................................. 33
5.1 Making of Representations and Warranties................................. 33
5.2 Organization and Qualifications of Buyer................................. 33
5.3 Capital Stock of Buyer................................................... 34
5.4 Authority of Buyer....................................................... 34
5.5 Operations and Financial Condition; Absence of Undisclosed Liabilities... 34
5.6 Investment Company....................................................... 35
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 6. COVENANTS OF BUYER....................................................... 35
6.1 Making of Covenants and Agreements....................................... 35
6.2 Confidentiality.......................................................... 35
6.3 Tax-Free Treatment....................................................... 35
6.4 Medical Benefits for Curtis L. Rogers, Jr................................ 35
SECTION 7. ADDITIONAL AGREEMENTS.................................................... 36
7.1 S-1 Registration Statement............................................... 36
7.2 Filings Under Hart-Scott-Rodino Act...................................... 36
7.3 Tax Returns.............................................................. 36
7.4 Leases................................................................... 36
7.5 1996 Bonuses............................................................. 37
7.6 Sale of Real Estate...................................................... 37
7.7 Tax Refund............................................................... 37
7.8 Bonuses ................................................................. 37
SECTION 8. CONDITIONS............................................................... 38
8.1 Conditions to the Obligations of Certain of the Parties.................. 38
8.2 Conditions to the Obligations of Buyer................................... 38
8.3 Conditions to the Obligations of the Company and the Stockholders........ 41
SECTION 9. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED.............................. 42
9.1 Termination.............................................................. 42
9.2 Effect of Termination.................................................... 43
9.3 Right to Proceed......................................................... 43
SECTION 10. INDEMNIFICATION.......................................................... 43
10.1 Survival................................................................. 43
10.2 Indemnification by the Stockholders...................................... 44
10.3 Limitations on Indemnification by the Stockholders....................... 45
10.4 Indemnification by Buyer................................................. 47
10.5 Limitations on Indemnification by Buyer.................................. 47
10.6 Notice; Defense of Claims................................................ 48
SECTION 11. MISCELLANEOUS............................................................ 50
11.1 Alternative Structure.................................................... 50
11.2 Fees and Expenses........................................................ 50
11.3 Governing Law............................................................ 50
11.4 Notices.................................................................. 50
11.5 Entire Agreement......................................................... 51
11.6 Assignability; Binding Effect............................................ 51
11.7 Captions and Gender...................................................... 52
11.8 Execution in Counterparts................................................ 52
</TABLE>
(iii)
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
11.9 Amendments............................................................... 52
11.10 Publicity and Disclosures................................................ 52
11.11 Consent to Jurisdiction.................................................. 52
11.12 Specific Performance..................................................... 52
</TABLE>
(iv)
<PAGE>
List of Exhibits and Schedules
Exhibit A: List of Stockholders
B: Allocation of Total Consideration
C: Form of Indemnification Escrow Agreement
D: Form of Registration Rights Agreement
E: Form of Opinion of Moore & Van Allen, PLLC
F: Form of Opinion of Johnston, Allison & Hord, P.A.
G: Form of Employment and Noncompetition Agreement
H: Form of General Release
I: Form of Opinion of Goodwin, Procter & Hoar LLP
Schedule 2.2 Organization and Qualifications
2.3 Capital Stock, Voting Agreements, etc.
2.4 Subsidiaries
2.5 Conflicts, Violations and Encumbrances
2.6(a) Real Property
2.6(b) Personal Property
2.7 Financial Statements
2.8 Tax Disclosures
2.9 Affiliated Accounts Receivable
2.11 Absence of Changes
2.13 Banking Arrangements
2.14 Intellectual Property
2.15 Contracts, etc.
2.16 Litigation
2.17 Compliance with Laws
2.18 Insurance
2.20 Powers of Attorney
2.22 Permits; Burdensome Agreements
2.24 Transactions with Interested Persons
2.25 Employee Benefit Programs
2.26 Environmental Matters
2.27 Officers and Directors
2.29 Labor Matters
2.30 Principals; Customers
2.31 Transfer of Shares
2.32 Stock Repurchase
4.2 Conduct of Business
4.14 Agreements to be Terminated
4.15 Automobile Leases
(v)
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
This STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into as
---------
of May 22, 1998 by and among Monroe, Inc., a Delaware corporation ("Buyer"),
-----
Rogers-American Company, Inc., a North Carolina corporation (the "Company"),
-------
Curtis L. Rogers, Jr., as representative of the Stockholders, and those
individuals identified as Stockholders on the signature pages to this Agreement
(each, individually a "Stockholder" and collectively the "Stockholders").
----------- ------------
WHEREAS, the Stockholders are the record and beneficial owners of all of
the issued and outstanding capital stock of the Company, which consists entirely
of an aggregate of nine hundred fifty-five and six tenths (955.6) shares of
common stock, par value $1.00 per share (the "Company Shares"); and
--------------
WHEREAS, subject to the terms and conditions set forth herein, the
Stockholders desire to transfer all of the Company Shares to Buyer, and Buyer
desires to acquire all of the Company Shares.
NOW, THEREFORE, in consideration of the mutual representations, warranties
and agreements, and upon the terms and subject to the conditions, herein set
forth, the parties hereto hereby agree as follows:
SECTION 1. TRANSFER OF SHARES; CONSIDERATION
1.1 Transfer of Company Shares. At the Closing (as hereinafter defined),
--------------------------
each Stockholder shall deliver or cause to be delivered to Buyer certificates
representing all of the Company Shares owned by such Stockholder as set forth
opposite such Stockholder's name on Exhibit A hereto under the column headed
---------
"Closing Ownership," which collectively shall represent all of the issued and
outstanding capital stock of the Company. Such stock certificates shall be duly
endorsed in blank for transfer or shall be presented with stock powers duly
executed in blank, with such signature guarantees and such other documents as
may be reasonably required by Buyer to effect a valid transfer of such Company
Shares by such Stockholder to Buyer, free and clear of any and all liens,
encumbrances, pledges, security interests, charges and claims. Each Stockholder
by execution of this Agreement hereby appoints Buyer as his attorney-in-fact to
effectuate transfer of the Company Shares at the Closing.
1.2 Total Consideration. In consideration of the transfer by the
-------------------
Stockholders to Buyer of the Company Shares, Buyer agrees to transfer to the
Stockholders aggregate consideration of $35,085,000 (the "Total Consideration")
-------------------
comprised of (a) cash in the aggregate amount of $25,635,000 and (b) a number of
shares of common stock of Buyer, $.01 par value per share ("Buyer Common
------------
Stock"), equal to (i) $9,450,000 divided by (ii) the price at which shares of
Buyer Common Stock will be sold to the public in the initial underwritten public
offering of shares of Buyer Common Stock (the "IPO"), as set forth in the final
---
<PAGE>
prospectus (the "Prospectus") contained in the registration statement on Form
----------
S-1 (the "Registration Statement") to be filed with the Securities and Exchange
----------------------
Commission (the "SEC") in connection with the IPO. The Total Consideration
---
shall be allocated among the Stockholders in the manner set forth in Exhibit B
---------
hereto. The cash portion of the Total Consideration shall, subject to the
deposit by Buyer into escrow of the Cash Escrow Amount (as defined in Section
1.8), be paid by Buyer at the Closing by wire transfer to an account which shall
be specified by each Stockholder at least three business days prior to the
Closing. The portion of the Total Consideration consisting of shares of Buyer
Common Stock shall, subject to the deposit by Buyer into escrow of certain
shares as contemplated by Section 1.8, be transferred by Buyer at the Closing by
delivery to each Stockholder of a certificate representing the number of shares
of Buyer Common Stock (rounded to the nearest whole share) to which such
Stockholder is entitled hereunder.
1.3 Closing. Unless this Agreement shall have been terminated in
-------
accordance with Section 9 hereof, the closing of the transfer of the Company
Shares provided for in this Agreement (the "Closing") shall take place at the
-------
offices of Goodwin, Procter & Hoar LLP at Exchange Place, 53 State Street,
Boston, Massachusetts 02109 commencing at 10:00 a.m. local time on the date on
which the conditions to closing set forth in Section 8 hereof are satisfied or,
if applicable, waived, or at such other time, date and place as may be otherwise
mutually agreed upon by the Company and Buyer (the "Closing Date").
------------
1.4 Further Assurances. The Stockholders from time to time after the
------------------
Closing at the request of Buyer and without further consideration shall execute
and deliver further instruments of transfer and assignment and take such other
action as Buyer may reasonably require to more effectively transfer and assign
to, and vest in, Buyer the Company Shares and all rights thereto, and to fully
implement the provisions of this Agreement.
1.5 Transfer Taxes. All sales and transfer taxes, fees and duties, if
--------------
any, under applicable federal and North Carolina law incurred in connection with
the sale and transfer of the Company Shares pursuant to this Agreement will be
borne and paid by the Stockholders, and the Stockholders shall promptly
reimburse each of Buyer and the Company for any such tax, fee or duty which it
is required to pay under applicable law.
1.6 Income Tax Treatment of the Transactions. It is intended that the
----------------------------------------
following transactions, which are occurring simultaneously as part of one
integrated plan, will be treated as exchanges qualifying under (S)351 of the
Internal Revenue Code of 1986, as amended (the "Code"): (i) the transfer of the
----
Company Shares by the Stockholders in exchange for Buyer Common Stock and cash
pursuant to this Agreement, (ii) the acquisition by Buyer of all of the issued
and outstanding capital stock of Merkert Enterprises, Inc., a Massachusetts
corporation ("Merkert") pursuant to a certain Stock Purchase Agreement by and
-------
among Buyer, Merkert, and the stockholders of Merkert (such purchase, the
"Merkert Acquisition") and (iii) the sale of Buyer Common Stock for cash in the
- --------------------
IPO. All of the parties to this Agreement agree to report the aforementioned
transactions, for all purposes, consistently with the foregoing.
2
<PAGE>
1.7 Stockholders' Representative.
----------------------------
(a) In order to administer efficiently (i) the implementation of
this Agreement by the Stockholders, (ii) the waiver of any condition to the
obligations of the Stockholders to consummate the transactions contemplated
hereby, and (iii) the settlement of any dispute with respect to this Agreement,
the Stockholders hereby designate Curtis L. Rogers, Jr. as their representative
(the "Stockholders' Representative").
----------------------------
(b) The Stockholders hereby authorize the Stockholders'
Representative
(i) to take all action necessary in connection with the
implementation of this Agreement and the Escrow Agreement (as defined in Section
1.8) on behalf of the Stockholders, the waiver of any condition to the
obligations of the Stockholders to consummate the transactions contemplated
hereby, or the settlement of any dispute, (ii) to give and receive all notices
required to be given under this Agreement and the Escrow Agreement and (iii) to
take any and all additional action as is contemplated to be taken by or on
behalf of the Stockholders by the terms of this Agreement and the Escrow
Agreement, including without limitation, the execution and delivery of the
Escrow Agreement and documents to transfer the Company Shares to Buyer.
(c) In the event that the Stockholders' Representative dies,
becomes legally incapacitated or resigns from such position, Douglas H. Holstein
shall fill such vacancy and shall be deemed to be the Stockholders'
Representative for all purposes of this Agreement; however, no change in the
Stockholders' Representative shall be effective until Buyer is given notice of
such change by the Stockholders.
(d) By their execution of this Agreement, the Stockholders agree
that:
(i) Buyer shall be able to rely conclusively on the
instructions and decisions of the Stockholders' Representative as to any actions
required or permitted to be taken by the Stockholders or the Stockholders'
Representative hereunder, and no party hereunder shall have any cause of action
against Buyer for any action taken by Buyer in reliance upon the instructions or
decisions of the Stockholders' Representative;
(ii) all actions, decisions and instructions of the
Stockholders' Representative shall be conclusive and binding upon all of the
Stockholders and no Stockholder shall have the right to object, dissent, protest
or otherwise contest the same or any cause of action against the Stockholders'
Representative for any action taken, decision made or instruction given by the
Stockholders' Representative under this Agreement, except for fraud or willful
breach of this Agreement by the Stockholders' Representative;
(iii) remedies available at law for any breach of the
provisions of this Section 1.7 are inadequate; therefore, Buyer shall be
entitled to temporary and permanent injunctive relief without the necessity of
proving damages if Buyer brings an action to enforce the provisions of this
Section 1.7; and
3
<PAGE>
(iv) the provisions of this Section 1.7 are independent and
severable, shall constitute an irrevocable power of attorney, coupled with an
interest and surviving death, granted by the Stockholders to the Stockholders'
Representative and shall be binding upon the executors, heirs, legal
representatives and successors of each Stockholder.
(e) All fees and expenses incurred by the Stockholders'
Representative shall be paid by the Stockholders.
1.8 Indemnification Escrow. On the Closing Date, Buyer shall deposit an
----------------------
amount of cash equal to $1,550,000 (the "Cash Escrow Amount") and a number of
------------------
shares of Buyer Common Stock (rounded to the nearest whole share) equal to (i)
$1,950,000 divided by (ii) the IPO Price (the "Escrowed Shares") with an escrow
---------------
agent mutually acceptable to Buyer and the Stockholders' Representative (the
"Escrow Agent"), to be held, invested and distributed by the Escrow Agent in
- -------------
accordance with the terms of an escrow agreement in substantially the form
attached hereto as Exhibit C (the "Escrow Agreement"). The Total Consideration
--------- ----------------
payable to the Stockholders at the Closing pursuant to Section 1.2 shall be
reduced by the Cash Escrow Amount and the Escrowed Shares as provided in Exhibit
-------
B attached hereto under the column headed "Escrow".
- -
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
STOCKHOLDERS.
2.1 Making of Representations and Warranties. As a material inducement to
----------------------------------------
Buyer to enter into this Agreement and consummate the transactions contemplated
hereby, the Company and the Stockholders, jointly and severally, hereby make to
Buyer the representations and warranties contained in this Section 2. For
purposes of this Section 2, references to "knowledge" or "best knowledge" of the
Company and the Stockholders shall be deemed to include, to and including the
Closing Date, actual knowledge of the Stockholders and the directors and
officers of the Company and its Subsidiaries after due inquiry.
2.2 Organization and Qualifications of the Company. The Company is a
----------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of North Carolina with full corporate power and authority to own or
lease its properties and to conduct its business in the manner and in the places
where such properties are owned or leased or such business is currently
conducted or proposed to be conducted. The copies of the Company's Certificate
of Incorporation as amended to date, certified by the North Carolina Secretary
of State (the "Company Certificate of Incorporation"), and of the Company's by-
------------------------------------
laws, as amended to date, certified by the Company's Secretary, and heretofore
delivered to Buyer's counsel, are complete and correct at the date hereof, and
no amendments thereto are pending. Except as set forth on Schedule 2.2 attached
------------
hereto, the Company is not in violation of any term of the Company Certificate
of Incorporation or by-laws. Except as set forth on Schedule 2.2 attached
------------
hereto, the Company is duly qualified to do business as a foreign
4
<PAGE>
corporation in each jurisdiction where the nature of its properties or the
conduct of its business makes its qualification so necessary.
2.3 Capital Stock of the Company; Beneficial Ownership.
--------------------------------------------------
(a) The authorized capital stock of the Company consists of
100,000 shares of common stock, par value $1.00 per share, 955.6 shares of which
are issued, outstanding, fully paid and non assessable and no shares are held
in treasury. Except as set forth on Schedule 2.3, there are no outstanding
------------
options, warrants, rights, commitments, preemptive rights or agreements of any
kind for the issuance or sale of any additional shares of capital stock of the
Company, and there are no outstanding securities convertible into such shares or
outstanding warrants, options or other rights to acquire any such convertible
securities. Except as set forth on Schedule 2.3, no capital stock of the Company
------------
has been issued in violation of any federal or state law or in violation of any
preemptive rights or any other rights of any other person. Except as set forth
on Schedule 2.3 attached hereto, there are no voting trusts, voting agreements,
------------
proxies or other agreements, instruments or undertakings with respect to the
voting of any capital stock of the Company to which the Company or any of the
Stockholders is a party.
(b) The Stockholders own of record and beneficially all of the
issued and outstanding shares of capital stock of the Company as set forth in
the column headed "Current Ownership" on Exhibit A hereto. As of the Closing,
---------
after giving effect to the Share Transfers (as defined in Section 4.13), the
-------------
Stockholders will own of record and beneficially all of the issued and
outstanding shares of capital stock as set forth in the column headed "Closing
Ownership."
2.4 Subsidiaries. The Company's subsidiaries and investments in any other
------------
corporation or business organization are listed in Schedule 2.4 (collectively,
------------
the "Subsidiaries" or individually, a "Subsidiary"). Except as set forth in
------------ ----------
Schedule 2.4, each Subsidiary of the Company is a duly organized, validly
- ------------
existing corporation in good standing under the laws of the state of its
incorporation with full corporate power and authority to own or lease its
properties and to conduct its business in the manner and in the places where
such properties are owned or leased or such business is currently conducted or
proposed to be conducted. Except as disclosed in Schedule 2.4, all of the
------------
outstanding shares of capital stock of each Subsidiary are owned beneficially
and of record by the Company free of any lien, restriction or encumbrance and
said shares have been duly and validly issued and are outstanding, fully paid
and non-assessable. The copies of each of the Subsidiaries' Certificate of
Incorporation (or comparable document), as amended to date, certified by the
Secretaries of State of each jurisdiction in which such Subsidiaries are
organized and of each of the Subsidiaries' by-laws (or comparable document), as
amended to date, certified by the Company's Secretary, and heretofore delivered
to Buyer's counsel, are complete and correct at the date hereof, and no
amendments thereto are pending. None of the Subsidiaries is in violation of any
term of its Certificate of Incorporation (or comparable document) or by-laws (or
comparable document). Each Subsidiary is duly qualified to do business as a
foreign corporation in each jurisdiction
5
<PAGE>
where the nature of its properties or the conduct of its business makes its
qualification so necessary, except where the failure to be so qualified could
not reasonably be expected to have a material adverse effect on the business,
assets, properties, results of operations, condition (financial or otherwise) or
prospects (a "Material Adverse Effect") on the Company and its Subsidiaries
-----------------------
taken as a whole. Except as disclosed in Schedule 2.4, there are no outstanding
------------
warrants, options or other rights to purchase or acquire any of the shares of
capital stock of any Subsidiary, or any outstanding securities convertible into
such shares or outstanding warrants, options or other rights to acquire any such
convertible securities.
2.5 Authority of the Company. The Company has full right, authority and
------------------------
power to enter into this Agreement and each agreement, document and instrument
to be executed and delivered by the Company pursuant to this Agreement and to
carry out the transactions contemplated hereby. The execution, delivery and
performance by the Company of this Agreement and each such other agreement,
document and instrument have been duly authorized by all necessary action of the
Company and no other action on the part of the Company is required in connection
therewith.
This Agreement and each agreement, document and instrument executed and
delivered by the Company pursuant to this Agreement constitutes, or when
executed and delivered will constitute, valid and binding obligations of the
Company enforceable in accordance with their terms. The execution, delivery and
performance by the Company of this Agreement and each such agreement, document
and instrument:
(i) does not and will not violate any provision of the
Company's Certificate of Incorporation or by-laws;
(ii) does not and will not violate any laws of the United
States, or any state or other jurisdiction applicable to the Company or
require the Company to obtain any approval, consent or waiver of, or make
any filing with, any person or entity (governmental or otherwise) that has
not been obtained or made; and
(iii) does not and will not result in a breach of, constitute a
default under, accelerate any obligation under, or give rise to a right of
termination of any indenture or loan or credit agreement or any other
material agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award to which the Company is a party or by which the property
of the Company is bound or affected, or result in the creation or
imposition of any mortgage, pledge, lien, security interest or other charge
or encumbrance on any of the Company's assets or capital stock, except as
specifically identified on Schedule 2.5.
------------
6
<PAGE>
2.6 Real and Personal Property.
--------------------------
(a) Real Property. All of the real property owned or leased by the
-------------
Company or any of its Subsidiaries is identified on Schedule 2.6(a) (herein
---------------
referred to as the "Owned Real Property" or the "Leased Real Property," as the
----- ------------- --------------------
case may be, or collectively as the "Real Property.")
---- --------
(i) Title. Each of the Company and its Subsidiaries has good,
-----
clear, record and marketable title to all Owned Real Property, free and
clear of all easements, covenants, restrictions, leases, mortgages, liens,
assessments, claims, rights, judgments, encroachments or other matters
affecting title (collectively, "Encumbrances"), other than:
------------
(x) easements, covenants, restrictions and similar
encumbrances that do not and could not materially
interfere with the use of the Owned Real Property as
currently used and improved,
(y) minor encroachments that do not and could not materially
adversely affect the value or use of the Owned Real
Property as currently used and improved and that could be
removed without material cost, and
(z) liens for Taxes (as defined in Section 2.8(a)) not yet due
or delinquent or being contested in good faith by
appropriate means and statutory liens arising in the
ordinary course of business by operation of law that are
not yet due or delinquent.
((x), (y) and (z) are collectively referred to as "Permitted
---------
Encumbrances"), except as set forth on Schedule 2.6(a). To the knowledge
---------------
of the Company and the Stockholders, the lessors of Leased Real Property
have good, clear, record and marketable title to the Leased Real Property,
and the Company and its Subsidiaries have good, clear, record and
marketable title to enforceable leasehold interests in the Leased Real
Property, in each case free and clear of all Encumbrances other than
Permitted Encumbrances, subject only to the right of reversion of the
lessor, except as set forth in Schedule 2.6(a).
---------------
(ii) Status of Leases. All leases of Leased Real Property or of
----------------
Owned Real Property are identified on Schedule 2.6(a), and true and
---------------
complete copies thereof have been delivered to Buyer. Each of said leases
has been duly authorized and executed by the Company and is in full force
and effect. To the knowledge of the Company and the Stockholders, each of
said leases has been duly authorized and executed by the other party to
each of said leases. Neither the Company nor any of its Subsidiaries is in
default under any material provision of any such said lease, nor has any
event occurred which, with notice or the passage of time, or both, would
give rise
7
<PAGE>
to such a default. To the knowledge of the Company and the Stockholders,
the other party to each of said leases is not in default under any material
provision of any such lease and there is no event which, with notice or the
passage of time, or both, would give rise to such a default.
(iii) Consents. Except as set forth in Schedule 2.6(a), (a) no
-------- ---------------
consent or approval is required with respect to the transactions
contemplated by this Agreement from the other parties to any lease of
Leased Real Property or of Owned Real Property, from the holder of any
Encumbrance on any Owned Real Property, and (b) no filing with any
regulatory authority is required in connection therewith, and to the extent
that any such consents, approvals or filings are required, the Company will
obtain or complete them before the Closing.
(iv) Condition of Real Property. Except as set forth in
--------------------------
Schedule2.6(a), there are no material defects in the physical condition
--------------
of any land, buildings or improvements constituting part of the Real
Property, including without limitation, structural elements, mechanical
systems, parking and loading areas, and all such buildings and improvements
are in good operating condition and repair.
(v) Compliance with the Law. Neither the Company nor any
-----------------------
Subsidiary has received any notice from any governmental authority of any
violation of any law, ordinance, regulation, license, permit or
authorization issued with respect to any Real Property that has not been
heretofore corrected and no such violation exists which could have a
material adverse effect on the operation or value of any Real Property.
All improvements located on or constituting part of the Real Property and
their use and operation by the Company and its Subsidiaries were and are
now in compliance in all material respects with all applicable laws,
ordinances, regulations, licenses, permits and authorizations, except as
set forth in Schedule 2.6(a). No approval or consent to the transactions
---------------
contemplated by this Agreement is required of any governmental authority
with jurisdiction over any aspect of the Real Property or its use or
operations, except where the failure to obtain such approval or consent
would not have a material adverse effect on the operation or value of the
Real Property. Neither the Company nor any Subsidiary has received any
notice of any material real estate tax deficiency or assessment which has
not been satisfied or is aware of any proposed material deficiency, claim
or assessment with respect to any of the Real Property, or any pending or
threatened condemnation thereof.
(b) Personal Property. A description of certain items of machinery
-----------------
and equipment of the Company and each of its Subsidiaries is contained in the
fixed asset register as of December 31, 1997, attached as Schedule 2.6(b)
---------------
hereto; however, as a result of accounting treatment, such fixed asset register
does not purport to be a complete description of all machinery and equipment of
the Company and each of its Subsidiaries as of December 31, 1997. Except as
specifically disclosed in Schedule 2.6(b) or in the Base Balance Sheet (as
---------------
hereinafter defined), the Company and each of its Subsidiaries has good and
marketable title to
8
<PAGE>
all of its personal property. None of such personal property or assets is
subject to any mortgage, pledge, lien, conditional sale agreement, security
title, encumbrance or other charge except as specifically disclosed in said
Schedule or in the Base Balance Sheet. Except as set forth on
Schedule 2.6(b), the Base Balance Sheet reflects all personal property of the
- ---------------
Company and each of its Subsidiaries. To the knowledge of the Company and the
Stockholders and except as otherwise specified in Schedule 2.6(b) hereto, all
---------------
leasehold improvements, furnishings, machinery and equipment of the Company and
each of its Subsidiaries are in good repair, have been well maintained, and
substantially comply with all applicable laws, ordinances and regulations, and
such machinery and equipment is in good working order, reasonable wear and tear
excepted. A complete list of each item of personal property of the Company and
its Subsidiaries to be removed from the respective offices of the Company and
its Subsidiaries upon consummation of the transactions contemplated hereby is
contained in Schedule 2.6(b).
---------------
2.7 Financial Statements.
--------------------
(a) The Company has delivered to Buyer (i) unaudited consolidated
balance sheets of the Company and its Subsidiaries as of October 31, 1995 and
1996 and statements of income, stockholders' equity and cash flows for the
fiscal years then ended, reviewed by McGladrey & Pullen LLP, independent public
accountants, (ii) an audited consolidated balance sheet of the Company and its
Subsidiaries as of October 31, 1997 and statements of income, stockholders'
equity and cash flows for the fiscal year then ended, certified by McGladrey &
Pullen LLP, independent public accountants, (iii) an unaudited consolidated
balance sheet of the Company and its Subsidiaries as of December 31, 1997 (the
"Base Balance Sheet") and (iv) an unaudited consolidated balance sheet of the
- -------------------
Company and its Subsidiaries as of March 31, 1998 and statements of income,
stockholders' equity and cash flows for the five-month period then ended. All
of such financial statements are attached hereto as Schedule 2.7, have been
------------
prepared in accordance with generally accepted accounting principles applied
consistently during the periods covered thereby, are complete and correct in all
material respects and present fairly in all material respects the financial
condition of the Company and each of its Subsidiaries at the dates of said
statements and the results of its operations for the periods covered thereby.
The Company's unaudited balance sheet as of March 31, 1998 is referred to herein
as the "Interim Balance Sheet."
---------------------
(b) As of the date of the Base Balance Sheet, neither the Company
nor any Subsidiary had any liabilities (which liabilities, when taken
individually or in the aggregate were material) of any nature, whether accrued,
absolute, contingent or otherwise, asserted or unasserted, known or unknown
(including, without limitation, liabilities as guarantor or otherwise with
respect to obligations of others, liabilities for taxes due or then accrued or
to become due, or contingent or potential liabilities relating to activities of
the Company or any Subsidiary or the conduct of their business prior to the date
of the Base Balance Sheet regardless of whether claims in respect thereof had
been asserted as of such date), except liabilities (i) stated or adequately
reserved against on the Base Balance Sheet, (ii) reflected in Schedules
furnished to Buyer hereunder as of the date hereof or (iii) incurred in the
ordinary
9
<PAGE>
course of business of the Company and its Subsidiaries which are not required to
be reflected in the Base Balance Sheet under generally accepted accounting
principles.
(c) As of the date hereof and as of the Closing, neither the
Company nor any Subsidiary has or will have any liabilities of any nature,
whether accrued, absolute, contingent or otherwise, asserted or unasserted,
known or unknown (including without limitation, liabilities as guarantor or
otherwise with respect to obligations of others, or liabilities for taxes due or
then accrued or to become due or contingent or potential liabilities relating to
activities of the Company or any Subsidiary or the conduct of their business
prior to the date hereof or the Closing, as the case may be, regardless of
whether claims in respect thereof had been asserted as of such date), except
liabilities (i) stated or adequately reserved against on the Base Balance Sheet,
(ii) reflected in Schedules furnished to Buyer hereunder on the date hereof, or
(iii) incurred in the ordinary course of business of the Company and its
Subsidiaries consistent with the terms of this Agreement.
2.8 Taxes.
-----
(a) The Company and each of its Subsidiaries has timely paid or
caused to be paid all federal, state, local, foreign, and other taxes, including
without limitation, income taxes, estimated taxes, alternative minimum taxes,
excise taxes, sales taxes, use taxes, value-added taxes, gross receipts taxes,
franchise taxes, capital stock taxes, employment and payroll-related taxes,
withholding taxes, stamp taxes, transfer taxes, windfall profit taxes,
environmental taxes and property taxes, whether or not measured in whole or in
part by net income , and all deficiencies, or other additions to tax, interest,
fines and penalties owed by it (collectively, "Taxes"), required to be paid by
-----
it through the date hereof, other than disputed Taxes set forth in Schedule 2.8
------------
attached hereto.
(b) The Company and each of its Subsidiaries has in accordance
with applicable law timely filed all federal, state, local and foreign tax
returns required to be filed by it through the date hereof, and all such returns
correctly and accurately in all material respects set forth the amount of any
Taxes relating to the applicable period, other than disputed Taxes set forth in
Schedule 2.8 attached hereto. A list of all federal, state, local and foreign
- ------------
income tax returns filed with respect to the Company and its Subsidiaries on or
after January 1, 1992 is set forth in Schedule 2.8 attached hereto, and said
------------
Schedule indicates those returns that have been audited or currently are the
subject of an audit. The Company has delivered to Buyer complete copies of all
federal, state, local and foreign income tax returns, examination reports and
statements of deficiencies assessed against or agreed to by the Company or any
of its Subsidiaries which were filed or received by the Company or any of its
Subsidiaries on or after January 1, 1992.
(c) Except as set forth on Schedule 2.8, neither the Internal
------------
Revenue Service (the "IRS") nor any other governmental authority is now
---
asserting or, to the knowledge of the Company or any Stockholder, threatening to
assert against the Company or any Subsidiary any deficiency or claim for
additional Taxes. No claim which remains unresolved has ever been
10
<PAGE>
made by an authority in a jurisdiction where the Company or any Subsidiary does
not file reports and returns that the Company or such Subsidiary is or may be
subject to taxation by that jurisdiction. There are no security interests on any
of the material assets of the Company or any Subsidiary that arose in connection
with any failure (or alleged failure) to pay any Taxes except a lien referred to
in Section 2.6(a)(i)(z). Neither the Company nor any Subsidiary has ever entered
into a closing agreement pursuant to Section 7121 of the Code.
(d) Except as set forth in Schedule 2.8 attached hereto, there
------------
has not been any audit of any tax return filed by the Company or any Subsidiary,
no such audit is in progress, and neither the Company nor any Subsidiary has
been notified by any tax authority that any such audit is contemplated or
pending. Except as set forth in Schedule 2.8, no extension of time with respect
------------
to any date on which a tax return was or is to be filed by the Company or any
Subsidiary is in force, and no waiver or agreement by the Company or any
Subsidiary is in force for the extension of time for the assessment or payment
of any Taxes.
(e) Except as set forth on Schedule 2.8, neither the Company nor
------------
any Subsidiary has ever been (or has ever had any liability for unpaid Taxes
because it once was) a member of an "affiliated group" (as defined in Section
1504(a) of the Code). Except as set forth in Schedule 2.8, neither the Company
------------
nor any Subsidiary has ever filed, and has ever been required to file, a
consolidated, combined or unitary tax return with any other entity. Except as
set forth in
Schedule 2.8, neither the Company nor any Subsidiary owns and has ever owned a
- ------------
direct or indirect interest in any trust, partnership, corporation or other
entity. Except as set forth in Schedule 2.8 attached hereto, neither the Company
------------
nor any Subsidiary is a party to any tax sharing agreement.
(f) For purposes of this Agreement, all references to Sections of
the Code shall include any predecessor provisions to such Sections and any
similar provisions of federal, state, local or foreign law.
(g) The Share Transfers (as defined in Section 4.13) have been
approved by the Stockholders in accordance with Section 280G(b)(5)(B) of the
Code and Answer A-7 of Proposed Regulation 1.280G-1.
2.9 Collectibility of Accounts Receivable. All of the accounts
-------------------------------------
receivable of the Company or any Subsidiary shown or reflected on the Interim
Balance Sheet or existing at the date hereof (less the reserve for bad debts set
forth on the Interim Balance Sheet) are or will be at the Closing valid and
enforceable claims, fully collectible and subject to no setoff or counterclaim.
Neither the Company nor any Subsidiary has any accounts or loans receivable from
any person, firm or corporation which is affiliated with the Company or any
Subsidiary or from any director, officer or employee of the Company or any
as disclosed on Schedule 2.9 hereto, and all accounts and loans receivable from
------------
Subsidiary, except any such person, firm or corporation shall be paid in cash
prior to the Closing.
2.10 [Intentionally Omitted.]
-----------------------
11
<PAGE>
2.11 Absence of Certain Changes. Except as disclosed in Schedule 2.11
-------------------------- -------------
attached hereto, since the date of the Base Balance Sheet there has not been:
(a) Any change in the financial condition, properties, assets,
liabilities, business or operations of the Company or any of its Subsidiaries,
which change by itself or in conjunction with all other such changes, whether or
not arising in the ordinary course of business, has had a Material Adverse
Effect on the Company and its Subsidiaries taken as a whole;
(b) Any contingent liability incurred by the Company or any of its
Subsidiaries as guarantor or otherwise with respect to the obligations of others
or any cancellation of any material debt or claim owing to, or waiver of any
material right of, the Company or any of its Subsidiaries;
(c) Any mortgage, encumbrance or lien placed on any of the
properties of the Company or any of its Subsidiaries which remains in existence
on the date hereof or will remain on the Closing Date;
(d) Any obligation or liability of any nature, whether accrued,
absolute, contingent or otherwise, asserted or unasserted, known or unknown
(including without limitation liabilities for Taxes due or to become due or
contingent or potential liabilities relating to products or services provided by
the Company or any of its Subsidiaries or the conduct of the business of the
Company or any of its Subsidiaries since the date of the Base Balance Sheet
regardless of whether claims in respect thereof have been asserted), incurred by
the Company or any of its Subsidiaries other than obligations and liabilities
incurred in the ordinary course of business consistent with the terms of this
Agreement (it being understood that product or service liability claims shall
not be deemed to be incurred in the ordinary course of business);
(e) Any purchase, sale or other disposition, or any agreement or
other arrangement for the purchase, sale or other disposition, of any of the
properties or assets of the Company or any of its Subsidiaries other than in the
ordinary course of business;
(f) Any damage, destruction or loss, whether or not covered by
insurance, having a Material Adverse Effect on the Company and its Subsidiaries
taken as a whole;
(g) Any declaration, setting aside or payment of any dividend by
the Company or any of its Subsidiaries, or the making of any other distribution
in respect of the capital stock of the Company or any of its Subsidiaries, or
any direct or indirect redemption, purchase or other acquisition by the Company
or any of its Subsidiaries of its own capital stock;
(h) Any labor trouble or claim of unfair labor practices involving
the Company or any of its Subsidiaries; any change in the compensation payable
or to become
12
<PAGE>
payable by the Company or any of its Subsidiaries to any of its officers,
employees, agents or independent contractors other than normal merit increases
in accordance with its usual practices; or any bonus payment or arrangement made
to or with any of such officers, employees, agents or independent contractors;
(i) Any change with respect to the officers or management of the
Company or any of its Subsidiaries;
(j) Any payment or discharge of a material lien or liability of
the Company or any of its Subsidiaries which was not shown on the Base Balance
Sheet or incurred in the ordinary course of business thereafter;
(k) Any obligation or liability incurred by the Company or any of
its Subsidiaries to any of its officers, directors, stockholders or employees,
or any loans or advances made by the Company or any of its Subsidiaries to any
of its officers, directors, stockholders or employees, except normal
compensation and expense allowances payable to officers or employees;
(l) Any change in accounting methods or practices, credit
practices or collection policies used by the Company or any of its Subsidiaries;
(m) Any resignation or termination of the Company's representation
of any Principal (with respect to all or any of the products of such Principal
or with respect to any Customers) from whom the Company received commission
revenues in excess of $1,206,900 during the Company's fiscal year ended October
31, 1997 (each, a "Top Principal"), or any change in commission rate paid by any
-------------
Top Principal, or any notice of same (for purposes of this Agreement,
"Principal" shall mean any manufacturer, grower, processor, producer,
---------
distributor or other wholesaler, or any supplier whose goods, products or lines
are offered for sale or for retail merchandising by the Company, and "Customer"
--------
shall mean any individual, firm, corporation or other business entity from which
the Company obtains product orders on behalf of its Principals);
(n) Any other transaction entered into by the Company or any of
its Subsidiaries other than transactions in the ordinary course of business; or
(o) Any agreement or understanding whether in writing or
otherwise, for the Company or any of its Subsidiaries to take any of the actions
specified in paragraphs (a) through (n) above.
2.12 Ordinary Course. Since the date of the Base Balance Sheet, the
---------------
Company and each of its Subsidiaries has conducted its business only in the
ordinary course and consistently with its prior practices.
13
<PAGE>
2.13 Banking Relations. All of the arrangements which the Company or any
-----------------
of its Subsidiaries has with any banking institution are completely and
accurately described in Schedule 2.13 attached hereto, indicating with respect
-------------
to each of such arrangements the type of arrangement maintained (such as
checking account, borrowing arrangements, safe deposit box, etc.) and the person
or persons authorized in respect thereof.
2.14 Intellectual Property.
---------------------
(a) Schedule 2.14 describes all patents, copyrights, trade
-------------
secrets, trademarks and other proprietary rights (collectively, "Intellectual
------------
Property") used in the conduct of the business of the Company and each of its
- ---------
Subsidiaries, each item of which the Company or such Subsidiary either has all
freely transferable right, title and interest in or rights under contract to
use. Except as disclosed in Schedule 2.14, (i) all registrations with and
-------------
applications to United States governmental authorities with respect to
Intellectual Property owned by the Company and any of its Subsidiaries disclosed
in Schedule 2.14 are valid and in full force and effect, (ii) neither the
-------------
Company nor any Subsidiary is, nor has it received any notice that it is in
default (or with the giving of notice or lapse of time or both, would be in
default) in any material respect under any contract to use its Intellectual
Property and (iii) to the knowledge of the Company and the Stockholders, such
Intellectual Property is not being infringed by any other person or entity.
Neither the Company nor any Subsidiary has received notice that it is infringing
any Intellectual Property of any other person or entity. No such claim is
pending or has been threatened or made to such effect that has not been resolved
and neither the Company nor any Subsidiary is infringing any Intellectual
Property of any other person or entity the effect of which, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect on
the Company and its Subsidiaries taken as a whole. Any and all claims of such
nature asserted against the Company or any Subsidiary since December 31, 1994
are summarized on Schedule 2.14, whether or not resolved as of the date hereof.
-------------
To the knowledge of the Company and the Stockholders, there exists no unexpired
patent or patent application which includes claims that would be infringed by or
otherwise adversely affect the products, activities or business of the Company
or any Subsidiary. Except as described in Schedule 2.14, the Company and each
-------------
of its Subsidiaries has the right to use, free and clear of claims or rights of
other persons, all customer lists, designs, manufacturing or other processes,
computer software, systems, data compilations, research results and other
information required for or incident to its products or its business as
presently conducted or contemplated.
(b) Except as set forth in Schedule 2.14, neither the Company or
-------------
any Subsidiary nor, to the knowledge of the Company and the Stockholders, any of
their employees have any agreements or arrangements with any persons other than
the Company or its Subsidiaries related to confidential information or trade
secrets of such persons or restricting any such employee's ability to engage in
business activities of any nature. The activities of their employees on behalf
of the Company or any Subsidiary do not violate any such agreements or
arrangements known to the Company.
14
<PAGE>
(c) The Company is engaged in a Year 2000 compliance process as
set forth on Schedule 2.14.
-------------
2.15 Contracts. Except for agreements relating to Principals, which are
---------
addressed in Section 2.30 and to which this Section 2.15 does not apply, and
except for contracts, commitments, plans, agreements and licenses described in
Schedule 2.15 or any other Schedule furnished to Buyer hereunder (true and
- -------------
complete copies of which have been delivered to Buyer), neither the Company nor
any of its Subsidiaries is a party to or subject to:
(a) any plan or contract providing for bonuses, pensions, options,
stock purchases, deferred compensation, retirement payments, profit sharing,
collective bargaining or the like, or any contract or agreement with any labor
union;
(b) any employment contract or contract for services which is not
terminable within 30 days by the Company or a Subsidiary without liability for
any penalty or severance payment;
(c) [Intentionally Omitted.]
(d) any contract or agreement under which, as of the date of this
Agreement, the Company or any of its Subsidiaries has unpaid obligations of
$100,000 or more, except contracts and agreements specifically disclosed
elsewhere under this Agreement;
(e) any contract or agreement involving more than $100,000 of
unpaid obligations of the Company or any of its Subsidiaries as of the date of
this Agreement which, by its terms, does not terminate or is not terminable
without penalty by the Company or a Subsidiary or their successors within one
year after the date hereof;
(f) any contract or agreement for the sale or lease of its
products or services not made in the ordinary course of business;
(g) any contract containing covenants limiting the freedom of the
Company or any of its Subsidiaries to compete in any line of business or with
any person or entity other than as is standard in the food brokerage industry;
(h) any contract or agreement for the purchase of any fixed asset
for a price in excess of $100,000 whether or not such purchase is in the
ordinary course of business;
(i) any license agreement (as licensor or licensee);
(j) any indenture, mortgage, promissory note, loan agreement,
guaranty or other agreement or commitment for the borrowing of money not
otherwise disclosed in the Base Balance Sheet (including in such Schedule, if
applicable, a description on any prepayment penalties or similar obligations);
or
15
<PAGE>
(k) any contract or agreement with any officer, employee, director
or stockholder of the Company or any of its Subsidiaries or with any persons or
organizations controlled by or affiliated with any of them.
Except as set forth in Schedule 2.15, neither the Company nor any of its
-------------
Subsidiaries is in default under any such contracts, commitments, plans,
agreements or licenses described in said Schedule or has any knowledge of
conditions or facts which with notice or passage of time, or both, would
constitute a default. To the knowledge of the Company and the Stockholders, no
third party under any contract, commitment, plan, agreement or license described
in Schedule 2.15 is in default thereunder and there is no event which, with
-------------
notice or the passage of time, or both, would give rise to such a default. Each
contract, commitment, plan, agreement or license described in Schedule 2.15 has
-------------
been duly authorized and executed by the Company, is in full force and effect
and is enforceable by the Company in accordance with its terms.
2.16 Litigation. Schedule 2.16 hereto lists all currently pending
---------- -------------
litigation and governmental or administrative proceedings or investigations to
which the Company or any of its Subsidiaries is a party. Except for matters
described in Schedule 2.16, there is no litigation or governmental or
-------------
administrative proceeding or investigation pending or, to the knowledge of the
Company or the Stockholders, threatened against the Company or any of its
Subsidiaries or their affiliates which may have, either individually or in the
aggregate, a Material Adverse Effect on the Company and its Subsidiaries taken
as a whole, or which would prevent or hinder the consummation of the
transactions contemplated by this Agreement. With respect to each matter set
forth therein, Schedule 2.16 sets forth a description of the matter, the forum
-------------
(if any) in which it is being conducted, the parties thereto and the type and
amount of relief sought.
2.17 Compliance with Laws. Except as set forth in Schedule 2.17 hereto,
-------------------- -------------
the Company and each of its Subsidiaries is in compliance with all applicable
statutes, ordinances, orders, judgments, decrees, rules and regulations
promulgated by any federal, state, municipal entity, agency, court or other
governmental authority which apply to the Company or any Subsidiary or to the
conduct of its business, except where the failure to be in such compliance could
not reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect on the Company and its Subsidiaries taken as a whole,
and neither the Company nor any of its Subsidiaries has received notice of a
material violation or alleged material violation of any such statute, ordinance,
order, rule or regulation.
2.18 Insurance. The physical properties and assets of the Company and
---------
each of its Subsidiaries are insured to the extent disclosed in Schedule 2.18
-------------
attached hereto and all such insurance policies and arrangements are disclosed
in said Schedule. Except as set forth on Schedule 2.18, said insurance policies
-------------
and arrangements are in full force and effect, all premiums with respect thereto
are currently paid, and the Company and each of its Subsidiaries is in
compliance in all material respects with the terms thereof. To the knowledge of
the Company and the Stockholders, said insurance is adequate and customary for
the business engaged in by the Company and each Subsidiary, is sufficient for
compliance by the Company
16
<PAGE>
and each Subsidiary with all requirements of law and all agreements and leases
to which the Company or any Subsidiary is a party and will, if the Buyer so
chooses, remain in full force and effect after the consummation of the
transactions contemplated hereby.
2.19 Warranty or Other Claims. There are no existing or, to the knowledge
------------------------
of the Company and the Stockholders, threatened product liability, warranty or
other similar claims, or any facts upon which a material claim of such nature
could be based, against the Company or any of its Subsidiaries for products or
services which are defective or fail to meet any product or service warranties.
No claim has been asserted against the Company or any of its Subsidiaries for
renegotiation or price redetermination of any business transaction, and, to the
knowledge of the Company and the Stockholders, there are no facts upon which any
such claim could be based.
2.20 Powers of Attorney. Except as set forth on Schedule 2.20, neither
------------------ -------------
the Company, any Subsidiary or any Stockholder has any outstanding power of
attorney.
2.21 Finder's Fee. Neither the Company nor any of its Subsidiaries nor
------------
any Stockholder has incurred or become liable for any broker's commission or
finder's fee relating to or in connection with the transactions contemplated by
this Agreement.
2.22 Permits; Burdensome Agreements. Schedule 2.22 lists all material
------------------------------ -------------
permits, registrations, licenses, franchises, certifications and other approvals
(collectively, the "Approvals") required from federal, state and local
---------
authorities in order for the Company and each of its Subsidiaries to conduct its
business. The Company and each of its Subsidiaries has obtained all such
Approvals, which are valid and in full force and effect, and is operating in
material compliance therewith. Except as disclosed in Schedule 2.22, neither
-------------
the Company nor any of its Subsidiaries is subject to or bound by any agreement,
judgment, decree or order which could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect on the Company and
its Subsidiaries taken as a whole. To the knowledge of the Company and the
Stockholders, the Company and its Subsidiaries have all registrations,
certifications and similar approvals necessary or customary in the Company's
business for use in the manufacture, marketing, sales and distribution of the
products and services of the Company and its Subsidiaries.
2.23 Corporate Records; Copies of Documents. To the knowledge of the
--------------------------------------
Company and the Stockholders, the corporate record books of the Company and each
of its Subsidiaries accurately record all votes on material corporate matters
taken by their respective stockholders and boards of directors and committees.
The copies of the corporate records of the Company and each of its Subsidiaries,
as made available to Buyer for review, are true and complete copies of the
originals of such documents. The Company has made available for inspection and
copying by Buyer and its counsel true and correct copies of all documents
referred to in this Section or in the Schedules delivered to Buyer pursuant to
this Agreement.
17
<PAGE>
2.24 Transactions with Interested Persons. Except as set forth in
------------------------------------
Schedule 2.24 hereto, neither the Company, any of its Subsidiaries, any
- -------- ----
Stockholder, officer, supervisory employee or director of the Company or any of
its Subsidiaries or, to the knowledge of the Company and the Stockholders, any
of their respective spouses or family members, (i) owns directly or indirectly
on an individual or joint basis any material interest in, or serves as an
officer or director or in another similar capacity of, any competitor or
supplier of Company or any of its Subsidiaries, or any organization which has a
material contract or arrangement with the Company or any of its Subsidiaries or
(ii) has directly or indirectly engaged in any transaction involving any lease
or other transaction of the transfer of any material (measured at the time of
such transaction or as of the date hereof) cash, property or rights to or from
the Company or any of its Subsidiaries from, to or for the benefit of any
affiliate or former affiliate of the Company or any of its Subsidiaries.
2.25 Employee Benefit Programs.
-------------------------
(a) Schedule 2.25 sets forth a list of every Employee Program
-------------
that has been maintained by the Company or an Affiliate at any time during the
three-year period ending on the Closing Date.
(b) Each Employee Program which has ever been maintained by the
Company or an Affiliate and which has been intended to qualify under Section
401(a) or 501(c)(9) of the Code has received a favorable determination or
approval letter from the IRS regarding its qualification under such section and
except as disclosed in Schedule 2.25 has, in fact, been qualified under the
-------------
applicable section of the Code from the effective date of such Employee Program
through and including the Closing Date (or, if earlier, the date that all of
such Employee Program's assets were distributed) and no amendment to any
Employee Program or failure to amend any Employee Program has occurred with
respect to which the remedial amendment period described in Treasury Regulation
Section 1.401(b)-1 has expired. No event or omission has occurred which would
cause any such Employee Program to lose its qualification under the applicable
Code section and each asset held under any such Employee Program may be
liquidated or terminated without the imposition of any redemption for surrender
charge or comparable liability.
(c) Neither the Company nor any Affiliate knows, nor should any of
them reasonably know, of any material failure of any party to comply with any
laws applicable with respect to the Employee Programs that have ever been
maintained by the Company or any Affiliate. With respect to any Employee
Program ever maintained by the Company or any Affiliate, there has been no (i)
"prohibited transaction," as defined in Section 406 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") or Code Section 4975, (ii)
-----
material failure to comply with any provision of ERISA, other applicable law, or
any agreement, or (iii) non-deductible contribution, which, in the case of any
of (i), (ii), or (iii), could subject the Company or any Affiliate to liability
either directly or indirectly (including, without limitation, through any
obligation of indemnification or contribution) for any damages, penalties, or
taxes, or any other loss or expense. No litigation or governmental
administrative proceeding (or investigation) or other proceeding (other than
those relating to routine claims
18
<PAGE>
for benefits) is pending or, to the knowledge of the Company and the
Stockholders, threatened with respect to any such Employee Program.
Notwithstanding anything to the contrary in subsection (b) and/or (c) of this
Section 2.25, no representation is made as to the satisfaction of any formal
requirements of the Code (relating to the documentation of such Employee
Programs) with respect to which the remedial amendment period set forth in
Section 401(b) of the Code, and any regulations, rulings or other releases
thereunder has not yet expired.
(d) Neither the Company nor any Affiliate (i) has ever maintained
any Employee Program which has been subject to title IV of ERISA or Code Section
412, including, but not limited to, any Multiemployer Plan, (ii) except as
disclosed in Schedule 2.25, has ever provided health care or any other non-
-------------
pension benefits to any employees after their employment is terminated (other
than as required by part 6 of subtitle B of title I of ERISA) or has ever
promised to provide such post-termination benefits or (iii) except as disclosed
in Schedule 2.25, has ever provided health care or any other non-pension
-------------
benefits to any individuals who were previously employed by entities acquired by
the Company prior to the date of this Agreement.
(e) With respect to each Employee Program maintained by the
Company within the three years preceding the Closing Date, complete and correct
copies of the following documents (if applicable to such Employee Program) have
previously been delivered to Buyer: (i) all documents embodying or governing
such Employee Program, and any funding medium for the Employee Program
(including, without limitation, trust agreements) as they may have been amended
to the date hereof; (ii) the most recent IRS determination or approval letter
with respect to such Employee Program under Code Section 401(a) or 501(c)(9),
and any applications for determination or approval subsequently filed with the
IRS; (iii) the three most recently filed IRS Forms 5500, with all applicable
schedules and accountants' opinions attached thereto; (iv) the three most recent
actuarial valuation reports completed with respect to such Employee Program; (v)
the summary plan description for such Employee Program (or other descriptions of
such Employee Program provided to employees) and all modifications thereto; (vi)
any insurance policy (including any fiduciary liability insurance policy or
fidelity bond) related to such Employee Program; (vii) any registration
statement or other filing made pursuant to any federal or state securities law
and (viii) all correspondence to and from any state or federal agency within the
last three years.
(f) Each Employee Program required to be listed on Schedule 2.25
-------------
may be amended, terminated, or otherwise modified by the Company to the greatest
extent permitted by applicable law, including the elimination of any and all
future benefit accruals under any Employee Program and no employee
communications or provision of any Employee Program document has ever purported
to limit the right of the Company or the Affiliate to so amend, terminate or
otherwise modify such Employee Program.
(g) Each Employee Program ever maintained by the Company
(including each non-qualified deferred compensation arrangement) has been
maintained in compliance with all applicable requirements of federal and state
securities laws including (without
19
<PAGE>
limitation, if applicable) the requirements that the offering of interests in
such Employee Program be registered under the Securities Act and/or state "blue
sky" laws.
(h) Each Employee Program ever maintained by the Company or an
Affiliate has complied in all material respects with the applicable notification
and other applicable requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985, Health Insurance Portability and Accountability Act
of 1996, the Newborns' and Mothers' Health Protection Act of 1996, and the
Mental Health Parity Act of 1996.
(i) For purposes of this section:
(i) "Employee Program" means (A) all employee benefit
----------------
plans within the meaning of ERISA Section 3(3), including, but not limited to,
multiple employer welfare arrangements (within the meaning of ERISA Section
3(40)), plans to which more than one unaffiliated employer contributes and
employee benefit plans (such as foreign or excess benefit plans) which are not
subject to ERISA; and (B) all stock option plans, bonus or incentive award
plans, severance pay policies or agreements, deferred compensation agreements,
supplemental income arrangements, vacation plans, and all other employee benefit
plans, agreements, and arrangements (including any informal arrangements) not
described in (A) above, including without limitation, any arrangement intended
to comply with Section 120, 125, 127 or 129 of the Code. In the case of an
Employee Program funded through a trust described in Code Section 401(a) or an
organization described in Code Section 501(c)(9), each reference to such
Employee Program shall include a reference to such trust or organization.
(ii) An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides benefits under such Employee Program, or
has any obligation (by agreement or under applicable law) to contribute to or
provide benefits under such Employee Program, or if such Employee Program
provides benefits to or otherwise covers employees of such entity (or their
spouses, dependents, or beneficiaries).
(iii) An entity is an "Affiliate" of the Company if it would
---------
have ever been considered a single employer with the Company under ERISA Section
4001(b) or part of the same "controlled group" as the Company for purposes of
ERISA Section 302(d)(8)(C).
(iv) "Multiemployer Plan" means a (pension or non-pension)
------------------
employee benefit plan to which more than one unaffiliated employer contributes
and which is maintained pursuant to one or more collective bargaining
agreements.
2.26 Environmental Matters.
---------------------
(a) Except as set forth in Schedule 2.26 hereto, (i) neither the
-------------
Company nor any of its Subsidiaries has ever generated, transported, used,
stored, treated, disposed of, or managed any Hazardous Waste (as defined below);
(ii) to the knowledge of the Company and the Stockholders, no Hazardous Material
(as defined below) has ever been or is threatened to be spilled, released, or
disposed of at any site presently or formerly owned, operated, leased,
20
<PAGE>
or used by the Company or any of its Subsidiaries, or has ever been located in
the soil or groundwater at any such site; (iii) to the knowledge of the Company
and the Stockholders, no Hazardous Material has ever been transported from any
site presently or formerly owned, operated, leased, or used by the Company or
any of its Subsidiaries for treatment, storage, or disposal at any other place;
(iv) to the knowledge of the Company and the Stockholders, neither the Company
nor any of its Subsidiaries presently owns, operates, leases, or uses, nor has
it previously owned, operated, leased, or used any site on which underground
storage tanks are or were located; and (v) no lien has ever been imposed by any
governmental agency on any property, facility, machinery, or equipment owned,
operated, leased, or used by the Company or any of its Subsidiaries in
connection with the presence of any Hazardous Material.
(b) Except as set forth in Schedule 2.26 hereto, (i) neither the
-------------
Company nor any of its Subsidiaries has any material liability under, nor has it
ever violated, any Environmental Law (as defined below); (ii) the Company and
each of its Subsidiaries, any property owned, operated, leased, or used by any
of them, and any facilities and operations thereon, are presently in compliance
with all applicable Environmental Laws; (iii) neither the Company or any of its
Subsidiaries has ever entered into or been subject to any judgment, consent
decree, compliance order, or administrative order with respect to any
environmental or health and safety matter or received any request for
information, notice, demand letter, administrative inquiry, or formal or
informal complaint or claim with respect to any environmental or health and
safety matter or the enforcement of any Environmental Law; and (iv) neither the
Company nor any of its Subsidiaries has any reason to believe that any of the
items enumerated in clause (iii) of this subsection will be forthcoming.
(c) To the knowledge of the Company and the Stockholders, no site
owned, operated, leased, or used by the Company or any of its Subsidiaries
contains any asbestos or asbestos-containing material, any polychlorinated
biphenyls ("PCBs") or equipment containing PCBs, or any urea formaldehyde foam
----
insulation.
(d) The Company has provided to Buyer copies of all documents,
records, and information in the possession or control of the Company or any of
its Subsidiaries concerning any environmental or health and safety matter
relevant to the Company or any of its Subsidiaries, whether generated by the
Company, its Subsidiaries, or others, including without limitation,
environmental audits, environmental risk assessments, site assessments,
documentation regarding off-site disposal of Hazardous Materials, spill control
plans, and reports, correspondence, permits, licenses, approvals, consents, and
other authorizations related to environmental or health and safety matters
issued by any governmental agency.
(e) For purposes of this Section 2.26, (i) "Hazardous Material"
------------ ------------------
shall mean and include any hazardous waste, hazardous material, hazardous
substance, petroleum product, oil, toxic substance, pollutant, contaminant, or
other substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental Law; (ii) "Hazardous
---------
Waste" shall mean and include any hazardous waste as defined or regulated under
- -----
any Environmental Law; (iii) "Environmental Law" shall mean any environmental or
-----------------
21
<PAGE>
health and safety-related law, regulation, rule, ordinance, or by-law at the
foreign, federal, state, or local level, whether existing as of the date hereof,
previously enforced, or subsequently enacted; and (iv) "Company" shall mean and
-------
include Company, each of its Subsidiaries and all other entities for whose
conduct the Company or any of its Subsidiaries is or may be held responsible
under any Environmental Law.
2.27 List of Directors and Officers. Schedule 2.27 hereto contains a true
------------------------------ -------------
and complete list of all current directors and officers of the Company and each
of its Subsidiaries. In addition, Schedule 2.27 hereto contains a list of (a)
-------------
the aggregate annual compensation received by all managers and employees of the
Company and any Subsidiary for the calendar year ending December 31, 1997, (b)
all Form 1099s filed by the Company and any Subsidiary for the calendar year
ending December 31, 1997 and (c) the aggregate compensation received by all
managers and employees of the Company and any Subsidiary for the month ending
March 31, 1998. In each case such Schedule includes the current job title of
each such individual.
2.28 Non-Foreign Status. Neither the Company nor any of its Subsidiaries
------------------
is a "foreign person" within the meaning of Section 1445 of the Code and
Treasury Regulations Section 1.1445-2.
2.29 Employees; Labor Matters. The Company and its Subsidiaries employ a
------------------------
total of approximately 1,150 full-time employees and 500 part-time employees and
generally enjoy good employer-employee relationships. Except as disclosed in
Schedule 2.29, neither the Company nor any of its Subsidiaries is delinquent in
- -------------
payments to any of its employees for any wages, salaries, commissions, bonuses
or other direct compensation for any services performed for it to the date
hereof or amounts required to be reimbursed to such employees. Upon termination
of the employment of any of said employees, neither the Company, any Subsidiary
nor Buyer will by reason of the transactions contemplated under this Agreement
or anything done prior to the Closing be liable to any of said employees for so-
called "severance pay" or any other payments, except as set forth in Schedule
--------
2.29. Neither the Company nor any Subsidiary has any policy, practice, plan or
- ----
program of paying severance pay or any form of severance compensation in
connection with the termination of employment, except as set forth in said
Schedule. The Company and each of its Subsidiaries are in compliance in all
material respects with all applicable laws and regulations respecting labor,
employment, fair employment practices, work place safety and health, terms and
conditions of employment, wages and hours, and withholding of taxes and
reporting of income. There are no charges of employment discrimination or
unfair labor practices, nor are there any strikes, slowdowns, stoppages of work,
or any other concerted interference with normal operations which are existing,
pending or threatened against or involving the Company or any of its
Subsidiaries. No question concerning representation exists respecting any
employees of the Company or any of its Subsidiaries. There are no grievances,
complaints or charges that have been filed against the Company or any of its
Subsidiaries under any dispute resolution procedure (including, but not limited
to, any proceedings under any dispute resolution procedure under any collective
bargaining agreement) that might have a Material Adverse Effect on the Company
or
22
<PAGE>
Subsidiaries taken as a whole, and there is no arbitration or similar
proceeding pending and no claim therefor has been asserted. No collective
bargaining agreement is in effect or is currently being or is about to be
negotiated by the Company or any of its Subsidiaries. Neither the Company nor
any of its Subsidiaries has received any information indicating that any of its
employment policies or practices is currently being audited or investigated by
any federal, state or local government agency. The Company and each of its
Subsidiaries is, and at all times since its incorporation has been, in
compliance in all material respects with the requirements of the Immigration
Reform Control Act of 1986.
2.30 Principals.
----------
(a) The list of the Company's Top Principals (as defined in
Section 2.11(m) hereof) and the aggregate brokerage commission revenues received
by the Company during such calendar year from each such Top Principal, attached
hereto as Schedule 2.30, i s true, correct and complete. The Company has
-------------
delivered to Buyer true and complete copies of all written brokerage agreements
and/or letters of appointment with or from Top Principals in effect as of the
date of this Agreement. Set forth on Schedule 2.30 is a list of all other
-------------
agreements and documents with or involving any person or entity and relating to
financial obligations of the Company with respect to commissions or other
payments received by the Company (or an affiliate of the Company) from Top
Principals. Except as set forth on Schedule 2.30, since October 31, 1997, the
-------------
Company has had no commitment, understanding or agreement with any Top Principal
or any other person or entity relating to payments to be made by the Company to
any person or entity computed in whole or in part with respect to sales of or
commissions paid or to be paid by any Top Principal.
(b) Except as set forth on Schedule 2.30, to the knowledge of the
-------------
Company and the Stockholders, the Company is not currently, and since October
31, 1997 has not been, subject to any notice of probation from any Top
Principal. Except as set forth on Schedule 2.30, to the knowledge of the
-------------
Company and the Stockholders, since October 31, 1997, the Company has not
received any oral or written communication from any Top Principal which places
the Company on probation or otherwise suggests, threatens or implies (i)
possible termination of the Company's appointment as broker for such Top
Principal, or (ii) that such Top Principal intends to amend the terms of the
Company's brokerage agreement with such Top Principal in order or reappoint, or
continue the appointment of, the Company as broker with respect to a lesser
portion of the applicable territory than the greatest portion of such area in
which the Company acted as broker for such Top Principal during the twelve-month
period ended March 31, 1998, or at a lower commission rate than the highest rate
paid by such Top Principal to the Company with respect to sales during such
period. The relationships of the Company with its Principals are good
commercial working relationships.
(c) Except as set forth on Schedule 2.30, there are, and since
--------------
October 31, 1997 there have been, no disputes or claims involving individually
in ex cess of $25,000 or in the aggregate in excess of $100,000, (i) between the
Company and any Top Principal, (ii) between the Company and any Top Customer, or
(iii) to the knowledge of the Company and
23
<PAGE>
the Stockholders, between any Top Principal and any Top Customer. As used in
this Section 2.30(d), the terms "disputes" or "claims" shall mean (A) matters
which, to the knowledge of the Company and the Stockholders, have been referred
to counsel or are the subject of litigation, or (B) matters as to which a Top
Principal has informed the Company that it intends to seek recourse against the
Company, or may be reasonably expected to seek recourse against the Company, if
such matter is not resolved to the satisfaction of such Top Principal. For the
purposes of this Agreement, "Top Customers" shall mean and include those
-------------
Customers listed on Schedule 2.30.
-------------
2.31 Transfer of Shares. Except as set forth on Schedule 2.31 attached
------------------ -------------
hereto, no holder of stock of the Company or any Subsidiary has at any time
transferred any of such stock to any employee of the Company or any Subsidiary,
which transfer constituted or could be viewed as compensation for services
rendered to the Company or any Subsidiary by said employee.
2.32 Stock Repurchase. Except as set forth on Schedule 2.32, since
---------------- -------------
January 1, 1988, neither the Company nor any Subsidiary has redeemed or
repurchased any of its capital stock.
2.33 Absence of Improper Payments. Since December 31, 1994, the Company:
----------------------------
(a) has not made any contributions, payments or gifts of its property to or for
the private use of any governmental official, employee or agent where either the
payment or the purpose of such contribution, payments or gift is illegal under
the laws of the United States, any state thereof or any other jurisdiction
(foreign or domestic) or (b) has not made any contribution, or reimbursed any
political gift or contribution made by any other person, to candidates for
public office, whether federal, state or local, where such contribution would be
in violation of applicable law.
2.34 Disclosure.
----------
(a) The representations, warranties and statements contained in
this Agreement and in the certificates, Exhibits and Schedules delivered by the
Company and the Stockholders to Buyer pursuant to or contemplated by this
Agreement, do not contain any untrue statement of a material fact, and, when
taken together, do not omit to state a material fact required to be stated
therein or necessary in order to make such representations, warranties or
statements not misleading in light of the circumstances under which they were
made. To the knowledge of the Company and the Stockholders, there are no facts
which presently or may in the future have a material adverse effect on the
business, properties, prospects, operations or condition of the Company or any
of its Subsidiaries which have not been specifically disclosed herein or in a
Schedule furnished herewith, other than general economic conditions affecting
the industries in which the Company and each of its Subsidiaries operate.
(b) Provided only that Buyer has accurately incorporated any
information furnished in writing by the Company to Buyer specifically for
inclusion in the Registration Statement or the Prospectus (as applicable) in
connection with the IPO and has deleted from the
24
<PAGE>
Registration Statement or the Prospectus (as applicable) any statement that the
Company has specifically requested in writing be so deleted, (i) at the time the
Registration Statement becomes effective under the Securities Act of 1933, as
amended (the "Securities Act"), it will not contain an 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 not misleading, and (ii) at the time of
the IPO, the Prospectus will not include an untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The representations and warranties in this Section 2.34(b) shall not
apply to statements in or omissions from the Registration Statement and
prospectus relating to any person or entity other than the Company and its
officers, directors and stockholders.
(c) The only representations and warranties made by the Company
and the Stockholders to Buyer are those contained in this Agreement and in the
certificates, Exhibits and Schedules delivered by the Company and the
Stockholders pursuant to or contemplated by this Agreement.
SECTIONAL 3. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.
As a material inducement to Buyer to enter into this Agreement and
consummate the transactions contemplated hereby, each Stockholder hereby
severally makes to Buyer each of the representations and warranties set forth in
this Section 3 with respect to such Stockholder. No Stockholder shall have any
right of indemnity or contribution from the Company or any Subsidiary with
respect to the breach of any representation or warranty hereunder.
3.1 Company Shares. Such Stockholder owns of record and beneficially the
--------------
Company Shares set forth opposite such Stockholder's name in the column headed
"Current Ownership" on Exhibit A hereto. As of the Closing, such Stockholder
---------
will own of record and beneficially the Company Shares set forth opposite such
Stockholder's name in the column headed "Closing Ownership" on Exhibit A hereto.
---------
Such Company Shares are, and when delivered by such Stockholder to Buyer
pursuant to this Agreement will be, duly authorized, validly issued, fully paid,
non-assessable and free and clear of any and all liens, encumbrances, charges or
claims, under Article 8 of any applicable state version of the Uniform
Commercial Code or otherwise.
3.2 Authority. Such Stockholder has full right, authority, power and
---------
capacity to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by or on behalf of such Stockholder
pursuant to this Agreement and to carry out the transactions contemplated hereby
and thereby. This Agreement and each agreement, document and instrument
executed and delivered by such Stockholder pursuant to this Agreement constitute
valid and binding obligations of such Stockholder, enforceable in accordance
with their respective terms, and have been duly authorized by all necessary
corporate action of each
25
<PAGE>
Stockholder which is a corporation, and such Stockholder has full power and
authority to transfer, sell and deliver to Buyer pursuant to this Agreement the
Company Shares owned by such Stockholder as of Closing. The execution, delivery
and performance of this Agreement and each such agreement, document and
instrument:
(i) does not and will not violate any provision of the
organizational documents of any Stockholder which is not a natural person,
or any laws of the United States or any state or other jurisdiction
applicable to such Stockholder, or require such Stockholder to obtain any
approval, consent or waiver from, or make any filing with, any person or
entity (governmental or otherwise) that has not been obtained or made; and
(ii) does not and will not result in a breach of, constitute a
default under, accelerate any obligation under, or give rise to a right of
termination of, any indenture or loan or credit agreement or any other
agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award to which such Stockholder is a party or by which the
property of such Stockholder is bound or affected, or result in the
creation or imposition of any mortgage, pledge, lien, security interest or
other charge or encumbrance on any assets of the Company or any Subsidiary
or Company Shares owned by such Stockholder.
3.3 Agreements. Each such Stockholder who is employed by, or retained as
----------
a consultant to, the Company or any Subsidiary is not a party to any non-
competition, trade secret or confidentiality agreement with any party other than
the Company or a Subsidiary. There are no agreements or arrangements not
contained herein or disclosed in a Schedule hereto, to which such Stockholder is
a party relating to the business of the Company or any Subsidiary or to such
Stockholder's rights and obligations as a stockholder, director or officer of
the Company or any Subsidiary. Such Stockholder does not own, directly or
indirectly, on an individual or joint basis, any material interest in, or serve
as an officer or director of, any customer, competitor or supplier of the
Company or any Subsidiary, or any organization which has a contract or
arrangement with the Company or any Subsidiary. The execution, delivery and
performance of this Agreement will not violate or result in a default or
acceleration of any obligation under any contract, agreement, indenture or other
instrument involving the Company or any Subsidiary to which such Stockholder is
a party.
3.4 Investment Representations. Such Stockholder hereby represents and
--------------------------
warrants to and agrees with Buyer as follows, and such Stockholder acknowledges
that Buyer intends to rely on such representations, warranties and agreements in
connection with the transactions contemplated by this Agreement:
(a) All of the shares of Buyer Common Stock to be acquired by the
Stockholder hereunder (the "Buyer Shares") will be acquired for investment for
------------
the Stockholder's own account, not as a nominee or agent, and not with a view
toward distribution
26
<PAGE>
of any part thereof, and the Stockholder has no present plan or intention of
selling, granting participation in, or otherwise disposing of or distributing
such Buyer Shares. The Stockholder is not currently negotiating with any party
to pledge, exchange, sell or otherwise dispose of the Buyer Shares, has not
entered into any contract or binding commitment to pledge, exchange, sell or
otherwise dispose of the Buyer Shares, and will not enter into any such contract
or commitment prior to the transfer of the Buyer Shares to the Stockholders.
(b) The Stockholder acknowledges and understands that the Buyer
Shares will not be registered under the Securities Act in reliance on an
exemption from registration under the Securities Act, and that the reliance by
Buyer on such exemption is predicated on the representations of the Stockholder
set forth herein.
(c) The Stockholder understands that the Buyer Shares may not be
sold, transferred or otherwise disposed of without registration under the
Securities Act or an exemption therefrom, and that in the absence of an
effective registration statement covering the Buyer Shares or an available
exemption from registration under the Securities Act, the Buyer Shares must be
held indefinitely. The Stockholder is aware that current information about Buyer
is not now publicly available. The Stockholder agrees that, in addition to any
other applicable limitations on the transfer of the Buyer Shares, in no event
will he make a transfer, pledge or other disposition of any of the Buyer Shares
other than pursuant to an effective registration statement under the Securities
Act, unless and until (i) the Stockholder shall have notified Buyer of the
proposed disposition and shall have furnished to Buyer a statement of the
circumstances surrounding the disposition, and (ii) at the expense of the
Stockholder or his transferee, the Stockholder shall have furnished to Buyer an
opinion of counsel reasonably satisfactory to Buyer to the effect that such
transfer, pledge or other disposition may be made without registration under the
Securities Act.
(d) The Stockholder (i) by reason of his business and financial
experience, has such knowledge, sophistication and experience in business and
financial matters as to be capable of evaluating the merits and risks of his
investment in the Buyer Shares, and (ii) believes his financial condition and
investments are such that he is able to bear the economic risk of a complete
loss of the Buyer Shares. The Stockholder has consulted with his own advisers
with respect to his proposed investment in Buyer. The Stockholder represents
and warrants that he has had the opportunity to ask questions and to receive
answers from Buyer concerning the financial condition, operations and prospects
of Buyer and the terms and conditions of the Stockholder's investment, as well
as the opportunity to obtain any additional information necessary to verify the
accuracy of information furnished in connection therewith that Buyer possesses
or can acquire without unreasonable effort or expense.
(e) The Stockholder agrees that any certificate(s) representing
the Buyer Shares shall carry substantially the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or the
27
<PAGE>
securities laws of any State. The shares represented by this
certificate may not be sold or transferred in the absence of such
registration or an exemption from registration."
SECTION 4. COVENANTS OF THE COMPANY AND THE STOCKHOLDERS.
4.1 Making of Covenants and Agreements. The Company and the Stockholders
----------------------------------
jointly and severally hereby make the covenants and agreements set forth in this
Section 4 and the Stockholders agree to cause the Company and its Subsidiaries
to comply with such agreements and covenants. No Stockholder shall have any
right of indemnity or contribution from the Company or any Subsidiary with
respect to the breach of any covenant or agreement hereunder.
4.2 Conduct of Business. Between the date of this Agreement and the
-------------------
Closing Date, the Company and each of its Subsidiaries will:
(a) Conduct its business only in the ordinary course and refrain
from changing or introducing any method of management or operations except in
the ordinary course of business and consistent with prior practices;
(b) Refrain from making any purchase, sale or disposition of any
asset or property other than in the ordinary course of business, from making any
capital expenditures in excess of $50,000 in the aggregate without prior written
approval of Buyer and from mortgaging, pledging, subjecting to a lien or
otherwise encumbering any of its properties or assets other than in the ordinary
course of business;
(c) Refrain from incurring any contingent liability as a guarantor
or otherwise with respect to the obligations of others, and from incurring any
other contingent or fixed obligations or liabilities except in the ordinary
course of business;
(d) Refrain from making any change or incurring any obligation to
make a change in its Articles of Organization, By-laws, capital structure or
authorized or issued capital stock, including but not limited to the issuance of
any option, warrant, call, conversion right or commitment of any kind with
respect to the Company's capital stock;
(e) Refrain from declaring, setting aside or paying any dividend,
making any other distribution in respect of its capital stock or making any
direct or indirect redemption, purchase or other acquisition of its stock except
as set forth in Schedule 4.2 hereto;
------------
(f) Refrain from making any change in the compensation payable or
to become payable, and making any unusual distributions, to any of its officers,
directors, employees, agents or independent contractors except as set forth in
Schedule 4.2 hereto;
- ------------
28
<PAGE>
(g) Refrain from prepaying any loans (if any) from its
stockholders, officers or directors or making any change in its borrowing
arrangements except as set forth in Schedule 4.2 hereto;
------------
(h) Use commercially reasonable efforts to prevent any change with
respect to its management and personnel and banking arrangements;
(i) Use commercially reasonable efforts to keep intact its business
organization, to keep available its present officers and employees and to
preserve the goodwill of all Principals, Customers, independent contractors and
others having business relations with it;
(j) Have in effect and maintain at all times all insurance of the
kind, in the amount and with the insurers set forth in the Schedule 2.18 hereto
-------------
or equivalent insurance with any substitute insurers approved in writing by
Buyer;
(k) Furnish Buyer with unaudited statements of income of the
Company and each of its Subsidiaries on a consolidated basis within fifteen (15)
days after each month end for each month ending more than ten (10) days before
the Closing;
(l) Furnish Buyer with unaudited monthly balance sheets and
statements of stockholders' equity and cash flows of the Company and each of its
Subsidiaries on a consolidated basis within twenty (20) days after each month
end for each month ending more than ten (10) days before the Closing;
(m) Permit Buyer, the managing underwriters of the IPO and their
respective authorized representatives to have full access to all its properties,
assets, records, tax returns, contracts and documents and furnish to Buyer, the
managing underwriters of the IPO and their respective authorized representatives
such financial and other information with respect to its business or properties
as they may from time to time reasonably request;
(n) Maintain its properties, facilities, equipment and other assets
in as good working order and condition as of the date of this Agreement,
ordinary wear and tear excepted;
(o) Perform all its material obligations under debt and lease
instruments and all other agreements relating to or affecting its assets,
properties, equipment and rights;
(p) Refrain from entering into any new lease agreements other than
in the ordinary course of business without the prior knowledge and written
consent of Buyer; and
(q) Maintain compliance with all applicable permits, rules, laws,
regulations, consent orders and the like.
29
<PAGE>
Notwithstanding the foregoing provisions of this Section 4.2, prior to the
Closing, the Company (i) shall sell the real estate (together with buildings and
other improvements located thereon) owned by the Company at 7315 Pineville -
Matthews Road, Charlotte, North Carolina (the "Charlotte Real Estate"), which
---------------------
sale shall be subject to any and all mortgages on the Charlotte Real Estate
(including the mortgage with Rexham Industries), which shall be paid in full
with proceeds from such sale, (ii) shall, subject to a favorable stockholder
vote pursuant to Section 280G(b)(5)(B) of the Code and Answer A-7 of Proposed
Regulation 1.280G-1 taken prior to the Closing Date, assign to certain
Stockholders the life insurance policies listed on Schedule 4.2 attached hereto
------------
or surrender such policies for cash and distribute or pay such cash to such
Stockholders, (iii) shall purchase the two automobiles leased by the Company for
the use of Curtis L. Rogers, Jr. and Robert J. Maccubbin, Sr., which automobiles
are listed on Schedule 4.2 attached hereto, and transfer title to such
------------
automobiles to Curtis L. Rogers, Jr. and Robert J. Maccubbin, Sr., and (iv) may
distribute certain assets of the Company specified on Schedule 4.2 to one or
------------
more Stockholders between the date of this Agreement and the Closing Date. The
Company represents that the aggregate net book value of such assets does not
exceed $50,000.
4.3 Authorization from Others. Prior to the Closing Date, the
-------------------------
Stockholders, the Company and each Subsidiary will use their respective best
efforts to obtain all authorizations, consents and permits of others required to
permit the consummation by the Stockholders, the Company and its Subsidiaries of
the transactions contemplated by this Agreement.
4.4 Notification of Certain Matters. The Company and each of the
-------------------------------
Stockholders (each a "Notifying Party") shall give prompt notice to Buyer of (a)
---------------
the occurrence or non-occurrence of any event that would be likely to cause any
representation or warranty of the Notifying Party contained in this Agreement to
be untrue or inaccurate in any material respect at or prior to the Closing and
(b) any material failure of the Notifying Party to comply with or satisfy any
covenant, condition, or agreement to be complied with or satisfied by it
hereunder and the Company and the Stockholders shall use their best efforts to
prevent or promptly remedy the same. Without limiting the foregoing, from time
to time prior to the Closing the Company will promptly supplement or amend the
Schedules hereto both to correct any inaccuracy in such Schedules when delivered
and to reflect any development which, if existing at the date of this Agreement,
would have been required to be set forth in the Schedules or which has rendered
inaccurate the information contained in such Schedules (each notice furnishing
such information being called a "Company Disclosure Supplement"), and at least
-----------------------------
five (5) business days prior to the Closing the Company will deliver to Buyer a
final Company Disclosure Supplement consisting of a complete update of the
Schedules hereto as though all representations and warranties contained in
Section 2 and Section 3 hereof were to be made as of the date of the Closing.
In addition, the Company and each of the Stockholders shall promptly notify
Buyer in writing if at any time prior to a closing in connection with the IPO it
shall obtain knowledge of any facts relating to the Company or its officers,
directors or stockholders that might make it necessary or appropriate to amend
or supplement the prospectus in order to make the statements contained therein
not misleading or comply with applicable law. The delivery of any Company
Disclosure Supplement or other notice pursuant
30
<PAGE>
to this Section 4.4 shall not render correct any representation or warranty that
was incorrect when made or limit or otherwise affect the remedies available
hereunder to the party receiving such Company Disclosure Supplement or notice.
4.5 Consummation of Agreement. The Company and each of the Stockholders
-------------------------
shall use their respective best efforts to perform and fulfill all conditions
and obligations on their parts to be performed and fulfilled under this
Agreement, to the end that the transactions contemplated by this Agreement shall
be fully carried out. To this end, the Company will obtain prior to the Closing
all necessary authorizations or approvals of its stockholders and Board of
Directors.
4.6 Cooperation of the Company and Stockholders. The Company and each of
-------------------------------------------
the Stockholders shall (a) cooperate with all reasonable requests of Buyer,
Buyer's counsel and accountants in connection with the consummation of the
transactions contemplated hereby and (b) execute and deliver such other
instruments and take such other actions as may be reasonably required by Buyer
or the managing underwriters of the IPO in order to carry out the intent of this
Agreement and to close the IPO, including without limitation the execution and
delivery of customary lock-up agreements, director and officer questionnaires
and S-1 questionnaires, subject to the other terms of this Agreement.
4.7 No Solicitation of Other Offers. Unless and until this Agreement
-------------------------------
shall have been terminated, neither the Company nor any of the Stockholders
shall, nor shall the Company permit any of its directors, officers, employees or
agents to, directly or indirectly, (i) take any action to solicit, initiate
submission of or encourage, proposals or offers from any person relating to any
acquisition or purchase of all or (other than in the ordinary course of
business) a portion of the assets of, or any equity interest in, the Company,
any merger or business combination with the Company or any public or private
offering of interests in the Company (an "Acquisition Proposal"), (ii)
--------------------
participate in any discussions or negotiations regarding an Acquisition Proposal
with any person or entity other than Buyer and its representatives, (iii)
furnish any information or afford access to the properties, books or records of
the Company to any person or entity that may consider making or has made an
offer with respect to an Acquisition Proposal other than Buyer and its
representatives, or (iv) otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
person to do any of the foregoing. The Company will promptly notify Buyer upon
receipt of any offer or indication that any person is considering making an
offer with respect to an Acquisition Proposal or any request for information
relative to the Company or for access to the properties, books and records of
the Company, and will promptly reject any such offer or request.
4.8 Confidentiality. The Company and the Stockholders agree that, unless
---------------
and until the Closing has been consummated, each of the Company, its
Subsidiaries, the Stockholders and their officers, directors, agents and
representatives will hold in strict confidence, and will not use, any
confidential or proprietary data or information obtained from Buyer with respect
to its business or financial condition except for the purpose of evaluating,
negotiating and
31
<PAGE>
completing the transaction contemplated hereby. Information generally known in
Buyer's industry or which has been disclosed to the Company, any Subsidiary or
the Stockholders by third parties which have a right to do so shall not be
deemed confidential or proprietary information for purposes of this agreement.
If the transaction contemplated by this Agreement is not consummated, the
Company, its Subsidiaries and the Stockholders will return to Buyer (or certify
that they have destroyed) all copies of such data and information, including but
not limited to financial information, customer lists, business and corporate
records, worksheets, test reports, tax returns, lists, memoranda, and other
documents prepared by or made available to the Company, its Subsidiaries or the
Stockholders in connection with the transaction.
4.9 Tax-Free Treatment. Neither the Company nor the Stockholders shall
------------------
intentionally take or cause to be taken any action, whether before or after
Closing, which would cause the transactions contemplated hereunder to fail to
qualify as exchanges under
(S) 351 of the Code.
4.10 Tax Returns. The Company and the Stockholders shall cooperate with
-----------
Buyer to permit the Company and its Subsidiaries in accordance with applicable
law to promptly prepare and file on or before the due date or any extension
thereof all federal, state and local tax returns required to be filed by the
Company and its Subsidiaries with respect to taxable periods ending on or before
the Closing.
4.11 Filing Cooperation. In connection with any filings to be made by
------------------
Buyer under the Securities Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Company shall (a) provide for inclusion
------------
therein or filing therewith the financial, business and other information and
documents reasonably requested for inclusion therein by Buyer,
(b) consider promptly Buyer's reasonable requests for any additional information
or documents and use commercially reasonable efforts to make such available, and
(c) generally cooperate with Buyer and its representatives and agents in
connection therewith.
4.12 Buyouts. At Buyer's request, the Company will take all necessary
-------
action to enter into agreements with certain entities previously acquired by the
Company (which agreements shall be satisfactory to Buyer) pursuant to which the
Company shall obtain an option to buy out the remaining obligations of the
Company with respect to each such entity for a price to be agreed upon by Buyer,
the Company and the respective entity.
4.13 No Transfer of Company Shares. Except for the transfers of Company
-----------------------------
Shares from Curtis L. Rogers, Jr., Robert J. Maccubbin, Sr., Michael G. Macalka
and Steven C. Reese to the other Stockholders in the share amounts contemplated
by Schedule 2.31 hereto, which shall occur on the business day immediately
-------------
preceding the Closing Date (the "Share Transfers"), unless and until this
Agreement shall have been terminated in accordance with its terms, no
Stockholder shall directly or indirectly enter into any contract or binding
commitment to sell, exchange, deliver, assign, pledge, encumber or otherwise
transfer or dispose of any Company Shares, nor shall any Stockholder directly or
indirectly enter into any contract or binding commitment or grant any right of
any kind to acquire, dispose of, vote or
32
<PAGE>
otherwise control in any manner any Company Shares. The Company has accrued or
will accrue prior to June 30, 1998 an amount estimated by the Company to
constitute compensation to the Stockholders as a result of the Share Transfers
(approximately $16,000,000 in the aggregate).
4.14 Termination of Certain Agreements. Prior to the Closing Date, the
---------------------------------
Company and the Stockholders shall, pursuant to documentation in form and
substance satisfactory to Buyer and its counsel and without any liability to the
Company, terminate (a) any stockholders agreements, voting trusts, options and
warrants and (b) each of the agreements listed on Schedule 4.14 (including
-------------
payment in full of the mortgage with Rexham Industries).
4.15 Automobile Leases. Prior to the Closing Date, the Company shall
-----------------
cause all obligations under each of the leases with respect to the cars listed
on Schedule 4.15 to be assumed by the individual whose name is set forth
-------------
opposite such car on Schedule 4.15. Evidence of such assumption shall be
-------------
delivered to counsel for Buyer prior to the Closing Date.
4.16 Foreign Qualifications. The Company will take all actions necessary
----------------------
to qualify, prior to the Closing Date, to do business as a foreign corporation
in each of the states listed on Schedule 2.2 hereto which Buyer may request.
------------
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER.
5.1 Making of Representations and Warranties. As a material inducement to
----------------------------------------
the Company and the Stockholders to enter into this Agreement and consummate the
transactions contemplated hereby, Buyer hereby makes the representations and
warranties to the Company and the Stockholders contained in this Section 5.
5.2 Organization and Qualifications of Buyer. Buyer is a corporation duly
----------------------------------------
organized, validly existing and in good standing under the laws of State of
Delaware with full corporate power and authority to own or lease its properties
and to conduct its business in the manner and in the places where such
properties are owned or leased or such business is currently conducted or
proposed to be conducted. The copies of Buyer's Certificate of Incorporation,
certified by the Delaware Secretary of State, and of Buyer's by-laws, certified
by Buyer's Secretary, as heretofore delivered to Company's counsel, are complete
and correct at the date hereof, and no amendments thereto are pending. Buyer is
not in violation of any term of its Certificate of Incorporation or by-laws.
Buyer is duly qualified to do business as a foreign corporation in each
jurisdiction where the nature of its properties or the conduct of its business
makes its qualification so necessary, except where the failure to be so
qualified could not reasonably be expected to have a Material Adverse Effect on
Buyer.
33
<PAGE>
5.3 Capital Stock of Buyer. As of the date hereof, the authorized capital
----------------------
stock of Buyer consists of 10,000 shares of Buyer Common Stock. As of the date
hereof, 1,800 shares of Buyer Common Stock are issued, outstanding, fully paid
and non assessable. As of the date hereof, no shares of Buyer Common Stock are
reserved for issuance upon exercise of outstanding stock options, warrants or
otherwise except for shares of Buyer Common Stock reserved for issuance pursuant
to Buyer's 1998 Stock Option and Incentive Plan. Except for options outstanding
under Buyer's 1998 Stock Option and Incentive Plan, there are no outstanding
options, warrants, rights, commitments, preemptive rights or agreements of any
kind for the issuance or sale of, or outstanding securities convertible into,
any additional shares of capital stock of any class of Buyer.
5.4 Authority of Buyer. Buyer has full right, authority and power to
------------------
enter into this Agreement and each agreement, document and instrument to be
executed and delivered by Buyer pursuant to this Agreement and to carry out the
transactions contemplated hereby. The execution, delivery and performance by
Buyer of this Agreement and each such other agreement, document and instrument
have been duly authorized by all necessary action of Buyer and no other action
on the part of Buyer or its stockholders is required in connection therewith.
This Agreement and each agreement, document and instrument executed and
delivered by Buyer pursuant to this Agreement constitutes, or when executed and
delivered will constitute, valid and binding obligations of Buyer enforceable in
accordance with their terms. The execution, delivery and performance by Buyer of
this Agreement and each such agreement, document and instrument:
(i) does not and will not violate any provision of the
Certificate of Incorporation or by-laws of Buyer;
(ii) does not and will not violate any laws of the United
States, or any state or other jurisdiction applicable to Buyer or require
Buyer to obtain any approval, consent or waiver of, or make any filing
with, any person or entity (governmental or otherwise) that has not been
obtained or made; and
(iii) does not and will not result in a breach of, constitute a
default under, accelerate any obligation under, or give rise to a right of
termination of any indenture or loan or credit agreement or any other
material agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award to which Buyer is a party or by which the property of
Buyer is bound or affected, or result in the creation or imposition of any
mortgage, pledge, lien, security interest or other charge or encumbrance on
any of the Buyer's assets or its capital stock.
5.5 Operations and Financial Condition; Absence of Undisclosed
----------------------------------------------------------
Liabilities. Buyer has not conducted any material business operations other
- -----------
than in connection with the
34
<PAGE>
transactions contemplated hereby, the Merkert Acquisition and the IPO or in
preparation for operations to be conducted after the Closing Date. Buyer does
not have any material tangible assets or material liabilities or obligations of
any nature, whether accrued, absolute, contingent, or otherwise and whether due
or to become due, including without limitation liabilities that may become known
or arise after the date hereof and which relate to transactions entered into or
any state of facts existing on or before the date hereof and which would be
required under generally accepted accounting principles to be shown in a balance
sheet or referenced in the notes thereto prepared as of the date hereof, other
than those incurred in connection with the transactions contemplated hereby, the
Merkert Acquisition and the IPO or in connection with Buyer's preparation for
future operations.
5.6 Investment Company. On the Closing Date Buyer will not be an
------------------
"investment company" within the meaning of (S) 351(e) of the Code and Treasury
Reg. (S) 1.351-1(c).
SEC COVENANTS OF BUYER.
6.1 Making of Covenants and Agreements. Buyer hereby makes the covenants
----------------------------------
and agreements set forth in this Section 6.
6.2 Confidentiality. Buyer agrees that, unless and until the Closing has
---------------
been consummated, Buyer and its officers, directors, agents and representatives
will hold in strict confidence, and will not use any confidential or proprietary
data or information obtained from the Company or the Stockholders with respect
to the business or financial condition of the Company and its Subsidiaries
except for the purpose of evaluating, negotiating and completing the transaction
contemplated hereby. Information generally known in the industries of the
Company or its Subsidiaries or which has been disclosed to Buyer by third
parties which have a right to do so shall not be deemed confidential or
proprietary information for purposes of this agreement. If the transaction
contemplated by this Agreement is not consummated, Buyer will return to the
Company (or certify that it has destroyed) all copies of such data and
information, including but not limited to financial information, customer lists,
business and corporate records, worksheets, test reports, tax returns, lists,
memoranda, and other documents prepared by or made available to Buyer in
connection with the transaction. Notwithstanding the foregoing, Buyer shall be
permitted to disclose such information about the Company, its stockholders and
the transactions contemplated hereby as may be legally required, and otherwise
reasonably necessary, in the preparation, completion, filing and distribution of
such reports, filings and other documents required by the Securities Act or the
Exchange Act.
6.3 Tax-Free Treatment. Buyer shall not intentionally take or cause to be
------------------
taken any action after the Closing which would cause the transactions
contemplated hereunder to fail to qualify as exchanges under (S) 351 of the
Code.
6.4 Medical Benefits for Curtis L. Rogers, Jr. Buyer shall provide the
-----------------------------------------
health insurance coverage currently provided to Curtis L. Rogers, Jr. and his
spouse under the
35
<PAGE>
Company's current health insurance plan, or substantially equivalent medical
benefits under a successor plan, through and including Mr. Rogers' and his
spouse's respective sixty-fifth (65th) birthdays.
SECTION 7. ADDITIONAL AGREEMENTS.
7.1 S-1 Registration Statement. The parties shall cooperate in the
--------------------------
preparation and filing with the SEC of the Registration Statement under the
Securities Act with respect to the IPO and will use all reasonable efforts to
have the Registration Statement declared effective by the SEC as promptly as
practicable.
7.2 Filings Under Hart-Scott-Rodino Act. As soon as practicable, each
-----------------------------------
of Buyer and the Company shall file with the Federal Trade Commission (the
"FTC") and the Antitrust Division of the Department of Justice (the "Antitrust
--- ---------
Division") a premerger notification form and any supplemental information (other
- --------
than privileged information) which may be requested in connection therewith
pursuant to the Hart-Scott-Rodino Act, which filings and supplemental
information will comply in all material respects with the requirements of the
Hart-Scott-Rodino Act. Each of Buyer and the Company shall cooperate fully with
the other in connection with the preparation of such filings and shall use their
respective best efforts to respond to any requests for supplemental information
from the FTC or the Antitrust Division and to obtain early termination of any
waiting period applicable to the transfer of Company Shares pursuant to this
Agreement under the Hart-Scott-Rodino Act. Any and all filing fees required to
be paid on behalf of the Company in connection with the premerger notification
form pursuant to the Hart-Scott-Rodino Act shall be paid by Buyer.
7.3 Tax Returns. With respect to the short tax year ending as of the
-----------
Closing Date (the "Short Year"), Marty D. Carter will cause the tax returns to
be prepared and, in the event of an IRS audit of the fiscal year ended October
31, 1997, or of the Short Year, Mr. Carter, so long as he is an employee of the
Company, will represent the Company in such audits. Mr. Carter's representation
of the Company in such audits and his preparation of the Short Year tax returns
will, however, be subject to review and approval by the Company. With respect
to the Short Year, an election to waive carryback under Section 172(b)(3) of the
Code will not be made.
7.4 Leases.
------
(a) Boland Court. Buyer and 31 Boland Court (a partnership of
------------
which certain Stockholders are partners) shall negotiate a new lease by the
Company of the Company's current space at 31 Boland Court, Greenville, South
Carolina. Such lease shall be for a term of five (5) years, shall commence on
the Closing Date, and shall otherwise include mutually satisfactory terms and
conditions.
36
<PAGE>
(b) Charlotte. Buyer shall negotiate with the purchaser of the
---------
Charlotte Real Estate a lease providing for the lease by the Company of the
office space currently used by the Company at the Charlotte Real Estate. Such
lease shall be triple-net, shall provide for a term of ten (10) years, with
annual rent of $12.59 per square foot, and shall otherwise include mutually
satisfactory terms and conditions.
7.5 1996 Bonuses. The Company represents that it had accrued as of
------------
October 31, 1996 aggregate bonuses/loans payable to certain employees in the
amount of $750,000 (the "1996 Bonuses"). The Company represents that it has paid
$150,000 of the 1996 Bonuses as of the date hereof, and will not pay any further
amounts of the 1996 Bonuses on or before the Closing Date. Buyer shall pay, or
cause the Company to pay, no later than five (5) business days after the Closing
Date, all of the 1996 Bonuses remaining unpaid as of the date of payment, but in
no event more than $600,000 in the aggregate. Subject to the foregoing, the 1996
Bonuses shall be paid to such employees and in such amounts as the Stockholders'
Representative shall designate to Buyer in a schedule delivered no later than
ten (10) days prior to the Closing Date.
7.6 Sale of Real Estate. The Company has accrued or will accrue prior to
-------------------
June 30, 1998 an amount for payments to certain employees equal to the net
proceeds (including following payment of all mortgages) to the Company from the
sale of the Charlotte Real Estate (the "Real Estate Bonuses"). The parties
hereto agree that the sale of the Charlotte Real Estate shall occur on or prior
to the Closing Date. Buyer shall pay, or cause the Company to pay, the
aggregate amount of the Real Estate Bonuses no later than the ninetieth (90th)
day after the end of the calendar month in which the Closing occurs. Subject to
the foregoing, the Real Estate Bonuses shall be paid to such employees and in
such amounts as the Stockholders' Representative shall designate to Buyer in a
schedule delivered no later than ten (10) days prior to the Closing Date.
7.7 Tax Refund. The Company has accrued or will accrue prior to June 30,
----------
1998 an amount for payment to certain employees equal to the aggregate amount
expected to be received by the Company as refunds with respect to the Company's
federal and state income tax returns for the Company's fiscal years ended
October 31, 1995, 1996 and 1997. Buyer shall pay, or cause the Company to pay,
the actual amount received by the Company as refunds with respect to the
Company's federal and state income tax returns for the Company's fiscal years
ended October 31, 1995, 1996 and 1997 (the "Tax Refund Bonuses"). The Tax
Refund Bonuses shall be paid no later than the date on which the Company has
received all state and federal tax refunds which determine the amount of the Tax
Refund Bonuses. Subject to the foregoing, the Tax Refund Bonuses shall be paid
to such employees and in such amounts as the Stockholders' Representative shall
designate to Buyer in a schedule delivered no later than ten (10) days prior to
the Closing Date.
7.8 Bonuses Contingent. Notwithstanding Sections 7.5, 7.6 and 7.7 hereof,
------------------
no employee shall have any right to any 1996 Bonus, Real Estate Bonus or Tax
Refund Bonus (collectively, the "Bonuses") unless such employee's right to such
Bonus has been, prior to the
37
<PAGE>
Closing Date, approved by the Stockholders in accordance with Section
280G(b)(5)(B) of the Code and Answer A-7 of Proposed Regulation 1.280G-1.
SECTION 8. CONDITIONS.
8.1 Conditions to the Obligations of Certain of the Parties. The
-------------------------------------------------------
obligations of each of the Company and Buyer to consummate this Agreement and
the transactions are subject to the fulfillment, prior to or at the Closing, of
the following conditions:
(a) No Litigation. There shall have been no determination by
-------------
Buyer or the Company, as the case may be, acting in good faith, that the
consummation of the transactions contemplated by this Agreement has become
inadvisable or impracticable by reason of the institution or threat by any
person or any federal, state or other governmental authority of litigation,
proceedings or other action against Buyer, the Company or any Subsidiary or
Stockholder.
(b) Hart-Scott-Rodino. All required filings under the Hart-Scott-
-----------------
Rodino Act shall have been completed and all applicable time limitations under
such Act shall have expired without a request for further information by the
relevant federal authorities under such Act, or in the event of such a request
for further information, the expiration of all applicable time limitations under
the Act shall have occurred without the objection of such federal authorities.
(c) Registration Statement. The Registration Statement shall have
----------------------
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the SEC.
(d) Listing of Buyer Common Stock. The shares of Buyer Common
-----------------------------
Stock which shall be issued to the stockholders of the Company upon the Closing
shall have been authorized for listing on the New York Stock Exchange or quoted
on the NASDAQ National Market, subject to official notice of issuance.
(e) Registration Rights Agreement. Buyer and the Stockholders
-----------------------------
shall have entered into a registration rights agreement (the
"Registration Rights Agreement") in the form attached as Exhibit D hereto.
------------------- --------- ---------
8.2 Conditions to the Obligations of Buyer. The obligation of Buyer to
--------------------------------------
consummate this Agreement and the transactions contemplated hereby are subject
to the fulfillment, prior to or at the Closing, of the following conditions
precedent:
(a) IPO and Merkert Acquisition. The IPO and the Merkert
---------------------------
Acquisition shall have been completed at the same time as the transfer of the
Company Shares hereunder.
(b) Representations; Warranties; Covenants. Each of the
--------------------------------------
representations and warranties of the Company and the Stockholders contained in
Section 2 and Section 3,
38
<PAGE>
respectively, (giving effect to the Schedules, but not to any Company Disclosure
Supplement) shall be true and correct as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing; and the Company and
each of the Stockholders shall, on or before the Closing, have performed all of
their obligations hereunder which by the terms hereof are to be performed on or
before the Closing.
(c) No Material Change. There shall have been no material adverse
------------------
change in the financial condition, prospects, properties, assets, liabilities,
business or operations of the Company or any Subsidiary since the date hereof,
whether or not in the ordinary course of business.
(d) President's Certificate. The Company shall have delivered to
-----------------------
Buyer a certificate of the Company's President dated as of the Closing to the
effect that the statements set forth in paragraph (b) and (c) above in this
Section 8.2 are true and correct.
(e) Approval of Buyer's Counsel. All actions, proceedings,
---------------------------
instruments and documents required to carry out this Agreement and the
transactions contemplated hereby and all related legal matters contemplated by
this Agreement shall have been approved by Goodwin, Procter & Hoar LLP as
counsel for Buyer, and such counsel shall have received on behalf of Buyer such
other certificates, opinions, and documents in form satisfactory to such
counsel, as Buyer may reasonably require from the Company and the Stockholders
to evidence compliance with the terms and conditions hereof as of the Closing
and the correctness as of the Closing of the representations and warranties of
the Stockholders and the Company and the fulfillment of their respective
covenants.
(f) Opinions of Counsel. On the Closing Date, Buyer shall have
-------------------
received from (i) Moore & Van Allen, PLLC, counsel for the Company, an opinion
as of said date, in the form attached hereto as Exhibit E, and (ii) Johnston,
---------
Allison & Hord, P.A., counsel for the Stockholders, an opinion as of said date,
in the form attached hereto as Exhibit F, which opinions shall provide that they
---------
may be relied upon by the managing underwriters of the IPO.
(g) Federal Tax Opinion. Buyer shall have received an opinion of
-------------------
Goodwin, Procter & Hoar LLP, counsel to Buyer, in form and substance reasonably
satisfactory to Buyer, dated as of the Closing Date, that, on the basis of the
facts, representations and assumptions set forth in such opinion, the transfer
of Company Shares and the receipt of Buyer Common Stock by the Stockholders
hereunder will be treated for federal income tax purposes as an exchange
qualifying under (S) 351 of the Code. In rendering such an opinion, Goodwin,
Procter & Hoar LLP may require and rely on representations made in certificates
of officers of Buyer, the Company and others.
(h) Consents. The Company or the Stockholders shall have made all
--------
filings with and notifications of governmental authorities, regulatory agencies
and other entities required to be made by the Company, its Subsidiaries or the
Stockholders in connection with the execution and delivery of this Agreement,
the performance of the transactions contemplated
39
<PAGE>
hereby and the continued operation of the business of the Company and its
Subsidiaries by Buyer subsequent to the Closing, except where the failure to
make such filings would not, either individually or in the aggregate, adversely
affect the consummation of the transactions contemplated hereby or the Company
and its Subsidiaries taken as a whole. The Company, the Stockholders and Buyer
shall have received all authorizations, waivers, consents and permits, in form
and substance reasonably satisfactory to Buyer, including any and all notices,
consents and waivers required by the terms of any securities that are
convertible or exercisable into Common Stock, from all third parties, including,
without limitation, applicable governmental authorities, regulatory agencies,
lessors, lenders and contract parties, required to permit the continuation of
the business of the Company and each Subsidiary and the consummation of the
transactions contemplated by this Agreement, and to avoid a breach, default,
termination, acceleration or modification of any indenture, loan or credit
agreement or any other material agreement, contract, instrument, mortgage, lien,
lease, permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award as a result of, or in connection with, the
execution and performance of this Agreement, except where the failure to make
such filings would not, either individually or in the aggregate, adversely
affect the consummation of the transactions contemplated hereby or the Company
and its Subsidiaries taken as a whole.
(i) Employment and Noncompetition Agreements. The existing
----------------------------------------
Employment Agreement between each of John L. Brady, Sr., Danny L. Broadwater,
Marty D. Carter, Thomas S. Fincher, Douglas H. Holstein, E. Ray Johnson, Robert
J. Maccubbin, Jr. and Curtis L. Rogers, III (collectively, the "Executive
---------
Officers") and the Company shall have been terminated, and each of the Executive
- --------
Officers shall have executed and delivered to Buyer an Employment and
Noncompetition Agreement in substantially the form of Exhibit G attached hereto.
---------
The annual salary of each such individual pursuant to the applicable Employment
and Noncompetition Agreement shall be at least equal to such individual's annual
salary as in effect on the date of this Agreement.
(j) Resignations. The Company shall have delivered to Buyer the
------------
resignations of all of the Directors and officers of the Company and each
Subsidiary, such resignations to be effective at the Closing.
(k) Releases. The Company shall have delivered to Buyer general
--------
releases signed by each Stockholder and by each officer and director of the
Company and each Subsidiary of all claims which any of them have against the
Company and any Subsidiary in the form attached hereto as Exhibit H.
---------
(l) Financial Statements.
--------------------
(i) Buyer and/or its designated representatives shall have
completed a satisfactory review of the Company's financial statements for the
five-month period ended March 31, 1998 and any subsequent period (if available),
and such financial statements shall not have disclosed any material adverse
change in the financial condition and results of
40
<PAGE>
operations of the Company when compared to the Company's financial statements
that were previously furnished to the Buyer.
(ii) The Company's historical financial statements shall, in
the opinion of Buyer's independent public accountants, be suitable or readily
adaptable for incorporation in (A) the Registration Statement and (B) annual
reports on Form 10 -K to be filed by Buyer in the future under the Exchange Act.
8.3 Conditions to the Obligations of the Company and the Stockholders.
-----------------------------------------------------------------
The obligation of the Company and the Stockholders to consummate this Agreement
and the transactions contemplated hereby is subject to the fulfillment, prior to
or at the Closing, of the following conditions precedent:
(a) IPO and Merkert Acquisition. The IPO and the Merkert
---------------------------
Acquisition shall have been completed at the same time as the purchase and sale
of Company Shares hereunder.
(b) Representations; Warranties; Covenants. Each of the
--------------------------------------
representations and warranties of Buyer contained in Section 5 shall be true and
correct in all material respects as though made on and as of the Closing; Buyer
shall, on or before the Closing, have performed all of its obligations hereunder
which by the terms hereof are to be performed on or before the Closing; and
Buyer shall have delivered to the Company and the Stockholders a certificate of
the President or any Vice President of Buyer dated on the Closing to such
effect.
(c) Approval of Counsel. All actions, proceedings,
-------------------
instruments and documents required to carry out this Agreement and the
transactions contemplated hereby and all related legal matters contemplated by
this Agreement shall have been approved by Moore & Van Allen, PLLC as counsel
for the Company and Johnston, Allison & Hord, P.A. as counsel for the
Stockholders, and each such counsel shall have received on behalf of the Company
and the Stockholders, respectively, such other certificates, opinions and
documents in form satisfactory to such counsel as the Company and the
Stockholders may reasonably require from Buyer to evidence compliance with the
terms and conditions hereof as of the Closing and the correctness as of the
Closing of the representations and warranties of Buyer and the fulfillment of
its covenants.
(d) Opinion of Counsel. On the Closing Date, the Company and
------------------
the Stockholders shall have received from Goodwin, Procter & Hoar LLP, counsel
for Buyer, an opinion as of said date, in form attached hereto as Exhibit I.
---------
(e) Federal Tax Opinion. The Company and the Stockholders
-------------------
shall have received an opinion of Goodwin, Procter & Hoar LLP, counsel to Buyer,
in form and substance reasonably satisfactory to the Company and the
Stockholders, dated as of the Closing Date, that, on the basis of the facts,
representations and assumptions set forth in such opinion, the transfer of
Company Shares and the receipt of Buyer Common Stock by the Stockholders
41
<PAGE>
hereunder will be treated for federal income tax purposes as an exchange
qualifying under (S) 351 of the Code. In rendering such an opinion, Goodwin,
Procter & Hoar LLP may require and rely on representations made in certificates
of officers of Buyer, the Company and others.
(f) [Intentionally Omitted.]
(g) Consents. Buyer shall have made all filings with and
--------
notifications of governmental authorities, regulatory agencies and other
entities required to be made by Buyer in connection with the execution and
delivery of this Agreement, the performance of the transactions contemplated
hereby and the continued operation of the business of the Company and its
Subsidiaries by Buyer subsequent to the Closing, except where the failure to
make such filings would not, either individually or in the aggregate, adversely
affect the consummation of the transactions contemplated hereby or Buyer. Buyer
shall have received all authorizations, waivers, consents and permits, in form
and substance reasonably satisfactory to the Company and the Stockholders, from
all third parties, including, without limitation, applicable governmental
authorities, regulatory agencies, lessors, lenders and contract parties,
required to permit the continuation of the business of Buyer and the
consummation of the transactions contemplated by this Agreement, and to avoid a
breach, default, termination, acceleration or modification of any indenture,
loan or credit agreement or any other material agreement, contract, instrument,
mortgage, lien, lease, permit, authorization, order, writ, judgment, injunction,
decree, determination or arbitration award as a result of, or in connection
with, the execution and performance of this Agreement, except where the failure
to make such filings would not, either individually or in the aggregate,
adversely affect the consummation of the transactions contemplated hereby or
Buyer.
SECTION 9. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED.
9.1 Termination. At any time prior to the Closing, this Agreement may be
-----------
terminated as follows:
(a) by mutual written consent of all of the parties to this
Agreement;
(b) by the Company or the Stockholders' Representative, provided
that neither the Company nor any of the Stockholders is in material breach
of this Agreement, (i) if Buyer is in material breach of this Agreement and
such breach shall remain uncured for a period of five (5) business days
after the Company or the Stockholders' Representatives, as applicable,
shall have given written notice of such breach to Buyer, or (ii) if Buyer
shall have explicitly or by conduct repudiated this Agreement and such
repudiation shall have remained uncured for a period of five (5) business
days after the Company or the Stockholders' Representatives, as applicable,
shall have given written notice thereof to Buyer, or (iii) if by November
30, 1998, any of the conditions in Section 8.1 or Section 8.3 shall not
have been satisfied, complied with or performed in all material respects
(unless such failure of satisfaction,
42
<PAGE>
noncompliance or nonperformance is the result directly or indirectly of any
action or failure to act on the part of the Company or any Stockholder) and
the Company and the Stockholders shall not have waived such failure of
satisfaction, noncompliance or nonperformance; or
(c) by Buyer, provided that Buyer is not in material breach of this
Agreement, (i) if the Company or any Stockholder is in material breach of
this Agreement and such breach shall remain uncured for a period of five
(5) business days after Buyer shall have given written notice of such
breach to the Company and, if applicable, such Stockholder, (ii) if the
---
Company or any Stockholder shall have explicitly or by conduct repudiated
this Agreement and such repudiation shall have remained uncured for a
period of five (5) business days after Buyer shall have given written
notice thereof to such party, or (iii) if by November 30, 1998, any of the
conditions in Section 8.1 or Section 8.2 shall not have been satisfied,
complied with or performed in all material respects (unless such failure of
satisfaction, noncompliance or nonperformance is the result directly or
indirectly of any action or failure to act on the part of Buyer) and Buyer
shall not have waived such failure of satisfaction, noncompliance or
nonperformance.
9.2 Effect of Termination. All obligations of the parties hereunder
---------------------
shall cease upon any termination pursuant to Section 9.1, provided, however,
that (i) the provisions of this Section 9, Section 4.8, Section 6.2 and Section
11 hereof shall survive any termination of this Agreement, (b) nothing herein
shall relieve any party from any liability for a material error or omission in
any of its representations or warranties contained herein or a material failure
to comply with any of its covenants, conditions or agreements contained herein
and (c) any party may proceed as further set forth in Section 9.3 below.
9.3 Right to Proceed. Anything in this Agreement to the contrary
----------------
notwithstanding, if any of the conditions specified in Section 8.1 or Section
8.2 hereof have not been satisfied, Buyer shall have the right to proceed with
the transactions contemplated hereby without waiving any of its rights
hereunder, and if any of the conditions specified in Section 8.1 or Section 8.3
hereof have not been satisfied, the Company and the Stockholders shall have the
right to proceed with the transactions contemplated hereby without waiving any
of their respective rights hereunder.
SECTION 10. INDEMNIFICATION.
10.1 Survival. Each of the representations, warranties, agreements,
--------
covenants and obligations herein or in any Schedule, Exhibit or certificate
delivered by any party incident to the transactions contemplated hereby are
material, may be relied upon by the party receiving the same, shall (subject to
the provisions of Sections 10.3(d) and 10.5(d) hereof) survive the Closing
regardless of any investigation by or knowledge of such party and shall not
merge into the performance of any obligation by any party hereto.
43
<PAGE>
10. Indemnification by the Stockholders. The Stockholders (other than
-----------------------------------
Michael G. Macalka and Steven C. Reese) (the Stockholders exclusive of Macalka
and Reese being referred to herein as the "Principal Stockholders") and their
----------------------
respective successors, executors, administrators, estates, heirs and permitted
assigns agree subsequent to the Closing, severally but not jointly, to indemnify
and hold harmless Buyer, its subsidiaries and affiliates and their respective
officers, directors, employees and agents (individually, a "Buyer Indemnified
-----------------
Party" and collectively, the "Buyer Indemnified Parties") from and against and
- ----- -------------------------
in respect of all losses, liabilities, obligations, damages, deficiencies,
actions, suits, proceedings, demands, assessments, orders, judgments, fines,
penalties, costs and expenses (including the reasonable fees, disbursements and
expenses of attorneys, accountants and consultants) of any kind or nature
whatsoever (whether or not arising out of third-party claims and including all
amounts paid in investigation, defense or settlement of the foregoing)
sustained, suffered or incurred by or made against any Buyer Indemnified Party
(a "Loss" or "Losses") arising out of, based upon or in connection with:
---- ------
(a) fraud, intentional misrepresentation or a deliberate or
willful breach by the Company or any Stockholder of any of their representations
or warranties under this Agreement or in any Schedule, Exhibit or certificate
delivered under or in connection with this Agreement;
(b) conditions, circumstances or occurrences which constitute or
result in any breach (other than a breach described in Section 10.2(a) above) of
any representation or warranty made by the Company or any Stockholder in this
Agreement or in any Schedule, Exhibit or certificate delivered under or in
connection with this Agreement, or by reason of any claim, action or proceeding
asserted or instituted arising out of any matter or thing covered by any such
representation or warranty;
(c) any liability of the Company or any Subsidiary for Taxes
relating to periods ending on or prior to the Closing or arising from an event
or transaction occurring prior to the Closing or as a result of the Closing,
including, without limitation, any increase in Taxes due to the unavailability
of any loss or deduction claimed by the Company or any Subsidiary, but excluding
income Taxes for the Company's short tax year ending on the Closing Date (the
"1998 Tax Year"), which is covered in Subsection (d) below;
(d) any liability of the Company or any Subsidiary for income Taxes
relating to the 1998 Tax Year, or arising from an event or transaction occurring
during the 1998 Tax Year, including, without limitation, any increase in Taxes
due to the unavailability of any loss or deduction claimed by the Company or any
Subsidiary (collectively, "1998 Tax Losses");
(e) any breach of any covenant or agreement made by the Company or
any Stockholder in this Agreement or in any Schedule, Exhibit or certificate
delivered under or in connection with this Agreement, or by reason of any claim,
action or proceeding asserted or instituted arising out of any matter or thing
covered by any such covenant or agreement;
44
<PAGE>
(f) any liability of the Company or any Subsidiary for
environmental-related claims, violations of any Environmental Law or any
activity relating to Hazardous Materials, in any such case which relate to or
arise from activities on real property currently or formerly owned by the
Charlotte Real Estate) which violation or activity (i) occurred during the
---------------------------------------------------
Company (including the Company's ownership of such real property or (ii)
- ------------------------------------------------------------------------
occurred prior to such ownership and the Company had knowledge thereof;
- -----------------------------------------------------------------------
(g) any liability of the Company or any Subsidiary relating to any
violation of any law or regulation regarding wages, hours or overtime pay
(including any liability to employees);
(h) any liability of the Company or any Subsidiary with respect to
or resulting from the litigation pending in U.S. District Court, Middle District
of Florida, case no. 96-715-CIV-T-23B as disclosed on Schedule 2.16; and
-------------
(i) any liability of the Company or any Subsidiary for misuse,
misapplication or improper handling, administration or management of market
development or promotional funds or market development or promotional fund
accounts, in each case which arises from an event or transaction occurring prior
to the Closing.
Claims under clauses (a) through (i) of this Section 10.2 are collectively
referred to herein as "Buyer Indemnifiable Claims," and Losses in respect of
--------------------------
such claims are collectively referred to herein as "Buyer Indemnifiable Losses."
--------------------------
For purposes of this Section 10.2, "severally" means each Principal
Stockholder shall be liable only for such Principal Stockholder's Proportionate
Share of the Loss or Losses. For purposes of this Agreement, the "Proportionate
-------------
Share" for any Principal Stockholder means the percentage set forth opposite
- -----
such Principal Stockholder's name on Exhibit B hereto under the column headed
---------
"Proportionate Share."
10. Limitations on Indemnification by the Stockholders.
--------------------------------------------------
(a) Cash Escrow. Subject to the exceptions set forth in Sections
-----------
10.3(c) and 10.3(e) below, all Buyer Indemnifiable Claims and Buyer
Indemnifiable Losses shall be satisfied solely from the Cash Escrow Amount and
the Escrowed Shares held in escrow pursuant to the Escrow Agreement.
(b) Deductible. Subject to the exceptions set forth in Sections
----------
10.3(c) and 10.3(e) below, no indemnification shall be payable by the
Stockholders with respect to Buyer Indemnifiable Losses except to the extent
that the cumulative amount of all Buyer Indemnifiable Losses exceeds Four
Hundred Thousand Dollars ($400,000) in the aggregate
45
<PAGE>
(the "Deductible Amount"), whereupon the amount by which such Buyer
-----------------
Indemnifiable Losses exceed the Deductible Amount shall be recoverable in
accordance with the terms hereof.
(c) No Limitation on Certain Claims. Notwithstanding anything
-------------------------------
herein to the contrary, Buyer Indemnified Parties (i) shall be entitled to
dollar-for-dollar indemnification from the first dollar, (ii) shall not be
subject to the Deductible Amount, (iii) shall not be limited to recourse against
the Cash Escrow Amount and the Escrowed Shares, (iv) shall, to the extent that
the Cash Escrow Amount and Escrowed Shares are insufficient to satisfy any Loss,
be entitled to claim directly against any Stockholder to the extent of such
Stockholder's Proportionate Share of such Loss and (v) shall not be subject to
any limitation as to time (except as provided in Section 10.3(d)), in seeking
indemnification from the Stockholders with respect to any of the following:
(i) Losses involving a breach by the Company or any
Stockholder of any of the representations and warranties contained in
Sections 2.3, 2.8 (other than Taxes relating to the 1998 Tax Year, which
are addressed in Section 10.3(e)) and 3.1; or
(ii) Buyer Indemnifiable Losses described in Sections 10.2(a),
(c), (f) and (i).
(d) Time Limitation. No indemnification shall be payable to a Buyer
---------------
Indemnified Party with respect to any Buyer Indemnifiable Claim asserted after
the first anniversary of the Closing Date (the "Expiration Date"); provided that
---------------
(i) any Buyer Indemnifiable Claim as to which notice is given by a Buyer
Indemnified Party to the Stockholders prior to the Expiration Date shall survive
the Expiration Date until final resolution of such Buyer Indemnifiable Claim,
(ii) Buyer Indemnifiable Claims based upon or related to a breach of any
representation or warranty contained in Sections 2.3, 2.8 and 3.1 and claims
related to Buyer Indemnifiable Losses described in Sections 10.2(a), (c), (f)
and (i) may be asserted until the 60th day following expiration of the statute
of limitations (if any) applicable to such claim, and (iii) claims related to
Buyer Indemnifiable Losses described in Section 10.2(d) may be asserted until
the third (3rd) anniversary of the Closing Date and, if asserted by such date,
shall survive until the final resolution thereof.
(e) 1998 Tax Losses. Notwithstanding anything in this Section
---------------
10.3 to the contrary, Buyer Indemnifiable Losses described in Section 10.2(d)
shall be indemnifiable as follows:
(i) an amount of such Buyer Indemnifiable Losses equal to
the aggregate amount of the Tax Refund Bonuses shall be indemnified from the
first dollar without regard to the Deductible Amount by recourse to the Cash
-----------------------
Escrow Amount and the Escrowed Shares and, to the extent that the Cash Escrow
- -----------------------------------------------------------------------------
Amount and Escrowed Shares are insufficient to satisfy any Loss, the Buyer
- --------------------------------------------------------------------------
Indemnified Parties shall be
46
<PAGE>
entitled to claim directly against any Stockholder
- --------------------------------------------------------------------------------
to the extent of such Stockholder's Proportionate share of such Loss;
- ---------------------------------------------------------------------
(ii) if the Buyer Indemnifiable Losses exceed the aggregate amount
of the Tax Refund Bonuses, the first $400,000 of such excess shall not be
subject to indemnification hereunder; and
(iii) if the Buyer Indemnifiable Losses exceed the aggregate amount
of the Tax Refund Bonuses by more than $400,000, such excess over $400,000 shall
be indemnified by recourse to the Cash Escrow Amount and the Escrowed Shares
and, to the extent that the Cash Escrow Amount and Escrowed Shares are
insufficient to satisfy any Loss, the Buyer Indemnified Parties shall be
entitled to claim directly against any Stockholder to the extent of such
Stockholder's Proportionate share of such Loss, subject to an aggregate limit of
--------------------------------
$3,500,000.
- -----------
10.4 Indemnification by Buyer. Buyer and its successors and permitted
------------------------
assigns agree subsequent to the Closing to indemnify and hold harmless the
Stockholders and their respective successors, executors, administrators,
estates, heirs and permitted assigns (individually, a "Stockholder Indemnified
-----------------------
Party" and collectively, the "Stockholder Indemnified Parties") from and against
- ----- -------------------------------
and in respect of all Losses arising out of, based upon or in connection with:
(a) fraud, intentional misrepresentation or a deliberate or
willful breach by Buyer of any of its representations or warranties under this
Agreement or in any Schedule, Exhibit or certificate delivered under or in
connection with this Agreement;
(b) conditions, circumstances or occurrences which constitute or
result in any breach (other than a breach described in Section 10.4(a) above) of
any representation or warranty made by Buyer in this Agreement or in any
Schedule, Exhibit or certificate delivered under or in connection with this
Agreement, or by reason of any claim, action or proceeding asserted or
instituted arising out of any matter or thing covered by any such representation
or warranty; and
(c) any breach of any covenant or agreement made by Buyer in
this Agreement or in any Schedule, Exhibit or certificate delivered under or in
connection with this Agreement, or by reason of any claim, action or proceeding
asserted or instituted arising out of any matter or thing covered by any such
covenant or agreement.
Claims under clauses (a) through (c) of this Section 10.4 are collectively
referred to herein as "Stockholder Indemnifiable Claims," and Losses in respect
--------------------------------
of such claims are collectively referred to as "Stockholder Indemnifiable
-------------------------
Losses."
- ------
47
<PAGE>
10.5 Limitations on Indemnification by Buyer.
---------------------------------------
(a) Maximum Indemnification. Subject to the exceptions set
-----------------------
forth in Section 10.5(c) below, Buyer shall not be obligated to indemnify
Stockholder Indemnified Parties for any amount of Stockholder Indemnifiable
Losses in excess of $3,500,000.
(b) Deductible. Subject to the exceptions set forth in Section
----------
10.5(c) below, no indemnification shall be payable by Buyer with respect to
Stockholder Indemnifiable Losses except to the extent that the cumulative amount
of all Stockholder Indemnifiable Losses exceeds the Deductible Amount, whereupon
the amount by which such Stockholder Indemnifiable Losses exceed the Deductible
Amount shall be recoverable in accordance with the terms hereof.
(c) No Limitation on Certain Claims. Notwithstanding anything
-------------------------------
herein to the contrary, Stockholder Indemnified Parties shall be entitled to
dollar-for-dollar indemnification from the first dollar and shall not be subject
to the Deductible Amount, whether pursuant to this Section 10.5 or otherwise, or
any limitation as to time (except as provided in Section 10.5(d)) in seeking
indemnification from Buyer with respect to Stockholder Indemnified Losses
described in Section 10.4(a).
(d) Time Limitation. No indemnification shall be payable to a
---------------
Stockholder Indemnified Party with respect to any Stockholder Indemnifiable
Claim asserted after the Expiration Date; provided that (i) any Stockholder
Indemnifiable Claim as to which notice is given by a Stockholder Indemnified
Party to Buyer prior to the Expiration Date shall survive the Expiration Date
until final resolution of such Stockholder Indemnifiable Claim and (ii) claims
relating to Stockholder Indemnifiable Losses described in Sections 10.4(a) and
(c) may be asserted until the 60th day following expiration of the statute of
limitations (if any) applicable to such claim.
10.6 Notice; Defense of Claims.
-------------------------
(a) Notice of Claims. Promptly after receipt by an indemnified
----------------
party of notice of any claim, liability or expense to which the indemnification
obligations hereunder would apply, the indemnified party shall give notice
thereof in writing (a "Claim Notice") to the indemnifying party, but the
------------
omission to so notify the indemnifying party promptly will not relieve the
indemnifying party from any liability except to the extent that the indemnifying
party shall have been prejudiced as a result of the failure or delay in giving
such Claim Notice. Such Claim Notice shall state the information then available
regarding the amount and nature of such claim, liability or expense and shall
specify the provision or provisions of this Agreement under which the liability
or obligation is asserted.
(b) Third Party Claims. With respect to third party claims, if
------------------
within 20 days after receiving the Claim Notice the indemnifying party gives
written notice (the "Defense Notice") to the indemnified party stating that
--------------
(i) it would be liable under the provisions hereof
48
<PAGE>
for indemnity in the amount of such claim if such claim were successful and (ii)
that it disputes and intends to defend against such claim, liability or expense
at its own cost and expense, then counsel for the defense shall be selected by
the indemnifying party (subject to the consent of the indemnified party which
consent shall not be unreasonably withheld) and the indemnified party shall not
be required to make any payment with respect to such claim, liability or expense
as long as the indemnifying party is conducting a good faith and diligent
defense at its own expense; provided, however, that the assumption of defense of
any such matters by the indemnifying party shall relate solely to the claim,
liability or expense that is subject or potentially subject to indemnification.
The indemnifying party shall have the right, with the consent of the
indemnified party, which consent shall not be unreasonably withheld, to settle
all indemnifiable matters related to claims by third parties which are
susceptible to being settled provided the indemnifying parties' obligation to
indemnify the indemnified party therefor will be fully satisfied. The
indemnifying party shall keep the indemnified party apprised of the status of
the claim, liability or expense and any resulting suit, proceeding or
enforcement action, shall furnish the indemnified party with all documents and
information that the indemnified party shall reasonably request and shall
consult with the indemnified party prior to acting on major matters, including
settlement discussions. Notwithstanding anything herein stated, the indemnified
party shall at all times have the right to fully participate in such defense at
its own expense directly or through counsel; provided, however, if the named
parties to the action or proceeding include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate under applicable standards of professional conduct, the expense
of separate counsel for the indemnified party shall be paid by the indemnifying
party.
If no Defense Notice is given by the indemnifying party, or if such
diligent good faith defense is not being or ceases to be conducted, the
indemnified party shall, at the expense of the indemnifying party, undertake the
defense of (with counsel selected by the indemnified party), and shall have the
right to compromise or settle (exercising reasonable business judgment), such
claim, liability or expense. If such claim, liability or expense is one that by
its nature cannot be defended solely by the indemnifying party, then the
indemnified party shall make available all information and assistance that the
indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense.
(c) Non-Third Party Claims. With respect to non-third party
----------------------
claims, if within 45 days after receiving the Claim Notice the indemnifying
party does not give written notice to the indemnified party that it contests
such indemnity, the amount of indemnity payable for such claim shall be as set
forth in the Claim Notice. If the indemnifying party provides written notice to
the indemnified party within such 20-day period that it contests such indemnity,
the parties shall attempt in good faith to reach an agreement with regard
thereto within 30 days of delivery of the indemnifying party's notice. If the
parties cannot reach agreement within such 30-day period, the matter shall be
submitted to a mutually agreeable third party for binding arbitration. If the
parties cannot reach agreement with respect to the
49
<PAGE>
selection of such third party, the matter shall be submitted to
J.A.M.S./ENDISPUTE for binding arbitration in Boston, Massachusetts under the
rules of practice and procedure of such organization. In any event, the costs of
such arbitration shall be split equally between the parties.
SECTION 11. MISCELLANEOUS.
11.1 Alternative Structure. Notwithstanding anything to the contrary
---------------------
contained in this Agreement, prior the Closing, Buyer shall be entitled to
revise the structure of the sale of the Company Shares and related transactions
provided that each of the transactions describing such revised structure shall
(a) qualify as, or be treated as part of, an exchange under (S) 351 of the Code,
and not subject any of the Stockholders of the Company to a material increase in
federal income tax liability or change the amount of consideration to be
received by such Stockholders, (b) be capable of consummation in as timely a
manner as the structure contemplated herein and (c) not otherwise be prejudicial
to the interests of Stockholders or employees of the Company. This Agreement
and any related documents shall be appropriately amended in order to reflect any
such revised structure.
11.2 Fees and Expenses. Each of Buyer, the Company, and the Stockholders
-----------------
shall bear its or his own expenses and costs in connection with the preparation
and negotiation of this Agreement and the consummation of the transactions
contemplated hereby, provided that solely in the event that the transfer of
Company Shares is consummated as contemplated hereunder, the reasonable expenses
of the Company and the Stockholders (including the legal and accounting expenses
of the Company and the Stockholders) in connection with such transaction, up to
a maximum of $400,000, may be paid by the Company, reflected in any account of
the Company as of the Closing Date or paid by Buyer.
11.3 Governing Law. This Agreement shall be construed under and governed
-------------
by the internal laws of North Carolina without regard to its conflict of laws
provisions.
11.4 Notices. Any notice, request, demand or other communication
-------
required or permitted hereunder shall be in writing and shall be deemed to have
been given if delivered or sent by facsimile transmission or overnight courier
of national reputation, upon receipt, or if sent by registered or certified
mail, upon the sooner of the date on which receipt is acknowledged or the
expiration of three days after deposit in United States post office facilities
properly addressed with postage prepaid. All notices to a party will be sent to
the addresses set forth below or to such other address or person as such party
may designate by notice to each other party hereunder:
50
<PAGE>
TO BUYER: Monroe, Inc.
- --------
8 Cedar Street, Suite 54A
Woburn, MA 01801
Fax: (781) 933-3680
Attn: President
With a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Fax(617) 523-1231
Attn: Robert P. Whalen, Jr., Esq.
TO COMPANY: Rogers-American Company, Inc.
- ----------
7315 Pineville-Matthews Road
Charlotte, NC 28247-3510
Fax: (704) 541-8673
Attn: Chairman
With a copy to: Moore & Van Allen, PLLC
NationsBank Corporate Center
100 North Tryon Street, 47th Floor
Charlotte, NC 28202-4003
Fax: (704) 331-1159
Attn: R. Michael Childs, Esq.
TO THE STOCKHOLDERS: c/o Stockholders' Representative
- -------------------
Curtis L. Rogers, Jr.
4601 Kuykendall Road
Charlotte, NC 28277
With a copy to: Johnston, Allison & Hord, P.A.
610 East Morehead Street
Charlotte, NC 28202
Fax: (704) 376-1628
Attn: H. Morrison Johnston, Jr., Esq.
Any notice given hereunder may be given on behalf of any party by his counsel or
other authorized representatives.
11. Entire Agreement. This Agreement, including the Schedules and
----------------
Exhibits referred to herein and the other writings specifically identified
herein or contemplated hereby, is complete, reflects the entire agreement of the
parties with respect to its subject matter, and supersedes all previous written
or oral negotiations, commitments and writings, including
51
<PAGE>
without limitation the letter of intent, dated as of March 9, 1998, by and among
Buyer, the Company and the Stockholders.
11.6 Assignability; Binding Effect. This Agreement shall only be
-----------------------------
assignable by Buyer to a corporation or partnership controlling, controlled by
or under common control with Buyer upon written notice to the Company and the
Stockholders, and such assignment shall not relieve Buyer of any liability
hereunder. This Agreement may not be assigned by the Stockholders or the
Company without the prior written consent of Buyer. This Agreement shall be
binding upon and enforceable by, and shall inure to the benefit of, the parties
hereto and their respective successors and permitted assigns.
11.7 Captions and Gender. The captions in this Agreement are for
-------------------
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter,
as the context may require.
11.8 Execution in Counterparts. For the convenience of the parties
-------------------------
and to facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
11.9 Amendments. This Agreement may not be amended or modified, nor may
----------
compliance with any condition or covenant set forth herein be waived, except by
a writing duly and validly executed by each party hereto, or in the case of a
waiver, the party waiving compliance.
11.10 Publicity and Disclosures. No press releases or public disclosure,
-------------------------
either written or oral, of the transactions contemplated by this Agreement,
shall be made by a party to this Agreement without the prior knowledge and
written consent of Buyer and the Company. Notwithstanding the foregoing, neither
the filing of the Registration Statement (or any other document filed with any
public official in connection with the IPO), nor the distribution of the related
prospectus (whether in preliminary or final form), nor any selling activity
conducted by Buyer or the underwriters in connection with the IPO, including
without limitation those conducted as part of the so-called road show, shall be
construed as press releases or public disclosure requiring the prior approval of
the Company.
11.11 Consent to Jurisdiction. Each of the parties hereby consents to
-----------------------
personal jurisdiction, service of process and venue in the federal or state
courts of Massachusetts for any claim, suit or proceeding arising under this
Agreement, or in the case of a third party claim subject to indemnification
hereunder, in the court where such claim is brought.
11.12 Specific Performance. The parties agree that it would be
--------------------
difficult to measure damages which might result from a breach of this Agreement
by the Company or the Stockholders and that money damages would be an inadequate
remedy for such a breach. Accordingly, if there is a breach or proposed breach
of any provision of this Agreement by the
52
<PAGE>
Company or the Stockholders, and Buyer does not elect to terminate under Section
9, Buyer shall be entitled, in addition to any other remedies which it may have,
to an injunction or other appropriate equitable relief to restrain such breach
without having to show or prove actual damage to Buyer.
[Remainder of page left intentionally blank]
53
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date set forth above by their duly authorized
representatives.
MONROE, INC.
By: /s/ James L. Monroe
_________________________________
James L. Monroe
President
ROGERS-AMERICAN COMPANY, INC.
By: /s/ Curtis L. Rogers, Jr.
_________________________________
Curtis L. Rogers, Jr.
Chairman/CEO
STOCKHOLDERS' REPRESENTATIVE
/s/ Curtis L. Rogers, Jr.
____________________________________
Curtis L. Rogers, Jr., as
Stockholder Representative
54
<PAGE>
STOCKHOLDERS
------------
/s/ John L. Brady, Sr.
_________________________________
John L. Brady, Sr.
14812 Hickory View Lane
Charlotte, NC 28273
/s/ Danny L. Broadwater
__________________________________
Danny L. Broadwater
2964 Harlinsdale Drive
Rock Hill, SC 29730
/s/ Marty D. Carter
__________________________________
Marty D. Carter
11402 Pine Valley Club Drive
Charlotte, NC 28277
/s/ Thomas S. Fincher
__________________________________
Thomas S. Fincher
9916 Pallisers Terrace
Charlotte, NC 28210
/s/ Douglas H. Holstein
__________________________________
Douglas H. Holstein
5710 Providence Country Club Drive
Charlotte, NC 28277
/s/ E. Ray Johnson
__________________________________
E. Ray Johnson
10721 Alexander Hill Drive
Charlotte, NC 28277
/s/ Robert J. Maccubbin, Sr.
__________________________________
Robert J. Maccubbin, Sr.
2138 Granada Drive
Charlotte, NC 28270
55
<PAGE>
/s/ Robert J. Maccubbin, Jr.
__________________________________
Robert J. Maccubbin, Jr.
2226 Vernon Drive
Charlotte, NC 28211
/s/ Michael G. Macalka
___________________________________
Michael G. Macalka
103 Pine Straw Way
Greenville, SC 29607
/s/ Steven C. Reese
____________________________________
Steven C. Reese
#10 Harvest Court
Greenville, SC 29602
/s/ Curtis L. Rogers, Jr.
__________________________________
Curtis L. Rogers, Jr.
4601 Kuykendall Road
Charlotte, NC 28277
/s/ Curtis L. Rogers, III
__________________________________
Curtis L. Rogers, III
2334 Overhill Road
Charlotte, NC 28211
56
<PAGE>
EXHIBIT A
LIST OF STOCKHOLDERS
--------------------
Name of Stockholder Current Closing Percentage of Outstanding
Ownership Ownership Common Stock Owned at
Closing
- --------------------------------------------------------------------------
Curtis L. Rogers, Jr. 580 304.51 31.866%
Robert J. Maccubbin, Sr. 289 162.24 16.978%
John L. Brady, Sr. 10 49.92 5.22%
Danny L. Broadwater 10 49.92 5.22%
Marty D. Carter 10 49.92 5.22%
Thomas S. Fincher 10 49.92 5.22%
Douglas H. Holstein 14 137.28 14.365%
E. Ray Johnson 10 49.92 5.22%
Robert J. Maccubbin, 10 49.92 5.22%
Jr.
Curtis L. Rogers, III 10 49.92 5.22%
Michael G. Macalka 1.35 1.10 .115%
Steven C. Reese 1.25 1.02 .107%
------ ------ ------
TOTAL: 955.60 955.60 100.00%
57
<PAGE>
EXHIBIT B
ALLOCATION O F TOTAL CONSIDERATION AMONG STOCKHOLDERS
R OGERS-AMERICAN COMPANY, INC.
(ALL FIGURES IN $ AND 000'S)
<TABLE>
<CAPTION>
CASH BUYER TOTAL ESCROW PROPORTIONATE
COMMON (C/S)* SHARE**
STOCK
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------
Danny L. Broadwater $ 1,250 750S 2,000 200(S) 5.714%
- ------------------------------------------------------------------------------
John L. Brady, Sr. 1,250 750S 2,000 200(S) 5.714%
- ------------------------------------------------------------------------------
E. Ray Johnson 1,250 750S 2,000 200(S) 5.714%
- ------------------------------------------------------------------------------
Marty D. Carter 1,250 750S 2,000 200(S) 5.714%
- ------------------------------------------------------------------------------
Curtis L. Rogers, III 1,250 750S 2,000 200(S) 5.714%
- ------------------------------------------------------------------------------
Robert J. Maccubbin, Jr. 1,250 750S 2,000 200(S) 5.714%
- ------------------------------------------------------------------------------
Thomas S. Fincher 1,250 750S 2,000 200(S) 5.714%
- ------------------------------------------------------------------------------
Douglas H. Holstein 3,700 1,800S 5,500 550(S) 15.714%
- ------------------------------------------------------------------------------
Curtis L. Rogers, Jr. 9,100 1,500S 10,600 1,060(C) 30.286%
- ------------------------------------------------------------------------------
Robert J. Maccubbin, Sr. 4,000 900S 4,900 490(C) 14.000%
- ------------------------------------------------------------------------------
Michael G. Macalka 44.135 0 44.135 N/A
- ------------------------------------------------------------------------------
Steven C. Reese 40.865 0 40.865 N/A
- ------------------------------------------------------------------------------
Total 25,635 9,450S 35,085 1,950(S) 100%
1,550(C)
- ------------------------------------------------------------------------------
</TABLE>
* C = Cash
S = Stock, valued at IPO Price
** Excludes consideration allocated to Macalka and Reese.
58
<PAGE>
EXHIBIT 10.3
EXHIBIT H
FORM OF EMPLOYMENT AND NONCOMPETITION AGREEMENT
This AGREEMENT (the "Agreement") is made as of [INSERT CLOSING DATE OF
IPO], 1998 (the "Effective Date"), by and between [MONROE, INC., A DELAWARE
CORPORATION] [MERKERT ENTERPRISES, INC., A MASSACHUSETTS CORPORATION] (the
"Employer"), and ____________ (the "Executive"). In consideration of the mutual
covenants contained in this Agreement, the Employer and the Executive agree as
follows:
1. Employment. The Employer agrees to employ the Executive and the
----------
Executive agrees to be employed by the Employer on the terms and conditions set
forth in this Agreement.
2. Capacity. The Executive shall initially serve the Employer as
--------
______________, subject to election by the Board of Directors of the Employer
(the "Board of Directors"). The Executive shall also serve the Employer in such
other or additional offices as the Executive may be requested to serve by the
Board of Directors or the Chief Executive Officer. In such capacity or
capacities, the Executive shall perform such services and duties in connection
with the business, affairs and operations of the Employer as may be assigned or
delegated to the Executive from time to time by or under the authority of the
Board of Directors or the Chief Executive Officer.
3. Term. Subject to the provisions of Section 6, the term of employment
----
pursuant to this Agreement shall be three (3) years from the Effective Date (the
"Initial Term") and shall continue from month to month thereafter (the "Extended
Term"), subject to either party's thirty (30) day advance notice of non-renewal
(a "Non-renewal Notice").
4. Compensation and Benefits. The regular compensation and benefits
-------------------------
payable to the Executive under this Agreement shall be as follows:
(a) Salary. For all services rendered by the Executive under this
------
Agreement, the Employer shall pay the Executive a salary (the "Salary") at
the annual rate of ________________________ Dollars ($________), subject to
increase from time to time in the discretion of the Board of Directors or
the Compensation Committee of the Board of Directors (the "Compensation
Committee"). The Salary shall be payable in periodic installments in
accordance with the Employer's usual practice for its senior executives.
(b) Bonus. Beginning with the fiscal year ending December 31, 1998,
-----
the Executive shall be entitled to participate in an annual incentive
program established by the Board of Directors or the Compensation Committee
with such terms as may be
<PAGE>
established in the sole discretion of the Board of Directors or Compensation
Committee.
(c) Regular Benefits. From and after the commencement of the Initial
----------------
Term, the Executive shall continue to participate in such employee benefit
plans of Merkert Enterprises, Inc. in which the Executive participated
prior to the acquisition of Merkert Enterprises, Inc. and which may have
been adopted or assumed by the Employer in its sole discretion (the
"Predecessor Plans"). The Executive may continue to participate in each
such Predecessor Plan, in accordance with and subject to each such
Predecessor Plan's terms and conditions, as may be modified or amended from
time to time by the Employer, until such time as the Employer terminates
any such Predecessor Plan. Thereafter, the Executive shall be entitled to
participate in any employee benefit plans, including, without limitation,
medical insurance plans, life insurance plans, disability income plans,
retirement plans, and other benefit plans, which the Employer may from time
to time have in effect for all or most of its senior executives. During
the Initial Term, the Employer shall provide the Executive with medical
insurance coverage that is substantially equivalent to the medical
insurance coverage applicable to the Executive immediately prior to the
acquisition of Merkert Enterprises, Inc. The Executive's participation in
any employee benefit plan shall at all times be subject to the terms of the
applicable plan documents, generally applicable policies of the Employer,
applicable law and the discretion of the Board of Directors, the
Compensation Committee or any administrative or other committee provided
for in or contemplated by any such plan. Nothing contained in this
Agreement shall be construed to create any obligation on the part of the
Employer to establish any such plan or to maintain the effectiveness of any
such plan which may be in effect from time to time.
(d) Other Benefits and Perquisites.
------------------------------
(i) Expenses. The Employer shall reimburse the Executive for
--------
expenses reasonably incurred by the Employee in furtherance of his
duties for the Employer hereunder. The Employer's obligation to
reimburse the Executive for such expenses shall be subject to the
Employer's expense reimbursement policies, as established,
modified or amended by the Employer from time to time, and the
submission by the Executive of documentation in a form acceptable
to the Employer.
(ii) Automobile. During the Initial Term, the Executive shall be
----------
entitled to use an automobile supplied by the Employer and to
receive reimbursement from the Employer for business-related
automobile expenses to the extent that and subject to
substantially equivalent terms and conditions on which Merkert
Enterprises, Inc. provided such benefits to the Executive
immediately prior to the acquisition of Merkert Enterprises, Inc.
2
<PAGE>
(iii) Vacation. The Executive shall be entitled to accrue on a
--------
pro rata basis up to _______ weeks of paid vacation per year.
The Executive's entitlement to carry-over unused vacation from
year to year shall be subject to vacation policies established,
and as modified or amended, from time to time by the Employer;
provided, that nothing contained herein shall be construed to
require the Employer to permit the carry-over of unused vacation.
(d) Taxation of Payments and Benefits. The Employer shall undertake
---------------------------------
to make deductions, withholdings and tax reports with respect to payments
and benefits under this Agreement to the extent that it reasonably and in
good faith believes that it is required to make such deductions,
withholdings and tax reports. Payments under this Agreement shall be in
amounts net of any such deductions or withholdings. Nothing in this
Agreement shall be construed to require the Employer to make any payments
to compensate the Executive for any adverse tax effect associated with any
payments or benefits or for any deduction or withholding from any payment
or benefit.
(e) Exclusivity of Salary and Benefits. The Executive shall not be
----------------------------------
entitled to any payments or benefits other than those provided under this
Agreement.
5. Extent of Service. During the Executive's employment under this
-----------------
Agreement, the Executive shall, subject to the direction and supervision of the
Board of Directors or the Chief Executive Officer, devote the Executive's full
business time, best efforts and business judgment, skill and knowledge to the
advancement of the Employer's interests and to the discharge of the Executive's
duties and responsibilities under this Agreement. The Executive shall not
engage in any other business activity, except as may be approved by the Board of
Directors; provided that nothing in this Agreement shall be construed as
preventing the Executive from:
(a) investing the Executive's assets in any company or other entity
in a manner not prohibited by Section 7(d) and in such form or manner as
shall not require any material activities on the Executive's part in
connection with the operations or affairs of the companies or other
entities in which such investments are made; or
(b) engaging in religious, charitable or other community or non-
profit activities that do not impair the Executive's ability to fulfill the
Executive's duties and responsibilities under this Agreement.
6. Termination and Termination Benefits. Notwithstanding the provisions
------------------------------------
of Section 3, the Executive's employment under this Agreement shall terminate
under the following circumstances set forth in this Section 6.
(a) Termination by the Employer for Cause. The Executive's
-------------------------------------
employment under this Agreement may be terminated for cause without further
liability on the part
3
<PAGE>
of the Employer effective immediately upon a vote of the Board of Directors
and written notice to the Executive. Only the following shall constitute
"cause" for such termination:
(i) dishonest statements or acts of the Executive with respect
to the Employer or any affiliate of the Employer which constitute
material disloyalty or dishonesty toward the Employer or any affiliate
of the Employer or cause significant damage to the Employer or any
affiliate of the Employer, including damage to the business reputation
of the Employer or any affiliate of the Employer;
(ii) the commission by or indictment of the Executive for (A) a
felony or (B) any misdemeanor involving moral turpitude, deceit,
dishonesty or fraud ("indictment," for these purposes, meaning an
indictment, probable cause hearing or any other procedure pursuant to
which an initial determination of probable or reasonable cause with
respect to such offense is made);
(iii) failure to perform to the reasonable satisfaction of the
Board of Directors a substantial portion of the Executive's duties and
responsibilities reasonably assigned or delegated under this
Agreement, which failure continues, in the reasonable judgment of the
Board of Directors, after written notice given to the Executive by the
Board of Directors;
(iv) gross negligence, willful misconduct or insubordination of
the Executive with respect to the Employer or any affiliate of the
Employer which is repeated or continued by the Executive, in the
reasonable judgment of the Board of Directors, after written notice
given to the Executive by the Board of Directors; or
(v) material breach by the Executive of any of the Executive's
material obligations under this Agreement, which breach is repeated or
continued by the Executive, in the reasonable judgment of the Board of
Directors, after written notice given to the Executive by the Board of
Directors.
(b) Termination by the Executive. The Executive's employment under
----------------------------
this Agreement may be terminated by the Executive by written notice to the
Board of Directors at least thirty (30) days prior to such termination.
(c) Termination by the Employer Without Cause. Subject to the payment
-----------------------------------------
of Termination Benefits pursuant to Section 6(d), the Executive's
employment under this Agreement may be terminated by the Employer without
cause upon written notice to the Executive by a vote of the Board of
Directors at least thirty (30) days prior to such termination, provided
that, the Employer, in its sole discretion, may elect to provide the
Executive with pay in lieu of all or a portion of such notice.
4
<PAGE>
(d) Certain Termination Benefits. Unless otherwise specifically
----------------------------
provided in this Agreement or otherwise required by law, all compensation
and benefits payable to the Executive under this Agreement shall terminate
on the date of termination of the Executive's employment under this
Agreement pursuant to this Section 6 or due to delivery of a Non-renewal
Notice from either party to the other. Notwithstanding the foregoing, (i)
nothing in this Agreement shall be construed to affect the Executive's
right to receive continuation of group health plan benefits to the extent
authorized by and consistent with 29 U.S.C. (S) 1161 et seq. (commonly
known as "COBRA") entirely at the Executive's own cost and (ii) in the
event of termination of the Executive's employment with the Employer
pursuant to Section 6(c) above, provided that the Executive shall not have
breached, as of the date of termination or thereafter, any of his or her
covenants or agreements contained in this Agreement, the Employer shall
provide to the Executive continuation of the Salary at the rate then in
effect pursuant to Section 4(a) (the "Termination Benefits") until the
later of (A) the expiration of the Initial Term or (B) for twelve months
from the date of termination of employment; provided further, that in the
event that the Executive commences any employment or self-employment during
the period during which the Executive is entitled to receive Termination
Benefits (the "Termination Benefits Period"), the remaining amount of
Salary due for the period from the commencement of such employment or self-
employment to the end of the Termination Benefits Period shall be reduced
by one-half. The Employer's liability for Salary continuation shall be
reduced by the amount of any severance pay due or otherwise paid to the
Executive pursuant to any severance pay plan or stay bonus plan of the
Employer. The Executive shall be obligated to give prompt notice of the
date of commencement of any employment or self-employment during the
Termination Benefits Period and shall respond promptly to any reasonable
inquiries concerning any employment or self-employment in which the
Executive engages during the Termination Benefits Period.
(e) Disability. If the Executive shall be disabled so as to be unable
----------
to perform the essential functions of the Executive's then existing
position or positions under this Agreement with or without reasonable
accommodation, the Chief Executive Officer or the Board of Directors may
remove the Executive from any responsibilities and/or reassign the
Executive to another position with the Employer for the remainder of the
Initial Term or, if the Initial Term has expired, any Extended Term, or
during the period of such disability. Notwithstanding any such removal or
reassignment, the Executive shall continue to receive the Executive's full
Salary (less any disability pay or sick pay benefits to which the Executive
may be entitled under the Employer's policies) and benefits under Section 4
of this Agreement (except to the extent that the Executive may be
ineligible for one or more such benefits under applicable plan terms) for a
period of time equal to the remainder of the Initial Term or, if the
Initial Term has expired, any Extended Term, provided that the Executive
remains employed by the Employer during such period. In the event that the
Employer terminates the Executive's employment without cause pursuant to
Section 6(c) or the Employer delivers a Non-renewal Notice to the
Executive, in either case due to the Executive's
5
<PAGE>
continuing inability to perform the essential functions of the Executive's
then existing position or positions, the Executive shall be eligible to
receive Termination Benefits subject to and in accordance with the terms
and conditions of Section 6(d), provided that the Executive's Termination
Benefit additionally shall be subject to reduction by the amount of any
payments the Executive receives under any disability benefit plan or plans
or insurance policies the Employer maintains for the Executive, or under
worker's compensation, or state or federal disability benefit programs. If
any question shall arise as to whether during any period the Executive is
disabled so as to be unable to perform the essential functions of the
Executive's then existing position or positions with or without reasonable
accommodation, the Executive may, and at the request of the Employer shall,
submit to the Employer a certification in reasonable detail by a physician
selected by the Employer to whom the Executive or the Executive's guardian
has no reasonable objection as to whether the Executive is so disabled or
how long such disability is expected to continue, and such certification
shall for the purposes of this Agreement be conclusive of the issue. The
Executive shall cooperate with any reasonable request of the physician in
connection with such certification. If such question shall arise and the
Executive shall fail to submit such certification, the Employer's
determination of such issue shall be binding on the Executive. Nothing in
this Section 6(e) shall be construed to waive the Executive's rights, if
any, under existing law including, without limitation, the Family and
Medical Leave Act of 1993, 29 U.S.C. (S)2601 et seq. and the Americans with
Disabilities Act, 42 U.S.C. (S)12101 et seq.
(f) Deductibility of Payments. It is the intention of the Executive
-------------------------
and of the Employer that no payments by the Employer to or for the benefit
of the Executive under this Agreement or any other agreement or plan, if
any, pursuant to which the Executive is entitled to receive payments or
benefits shall be nondeductible to the Employer by reason of the operation
of Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code"), relating to parachute payments or any like statutory or regulatory
provision. Accordingly, and notwithstanding any other provision of this
Agreement or any such agreement or plan, if by reason of the operation of
said Section 280G or any like statutory or regulatory provision, any such
payments exceed the amount which can be deducted by the Employer, such
payments shall be reduced to the maximum amount which can be deducted by
the Employer. To the extent that payments exceeding such maximum
deductible amount have been made to or for the benefit of the Executive,
such excess payments shall be refunded to the Employer with interest
thereon at the applicable Federal rate determined under Section 1274(d) of
the Code, compounded annually, or at such other rate as may be required in
order that no such payments shall be nondeductible to the Employer by
reason of the operation of said Section 280G or any like statutory or
regulatory provision. To the extent that there is more than one method of
reducing the payments to bring them within the limitations of said Section
280G or any like statutory or regulatory provision, the Executive shall
determine which method shall be followed, provided that if the Executive
fails to make such determination within forty-five (45) days after the
6
<PAGE>
Employer has given notice of the need for such reduction, the Employer may
determine the method of such reduction in its sole discretion.
7. Confidential Information, Noncompetition and Cooperation.
--------------------------------------------------------
(a) Confidential Information. As used in this Agreement,
------------------------
"Confidential Information" means information belonging to the Employer
which is of value to the Employer in the course of conducting its business
and the disclosure of which could result in a competitive or other
disadvantage to the Employer. Confidential Information includes, without
limitation, financial information, reports, and forecasts; market or sales
information, plans, methods and techniques; pricing policies; customer
lists; price lists; inventions, improvements and other intellectual
property; trade secrets; know-how; designs, processes or formulae;
software; and business plans, prospects and opportunities (such as possible
acquisitions or dispositions of businesses or facilities) which have been
discussed or considered by the management of the Employer. Confidential
Information includes information developed by the Executive in the course
of the Executive's employment by the Employer, as well as other information
to which the Executive may have access in connection with the Executive's
employment. Confidential Information also includes the confidential
information of others with which the Employer has a business relationship,
including without limitation its principals, packers and suppliers.
Notwithstanding the foregoing, Confidential Information does not include
information in the public domain, unless due to breach of the Executive's
duties under Section 7(b).
(b) Confidentiality. The Executive understands and agrees that the
---------------
Executive's employment creates a relationship of confidence and trust
between the Executive and the Employer with respect to all Confidential
Information. At all times, both during the Executive's employment with the
Employer and after its termination, the Executive will keep in confidence
and trust all such Confidential Information, and will not use or disclose
any such Confidential Information without the written consent of the
Employer, except as may be necessary in the ordinary course of performing
the Executive's duties to the Employer.
(c) Documents, Records, etc. All documents, records, data, apparatus,
------------------------
equipment and other physical property, whether or not pertaining to
Confidential Information, which are furnished to the Executive by the
Employer or are produced by the Executive in connection with the
Executive's employment will be and remain the sole property of the
Employer. The Executive will return to the Employer all such materials and
property as and when requested by the Employer. In any event, the
Executive will return all such materials and property immediately upon
termination of the Executive's employment for any reason. The Executive
will not retain with the Executive any such material or property or any
copies thereof after such termination.
7
<PAGE>
(d) Noncompetition and Nonsolicitation. During the Initial Term and
----------------------------------
any Extended Term(s) and for one (1) year thereafter (or during the
Termination Benefits Period, if longer) (the "Restricted Period"), the
Executive (i) will not, directly or indirectly, whether as owner, partner,
shareholder, advisor, consultant, agent, employee, co-venturer, creditor,
officer, director, trustee or otherwise, engage, participate, assist or
invest in any Restricted Business within the Territory (as those terms are
hereinafter defined); (ii) will refrain from directly or indirectly
employing, attempting to employ, recruiting or otherwise soliciting,
inducing or influencing any person to leave employment with the Employer
(other than terminations of employment of subordinate employees undertaken
in the course of the Executive's employment with the Employer); and (iii)
will refrain from soliciting or encouraging any principal, customer or
supplier to terminate or otherwise modify adversely its business
relationship with the Employer. The Executive understands that the
restrictions set forth in this Section 7(d) are intended to protect the
Employer's interest in its Confidential Information and established
employee, customer and supplier relationships and goodwill, and agrees that
such restrictions are reasonable and appropriate for this purpose.
For purposes of this Agreement, the term "Restricted Business" shall mean
any business which is competitive with:
(A) any business conducted by the Employer on the date of the
termination of Executive's employment with the Employer, and
(B) any business conducted by the Employer within the twelve (12)
month period immediately preceding the termination of Executive's
employment with the Employer, and
(C) any business the Employer actively considered entering within
twelve (12) months preceding the date of the termination of
Executive's employment with the Employer if the Executive had
knowledge of such consideration and the Employer in fact commences
conducting such business during the Restricted Period.
Notwithstanding the foregoing, the Executive may own up to one percent
(1%) of the outstanding stock of a publicly held corporation which
constitutes or is affiliated with a Restricted Business.
For purposes of this Agreement, the term "Territory" shall mean:
(A) any geographic area in which the Employer engaged in business and
for which the Executive had any responsibility at the time of the
termination of the Executive's employment or within the twelve (12)
month period preceding termination, and
8
<PAGE>
(B) any geographic area in which the Employer engaged in business at
the time of the termination of the Executive's employment or within
the twelve (12) month period preceding termination, and
(C) any geographic area in which the Employer actively considered
conducting business within twelve (12) months preceding the date of
the termination of Executive's employment with the Employer if the
Executive had knowledge of such consideration and the Employer in fact
commences conducting business therein during the Restricted Period.
The parties acknowledge and agree that for purpose of this Section 7,
the term "Employer" includes the Employer, its related and affiliated
entities, and their respective predecessors, successors and assigns.
(e) Principals and Customers. For purposes of construing the
------------------------
provisions of this Section 7, any and all persons, firms and entities for
whom the Employer performs services, to whom the Employer sells or from
whom the Employer solicits and obtains orders, in the course of its
business, are and shall be deemed the principals and/or customers of the
Employer (or its principals), both during and after the Term,
notwithstanding the fact that some or all of said persons, firms or
entities may have been induced to give their business to the Employer by
the solicitation by the Executive, or by someone on his or her behalf,
either during the usual working hours of the Executive or otherwise, and
notwithstanding the fact that all or some of such persons, firms or
entities may have previously been principals or customers of (i) the
Executive, (ii) any corporation or other entity with which the Executive
was formerly employed or which was controlled or owned, in whole or in
part, by the Executive, or (iii) any principal of such corporation or
entity.
(f) Third-Party Agreements and Rights. The Executive hereby confirms
---------------------------------
that the Executive is not bound by the terms of any agreement with any
previous employer or other party which restricts in any way the Executive's
use or disclosure of information or the Executive's engagement in any
business. The Executive represents to the Employer that the Executive's
execution of this Agreement, the Executive's employment with the Employer
and the performance of the Executive's proposed duties for the Employer
will not violate any obligations the Executive may have to any such
previous employer or other party. In the Executive's work for the
Employer, the Executive will not disclose or make use of any information in
violation of any agreements with or rights of any such previous employer or
other party, and the Executive will not bring to the premises of the
Employer any copies or other tangible embodiments of non-public information
belonging to or obtained from any such previous employment or other party.
(g) Litigation and Regulatory Cooperation. During and after the
-------------------------------------
Executive's employment, the Executive shall cooperate fully with the
Employer in the defense or
9
<PAGE>
prosecution of any claims or actions now in existence or which may be
brought in the future against or on behalf of the Employer which relate to
events or occurrences that transpired while the Executive was employed by
the Employer. The Executive's full cooperation in connection with such
claims or actions shall include, but not be limited to, being available to
meet with counsel to prepare for discovery or trial and to act as a witness
on behalf of the Employer at mutually convenient times. During and after
the Executive's employment, the Executive also shall cooperate fully with
the Employer in connection with any investigation or review of any federal,
state or local regulatory authority as any such investigation or review
relates to events or occurrences that transpired while the Executive was
employed by the Employer. The Employer shall reimburse the Executive for
any reasonable out-of-pocket expenses incurred in connection with the
Executive's performance of obligations pursuant to this Section 7(g).
(h) Injunction. The Executive agrees that it would be difficult to
----------
measure any damages caused to the Employer which might result from any
breach by the Executive of the promises set forth in this Section 7, and
that in any event money damages would be an inadequate remedy for any such
breach. Accordingly, subject to Section 8 of this Agreement, the Executive
agrees that if the Executive breaches, or proposes to breach, any portion
of this Agreement, the Employer shall be entitled, in addition to all other
remedies that it may have, to an injunction or other appropriate equitable
relief to restrain any such breach without showing or proving any actual
damage to the Employer.
8. Arbitration of Disputes. Any controversy or claim arising out of or
-----------------------
relating to this Agreement or the breach thereof or otherwise arising out of the
Executive's employment or the termination of that employment (including, without
limitation, any claims of unlawful employment discrimination whether based on
age or otherwise) shall, to the fullest extent permitted by law, be settled by
arbitration in any forum and form agreed upon by the parties or, in the absence
of such an agreement, under the auspices of the American Arbitration Association
("AAA") in Boston, Massachusetts in accordance with the Employment Dispute
Resolution Rules of the AAA, including, but not limited to, the rules and
procedures applicable to the selection of arbitrators. In the event that any
person or entity other than the Executive or the Employer may be a party with
regard to any such controversy or claim, such controversy or claim shall be
submitted to arbitration subject to such other person or entity's agreement.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. This Section 8 shall be specifically enforceable.
Notwithstanding the foregoing, this Section 8 shall not preclude either party
from pursuing a court action for the sole purpose of obtaining a temporary
restraining order or a preliminary injunction in circumstances in which such
relief is appropriate; provided that any other relief shall be pursued through
an arbitration proceeding pursuant to this Section 8.
9. Consent to Jurisdiction. To the extent that any court action is
-----------------------
permitted consistent with or to enforce Section 8 of this Agreement, the parties
hereby consent to the
10
<PAGE>
jurisdiction of the courts of the Commonwealth of Massachusetts and (to the
extent subject matter jurisdiction exists therefor) of the United States
District Court for the District of Massachusetts. Accordingly, with respect to
any such court action, the Executive (a) submits to the personal jurisdiction of
such courts; (b) consents to service of process; and (c) waives any other
requirement (whether imposed by statute, rule of court, or otherwise) with
respect to personal jurisdiction or service of process.
10. Integration. This Agreement constitutes the entire agreement between
-----------
the parties with respect to the subject matter hereof and supersedes all prior
agreements between the parties with respect to any related subject matter.
11. Assignment; Successors and Assigns, etc. Neither the Employer nor the
---------------------------------------
Executive may make any assignment of this Agreement or any interest herein, by
operation of law or otherwise, without the prior written consent of the other
party; provided that the Employer may assign its rights under this Agreement
without the consent of the Executive in the event that the Employer shall effect
a reorganization, consolidate with or merge into any other corporation,
partnership, organization or other entity, or transfer all or substantially all
of its properties or assets to any other corporation, partnership, organization
or other entity. This Agreement shall inure to the benefit of and be binding
upon the Employer and the Executive and their respective successors, executors,
administrators, heirs and permitted assigns.
12. Enforceability. If any portion or provision of this Agreement
--------------
(including, without limitation, any portion or provision of any section of this
Agreement) shall to any extent be declared illegal or unenforceable by a court
of competent jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other than those as to
which it is so declared illegal or unenforceable, shall not be affected thereby,
and each portion and provision of this Agreement shall be valid and enforceable
to the fullest extent permitted by law.
13. Waiver. No waiver of any provision hereof shall be effective unless
------
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
14. Notices. Any notices, requests, demands and other communications
-------
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by a nationally recognized overnight courier service or by
registered or certified mail, postage prepaid, return receipt requested, to the
Executive at the last address the Executive has filed in writing with the
Employer or, in the case of the Employer, at its main offices, attention of the
Chief Executive Officer, and shall be effective on the date of delivery in
person or by courier or three (3) days after the date mailed.
11
<PAGE>
15. Amendment. This Agreement may be amended or modified only by a
---------
written instrument signed by the Executive and by a duly authorized
representative of the Employer.
16. Governing Law. This is a Massachusetts contract and shall be
-------------
construed under and be governed in all respects by the laws of the Commonwealth
of Massachusetts, without giving effect to the conflict of laws principles of
such Commonwealth. With respect to any disputes concerning federal law, such
disputes shall be determined in accordance with the law as it would be
interpreted and applied by the United States Court of Appeals for the First
Circuit.
17. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed and delivered shall be taken to be
an original; but such counterparts shall together constitute one and the same
document.
[End of text]
12
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
by the Employer, by its duly authorized officer, and by the Executive, as of the
Effective Date.
[MONROE, INC.]
[MERKERT ENTERPRISES, INC.]
By: _________________________
Name:
Title:
_______________________________
[NAME OF EXECUTIVE]
13
<PAGE>
EXHIBIT 10.4
EXHIBIT G
---------
FORM OF EMPLOYMENT AND NONCOMPETITION AGREEMENT
-----------------------------------------------
This AGREEMENT (the "Agreement") is made as of [INSERT CLOSING DATE OF
IPO], 1998 (the "Effective Date"), by and between [MONROE, INC., A DELAWARE
CORPORATION] [ROGERS-AMERICAN COMPANY, INC., A NORTH CAROLINA CORPORATION] (the
"Employer"), and ____________ (the "Executive"). In consideration of the mutual
covenants contained in this Agreement, the Employer and the Executive agree as
follows:
1. Employment. The Employer agrees to employ the Executive and the
----------
Executive agrees to be employed by the Employer on the terms and conditions set
forth in this Agreement.
2. Capacity. The Executive shall initially serve the Employer as
--------
______________, subject to election by the Board of Directors of the Employer
(the "Board of Directors"). The Executive shall also serve the Employer in such
other or additional offices as the Executive may be requested to serve by the
Board of Directors or the Chief Executive Officer. In such capacity or
capacities, the Executive shall perform such services and duties in connection
with the business, affairs and operations of the Employer as may be assigned or
delegated to the Executive from time to time by or under the authority of the
Board of Directors or the Chief Executive Officer.
3. Term. Subject to the provisions of Section 6, the term of employment
----
pursuant to this Agreement shall be three (3) years from the Effective Date (the
"Initial Term") and shall continue from month to month thereafter (the "Extended
Term"), subject to either party's thirty (30) day advance notice of non-renewal
(a "Non-renewal Notice").
4. Compensation and Benefits. The regular compensation and benefits
-------------------------
payable to the Executive under this Agreement shall be as follows:
(a) Salary. For all services rendered by the Executive under this
------
Agreement, the Employer shall pay the Executive a salary (the "Salary") at
the annual rate of ________________________Dollars ($________), subject to
increase from time to time in the discretion of the Board of Directors or
the Compensation Committee of the Board of Directors (the "Compensation
Committee"). The Salary shall be payable in periodic installments in
accordance with the Employer's usual practice for its senior executives.
(b) Bonus. Beginning with the fiscal year ending December 31, 1998,
-----
the Executive shall be entitled to participate in an annual incentive
program established by the Board of Directors or the Compensation Committee
with such terms as may be
<PAGE>
established in the sole discretion of the Board of Directors or
Compensation Committee.
(c) Regular Benefits. From and after the commencement of the Initial
----------------
Term, the Executive shall continue to participate in such employee benefit
plans of Rogers-American Company, Inc. in which the Executive participated
prior to the acquisition of Rogers-American Company, Inc. and which may
have been adopted or assumed by the Employer in its sole discretion (the
"Predecessor Plans"). The Executive may continue to participate in each
such Predecessor Plan, in accordance with and subject to each such
Predecessor Plan's terms and conditions, as may be modified or amended from
time to time by the Employer, until such time as the Employer terminates
any such Predecessor Plan. Thereafter, the Executive shall be entitled to
participate in any employee benefit plans, including, without limitation,
medical insurance plans, life insurance plans, disability income plans,
retirement plans, and other benefit plans, which the Employer may from time
to time have in effect for all or most of its senior executives. During
the Initial Term, the Employer shall provide the Executive with medical
insurance coverage that is substantially equivalent to the medical
insurance coverage applicable to the Executive immediately prior to the
acquisition of Rogers-American Company, Inc. The Executive's participation
in any employee benefit plan shall at all times be subject to the terms of
the applicable plan documents, generally applicable policies of the
Employer, applicable law and the discretion of the Board of Directors, the
Compensation Committee or any administrative or other committee provided
for in or contemplated by any such plan. Nothing contained in this
Agreement shall be construed to create any obligation on the part of the
Employer to establish any such plan or to maintain the effectiveness of any
such plan which may be in effect from time to time.
(d) Other Benefits and Perquisites.
------------------------------
(i) Expenses. The Employer shall reimburse the Executive for
--------
expenses reasonably incurred by the Executive in furtherance of
his duties for the Employer hereunder. The Employer's obligation
to reimburse the Executive for such expenses shall be subject to
the Employer's expense reimbursement policies, as established,
modified or amended by the Employer from time to time, and the
submission by the Executive of documentation in a form acceptable
to the Employer.
(ii) Automobile. During the Initial Term, the Executive shall be
----------
entitled to use an automobile supplied by the Employer and to
receive reimbursement from the Employer for business-related
automobile expenses to the extent that and subject to
substantially equivalent terms and conditions on which Rogers-
American Company, Inc. provided such benefits to the Executive
immediately prior to the acquisition of Rogers-American Company,
Inc.
2
<PAGE>
(iii) Vacation. The Executive shall be entitled to accrue on a
--------
pro rata basis up to _______ weeks of paid vacation per year.
The Executive's entitlement to carry-over unused vacation from
year to year shall be subject to vacation policies established,
and as modified or amended, from time to time by the Employer;
provided, that nothing contained herein shall be construed to
require the Employer to permit the carry-over of unused vacation.
(e) Taxation of Payments and Benefits. The Employer shall undertake
---------------------------------
to make deductions, withholdings and tax reports with respect to payments
and benefits under this Agreement to the extent that it reasonably and in
good faith believes that it is required to make such deductions,
withholdings and tax reports. Payments under this Agreement shall be in
amounts net of any such deductions or withholdings. Nothing in this
Agreement shall be construed to require the Employer to make any payments
to compensate the Executive for any adverse tax effect associated with any
payments or benefits or for any deduction or withholding from any payment
or benefit.
(f) Exclusivity of Salary and Benefits. The Executive shall not be
----------------------------------
entitled to any payments or benefits other than those provided under this
Agreement.
5. Extent of Service. During the Executive's employment under this
-----------------
Agreement, the Executive shall, subject to the direction and supervision of the
Board of Directors or the Chief Executive Officer, devote the Executive's full
business time, best efforts and business judgment, skill and knowledge to the
advancement of the Employer's interests and to the discharge of the Executive's
duties and responsibilities under this Agreement. The Executive shall not
engage in any other business activity, except as may be approved by the Board of
Directors; provided that nothing in this Agreement shall be construed as
preventing the Executive from:
(a) investing the Executive's assets in any company or other entity in
a manner not prohibited by Section 7(d) and in such form or manner as shall
not require any material activities on the Executive's part in connection
with the operations or affairs of the companies or other entities in which
such investments are made; or
(b) engaging in religious, charitable or other community or non-profit
activities that do not impair the Executive's ability to fulfill the
Executive's duties and responsibilities under this Agreement.
6. Termination and Termination Benefits. Notwithstanding the provisions
------------------------------------
of Section 3, the Executive's employment under this Agreement shall terminate
under the following circumstances set forth in this Section 6.
(a) Termination by the Employer for Cause. The Executive's employment
-------------------------------------
under this Agreement may be terminated for cause without further liability
on the part
3
<PAGE>
of the Employer effective immediately upon a vote of the Board of Directors
and written notice to the Executive. Only the following shall constitute
"cause" for such termination:
(i) dishonest statements or acts of the Executive with respect to
the Employer or any affiliate of the Employer which constitute
material disloyalty or dishonesty toward the Employer or any affiliate
of the Employer or cause significant damage to the Employer or any
affiliate of the Employer, including damage to the business reputation
of the Employer or any affiliate of the Employer;
(ii) the commission by or indictment of the Executive for (A) a
felony or (B) any misdemeanor involving moral turpitude, deceit,
dishonesty or fraud ("indictment," for these purposes, meaning an
indictment, probable cause hearing or any other procedure pursuant to
which an initial determination of probable or reasonable cause with
respect to such offense is made);
(iii) failure to perform to the reasonable satisfaction of the
Board of Directors a substantial portion of the Executive's duties and
responsibilities reasonably assigned or delegated under this
Agreement, which failure continues, in the reasonable judgment of the
Board of Directors, after written notice given to the Executive by the
Board of Directors;
(iv) gross negligence, willful misconduct or insubordination of
the Executive with respect to the Employer or any affiliate of the
Employer which is repeated or continued by the Executive, in the
reasonable judgment of the Board of Directors, after written notice
given to the Executive by the Board of Directors; or
(v) material breach by the Executive of any of the Executive's
obligations under this Agreement, which breach is repeated or
continued by the Executive, in the reasonable judgment of the Board of
Directors, after written notice given to the Executive by the Board of
Directors.
Notwithstanding the foregoing, the Executive's employment may not be
terminated for cause as a result of the Executive's refusal to comply with
any request by the Employer to relocate the Executive's principal place of
employment to a new location that is beyond a fifty (50) mile radius from
the Executive's current principal place of employment.
(b) Termination by the Executive. The Executive's employment under
----------------------------
this Agreement may be terminated by the Executive by written notice to the
Board of Directors at least thirty (30) days prior to such termination.
4
<PAGE>
(c) Termination by the Employer Without Cause. Subject to the payment
-----------------------------------------
of Termination Benefits pursuant to Section 6(d), the Executive's
employment under this Agreement may be terminated by the Employer without
cause upon written notice to the Executive by a vote of the Board of
Directors at least thirty (30) days prior to such termination, provided
that, the Employer, in its sole discretion, may elect to provide the
Executive with pay in lieu of all or a portion of such notice.
(d) Certain Termination Benefits. Unless otherwise specifically
----------------------------
provided in this Agreement or otherwise required by law, all compensation
and benefits payable to the Executive under this Agreement shall terminate
on the date of termination of the Executive's employment under this
Agreement pursuant to this Section 6 or due to delivery of a Non-renewal
Notice from either party to the other. Notwithstanding the foregoing, in
the event of termination of the Executive's employment with the Employer
pursuant to Section 6(c) above, the Employer shall provide to the Executive
the following termination benefits ("Termination Benefits"):
(i) continuation of the Salary at the rate then in effect
pursuant to Section 4(a);
(ii) continuation of group health plan benefits, (A) if
permitted by Employer's health plan or if Employer self-insures
(provided that Employer shall have no obligations to self-
insure), until the expiration of the Initial Term, or (B) if not
permitted by Employer's health plan, to the extent authorized by
and consistent with 29 U.S.C (S) 1161 et seq. (commonly known as
"COBRA"), in either case with the cost of the regular premium for
such benefits shared in the same relative proportion by the
Employer and the Executive as in effect on the date of
termination; and
(iii) continuation of automobile benefits as in effect on the
date of termination pursuant to Section 4(d)(ii).
The Termination Benefits set forth in (i) above shall continue effective
until the later of (A) the expiration of the Initial Term or (B) for twelve
months from the date of termination of employment, provided that the Executive
shall not have breached, (1) as of the date of termination, any of his or her
covenants or agreements contained in Sections 7 and 8 of this Agreement or (2)
thereafter, any of his or her covenants or agreements contained in this
Agreement. The Termination Benefits set forth in (ii) and (iii) above shall
continue effective until the expiration of the Initial Term, provided that the
Executive shall not have breached, (x) as of the date of termination, any of his
or her covenants or agreements contained in Section 7 and 8 of this Agreement or
(y) thereafter, any of his or her covenants or agreements contained in this
Agreement. In the event that the Executive commences any employment or self-
employment during the period during which the Executive is entitled to receive
Termination Benefits (the "Termination Benefits Period"), the remaining amount
of Salary due for the period from the commencement of such employment or self-
employment to the end of the Termination Benefits Period shall be reduced by
one-half and the Termination Benefits provided under Sections 6(d)(ii) and (iii)
shall cease effective as of the date of commencement of such employment or self-
employment. The Employer's liability for Salary continuation
5
<PAGE>
pursuant to Section 6(d)(i) shall be reduced by the amount of any severance pay
due or otherwise paid to the Executive pursuant to any severance pay plan or
stay bonus plan of the Employer. Notwithstanding the foregoing, nothing in this
Section 6(d) shall be construed to affect the Executive's right to receive COBRA
continuation entirely at the Executive's own cost to the extent that the
Executive may continue to be entitled to COBRA continuation after the
Executive's right to cost sharing under Section 6(d)(ii) ceases. The Executive
shall be obligated to give prompt notice of the date of commencement of any
employment or self-employment during the Termination Benefits Period and shall
respond promptly to any reasonable inquiries concerning any employment or self-
employment in which the Executive engages during the Termination Benefits
Period.
(e) Disability. If the Executive shall be disabled so as to be unable
----------
to perform the essential functions of the Executive's then existing
position or positions under this Agreement with or without reasonable
accommodation, the Chief Executive Officer or the Board of Directors may
remove the Executive from any responsibilities and/or reassign the
Executive to another position with the Employer for the remainder of the
Initial Term or, if the Initial Term has expired, any Extended Term, or
during the period of such disability. Notwithstanding any such removal or
reassignment, the Executive shall continue to receive the Executive's full
Salary (less any disability pay or sick pay benefits to which the Executive
may be entitled under the Employer's policies) and benefits under Section 4
of this Agreement (except to the extent that the Executive may be
ineligible for one or more such benefits under applicable plan terms) for a
period of time equal to the remainder of the Initial Term or, if the
Initial Term has expired, any Extended Term, provided that the Executive
remains employed by the Employer during such period. In the event that the
Employer terminates the Executive's employment without cause pursuant to
Section 6(c) or the Employer delivers a Non-renewal Notice to the
Executive, in either case due to the Executive's continuing inability to
perform the essential functions of the Executive's then existing position
or positions, the Executive shall be eligible to receive Termination
Benefits subject to and in accordance with the terms and conditions of
Section 6(d), provided that the Executive's Termination Benefits
additionally shall be subject to reduction by the amount of any payments
the Executive receives under any disability benefit plan or plans or
insurance policies the Employer maintains for the Executive, or under
worker's compensation, or state or federal disability benefit programs. If
any question shall arise as to whether during any period the Executive is
disabled so as to be unable to perform the essential functions of the
Executive's then existing position or positions with or without reasonable
accommodation, the Executive may, and at the request of the Employer shall,
submit to the Employer a certification in reasonable detail by a physician
selected by the Employer to whom the Executive or the Executive's guardian
has no reasonable objection as to whether the Executive is so disabled or
how long such disability is expected to continue, and such certification
shall for the purposes of this Agreement be conclusive of the issue. The
Executive shall cooperate with any reasonable request of the physician in
connection with such certification. If such question shall arise and the
Executive shall fail to submit such certification, the
6
<PAGE>
Employer's determination of such issue shall be binding on the Executive.
Nothing in this Section 6(e) shall be construed to waive the Executive's
rights, if any, under existing law including, without limitation, the
Family and Medical Leave Act of 1993, 29 U.S.C. (S)2601 et seq. and the
Americans with Disabilities Act, 42 U.S.C. (S)12101 et seq.
(f) Deductibility of Payments. It is the intention of the Executive
-------------------------
and of the Employer that no payments by the Employer to or for the benefit
of the Executive under this Agreement or any other agreement or plan, if
any, pursuant to which the Executive is entitled to receive payments or
benefits shall be nondeductible to the Employer by reason of the operation
of Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code"), relating to parachute payments or any like statutory or regulatory
provision. Accordingly, and notwithstanding any other provision of this
Agreement or any such agreement or plan, if by reason of the operation of
said Section 280G or any like statutory or regulatory provision, any such
payments exceed the amount which can be deducted by the Employer, such
payments shall be reduced to the maximum amount which can be deducted by
the Employer. To the extent that payments exceeding such maximum
deductible amount have been made to or for the benefit of the Executive,
such excess payments shall be refunded to the Employer with interest
thereon at the applicable Federal rate determined under Section 1274(d) of
the Code, compounded annually, or at such other rate as may be required in
order that no such payments shall be nondeductible to the Employer by
reason of the operation of said Section 280G or any like statutory or
regulatory provision. To the extent that there is more than one method of
reducing the payments to bring them within the limitations of said Section
280G or any like statutory or regulatory provision, the Executive shall
determine which method shall be followed, provided that if the Executive
fails to make such determination within forty-five (45) days after the
Employer has given notice of the need for such reduction, the Employer may
determine the method of such reduction in its sole discretion.
7. Confidential Information, Noncompetition and Cooperation.
--------------------------------------------------------
(a) Confidential Information. As used in this Agreement,
------------------------
"Confidential Information" means information belonging to the Employer
which is of value to the Employer in the course of conducting its business
and the disclosure of which could result in a competitive or other
disadvantage to the Employer. Confidential Information includes, without
limitation, financial information, reports, and forecasts; market or sales
information, plans, methods and techniques; pricing policies; customer
lists; price lists; inventions, improvements and other intellectual
property; trade secrets; know-how; designs, processes or formulae;
software; and business plans, prospects and opportunities (such as possible
acquisitions or dispositions of businesses or facilities) which have been
discussed or considered by the management of the Employer. Confidential
Information includes information developed by the Executive in the course
of the Executive's employment by the Employer, as well as other information
to which
7
<PAGE>
the Executive may have access in connection with the Executive's
employment. Confidential Information also includes the confidential
information of others with which the Employer has a business relationship,
including without limitation its principals, packers and suppliers.
Notwithstanding the foregoing, Confidential Information does not include
information in the public domain, unless due to breach of the Executive's
duties under Section 7(b).
(b) Confidentiality. The Executive understands and agrees that the
---------------
Executive's employment creates a relationship of confidence and trust
between the Executive and the Employer with respect to all Confidential
Information. At all times, both during the Executive's employment with the
Employer and after its termination, the Executive will keep in confidence
and trust all such Confidential Information, and will not use or disclose
any such Confidential Information without the written consent of the
Employer, except as may be necessary in the ordinary course of performing
the Executive's duties to the Employer.
(c) Documents, Records, etc. All documents, records, data, apparatus,
------------------------
equipment and other physical property, whether or not pertaining to
Confidential Information, which are furnished to the Executive by the
Employer or are produced by the Executive in connection with the
Executive's employment will be and remain the sole property of the
Employer. The Executive will return to the Employer all such materials and
property as and when requested by the Employer. In any event, the
Executive will return all such materials and property immediately upon
termination of the Executive's employment for any reason. The Executive
will not retain with the Executive any such material or property or any
copies thereof after such termination.
(d) Noncompetition and Nonsolicitation. During the Initial Term and
----------------------------------
any Extended Term(s) and for one (1) year thereafter (or during the
Termination Benefits Period, if longer) (the "Restricted Period"), the
Executive (i) will not, directly or indirectly, whether as owner, partner,
shareholder, advisor, consultant, agent, employee, co-venturer, creditor,
officer, director, trustee or otherwise, engage, participate, assist or
invest in any Restricted Business within the Territory (as those terms are
hereinafter defined); (ii) will refrain from directly or indirectly
employing, attempting to employ, recruiting or otherwise soliciting,
inducing or influencing any person to leave employment with the Employer
(other than terminations of employment of subordinate employees undertaken
in the course of the Executive's employment with the Employer); and (iii)
will refrain from soliciting or encouraging any principal, customer or
supplier to terminate or otherwise modify adversely its business
relationship with the Employer. The Executive understands that the
restrictions set forth in this Section 7(d) are intended to protect the
Employer's interest in its Confidential Information and established
employee, customer and supplier relationships and goodwill, and agrees that
such restrictions are reasonable and appropriate for this purpose.
8
<PAGE>
For purposes of this Agreement, the term "Restricted Business" shall mean
any business which is competitive with:
(A) any business conducted by the Employer on the date of the
termination of Executive's employment with the Employer, and
(B) any business conducted by the Employer within the twelve (12)
month period immediately preceding the termination of Executive's
employment with the Employer, and
(C) any business the Employer actively considered entering within
twelve (12) months preceding the date of the termination of
Executive's employment with the Employer if the Executive had
knowledge of such consideration and the Employer in fact commences
conducting such business during the Restricted Period.
Notwithstanding the foregoing, the Executive may own up to one percent
(1%) of the outstanding stock of a publicly held corporation which
constitutes or is affiliated with a Restricted Business.
For purposes of this Agreement, the term "Territory" shall mean:
(A) any geographic area in which the Employer engaged in business and
for which the Executive had any responsibility at the time of the
termination of the Executive's employment or within the twelve (12)
month period preceding termination, and
(B) any geographic area in which the Employer engaged in business at
the time of the termination of the Executive's employment or within
the twelve (12) month period preceding termination, and
(C) any geographic area in which the Employer actively considered
conducting business within twelve (12) months preceding the date of
the termination of Executive's employment with the Employer if the
Executive had knowledge of such consideration and the Employer in fact
commences conducting business therein during the Restricted Period.
The parties acknowledge and agree that for purpose of this Section 7,
the term "Employer" includes the Employer, its related and affiliated
entities, and their respective predecessors, successors and assigns.
(e) Principals and Customers. For purposes of construing the
------------------------
provisions of this Section 7, any and all persons, firms and entities for
whom the Employer performs services, to whom the Employer sells or from
whom the Employer solicits and obtains orders, in the course of its
business, are and shall be deemed the principals and/or customers of the
Employer (or its principals), both during and after the Term,
9
<PAGE>
notwithstanding the fact that some or all of said persons, firms or
entities may have been induced to give their business to the Employer by
the solicitation by the Executive, or by someone on his or her behalf,
either during the usual working hours of the Executive or otherwise, and
notwithstanding the fact that all or some of such persons, firms or
entities may have previously been principals or customers of (i) the
Executive, (ii) any corporation or other entity with which the Executive
was formerly employed or which was controlled or owned, in whole or in
part, by the Executive, or (iii) any principal of such corporation or
entity.
(f) Third-Party Agreements and Rights. The Executive hereby confirms
---------------------------------
that the Executive is not bound by the terms of any agreement with any
previous employer or other party which restricts in any way the Executive's
use or disclosure of information or the Executive's engagement in any
business. The Executive represents to the Employer that the Executive's
execution of this Agreement, the Executive's employment with the Employer
and the performance of the Executive's proposed duties for the Employer
will not violate any obligations the Executive may have to any such
previous employer or other party. In the Executive's work for the
Employer, the Executive will not disclose or make use of any information in
violation of any agreements with or rights of any such previous employer or
other party, and the Executive will not bring to the premises of the
Employer any copies or other tangible embodiments of non-public information
belonging to or obtained from any such previous employment or other party.
(g) Litigation and Regulatory Cooperation. During and after the
-------------------------------------
Executive's employment, the Executive shall cooperate fully with the
Employer in the defense or prosecution of any claims or actions now in
existence or which may be brought in the future against or on behalf of the
Employer which relate to events or occurrences that transpired while the
Executive was employed by the Employer. The Executive's full cooperation
in connection with such claims or actions shall include, but not be limited
to, being available to meet with counsel to prepare for discovery or trial
and to act as a witness on behalf of the Employer at mutually convenient
times. During and after the Executive's employment, the Executive also
shall cooperate fully with the Employer in connection with any
investigation or review of any federal, state or local regulatory authority
as any such investigation or review relates to events or occurrences that
transpired while the Executive was employed by the Employer. The Employer
shall reimburse the Executive for any reasonable out-of-pocket expenses
incurred in connection with the Executive's performance of obligations
pursuant to this Section 7(g).
(h) Injunction. The Executive agrees that it would be difficult to
----------
measure any damages caused to the Employer which might result from any
breach by the Executive of the promises set forth in this Section 7, and
that in any event money damages would be an inadequate remedy for any such
breach. Accordingly, subject to Section 8 of this Agreement, the Executive
agrees that if the Executive breaches, or
10
<PAGE>
proposes to breach, any portion of this Agreement, the Employer shall be
entitled, in addition to all other remedies that it may have, to an
injunction or other appropriate equitable relief to restrain any such
breach without showing or proving any actual damage to the Employer.
8. Arbitration of Disputes. Any controversy or claim arising out of or
-----------------------
relating to this Agreement or the breach thereof or otherwise arising out of the
Executive's employment or the termination of that employment (including, without
limitation, any claims of unlawful employment discrimination whether based on
age or otherwise) shall, to the fullest extent permitted by law, be settled by
arbitration in any forum and form agreed upon by the parties or, in the absence
of such an agreement, under the auspices of the American Arbitration Association
("AAA") in Charlotte, North Carolina in accordance with the Employment Dispute
Resolution Rules of the AAA, including, but not limited to, the rules and
procedures applicable to the selection of arbitrators. In the event that any
person or entity other than the Executive or the Employer may be a party with
regard to any such controversy or claim, such controversy or claim shall be
submitted to arbitration subject to such other person or entity's agreement.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. This Section 8 shall be specifically enforceable.
Notwithstanding the foregoing, this Section 8 shall not preclude either party
from pursuing a court action for the sole purpose of obtaining a temporary
restraining order or a preliminary injunction in circumstances in which such
relief is appropriate; provided that any other relief shall be pursued through
an arbitration proceeding pursuant to this Section 8.
9. Consent to Jurisdiction. To the extent that any court action is
-----------------------
permitted consistent with or to enforce Section 8 of this Agreement, the parties
hereby consent to the jurisdiction of the courts of the State of North Carolina
and (to the extent subject matter jurisdiction exists therefor) of the United
States District Court for the Western District of North Carolina. Accordingly,
with respect to any such court action, the Executive (a) submits to the personal
jurisdiction of such courts; (b) consents to service of process; and (c) waives
any other requirement (whether imposed by statute, rule of court, or otherwise)
with respect to personal jurisdiction or service of process.
10. Integration. This Agreement constitutes the entire agreement between
-----------
the parties with respect to the subject matter hereof and supersedes all prior
agreements between the parties with respect to any related subject matter.
11. Assignment; Successors and Assigns, etc. Neither the Employer nor the
---------------------------------------
Executive may make any assignment of this Agreement or any interest herein, by
operation of law or otherwise, without the prior written consent of the other
party; provided that the Employer may assign its rights under this Agreement
without the consent of the Executive in the event that the Employer shall effect
a reorganization, consolidate with or merge into any other corporation,
partnership, organization or other entity, or transfer all or substantially all
of its properties or assets to any other corporation, partnership, organization
or other entity. This Agreement shall inure to the benefit of and be binding
upon the Employer and the
11
<PAGE>
Executive and their respective successors, executors, administrators, heirs and
permitted assigns.
12. Enforceability. If any portion or provision of this Agreement
--------------
(including, without limitation, any portion or provision of any section of this
Agreement) shall to any extent be declared illegal or unenforceable by a court
of competent jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other than those as to
which it is so declared illegal or unenforceable, shall not be affected thereby,
and each portion and provision of this Agreement shall be valid and enforceable
to the fullest extent permitted by law.
13. Waiver. No waiver of any provision hereof shall be effective unless
------
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
14. Notices. Any notices, requests, demands and other communications
-------
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by a nationally recognized overnight courier service or by
registered or certified mail, postage prepaid, return receipt requested, to the
Executive at the last address the Executive has filed in writing with the
Employer or, in the case of the Employer, at its main offices, attention of the
Chief Executive Officer, and shall be effective on the date of delivery in
person or by courier or three (3) days after the date mailed.
15. Amendment. This Agreement may be amended or modified only by a
---------
written instrument signed by the Executive and by a duly authorized
representative of the Employer.
16. Governing Law. This is a North Carolina contract and shall be
-------------
construed under and be governed in all respects by the laws of the State of
North Carolina, without giving effect to the conflict of laws principles of such
State. With respect to any disputes concerning federal law, such disputes shall
be determined in accordance with the law as it would be interpreted and applied
by the United States Court of Appeals for the Fourth Circuit.
17. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed and delivered shall be taken to be
an original; but such counterparts shall together constitute one and the same
document.
[End of text]
12
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
by the Employer, by its duly authorized officer, and by the Executive, as of the
Effective Date.
[MONROE, INC.]
[ROGERS-AMERICAN COMPANY, INC.]
By: ____________________________
Name:
Title:
__________________________________
[NAME OF EXECUTIVE]
13
<PAGE>
EXHIBIT 10.5
EXHIBIT C
---------
FORM OF TAX ESCROW AGREEMENT
----------------------------
AGREEMENT made as of ____________, 1998 by and among Monroe, Inc., a
Delaware corporation ("Buyer"), Robert Q. Crane, as Stockholders' Representative
(as defined in the Purchase Agreement (as defined below)), and _____________, as
escrow agent (the "Escrow Agent").
WHEREAS, Buyer, Merkert Enterprises, Inc., a Massachusetts corporation
("Merkert"), Eugene F. Merkert and the Stockholders are parties to a Stock
Purchase Agreement dated as of May __, 1998 (the "Purchase Agreement");
WHEREAS, pursuant to Section 1.4 of the Purchase Agreement, Buyer has
agreed to deposit the sum of Fifteen Million Three Hundred Fifty Dollars
Thousand ($15,350,000) with the Escrow Agent to hold, invest and deliver
pursuant to this Agreement; and
WHEREAS, the Escrow Agent is willing to enter into this Agreement and
perform as required herein in consideration of the premises and the mutual
obligations and promises contained in this Agreement on the terms and subject to
the conditions set forth herein.
NOW, THEREFORE, in consideration of these premises and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows.
1. Appointment of the Escrow Agent. Buyer and the Stockholders'
-------------------------------
Representative hereby appoint and designate _______________ as Escrow Agent for
the property described herein. The Stockholders' Representative shall serve as
exclusive representative of the Stockholders with respect to the Escrow Fund and
this Agreement.
2. Escrow Fund; Amounts Earned on Escrow Fund. Buyer shall deposit with
------------------------------------------
the Escrow Agent and the Escrow Agent agrees to accept Fifteen Million Three
Hundred Fifty Dollars Thousand ($15,350,000) to be held in a designated separate
account of the Escrow Agent (the "Escrow Account"). The consideration deposited
hereunder, inclusive of any earnings on the same, shall be referred to as the
"Escrow Fund." The Escrow Fund shall be invested from time to time in Eligible
Investments (as defined in Section 22) pursuant to (and as specified in) the
written direction of Buyer received by the Escrow Agent (which direction shall
include maturity terms selected by Buyer). The Escrow Agent shall be entitled
to presume that any maturity terms set forth in an investment instruction from
Buyer have been agreed to by Stockholders' Representative. The Escrow Agent is
authorized to liquidate any such investment at any time when necessary to pay
any amount hereunder. In no instance shall the Escrow Agent have any liability
for any loss on any such investment.
3. Amounts Earned on Escrow Fund; Tax Matters. All amounts earned, paid
------------------------------------------
or distributed with respect to the Escrow Fund (whether interest, dividends or
otherwise) shall become a part of the Escrow Fund and shall be held hereunder
upon the same terms as the
<PAGE>
original Escrow Fund. The parties agree that (i) for tax reporting purposes, and
for any tax year, all interest or other income earned from the investment of the
Escrow Fund shall be allocable to Buyer and (ii) to the extent permitted by
applicable law, including Section 468B(g) of the Internal Revenue Code of 1986,
as amended, Buyer will include all amounts earned on the Escrow Fund in its
gross incomes for federal, state and local income tax (collectively, "income
tax") purposes and pay any income tax resulting therefrom. Buyer and the
Stockholders also agree for income tax purposes to treat all amounts distributed
to the Stockholders from the Escrow Fund as increases in the cash portion of the
Total Consideration paid by Buyer to the Stockholders (subject to the
application of Section 483 and/or 1274 of the Internal Revenue Code of 1986, as
amended). Buyer agrees to provide the Escrow Agent with a certified tax
identification number by signing and returning a Form W-9 to the Escrow Agent
prior to the date on which interest or other income is first earned by the
Escrow Fund. The parties hereto understand that, in the event that such tax
identification numbers are not certified to the Escrow Agent prior to the date
on which any income is first earned on the Escrow Fund, the Internal Revenue
Code, as amended from time to time, may require withholding of a portion of any
interest or other income earned on the investment of the Escrow Fund.
4. Distribution of Escrow Fund. Distributions from the Escrow Fund shall
---------------------------
be made as follows:
(a) Upon receipt by the Escrow Agent of joint written instructions
signed by both Buyer and the Stockholders' Representative, the
Escrow Agent shall make payments out of the Escrow Fund in
accordance with such instructions in immediately available funds
within five (5) business days after receipt of such instructions
or as soon as possible thereafter.
(b) Upon receipt by the Escrow Agent of a certificate (an "Interim
Distribution Certificate") signed by Buyer certifying that (i)
enclosed therewith is a true, accurate and complete copy of a
demand for payment (including any assessment or determination of
an amount due), relating to one or more Audits, from the Internal
Revenue Service (the "IRS") and/or the Massachusetts Department
of Revenue (the "DOR") or (ii) Buyer reasonably believes the
amount instructed to be paid therein is payable to the IRS and/or
the DOR, relating to one or more Audits, and instructing the
Escrow Agent to pay to the IRS and/or the DOR, as the case may
be, the amount set forth in such Interim Distribution
Certificate, which Interim Distribution Certificate shall be
accompanied by the demand for payment, if any, the Escrow Agent
shall make payments out of the Escrow Fund in accordance with
such Interim Distribution Certificate in immediately available
funds within five (5) business days after receipt of such Interim
Distribution Certificate or as soon as possible thereafter.
2
<PAGE>
(c) Upon receipt by the Escrow Agent of a certificate (a "Final
Distribution Certificate") signed by Buyer certifying that (i)
full and final settlements with the IRS and the DOR of all
matters relating to the Audits have been reached, and (ii) either
(A) enclosed therewith is a true, accurate and complete copy of a
demand for payment (including any assessment or determination of
an amount due) from the IRS and/or the DOR or (B) Buyer
reasonably believes the amount instructed to be paid therein to
the IRS and/or the DOR is payable to the IRS and/or the DOR, and
instructing the Escrow Agent to (x) pay to the IRS and/or the
DOR, as the case may be, the amount set forth in such Final
Distribution Certificate and (y) pay in accordance with such
Final Distribution Certificate the remaining balance, if any, of
the Escrow Fund, the Escrow Agent shall make payments out of the
Escrow Fund in accordance with such Final Distribution
Certificate in immediately available funds within five (5)
business days after receipt of such Final Distribution
Certificate or as soon as possible thereafter.
Prior to making any payments out of the Escrow Fund pursuant to subparagraph (c)
of this Section 4, the Escrow Agent shall provide written notice to the
Stockholders' Representative that it has received a Final Distribution
Certificate (a copy of which shall accompany such notice) from Buyer.
5. Disputed Claims. If a controversy arises between one or more of the
---------------
parties hereto, as to whether or not or to whom the Escrow Agent shall deliver
the Escrow Fund or as to any other matter arising out of or relating to the
Escrow Fund or this Agreement, the Escrow Agent shall not be required to
determine the same and thereafter shall not make any delivery of the Escrow Fund
but shall retain it until the Escrow Agent shall have either (i) received
written instructions signed by both Buyer and the Stockholders' Representative
or (ii) been directed by an order of a court of competent jurisdiction as to the
respective rights of Buyer and the Stockholders' Representative with respect to
the Escrow Fund, in which case the Escrow Agent shall disburse the Escrow Fund
in accordance with such instructions or order within five (5) business days
after the receipt thereof, unless such instructions or order otherwise provide.
The Escrow Agent shall be entitled to assume that no such controversy has arisen
unless it has received a written notice that such a controversy has arisen which
refers specifically to this Agreement. If a controversy of the type referred to
in this Section 5 arises, the Escrow Agent may, in its sole discretion (but
shall not be obligated to), commence interpleader or similar actions or
proceedings for determination of the controversy pursuant to Section 9.
6. Termination. This Agreement shall terminate when all amounts of the
-----------
Escrow Fund have been distributed.
7. Scope of Undertaking. The Escrow Agent shall have no responsibility
--------------------
or obligation of any kind in connection with this Agreement and the Escrow Fund,
and shall not
3
<PAGE>
be required to deliver the same or any part thereof or take any action with
respect to any matters that might arise in connection therewith, other than to
receive, hold, and make delivery of the Escrow Fund as herein expressly provided
or by reason of a judgment or order of a court of competent jurisdiction.
8. Knowledge and Sufficiency of Documents. The Escrow Agent shall not be
--------------------------------------
bound by or have any responsibility with respect to compliance with any
agreement between any of the other parties hereto, irrespective of whether the
Escrow Agent has knowledge of the existence of any such agreement or terms and
provisions thereof, the Escrow Agent's only duty, liability, and responsibility
being to receive, hold and deliver the Escrow Fund as herein provided. The
Escrow Agent shall not be required in any way to determine the validity or
sufficiency, whether in form or in substance, of the Escrow Fund or the
validity, sufficiency, genuineness or accuracy of any instrument, document,
certificate, statement or notice referred to in this Agreement or contemplated
hereby (including, without limitation, wire transfer instructions, whether
incorporated herein or provided in a separate written instruction); or the
identity or authority of the persons executing the same, and it shall be
sufficient if any writing purporting to be such instrument, document,
certificate, statement or notice is delivered to the Escrow Agent and purports
on its face to be correct in form and signed or otherwise executed by the party
or parties required to sign or execute the same under this Agreement.
9. Right of Interpleader. Should any controversy arise between Buyer, on
---------------------
one hand, and the Stockholders' Representative, on the other, or any other
person, firm or entity, with respect to this Agreement, the Escrow Fund, or any
part thereof, or the right of any party or other person to receive the Escrow
Fund, or should such parties fail to designate another Escrow Agent as provided
in Section 17 hereof, or if the Escrow Agent should be in doubt as to what
action to take, the Escrow Agent shall have the right (but not the obligation)
to (i) withhold delivery of the Escrow Fund until the controversy is resolved as
provided in Section 5 hereof, the conflicting demands are withdrawn or its doubt
is resolved as provided in Section 5 hereof, or (ii) institute a bill of
interpleader in any court of competent jurisdiction to determine the rights of
the parties hereto (the right of the Escrow Agent to institute such bill of
interpleader, however, shall not be deemed to modify the manner in which the
Escrow Agent is entitled to make disbursements of the Escrow Fund as hereinabove
set forth, other than to tender the Escrow Fund into the registry of such
court). Should a bill of interpleader be instituted, or should the Escrow Agent
be threatened with litigation or become involved in litigation in any manner
whatsoever on account of this Agreement or the Escrow Fund, then as between
themselves and the Escrow Agent, Buyer and the Stockholders, jointly and
severally, hereby bind and obligate themselves, their successors, heirs,
executors and assigns to pay the Escrow Agent its reasonable attorneys' fees and
any and all other disbursements, expenses, losses, costs and damages of the
Escrow Agent in connection with or resulting from such threatened or actual
litigation. Notwithstanding the foregoing, as between themselves, Buyer and the
Stockholders shall each pay one-half of all amounts payable to the Escrow Agent
pursuant to this paragraph.
4
<PAGE>
10. Scope of Duties and Errors in Judgment. It is expressly understood
--------------------------------------
and agreed that the Escrow Agent shall be under no duty or obligation to give
any notice, or to do or to omit the doing of any action or anything with respect
to the Escrow Fund, except to hold the same (and any earnings thereon, pursuant
to the terms hereof) in the Escrow Account and to make disbursements in
accordance with the terms of this Agreement. Without limiting the generality of
the foregoing, it is acknowledged and agreed that (i) no implied duties shall be
read into this Agreement on the part of the Escrow Agent, and (ii) the Escrow
Agent shall not be obligated to take any legal or remedial action which might in
its judgment involve it in any expense or liability for which it has not been
furnished acceptable indemnification. The Escrow Agent, its directors, officers
and employees shall not be liable for any error in judgment or any act or steps
taken or permitted to be taken in good faith, or for any mistake of law or fact,
or for anything it may do or refrain from doing in connection herewith, except
for its own willful misconduct or gross negligence.
11. Indemnity. As between themselves and the Escrow Agent, Buyer and the
---------
Stockholders, jointly and severally, agree to indemnify the Escrow Agent against
and hold the Escrow Agent harmless from any and all losses, costs, damages,
expenses, claims, and attorney's fees and expenses suffered or incurred by the
Escrow Agent as a result of, in connection with or arising from or out of the
acts or omissions of the Escrow Agent in performance of or pursuant to this
Agreement, except such acts or omissions as may result from the Escrow Agent's
willful misconduct or gross negligence. In no event shall the Escrow Agent be
liable for indirect, punitive, special or consequential damages.
Buyer and the Stockholders, jointly and severally, agree to indemnify and
hold the Escrow Agent harmless from and against any taxes, additions for late
payment, interest, penalties and other expenses, that may be assessed against
the Escrow Agent with respect to any payment of Escrow Funds or other activities
under this Agreement. Buyer and Stockholders' Representative undertake to
instruct the Escrow Agent in writing with respect to the Escrow Agent's
responsibility for withholding and other taxes, assessments, or other
governmental charges, certifications and governmental reporting in connection
with its acting as Escrow Agent under this Agreement. Buyer and the
Stockholders, jointly and severally, agree to indemnify and hold the Escrow
Agent harmless from any liability on account of taxes, assessments or other
governmental charges, including, without limitation, the withholding or
deduction or the failure to withhold or deduct the same, and any liability for
failure to obtain proper certifications or to properly report to governmental
authorities, to which the Escrow Agent may be or become subject in connection
with or which arises out of this Agreement, including costs and expenses
(including reasonable legal fees and expenses), interest and penalties.
Notwithstanding the foregoing, as between themselves, Buyer and the Stockholders
shall each pay one-half of all amounts payable to the Escrow Agent pursuant to
this paragraph. Notwithstanding any term hereof to the contrary, the terms of
this Section 11 shall survive the termination of this Agreement.
12. Notices. Any notice or other communication required or permitted
-------
hereunder shall be in writing and shall be sent by registered or certified mail
and shall be deemed to have
5
<PAGE>
been given three (3) days after deposit in the U.S. mails, return receipt
requested, postage prepaid, addressed as follows (or to such other address as
any such party may hereafter designate by written notice to the other parties):
TO BUYER: Monroe, Inc.
- --------
8 Cedar Street, Suite 54A
Woburn, MA 01801
Attn: President
With a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
53 State Street
Boston, MA 02109
Attn: Robert P. Whalen, Jr., Esq.
TO STOCKHOLDERS: Robert Q. Crane
- ---------------
7 Mountview Road
Wellesley Hills, MA 02181
With a copy to: Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Attn: Douglas A. Zingale, Esq.
TO ESCROW AGENT: [_________________]
- ---------------
With a copy to: [_________________]
13. Consultation with Legal Counsel. The Escrow Agent may consult with
-------------------------------
its in-house counsel or other counsel satisfactory to it in respect to questions
relating to its duties or responsibilities hereunder or otherwise in connection
herewith and shall not be liable for any action taken, suffered, or omitted by
the Escrow Agent in good faith upon the advice of such counsel. The Escrow
Agent may act through its officers, employees, agents and attorneys.
14. Choice of Laws; Cumulative Rights. This Agreement and the disposition
---------------------------------
hereunder shall be construed and regulated under and their validity and effect
shall be determined by the Commonwealth of Massachusetts. All of the Escrow
Agent's rights hereunder are cumulative of any other rights it may have by law
or otherwise.
15. Reimbursement of Expenses. The Escrow Agent shall be entitled to
-------------------------
reimbursement from Buyer and the Stockholders of all its reasonable costs and
expenses, including reasonable fees and expenses of legal counsel incurred by it
in connection with the preparation, operating, administration and enforcement of
this Agreement. The Escrow Agent
6
<PAGE>
shall be entitled to reimbursement on demand for all expenses incurred in
connection with the administration of this Agreement or the escrow created
hereby which are in excess of its compensation for normal services hereunder,
including, without limitation, payment of any legal fees and expenses incurred
by the Escrow Agent in connection with resolution of any claim by any party
hereunder. Notwithstanding the foregoing, as between themselves, Buyer and the
Stockholders shall each pay one-half of all amounts payable to the Escrow Agent
pursuant to this paragraph.
16. Entire Agreement. This Agreement evidences the entire agreement among
----------------
Buyer, the Stockholders, the Stockholders' Representative and the Escrow Agent
in connection with the Escrow Fund and no other agreement entered into between
the parties or any of them shall be considered or adopted or binding, in whole
or in part, by or upon the Escrow Agent, notwithstanding that any other such
agreement may be deposited herewith or the Escrow Agent may have knowledge
thereof. This Agreement may be amended only in writing signed by all of the
parties hereto.
17. Resignation. The Escrow Agent may resign upon 10 days' prior written
-----------
notice to Buyer and the Stockholders' Representative, and upon the written
instruction of Buyer and the Stockholders' Representative, the Escrow Agent
shall deliver the Escrow Fund to any designated substitute Escrow Agent mutually
agreeable to such parties. If Buyer and the Stockholders' Representative fail
to designate a substitute Escrow Agent within 10 days, the Escrow Agent, in its
sole discretion and its sole option, either may (i) continue to hold the Escrow
Fund, or (ii) institute a bill of interpleader as contemplated by Section 9
hereof.
18. Captions. Section headings and captions have been inserted for
--------
convenience only and do not in any way limit the provisions set out in the
various sections hereof.
19. Severability. If one or more of the provisions contained herein for
------------
any reason shall be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provisions hereof, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein.
20. Compensation. Buyer and the Stockholders covenant and agree, jointly
------------
and severally, to pay to the Escrow Agent the fee determined by the Escrow
Agent, from time to time, to be applicable to this escrow and bear all costs and
expenses incurred by the Escrow Agent in connection therewith. The Escrow
Agent's fees, as in effect on the date hereof, are attached hereto as Schedule
--------
A. Without altering or limiting the joint and several liability of Buyer and
- -
the Stockholders hereunder, as between themselves, Buyer and the Stockholders
shall each pay one-half of all amounts payable to the Escrow Agent pursuant to
this Section 20.
21. Collected Funds; Collection of Items. No monies shall be required to
------------------------------------
be disbursed by the Escrow Agent until and unless it has collected funds. The
Escrow Agent may
7
<PAGE>
pay out monies held in escrow due to any party by its check. The Escrow Agent
shall not be obligated to take any legal action to enforce payment of any item
deposited with it in escrow.
22. Investment. Subject to Section 2(a) of this Agreement, the available
----------
uninvested portion of the Escrow Fund shall be invested (and reinvested, as the
case may be) from time to time by the Escrow Agent in any of the following
investments (collectively, "Eligible Investments"):
(i) Short term obligations issued or guaranteed by The United
States of America or any agency or instrumentality thereof;
(ii) Certificates of deposit of or interest bearing accounts with
national banks or corporations endowed with trust powers, including the Escrow
Agent, having capital and surplus in excess of $100,000,000;
(iii) Insured Money Market Account short term investments with
national banks or corporations endowed with trust powers, including the Escrow
Agent, having capital and surplus in excess of $100,000,000; or
(iv) Corporate bond funds with a rating of at least A+ or the
equivalent thereof by Standard & Poor's Corporation, at least A+ or the
equivalent thereof by Moody's Investors Service, Inc. or an equivalent rating by
another nationally recognized rating agency.
Investments pursuant to such investment instructions described above shall
in all instances be subject to availability (including any time-of-day
requirements). In no instance shall Escrow Agent have any obligation to provide
investment advice of any kind. The Escrow Agent shall not be required to invest
any funds held hereunder except as expressly provided in written instructions
received from Buyer pursuant to Section 2 hereof, and shall not be obligated to
pay interest on uninvested funds. All amounts received by the Escrow Agent (and
any credits to the Escrow Account) shall be conditional upon collection (and
actual receipt by the Escrow Agent of final payment). In no event shall the
Escrow Agent have any obligation to advance funds.
The Escrow Agent may be authorized at all times and from time to time to
liquidate any investment of the Escrow Fund as may be necessary to provide
available cash to make any release, disbursement or payment called for under the
terms of this Agreement. The Escrow Agent shall have no responsibility or
liability for any losses resulting from liquidation of the Escrow Fund (such as
liquidation prior to maturity).
23. Security Interest. The parties grant to the Escrow Agent a lien upon
-----------------
and security interest in the Escrow Fund, to secure payment of the parties'
obligations and liabilities, both joint and several hereunder.
8
<PAGE>
24. Execution in Counterparts. For the convenience of the parties and to
-------------------------
facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document and such counterparts may be delivered by
facsimile.
25. Consent to Jurisdiction and Service. Buyer, each Stockholder and the
-----------------------------------
Stockholders' Representative hereby absolutely and irrevocably consents and
submits to the jurisdiction of the courts in the Commonwealth of Massachusetts
and of any Federal court located in said Commonwealth in connection with any
actions or proceedings brought against Buyer, the Stockholders and/or the
Stockholders' Representative arising out of or relating to this Escrow
Agreement. In any such action or process, Buyer, each Stockholder and the
Stockholders' Representative hereby absolutely and irrevocably waive personal
service of any summons, complaint, declaration or other process and hereby
absolutely and irrevocably agree that the service thereof may be made by
certified or registered first-class mail directed to Buyer and the Stockholders'
Representative, as the case may be, at their respective addresses in accordance
with Section 12 hereof.
26. Force Majeure. Neither Buyer, any Stockholder, nor the Stockholders'
-------------
Representative nor the Escrow Agent shall be responsible for delays or failures
in performance resulting from acts beyond control. Such acts shall include but
not be limited to acts of God, strikes, lockouts, riots, acts of war, epidemics,
governmental regulations superimposed after the fact, fire, communication line
failures, computer viruses, power failures, earthquakes or other disasters.
27. Binding Effect. This Agreement shall be binding upon the respective
--------------
parties hereto and their heirs, executors, successors and assigns.
28. Modifications. This Agreement may not be altered or modified without
-------------
the express written consent of the parties hereto. No course of conduct shall
constitute a waiver of any of the terms and conditions of this Escrow Agreement,
unless such waiver is specified in writing, and then only to the extent so
specified. A waiver of any of the terms and conditions of this Escrow Agreement
on one occasion shall not constitute a waiver of the other terms of this Escrow
Agreement, or of such terms and conditions on any other occasion.
29. Reproduction of Documents. This Agreement and all documents relating
-------------------------
hereto, including, without limitation, (a) consents, waivers and modifications
which may hereafter be executed, and (b) certificates and other information
previously or hereafter furnished, may be reproduced by any photographic,
photostatic, microfilm, optical disk, micro-card, miniature photographic or
other similar process. The parties agree that any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and whether or not such
9
<PAGE>
reproduction was made by a party in the regular course of business, and that any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
[End of Text]
10
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement in multiple
counterparts, each of which is and shall be considered an original for all
intents and purposes effective as of the date first written above.
MONROE, INC.
By:_________________________________
James L. Monroe
President
____________________________________
Robert Q. Crane, as Stockholders'
Representative
_________________, as Escrow Agent
By:_________________________________
Name:
Title:
11
<PAGE>
SCHEDULE A
ESCROW AGENT FEES
-----------------
12
<PAGE>
Exhibit 10.6
EXHIBIT D
---------
FORM OF INDEMNIFICATION ESCROW AGREEMENT
----------------------------------------
This ESCROW AGREEMENT (the "Agreement") is made and entered into as of
_______________, 1998, by and among Monroe, Inc., a Delaware corporation
("Monroe"), Robert Q. Crane, an individual (the "Stockholder Representative"),
____________________ (the "Escrow Agent"), and the parties identified as the
Merkert Stockholders on the signature pages hereto, with reference to the
following facts:
A. Pursuant to the terms and conditions of a Stock Purchase Agreement
(the "Purchase Agreement") dated as of May ___, 1998, by and among Monroe,
Merkert Enterprises, Inc., a Massachusetts corporation, Eugene F. Merkert and
the Merkert Stockholders, Monroe has agreed to acquire all of the issued and
outstanding capital stock of Merkert Enterprises, Inc. Capitalized terms not
otherwise defined herein have the meanings set forth in the Purchase Agreement.
B. Under the terms of the Purchase Agreement, Monroe is entitled to
indemnification under certain circumstances as set forth in Section 10 of the
Purchase Agreement.
C. The purpose of this Agreement is to provide for the deposit into
escrow of shares of Monroe's common stock, par value $.01 per share ("Monroe
Common Stock"), pursuant to Section 1.9 of the Purchase Agreement to secure, in
part, the indemnification obligations of the Merkert Stockholders under Section
10 of the Purchase Agreement.
NOW, THEREFORE, based on the above premises and for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
1. Appointment of Escrow Agent and Stockholder Representative;
-----------------------------------------------------------
Indemnification.
- ---------------
1.1 Escrow Agent. The Escrow Agent is hereby appointed as escrow
------------
agent for the purposes set forth herein, and the Escrow Agent hereby accepts
such appointment on the terms set forth herein.
1.2 Stockholder Representative. The Stockholder Representative is
--------------------------
hereby appointed as agent and representative of the Merkert Stockholders for the
purposes set forth herein, and the Stockholder Representative accepts such
appointment on the terms set forth herein.
<PAGE>
1.3 Indemnification. The Merkert Stockholders have agreed to
---------------
indemnify and hold harmless Monroe pursuant to Section 10 of the Purchase
Agreement. The Escrowed Shares (as defined in Section 2.1 hereof) shall secure,
in part, the indemnification obligations of the Merkert Stockholders in the
manner provided in this Agreement.
2. Escrow of Shares.
----------------
2.1 Escrowed Shares: Proportionate Interest. In accordance with
---------------------------------------
Section 1.9 of the Purchase Agreement, on the Closing Date (which date shall be
set forth in a certificate of Monroe delivered to the Escrow Agent), Monroe, on
behalf of the Merkert Stockholders, shall deposit with the Escrow Agent a number
of shares of Monroe Common Stock (the "Escrowed Shares") equal to (a) $3,583,124
divided by (b) the price at which shares of Monroe Common Stock will be sold to
the public in the initial underwritten public offering of shares of Monroe
Common Stock (the "IPO Price"). Each Merkert Stockholder shall thereby
contribute a number of shares of Monroe Common Stock pro rata based upon the
ratio that the number of shares of common stock of Merkert Enterprises, Inc.,
par value $.01 per share ("Merkert Common Stock") held by such Merkert
Stockholder bears to the total number of shares of Merkert Common Stock held by
all Merkert Stockholders immediately prior to the Closing. Such pro rata
interest shall be referred to as such Merkert Stockholder's "Proportionate
Interest." Although the Escrowed Shares shall be issued in the name of the
Escrow Agent or its nominee, all Escrowed Shares shall be held by the Escrow
Agent for the benefit of the Merkert Stockholders. If during the term of this
Agreement there is declared a stock dividend or stock split, all securities
thereby issuable with respect to the Escrowed Shares shall be deposited
hereunder and shall be deemed "Escrowed Shares" for the purposes of this
Agreement. If during the term of this Agreement there is paid to the Escrow
Agent any dividends in cash or other property (other than securities) in respect
of the Escrowed Shares, such dividends shall be paid currently by the Escrow
Agent to the Merkert Stockholders in accordance with each Merkert Stockholder's
Proportionate Interest. The Escrowed Shares shall be held for the benefit of the
Merkert Stockholders and disbursed by the Escrow Agent in accordance with the
terms of this Agreement. The parties agree that for federal income tax
purposes, the Merkert Stockholders will own the Escrowed Shares as of the
Closing Date.
2.2 Voting of Escrowed Shares. The Escrowed Shares held by the
-------------------------
Escrow Agent pursuant to this Agreement shall be deemed issued and outstanding,
shall appear as issued and outstanding on Monroe's balance sheet, and shall be
legally outstanding under applicable state law. With respect to any matter on
which stockholders of Monroe have a right to vote, the Escrow Agent, upon
receipt of written notices to such effect, on behalf of the Merkert
Stockholders, acting at the written direction of such stockholders, shall
exercise the right to vote, or not vote, all Escrowed Shares (or any portion
thereof); provided, however, that the Escrow Agent shall at the expense of
-----------------
Monroe and the Merkert Stockholders promptly forward, or cause to be forwarded,
copies of any proxies, proxy statements and other soliciting materials which it
receives to the Merkert Stockholders, and shall vote the applicable portion of
the Escrowed Shares in accordance with any written instructions timely received
by the
2
<PAGE>
Escrow Agent from any Merkert Stockholder. Absent any such written instructions,
the Escrow Agent shall not vote any Escrowed Shares.
2.3 Escrowed Shares Nontransferable. The Merkert Stockholders'
-------------------------------
interest in this Agreement and the Escrowed Shares (prior to the disbursement
thereof) may not be transferred, except by operation of law, intestacy, devise
or descent.
3. Application of Escrowed Shares. The Escrowed Shares shall be held in
------------------------------
escrow under the terms of this Agreement and released by the Escrow Agent upon
the following terms:
3.1 Joint Instructions. Upon joint written notice and instruction
------------------
from Monroe and the Stockholder Representative that the Escrowed Shares, or any
portion thereof, should be disbursed, the Escrow Agent shall make such
disbursement in accordance with the directions set forth in such joint written
notice and instruction.
3.2 Indemnification Claim. If at any time, or from time to time, on
---------------------
or before the later of (i) the first (lst) anniversary of the Closing Date and
(ii) the date on which the Escrow Agent receives from Monroe or the Stockholder
Representative a certificate certifying that full and final settlements with the
IRS and the DOR of all matters relating to the Audits have been reached (such
later date, the "Termination Date"), Monroe delivers to the Escrow Agent written
notice (an "Indemnification Notice") and a copy thereof pursuant to Section 4.1
hereof asserting that Monroe is entitled to indemnification under Section 10 of
the Purchase Agreement, which Indemnification Notice shall state the basis and
amount of such indemnification claim, then the Escrow Agent shall disburse to
Monroe, on the thirtieth (30th) day following receipt by the Escrow Agent of the
Indemnification Notice, a number of the Escrowed Shares equal to (a) the amount
of such claim divided by (b) the IPO Price (subject to appropriate adjustment
after the Closing Date for any stock split or stock dividend with respect to
Monroe Common Stock, or any combination or reclassification of the Monroe Common
Stock into a greater or smaller number of shares), as certified by Monroe;
provided, however, that each Stockholder may elect to pay its respective portion
- -----------------
of such indemnification claim, in accordance with its respective Proportionate
Interest, in cash in lieu of Escrowed Shares (each, an "Electing Stockholder").
In the event of any such election, Monroe and the Stockholder Representative
shall provide joint written notice and instructions to the Escrow Agent to
deliver to each Electing Stockholder a number of the Escrowed Shares, equal to
(x) the amount of the cash payment that was made by such Electing Stockholder in
respect of such claim divided by (y) the IPO Price (subject to appropriate
adjustment after the Closing Date for any stock split or stock dividend with
respect to Monroe Common Stock, or any combination or reclassification of the
Monroe Common Stock into a greater or smaller number of shares), as certified by
Monroe (the "Cash Option"). Notwithstanding the foregoing, if the Escrow Agent
receives written notice from the Stockholder Representative prior to such
thirtieth (30th) day
3
<PAGE>
that a dispute exists with respect to such indemnification claim (a "Dispute
Notice"), which Dispute Notice shall state the basis of such dispute and the
number of Escrowed Shares, if any, as to which no dispute exists, the Escrow
Agent shall continue to hold the Escrowed Shares that are in dispute (but shall
disburse to Monroe the number of Escrowed Shares as to which no dispute exists)
until directed otherwise pursuant to Section 3.3 hereof. Monroe and the
Stockholder Representative shall deliver a joint written notice to the Escrow
Agent setting forth the Termination Date.
3.3 Dispute of Indemnification Claim. If the Escrow Agent timely
--------------------------------
receives a Dispute Notice, the Escrow Agent shall retain the Escrowed Shares in
dispute until the first to occur of the following:
3.3.1 the date on which the Escrow Agent receives joint written
instructions from Monroe and the Stockholder Representative, in which case the
Escrow Agent shall disburse the Escrowed Shares (or applicable portions thereof)
as set forth in such joint written instructions;
3.3.2 the date on which the Escrow Agent receives a final order
of a court of competent jurisdiction (the "Indemnity Award") resolving the
dispute, in which case the Escrow Agent shall disburse the Escrowed Shares (or
applicable portions thereof) as set forth in the Indemnity Award; or
3.3.3 the date which is four years and 364 days after the Closing
Date.
3.4 Automatic Disbursement on Termination Date. If, on the
------------------------------------------
Termination Date, there are Escrowed Shares remaining undisbursed and not
subject to an Indemnification Notice received by the Escrow Agent, the Escrow
Agent shall disburse (upon receipt of proper stock certificates from Monroe's
transfer agent) such Escrowed Shares to the Merkert Stockholders in accordance
with each Merkert Stockholder's Proportionate Interest.
3.5 Fractional Shares. No fractional shares shall be issued under
-----------------
this Agreement to any of the Merkert Stockholders. Any payment which would
result in the disbursement of a fractional share of Monroe Common Stock shall be
rounded to the nearest whole share.
3.6 Payment of Indemnification Claims; Valuation of Monroe Common
-------------------------------------------------------------
Stock. Whenever this Agreement provides that the Escrow Agent may or shall
- -----
disburse Escrowed Shares to Monroe, the Escrow Agent shall deliver to the
transfer agent for the Escrowed Shares the stock certificate representing such
Escrowed Shares and the transfer agent shall deliver to the Escrow Agent one
stock certificate representing the number of shares to be delivered to Monroe
and another stock certificate representing the balance of Escrowed Shares
remaining. The Escrow Agent shall then deliver to Monroe a stock certificate
representing the
<PAGE>
appropriate number of Escrowed Shares determined in accordance with the next
sentence. The number of Escrowed Shares disbursed to satisfy an indemnification
claim by Monroe shall be equal to the number of Escrowed Shares (rounded to the
nearest whole share) determined as follows: (i) the amount of Losses with
respect to which Monroe is entitled to indemnification under Section 10 of the
Purchase Agreement and as to which the Escrow Agent has received an
Indemnification Notice for which a Dispute Notice is not timely delivered or, if
so delivered, the dispute has been resolved in accordance with Section 3.3
hereof divided by (ii) the IPO Price, subject to appropriate adjustment after
----------
the Closing Date for any stock split or stock dividend with respect to Monroe
Common Stock, or any combination or reclassification of the Monroe Common Stock
into a greater or smaller number of shares, as certified by Monroe. Except as
set forth in Section 3.2 with respect to the Cash Option, the Merkert
Stockholders shall not have the right to substitute other property for the
Escrowed Shares with respect to the satisfaction of any indemnification claims
secured hereby.
4. Communications with Stockholder Representative.
----------------------------------------------
4.1 Notice of Indemnification Claims. Monroe shall provide a copy of
--------------------------------
any Indemnification Notice to the Stockholder Representative concurrently with
the delivery thereof to the Escrow Agent.
4.2 Additional Information Regarding Indemnification Claims. Within
-------------------------------------------------------
five (5) business days after receiving a request therefor from the Stockholder
Representative, Monroe shall furnish the Stockholder Representative with such
additional information relating to any claim made in an Indemnification Notice
as he may reasonably request from time to time for the purpose of evaluating the
merits of the claim for indemnification.
5. Scope of Undertaking. The Escrow Agent shall have no responsibility
--------------------
or obligation of any kind in connection with this Agreement and the Escrowed
Shares, and shall not be required to deliver the same or any part thereof or
take any action with respect to any matters that might arise in connection
therewith, other than to receive, hold, and make delivery of the Escrowed Shares
as herein expressly provided or by reason of a judgment or order of a court of
competent jurisdiction.
6. Knowledge and Sufficiency of Documents. The Escrow Agent shall not be
--------------------------------------
bound by or have any responsibility with respect to compliance with any
agreement between any of the other parties hereto, including the Purchase
Agreement, irrespective of whether the Escrow Agent has knowledge of the
existence of any such agreement or terms and provisions thereof, the Escrow
Agent's only duty, liability, and responsibility being to receive, hold and
deliver the Escrowed Shares as herein provided. The Escrow Agent shall not be
required in any way to determine the validity or sufficiency, whether in form or
in substance, of the Escrowed Shares or the validity, sufficiency, genuineness
or accuracy of any instrument, document, certificate, statement or notice
referred to in this Agreement or contemplated
5
<PAGE>
hereby, or the adequacy of any security interest created hereunder; or the
identity or authority of the persons executing the same, and it shall be
sufficient if any writing purporting to be such instrument, document,
certificate statement or notice is delivered to the Escrow Agent and purports on
its face to be correct in form and signed or otherwise executed by the party or
parties required to sign or execute the same under this Agreement.
7. Right of Interpleader. Should any controversy arise between Monroe,
---------------------
on one hand, and the Stockholder Representative, on the other, or any other
person, firm or entity, with respect to this Agreement, the Escrowed Shares, or
any part thereof, or the right of any party or other person to receive the
Escrowed Shares, or should such parties fail to designate another Escrow Agent
as provided in Section 12 hereof, or if the Escrow Agent should be in doubt as
to what action to take, the Escrow Agent shall have the right (but not the
obligation) to (i) withhold delivery of the Escrowed Shares until the
controversy is resolved as provided in Section 3.3 hereof or (ii) institute a
bill of interpleader in any court of competent jurisdiction to determine the
rights of the parties hereto (the right of the Escrow Agent to institute such
bill of interpleader, however, shall not be deemed to modify the manner in which
the Escrow Agent is entitled to make disbursements of the Escrowed Shares as
hereinabove set forth, other than to tender the Escrowed Shares into the
registry of such court). Should a bill of interpleader be instituted, or should
the Escrow Agent be threatened with litigation or become involved in litigation
in any manner whatsoever on account of this Agreement or the Escrowed Shares,
then as between themselves and the Escrow Agent, Monroe and the Merkert
Stockholders, jointly and severally, hereby bind and obligate themselves, their
successors, heirs, executors and assigns to pay the Escrow Agent its reasonable
attorneys' fees and any and all other disbursements, expenses, losses, costs and
damages of the Escrow Agent in connection with or resulting from such threatened
or actual litigation. Notwithstanding the foregoing, as between themselves,
Monroe and the Merkert Stockholders shall each pay one-half of all amounts
payable to the Escrow Agent pursuant to this Section 7.
8. Scope of Duties and Errors in Judgment. It is expressly understood
--------------------------------------
and agreed that the Escrow Agent shall be under no duty or obligation to give
any notice, or to do or to omit the doing of any action or anything with respect
to the Escrowed Shares, except to hold the same and to make disbursements in
accordance with the terms of this Agreement. Without limiting the generality of
the foregoing, it is acknowledged and agreed that (i) no implied duties shall be
read into this Agreement on the part of the Escrow Agent, and (ii) the Escrow
Agent shall not be obligated to take any legal or remedial action which might in
its judgment involve it in any expense or liability for which it has not been
furnished acceptable indemnification. The Escrow Agent, its directors, officers
and employees shall not be liable for any error in judgment or any act or steps
taken or permitted to be taken in good faith, or for any mistake of law or fact,
or for anything it may do or refrain from doing in connection herewith, except
for its own willful misconduct or gross negligence.
6
<PAGE>
9. Indemnity. As between themselves and the Escrow Agent, Monroe and the
---------
Merkert Stockholders, jointly and severally, agree to indemnify the Escrow Agent
against and hold the Escrow Agent and its officers, employees and directors
harmless from any and all losses, costs, damages, expenses, claims, and
attorney's fees and expenses suffered or incurred by the Escrow Agent as a
result of, in connection with or arising from or out of the acts or omissions of
the Escrow Agent in performance of or pursuant to this Agreement, except such
acts or omissions as may result from the Escrow Agent's willful misconduct or
gross negligence. In no event shall the Escrow Agent be liable for indirect,
punitive, special or consequential damages.
Monroe and the Merkert Stockholders, jointly and severally, agree to assume
any and all obligations imposed now or hereafter by any applicable tax law with
respect to the distribution of Escrowed Shares under this Agreement, and to
indemnify and hold the Escrow Agent harmless from and against any taxes,
additions for late payment, interest, penalties and other expenses, that may be
assessed against the Escrow Agent in any such distribution or other activities
under this Agreement. Monroe and the Stockholder Representative undertake to
instruct the Escrow Agent in writing with respect to the Escrow Agent's
responsibility for withholding and other taxes, assessments, or other
governmental charges, certifications and governmental reporting in connection
with its acting as Escrow Agent under this Agreement. Monroe and the Merkert
Stockholders, jointly and severally, agree to indemnify and hold the Escrow
Agent harmless from any liability on account of taxes, assessments or other
governmental charges, including without limitation the withholding or deduction
or the failure to withhold or deduct the same, and any liability for failure to
obtain proper certifications or to properly report to governmental authorities,
to which the Escrow Agent may be or become subject in connection with or which
arises out of this Agreement, including costs and expenses (including reasonable
legal fees and expenses), interest and penalties.
Notwithstanding the foregoing, as between themselves, Monroe and the
Merkert Stockholders shall each pay one-half of all amounts payable to the
Escrow Agent pursuant to this Section 9.
10. Consultation with Legal Counsel. The Escrow Agent may consult with
-------------------------------
its in-house counsel or other counsel satisfactory to it in respect to questions
relating to its duties or responsibilities hereunder or otherwise in connection
herewith and shall not be liable for any action taken, suffered, or omitted by
the Escrow Agent in good faith upon the advice of such counsel. The Escrow
Agent may act through its officers, employees, agents and attorneys.
11. Reimbursement of Expenses of the Escrow Agent. The Escrow Agent shall
---------------------------------------------
be entitled to reimbursement from Monroe and the Merkert Stockholders of all its
reasonable costs and expenses, including reasonable fees and expenses of legal
counsel incurred by it in connection with the preparation, operating,
administration and enforcement of this Agreement. The Escrow Agent shall be
entitled to reimbursement on demand for all expenses incurred in
7
<PAGE>
connection with the administration of this Agreement or the escrow created
hereby which are in excess of its compensation for normal services hereunder,
including without limitation, payment of any legal fees and expenses incurred by
the Escrow Agent in connection with resolution of any claim by any party
hereunder. Notwithstanding the foregoing, as between themselves, Monroe and the
Merkert Stockholders shall each pay one-half of all amounts payable to the
Escrow Agent pursuant to this Section 11.
12. Resignation. The Escrow Agent may resign upon 10 days' prior written
-----------
notice to Monroe and the Stockholder Representative, and upon written
instruction to Monroe and the Stockholder Representative, the Escrow Agent shall
deliver the Escrowed Shares to any designated substitute Escrow Agent mutually
agreeable to such parties. If Monroe and the Stockholder Representative fail to
designate a substitute Escrow Agent within 10 days, the Escrow Agent, in its
sole discretion and its sole option, either may (i) continue to hold the
Escrowed Shares or (ii) institute a bill of interpleader as contemplated by
Section 7 hereof.
13. Compensation. Monroe and the Merkert Stockholders covenant and agree,
------------
jointly and severally, to pay to the Escrow Agent the fee determined by the
Escrow Agent, from time to time, to be applicable to this escrow and bear all
costs and expenses incurred by the Escrow Agent in connection therewith. The
Escrow Agent's fees, as in effect on the date hereof, are attached hereto as
Schedule A. Without altering or limiting the joint and several liability of
- ----------
Monroe and the Merkert Stockholders hereunder, as between themselves, Monroe and
the Merkert Stockholders agree that they shall each pay one-half of all amounts
payable to the Escrow Agent pursuant to this Section 13.
14. [Intentionally Omitted]
15. Responsibilities of the Stockholder Representative.
--------------------------------------------------
15.1 General. The Stockholder Representative has been designated by
-------
the Merkert Stockholders to represent the Merkert Stockholders with respect to
the Escrowed Shares pursuant to the terms of this Agreement. The duties of the
Stockholder Representative hereunder shall be limited to the observance of the
express provisions of this Agreement. The Stockholder Representative shall not
be subject to, or be obliged to recognize, any other agreement between the
parties hereto or directions or instructions not specifically set forth or
provided for herein or in the Purchase Agreement.
15.2 Reimbursement of Expenses of the Stockholder Representative. The
-----------------------------------------------------------
Merkert Stockholders shall reimburse the Stockholder Representative for
reasonable out-of-pocket expenses incurred by the Stockholder Representative in
the performance of his duties hereunder. During the period the Escrowed Shares
are held in escrow under this Agreement, the reimbursement provided under this
Section 15.2 shall be from sources of funds other than the Escrowed Shares.
8
<PAGE>
15.3 Duties. The Merkert Stockholders hereby authorize and direct
------
the Stockholder Representative to take all action necessary in connection
with the implementation of this Agreement on behalf of the Merkert Stockholders,
including, without limitation, giving and receiving all notices required to be
given under this Agreement, settling any dispute arising hereunder and executing
all such documents as the Stockholder Representative shall deem necessary or
appropriate in connection with the transactions contemplated by this Agreement.
All decisions and actions by the Stockholder Representative shall be binding
upon all of the Merkert Stockholders, and no Merkert Stockholder shall have the
right to object, dissent, protest or otherwise contest the same.
15.4 Reliance. By their execution of this Agreement, the Merkert
--------
Stockholders agree that (i) Monroe and the Escrow Agent shall be able to rely
conclusively on the instructions and decisions of the Stockholder Representative
as to any actions required or permitted to be taken by the Merkert Stockholders
or the Stockholder Representative hereunder, and no party hereto shall have any
cause of action against any other for any action taken in reliance upon the
instructions or decisions of the Stockholder Representative, (ii) all actions,
decisions and instructions of the Stockholder Representative shall be conclusive
and binding upon all of the Merkert Stockholders and no Merkert Stockholder
shall have any cause of action against the Stockholder Representative or any
other person for any action taken, decision made or instruction given by the
Stockholder Representative under this Agreement, except for gross negligence,
breach of fiduciary duties owed to the Merkert Stockholders, fraud or willful
breach of this Agreement by the Stockholder Representative and (iii) the
provisions of this Section 15 are independent and severable, shall constitute an
irrevocable power of attorney, coupled with an interest and surviving death,
granted by the Merkert Stockholders to the Stockholder Representative and shall
be binding upon the executors, heirs, legal representatives and successors of
each Merkert Stockholder.
16. Change in the Stockholder Representative. The Stockholder
----------------------------------------
Representative may be removed and a successor named in accordance with the terms
of the Purchase Agreement. The Escrow Agent shall be promptly notified in
writing of any such change in the Stockholder Representative.
17. Confidentiality. All of the information provided by the parties to
---------------
this Agreement pursuant to this Agreement shall be deemed "Confidential
Information" except to the extent that such information (i) was known to the
receiving party prior to its receipt from the disclosing party, (ii) is or
becomes part of the public domain through no fault of any party hereto or (iii)
is disclosed by a party hereto to a third party that is legally free to disclose
such information. Each of the parties to this Agreement agrees that, without
the express written consent of the other parties hereto, it will (i) not use the
Confidential Information for any purpose except as required to discharge its
responsibilities under this Agreement; (ii) use reasonable efforts to prevent
the disclosure or other dissemination of the Confidential
9
<PAGE>
Information in its possession to any third party; and (iii) upon discharging its
responsibilities under this Agreement, return or destroy any document in its
possession containing any Confidential Information supplied by the other parties
to this Agreement.
18. Miscellaneous.
-------------
18.1 Complete Agreement. This Agreement and any documents referred to
------------------
herein (including, without limitation, the Purchase Agreement) or executed
contemporaneously herewith constitute the parties' entire agreement with respect
to the subject matter hereof and supersede all agreements, representations,
warranties, statements, promises and understandings, whether oral or written,
with respect to the subject matter hereof. This Agreement shall be binding upon
the respective parties hereto and their heirs, executors, successors and
assigns.
18.2 Amendments and Waivers. This Agreement may be amended, modified
----------------------
and supplemented, and compliance with any provision hereof may be waived, only
by a writing signed by Monroe, the Escrow Agent and the Stockholder
Representative.
18.3 Assignment. This Agreement shall be binding upon and inure to
----------
the benefit of Monroe, the Escrow Agent, the Merkert Stockholders and the
Stockholder Representative and their respective successors and permitted
assigns. Except as expressly provided in this Agreement, none of the parties
may assign any of his or its rights or obligations under this Agreement without
the prior written consent of the other parties; provided, however, that Monroe
-------- -------
may assign its rights under this Agreement in connection with a merger,
consolidation or sale of substantially all of the assets of Monroe.
18.4 Waivers Strictly Construed. With regard to any power, remedy or
--------------------------
right provided herein or otherwise available to any party hereunder (a) no
waiver or extension of time shall be effective unless expressly contained in a
writing signed by the waiving party; and (b) no alteration, modification or
impairment shall be implied by reason of any previous waiver, extension of time,
delay or omission in exercise, or other indulgence.
18.5 Severability. In case any one or more of the provisions
------------
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
18.6 Termination. Upon the final distribution of the Escrowed Shares
-----------
pursuant to Section 3 hereof, this Agreement shall terminate. Anything
contained herein to the contrary notwithstanding, the provisions of Sections 7,
9 and 17 shall remain in full force and effect following the termination of this
Agreement.
10
<PAGE>
18.7 Notices. All notices under this Agreement will be in writing and
-------
will be delivered by personal service or facsimile or certified mail (or, if
certified mail is not available, then by first class mail), postage prepaid, to
such address as may be designated from time to time by the relevant party, and
which will initially be as set forth below. Copies of all notices shall be
given to Monroe, the Stockholder Representative and the Escrow Agent; provided,
--------
however, that the failure to give copies of such notice shall not render the
- -------
notice invalid or unenforceable. Any notice sent by certified mail will be
deemed to have been given three (3) days after the date on which it is mailed.
Any notice transmitted by facsimile will be deemed given upon confirmation of
receipt. All other notices will be deemed given when received. No objection
may be made to the manner of delivery of any notice actually received in writing
by an authorized agent of a party. Notices will be addressed as follows or to
such other address as the party to whom the same is directed will have specified
in conformity with the foregoing:
(a) If to Monroe:
Monroe, Inc.
8 Cedar Street, Suite 54A
Woburn, MA 01801
Attn: President
Facsimile: (781) 933-3680
(b) If to the Stockholder Representative:
Robert Q. Crane
7 Mountview Road
Wellesley Hills, MA 02180
with a copy to:
Zack Kosnitzky, P.A.
100 S.E. 2nd Street, Suite 2800
Miami, FL 33131
Attn: Thomas O. Wells, Esq.
Facsimile: (305) 539-1307
(c) If to the Escrow Agent:
___________________________
___________________________
___________________________
___________________________
11
<PAGE>
18.8 Governing Law. The rights and liabilities of the parties under
-------------
this Agreement shall be governed by the laws of The Commonwealth of
Massachusetts, regardless of the choice of laws provisions of such state or any
other jurisdiction. Any litigation between the parties shall be conducted
exclusively in the state or federal courts of Massachusetts, and each party
consents to the exclusive jurisdiction of such courts for such purposes.
18.9 Headings. The headings in this Agreement are inserted only as a
--------
matter of convenience, and in no way define, limit, or extend or interpret the
scope of this Agreement or of any particular Section.
18.10 Force Majeure. Neither Monroe, the Stockholder Representative
-------------
nor the Escrow Agent shall be responsible for delays or failures in performance
resulting from acts beyond their control. Such acts shall include but not be
limited to acts of God, strikes, lockouts, riots, acts of war, epidemics,
governmental regulations superimposed after the fact, fire, communication line
failures, computer viruses, power failures, earthquakes or other disasters.
18.11 Reproduction of Documents. This Agreement and all documents
-------------------------
relating hereto, including, without limitation, (a) consents, waivers and
modifications which may hereafter be executed, and (b) certificates and other
information previously or hereafter furnished, may be reproduced by any
photographic, photostatic, microfilm, optical disk, micro-card, miniature
photographic or other similar process. The parties agree that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
18.12 Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
[NEXT PAGE IS SIGNATURE PAGE]
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, as of the day and year first above written.
MONROE, INC.
________________________________________________
James L. Monroe
President
_____________,as ESCROW AGENT
________________________________________________
Name:
Title:
________________________________________________
Robert Q. Crane, as Stockholder Representative
MERKERT STOCKHOLDERS:
_________________________________________________
Edward Cassorla
________________________________________________
Kenneth D. Chipman
________________________________________________
Robert Q. Crane
________________________________________________
Manley J. Kiley, Jr.
<PAGE>
______________________________________
Gerald R. Leonard
EUGENE F. MERKERT 1984 REVOCABLE
TRUST
______________________________________
Eugene F. Merkert, Trustee
EUGENE F. MERKERT 1991 CHARITABLE
REMAINDER UNITRUST
______________________________________
Eugene F. Merkert, Trustee
MERKERT ENTERPRISES, INC. EMPLOYEE
STOCK OWNERSHIP TRUST
______________________________________
James A. Schlindwein, as Trustee
and not individually
______________________________________
Sidney D. Rogers, Jr.
______________________________________
Murray C. Rosen
<PAGE>
Schedule A
----------
ESCROW AGENT FEES
-----------------
<PAGE>
EXHIBIT 10.7
EXHIBIT I
---------
FORM OF GENERAL RELEASE
-----------------------
This Release is delivered by _________________________ (the "Releasing
Party") pursuant to Section 8.2(k) of the Stock Purchase Agreement dated as of
May __, 1998 by and among Monroe, Inc., a Delaware corporation ("Monroe"),
Merkert Enterprises, Inc., a Massachusetts corporation (the "Company"), Eugene
F. Merkert, and the Stockholders named therein (the "Purchase Agreement").
Capitalized terms used herein and not otherwise defined shall have the meanings
provided in the Purchase Agreement.
1. Release. For good and valuable consideration, the receipt and
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sufficiency of which are hereby irrevocably acknowledged by the Releasing Party,
the Releasing Party hereby releases and forever discharges (i) the Company, (ii)
each present and former stockholder, director, officer, employee and agent of
the Company and (iii) each subsidiary, affiliate, successor and assign of the
persons named in clauses (i) and (ii) above (each, a "Released Party" and
collectively, the "Released Parties") of and from any and all commitments,
indebtedness, suits, demands, obligations and liabilities, whether asserted,
unasserted, absolute, contingent, known or unknown, or otherwise, of every kind
and nature, including claims and causes of action both in law and in equity
(collectively, "Claims"), which such Releasing Party and/or such Releasing
Party's heirs, executors, administrators, beneficiaries, affiliates, successors
or assigns ever had, now has or, to the extent arising from or in connection
with any act, omission or state of facts taken or existing on or prior to the
Closing Date, may have after the Closing Date, against any Released Party, other
than Claims arising under or in connection with (i) the Purchase Agreement, the
Registration Rights Agreement or any other agreement, certificate or instrument
delivered in connection with the Purchase Agreement (the "Transaction
Documents"), (ii) the transactions contemplated by the Transaction Documents,
(iii) the indemnification provisions contained in the Company's or any
Subsidiary's charter documents or by-laws or any indemnification agreement
between the Releasing Party and any Released Party, (iv) compensation and other
employment benefits which have accrued to the Releasing Party and which are
disclosed in the Purchase Agreement or a Schedule thereto, (v) any Employment
Agreement to which the Releasing Party and the Company are parties, (vi) any
insurance policy maintained by the Company or any Subsidiary and (vi) the
indemnification rights under the ESOP or the ESOP Trust Fund. The provisions of
this Release shall inure to the benefit of the Released Parties.
The Releasing Party hereby represents to the Released Parties that (a) the
Releasing Party has not assigned any Claim against any Released Party, (b) the
Releasing Party fully intends to release, and by executing this Release it is
releasing, all Claims against the Released Parties (other than those
specifically reserved above), and (c) such Releasing Party has had the
opportunity to consult with counsel with respect to the execution and delivery
of this Release and the consequences hereof.
2. Governing Law. This Release shall be construed in accordance with and
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<PAGE>
governed by the laws of The Commonwealth of Massachusetts applicable to
agreements made and to be performed wholly within such jurisdiction.
3. Severability. If any portion of this Release is declared by a court
------------
of competent jurisdiction to be invalid or unenforceable after all appeals have
either been exhausted or the time for any appeals to be taken has expired, the
remainder of the terms, provisions, covenants and restrictions of this Release
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
EXECUTED as of the ____ day of __________, 1998.
______________________________
[NAME OF THE RELEASING PARTY]
<PAGE>
EXHIBIT 10.8
[LETTERHEAD OF MONROE & COMPANY APPEARS HERE]
May 11, 1998
Monroe, Inc.
8 Cedar Street, Suite 54A
Woburn, MA 01801
Attn: James L. Monroe
Gentlemen:
This letter agreement ("Agreement") confirms the terms and conditions of
the exclusive engagement of Monroe & Company, LLC, a Delaware limited liability
company ("Monroe"), by Monroe, Inc., a Delaware corporation with a pending name
change to Merkert American Corporation ("MAC" or the "Company"), to render
certain business consulting, financial advisory and investment banking services
to MAC on an exclusive basis in connection with possible Transactions and
consulting projects. For the purposes of this Agreement, "Transaction" means any
merger, consolidation, reorganization, business combination, joint venture or
other transaction pursuant to which the Company (a) is acquired by, or combined
with, a third party or (b) acquires all or a portion of the assets or capital
stock of a third party (a "Prospective Target") or (c) enters into a joint
venture agreement with a third party, in each case in a single transaction or a
series of transactions. In addition, a "Transaction" includes, but is not
limited to, Monroe acting as an exclusive private placement agent on behalf of
the Company in connection with the arrangement of a senior credit facility for
the Company from a lending institution in the initial principal amount of $75-
$100 million.
1. SERVICES. Monroe agrees to perform the following services throughout the
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term of this Agreement:
(a) Review historical and projected financial and operating information of
MAC;
(b) Build a financial model to be used for analytical purposes, including
acquisition reviews and financial projections;
(c) Identify and seek out strategic acquisitions and joint ventures, both
domestic and abroad, consistent with MAC's strategic objectives as the
same may be established from time to time by MAC's Board of Directors;
(d) Advise and assist MAC as to the financial aspects and structure of any
proposed Transaction and assist in negotiating the terms thereof;
(e) Advise and assist MAC in the negotiation of any documentation relating
to a Transaction, which would include but not be limited to letters of
intent and definitive agreements;
<PAGE>
Mr. James L. Monroe
May 11, 1998
Page 2
(f) Prepare a memorandum describing MAC and the proposed capital structure
of MAC in connection with arranging a senior credit facility;
(g) Assist and advise MAC with respect to the negotiation of any
documentation relating to a senior credit facility;
(h) Prepare communications and engage in discussions on behalf of MAC in
connection with public relations and Wall Street analyst requirements;
(i) Assist in the development of a database which captures relevant
operations data to be used in connection with evaluating principal
conflicts and business opportunities;
(j) Assist in various business endeavors including, but not limited to,
endeavors with principals, retailers, food service providers, and
private label opportunities; and
(k) Assist MAC on an on-going basis as to the restructuring of its
organization including departments, personnel and functions.
2. FEES. MAC agrees to pay Monroe for its services as follows:
----
(a) A financial advisory fee ("Advisory Fee") equal to (i) 5% of the
Consideration (as defined below) paid up to $1 million, plus (ii) 4%
of the Consideration paid in excess of $1 million and up to $2
million, plus (iii) 3% of the Consideration paid in excess of $2
million and up to $3 million, plus (iv) 2% of the Consideration paid
in excess of $3 million and up to $4 million, plus (v) 1% of the
Consideration paid in excess of $4 million.
(b) Private placement fee ("Private Placement Fee") equal to three
quarters of one percent (0.75%) of the principal amount committed
under the senior credit facility. An additional fee shall be payable
upon increases in such amount or upon refinancings with a new lender
during the term of this Agreement. Such additional fee shall be equal
to three quarters of one percent (.75%) of the principal amount upon a
refinancing with a new lender or one half of one percent (.50%) of the
incremental principal amount authorized by the same lender.
(c) Consulting fees ("Consulting Fees") based on projects and fee
schedules to be mutually agreed upon by Monroe and a majority of the
independent directors, (not including James L. Monroe) of MAC.
All fees in connection with Sections 2(a) and (b) above shall be paid
to Monroe in cash at the closing of the relevant Transaction. All other
Consulting Fees shall be payable on a monthly basis as services are rendered. An
Advisory Fee shall be payable
<PAGE>
Mr. James L. Monroe
May 11, 1998
Page 3
to Monroe for Transactions entered into by the Company during the term of this
Agreement and within 6 months after the expiration of such term.
In the context of this Agreement "Consideration" means the value of all
cash, securities, assumption of debt of the Prospective Target and any other
forms of payment to the Prospective Target pursuant to a Transaction, including
the total of all interest bearing indebtedness including long term debt,
payments for noncompete agreements and earn-out obligations and other
obligations of the Prospective Target that are assumed or refinanced by MAC in
connection with the closing of a Transaction. The term "Consideration"
expressly includes any payments for noncompete agreements and excess employment
compensation to the existing shareholders and employees of a Prospective Target.
If all or any portion of the Consideration payable in connection with any
Transaction includes contingent future payments, then MAC shall pay to Monroe a
mutually agreed upon amount based upon the discounted value of such contingent
future payments.
If the Company requests Monroe to assist in arranging any transaction or to
engage in any consulting project that is not otherwise covered by the provisions
of this Agreement and Monroe agrees to pursue such a transaction or consulting
project, MAC agrees to pay Monroe mutually acceptable compensation taking into
account, among other things, the results obtained and the custom and practice
among investment bankers and consultants acting in similar transactions or
consulting assignments. Monroe will not perform any services which it believes
are not covered by the provisions of this Agreement, unless Monroe agrees to the
nature and scope of such services and is authorized to do so by the Company in a
writing which specifies the agreed-upon additional compensation for such
services.
3. EXPENSE REIMBURSEMENT. The Company agrees to reimburse Monroe for all of
---------------------
its reasonable out-of-pocket expenses in connection with the performance of
its activities under the terms of this Agreement. Reasonable out-of-pocket
expenses include, but are not limited to, costs such as printing,
telephone, courier services, direct computer expenses, legal and accounting
expenses, accommodations and travel. All such fees, expenses and costs will
be billed monthly and shall be payable upon the Company's receipt of the
applicable invoice. The parties' obligations under this section shall
survive the termination or expiration of this Agreement.
4. TERM; EXCLUSIVITY. The term of Monroe's engagement hereunder as the
-----------------
Company's exclusive financial advisor shall commence on the date hereof and
shall expire on the third anniversary of the date hereof. During the term
of this Agreement, Monroe shall have the exclusive right to represent the
Company in connection with specific services described in Section 1.
Moreover, the Company will be required to use Monroe in connection with all
Transactions contemplated by it during the term of this Agreement and shall
pay Monroe for its services pursuant to Section 2 hereof.
<PAGE>
Mr. James L. Monroe
May 11, 1998
Page 4
Monroe, on the other hand, shall be free to perform such services for any
other party or parties at any time during and after the term of this
Agreement.
5. INDEMNITY. In addition to the fees and reimbursement of expenses provided
---------
for above, the parties agree to the indemnification provisions set forth as
Annex A hereto, which are incorporated herein by reference and shall be
deemed to be included in this Section 5. The parties' obligations under
this Section 5 shall survive the termination or expiration of this
Agreement.
6. INFORMATION. The Company shall furnish, or cause to be furnished, to
-----------
Monroe all information reasonably requested by Monroe for the purpose of
rendering services hereunder (all such information being the
"Information"). In addition, the Company agrees to make available to Monroe
upon request from time to time the officers, directors, accountants,
counsel and other advisors of the Company. The Company recognizes and
confirms that Monroe (a) will use and rely on the Information and on
information available from generally recognized public sources in
performing the services contemplated by this Agreement without having
independently verified the same; and (b) does not assume responsibility for
the accuracy or completeness of the Information and such other information.
The Company agrees that all information furnished to Monroe in connection
with this Agreement shall be accurate in all material respects at the time
provided and that if such information, in whole or in part, becomes
materially inaccurate, misleading or incomplete during the term of Monroe's
engagement hereunder, the Company shall promptly so advise Monroe in
writing and correct any such inaccuracy or omission.
7. DISCLOSURE. Each party agrees that, except as compelled by law, it will
----------
not disclose the services or advice to be provided by Monroe under this
Agreement or any Information publicly or to any third party, without the
approval of the other party. It is understood that the existence and terms
of this Agreement will be disclosed as part of the Company's S-1
registration Statement. Notwithstanding the above, upon the completion of a
Transaction, Monroe shall be permitted to publicize the services it
provided in connection with such Transaction.
8. GOVERNING LAW: AMENDMENTS. This Agreement shall be governed by and
-------------------------
construed in accordance with the laws of the Commonwealth of Massachusetts,
without giving effect to conflict of law principles thereof. This Agreement
may not be amended or modified except in writing signed by both parties.
9. SUCCESSORS. This Agreement and all rights, liabilities and obligations
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hereunder shall be binding upon and inure to the benefit of each party's
successors but may not be assigned without the prior written approval of
the other party which shall not be unreasonably withheld.
<PAGE>
Mr. James L. Monroe
May 11, 1998
Page 5
10. NO BROKERS. The Company represents and warrants to Monroe that there is no
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other person or entity that is entitled to a finder's fee or any type of
brokerage commission in connection with the transactions contemplated by
this Agreement as a result of any agreement or understanding with such
person or entity which creates an interest in the compensation payable to
Monroe hereunder or impairs Monroe's interest in such compensation. The
Company agrees to indemnify and hold harmless Monroe from and against any
actions, suits, claims, costs, expenses, losses and liabilities arising out
of any breach of the foregoing sentence.
Very truly yours,
MONROE & COMPANY, LLC
By: /s/ James L. Monroe
---------------------------
James L. Monroe, Manager
Agreed to and accepted as of
the 11th day of May, 1998
MONROE, INC.
BY: /s/ James L. Monroe
------------------------------
James L. Monroe, President
<PAGE>
ANNEX A
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The Company agrees to indemnify Monroe, its members, managers, employees,
directors, officers, agents, affiliates and each person, if any, who controls it
within the meaning of either Section 20 of the Securities Exchange Act of 1934
or Section 15 of the Securities Act of 1933 (each such person, including Monroe,
is referred to as an "Indemnified Party") from and against any losses, claims,
damages and liabilities, joint or several (including all legal or other expenses
reasonably incurred by any Indemnified Party in connection with the preparation
for or defense of any threatened or pending claim, action or proceeding, whether
or not resulting in any liability) ("Damages"), to which such Indemnified Party,
in connection with its services or arising out of its engagement hereunder, may
become subject under any applicable Federal or state law or otherwise, including
but not limited to liability (i) caused by or arising out of an untrue statement
or an alleged untrue statement of a material fact or the omission or the alleged
omission to state a material fact necessary in order to make a statement not
misleading in light of the circumstances under which it was made, (ii) caused by
or arising out of any act or failure to act or (iii) arising out of Monroe's
engagement or the rendering by any Indemnified Party of its services under this
Agreement; provided, however, that the Company will not be liable to the
Indemnified Party hereunder to the extent that any Damages are found in a final
non-appealable judgment by a court of competent jurisdiction to have resulted
from the gross negligence, bad faith or willful misconduct of the Indemnified
Party seeking indemnification hereunder.
These indemnification provisions shall be in addition to any liability
which the Company may otherwise have to any Indemnified Party.
If for any reason, other than a final non-appealable judgment finding an
Indemnified Party liable for Damages for its gross negligence, bad faith or
willful misconduct, the foregoing indemnity is unavailable to an Indemnified
Party or insufficient to hold an Indemnified Party harmless, then the Company
shall contribute to the amount paid or payable by an Indemnified Party as a
result of such Damages in such proportion as is appropriate to reflect not only
the relative benefits received by the Company and its shareholders on the one
hand and Monroe on the other, but also the relative fault of the Company and the
Indemnified Party as well as any relevant equitable considerations, subject to
the limitation that in no event shall the total contribution of all Indemnified
Parties to all such Damages exceed the total amount of fees actually received
and retained by Monroe hereunder.
Promptly after receipt by the Indemnified Party of notice of any claim or
of the commencement of any action in respect of which indemnity may be sought,
the Indemnified Party will notify the Company in writing of the receipt or
commencement thereof and the Company shall have the right to assume the defense
of such claim or action (including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of fees and expenses of
such counsel), provided that the Indemnified Party shall have the right to
control its defense if, in the opinion of its counsel, the Indemnified Party's
defense is unique or separate to it as the case may be as
<PAGE>
opposed to a defense pertaining to the Company. In any event, the Indemnified
Party shall have the right to retain counsel reasonably satisfactory to the
Company, at the Company's expense, to represent the Indemnified Party in any
claim or action in respect of which indemnity may be sought and agrees to
cooperate with the Company and the Company's counsel in the defense of such
claim or action, it being understood, however, that the Company shall not, in
connection with any one such claim or action or separate but substantially
similar or related claims or action in the same jurisdiction arising out of the
same general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys, for all the Indemnified
Parties unless the defense of one Indemnified party is unique or separate from
that of another Indemnified Party subject to the same claim or action. In the
event that the Company does not promptly assume the defense of a claim or
action, the Indemnified Party shall have the right to employ counsel reasonably
satisfactory to the Company, at the Company's expense, to defend such claim or
action. The omission by an Indemnified Party to promptly notify the Company of
the receipt or commencement of any claim or action in respect of which indemnity
may be sought will relieve the Company from any liability the Company may have
to such Indemnified Party only to the extent that such a delay in notification
materially prejudices the Company's defense of such claim or action. The Company
shall not be liable for any settlement of any such claim or action effected
without its written consent, which shall not be unreasonably withheld or
delayed. Any obligation pursuant to this Annex A shall survive the termination
or expiration of this Agreement.
<PAGE>
EXHIBIT 10.12
DISTRIBUTOR'S AGREEMENT
THIS AGREEMENT made as of the 1st day of January, 1982, by and between
MERCO PRICE MARKING ("DISTRIBUTOR"), a division of Merkert Enterprises, INC.,
a Massachusetts corporation and MONARCH MARKING SYSTEMS, INC. ("MONARCH"),
a Delaware corporation.
WHEREAS, DISTRIBUTOR is engaged in the business of purchasing and selling
labelers, labels, and related supplies, with emphasis on sales to businesses
engaged in retail and wholesale food sales; and
WHEREAS, MONARCH is engaged in the manufacture of tickets, tags, labels and
labelers for inventory and price marking systems to all types of businesses; and
WHEREAS, MONARCH desires to appoint DISTRIBUTOR as a distributor primarily
to the food industry of certain products manufactured by MONARCH; and
WHEREAS, DISTRIBUTOR is willing to accept such appointment on the terms
hereinafter set forth.
NOW, THEREFORE, it is hereby agreed as follows:
1. Appointment. Subject to the terms of this Agreement, MONARCH hereby
-----------
appoints DISTRIBUTOR a purchaser and reseller of certain MONARCH Products
primarily to users within the food industry and primarily in the territory
hereinafter described.
2. Acceptance. Subject to the terms of this Agreement, DISTRIBUTOR hereby
----------
accepts the appointment as DISTRIBUTOR and agrees to use diligent efforts to
<PAGE>
sell certain MONARCH Products primarily to users within the food industry
primarily in the territory hereinafter described.
3. Products. The term "Products" as used in this Agreement shall mean
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the following: all conventional handheld labelers, labels, supplies and
equipment manufactured and/or distributed by MONARCH primarily for use in the
food industry, and any modifications or improvements thereon. In the event that
MONARCH should develop for sale new handheld labelers, labels, supplies and
equipment which are suitable for use in the food industry, DISTRIBUTOR, at its
option, shall have the right to purchase for resale, in accordance with the
applicable terms and conditions of this Agreement, such new labelers, labels,
supplies and equipment at such time as MONARCH, after appropriate field testing,
offers such labelers, labels, supplies and equipment for sale.
4. Customers of Distributor. DISTRIBUTOR agrees to use diligent efforts
------------------------
to sell the Products to customers in the food industry (which customers are
identified by the Standard Industrial Classification Codes listed on Exhibit A)
in the states of Maine, New Hampshire, Vermont, Massachusetts, Connecticut and
Rhode Island, and in New York and New Jersey for Stop & Shop Co. and its
divisions and First National Stores. It is the intention of the parties that
the DISTRIBUTOR is to resell primarily to customers within the territory, and if
DISTRIBUTOR is selling to stores in the territory through a headquarters
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<PAGE>
located in the territory, and the headquarters moves out of the territory, the
DISTRIBUTOR retains the right to resell through such headquarters to stores in
the territory. DISTRIBUTOR agrees to supply MONARCH with information concerning
other Products handled by DISTRIBUTOR which could be supplied by MONARCH so that
MONARCH will have an opportunity to quote prices on such Products to
DISTRIBUTOR.
5. Prices. The current prices to DISTRIBUTOR for Products hereunder are
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set forth in "MONARCH Price Agreement/Merco Price Marking", Number 190, dated
January 11, 1982, a copy of which has been delivered to DISTRIBUTOR. MONARCH
reserves the right, from time to time and at any time, to adjust the prices for
any Product, which adjustments shall be effective not less than thirty (30) days
after receipt by DISTRIBUTOR of the revised price schedule, either delivered by
hand or sent by certified mail, return receipt requested. The prices charged to
DISTRIBUTOR shall in no event exceed those charged to other customers of MONARCH
who purchase the same Products in like quantity. The price invoiced to
DISTRIBUTOR shall in all events be the price in effect upon the date items are
ordered by the DISTRIBUTOR, provided the shipping date specified by DISTRIBUTOR
is within sixty (60) days of the date of order.
6. Terms of Sale. Terms of sale by MONARCH to DISTRIBUTOR shall be "net
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30 days" on all Products. In the event that DISTRIBUTOR defaults in payment
terms, except with respect to good faith disputed items, MONARCH reserves the
right to alter
-3-
<PAGE>
all credit terms hereunder and further to require immediate payment of any
amounts then due to MONARCH from DISTRIBUTOR. MONARCH reserves the right to
request quarterly financial statements from DISTRIBUTOR in the event of any
default under this Agreement.
7. Relationship of the Parties. It is understood and agreed between the
---------------------------
parties that this Agreement is intended to create only an independent contractor
relationship and not one of partnership, joint venture, employment or agency.
8. Warranty. All Products sold to DISTRIBUTOR under this Agreement shall
--------
be covered by MONARCH'S standard warranty as established by MONARCH from time to
time. Any revision in any Product warranty shall be consistent with that
provided to MONARCH'S other customers. The provisions of this warranty shall
not apply to damages, disrepair or malfunction caused by malicious abuse,
recklessness or gross negligence of DISTRIBUTOR or DISTRIBUTOR'S customers. All
labelers shall bear MONARCH'S name and the date of manufacture. Subject to the
terms of paragraph 10, DISTRIBUTOR agrees not to delete, alter or obscure said
name or date of manufacture. Subject to the terms of paragraph 10, the warranty
periods shall commence on the first day of the date of manufacture stamped
inside each labeler by MONARCH.
9. Service. DISTRIBUTOR shall physically collect any Products requiring
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service or repair and shall deliver such Products to MONARCH'S service center,
located in Southborough,
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<PAGE>
Massachusetts or such other service center located within forty (40) miles of
440 Turnpike Street, Canton, Massachusetts as MONARCH may designate. MONARCH
agrees to promptly perform all service and repairs on such Products (at
MONARCH'S expense, if covered by warranty) and to notify DISTRIBUTOR upon
completion of such service and repairs. DISTRIBUTOR shall be responsible for
returning such Products to DISTRIBUTOR'S customers. If the applicable warranty
period has expired prior to delivery of such Products to MONARCH'S service
center or if MONARCH determines that the damage is not covered by warranty,
MONARCH shall invoice DISTRIBUTOR for such service and repair at MONARCH'S rate
as established from time to time, which rate shall not be more than those
charged to other MONARCH customers. MONARCH shall offer DISTRIBUTOR extended
warranty programs on MONARCH Products in accordance with such programs offered
to other customers of MONARCH.
10. Re-dating of labelers. In the event that DISTRIBUTOR receives from
---------------------
MONARCH any labeler(s) more than four (4) months following the date of
manufacture of such labeler, DISTRIBUTOR shall notify MONARCH, within one (1)
month from the date such labeler(s) are received by DISTRIBUTOR, that such
labeler(s) have been received. Within two (2) weeks from the date such notice is
received or given by telephone, a representative of MONARCH shall meet with a
representative of DISTRIBUTOR at DISTRIBUTOR'S place of business. Such
representative shall restamp all such labelers so that they bear then-current
dates and such then-current date shall be deemed the date of manufacture of such
labelers for purposes of warrant.
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<PAGE>
11. Patent, Copyright and Trademark Infringement.
--------------------------------------------
(a) DISTRIBUTOR agrees not to sell any products which infringe any
valid patent, copyright and trademark held by MONARCH, but it shall be the
responsibility of MONARCH to advise DISTRIBUTOR as to which of said products
infringe MONARCH patents, copyright and trademarks.
(b) MONARCH represents that the use or sale of Products sold to
DISTRIBUTOR under this Agreement will not infringe any valid patents, copyrights
or trademarks not licensed to or controlled by MONARCH. In the event that any
suit alleging patent, copyright and/or trademark infringement is brought against
DISTRIBUTOR, MONARCH will promptly defend such suit at MONARCH'S expense and
will hold DISTRIBUTOR harmless from damages, attorney fees and court costs in
connection with such suit; provided DISTRIBUTOR promptly notifies MONARCH of any
such suit and renders reasonable assistance to MONARCH when requested by
MONARCH, at MONARCH'S expense, in connection with the defense of any such suit,
and provided further that MONARCH has sole control of any such suits and any
settlement negotiations. MONARCH will also extend this indemnification to
DISTRIBUTOR'S customers of such Products provided such customer agrees to the
terms of this indemnification.
12. Retrofits. In the event that MONARCH, in its sole discretion,
---------
determines that any Product sold by MONARCH to
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<PAGE>
DISTRIBUTOR needs improvement or replacement without charge to DISTRIBUTOR or
its customers, MONARCH shall notify DISTRIBUTOR and DISTRIBUTOR shall collect
such Products from its customers and deliver them to MONARCH'S Southborough,
Massachusetts service center, or such other service center located within forty
(40) miles of 440 Turnpike Street, Canton, Massachusetts 02021 as MONARCH may
designate. Following repair or replacement, DISTRIBUTOR shall return the
corrected Products to its customers. MONARCH shall provide without charge
substitute products for use by DISTRIBUTOR'S customers during the period of such
improvements or replacement, except when DISTRIBUTOR is notified in writing that
substitute Products will not be made available.
13. Direct Sales by Monarch.
-----------------------
(a) MONARCH has the right to solicit orders for any products by
direct mail catalogs, mail order, telephone, trade shows or other indirect
activities (excluding door to door selling) from customers described in the
first sentence of paragraph 4.
(b) MONARCH shall pay to DISTRIBUTOR, within forty-five (45) days
following the end of each calendar quarter during the term of this Agreement, an
amount equal to eight percent (8%) of the net invoice amount on all sales during
such calendar quarter of any products advertised or offered in MONARCH'S "food
catalogue" to customers described in the first sentence of paragraph 4
(regardless of whether such customers are customers of DISTRIBUTOR at such
time), which sales were derived from MONARCH'S "food catalogue" (regardless of
the method used to order such products).
-7-
<PAGE>
(c) If, at any time during the term of this Agreement, MONARCH shall
discontinue publication or widespread distribution of its "food catalogue" to
customers or potential customers described in the first sentence of paragraph 4,
MONARCH shall pay to DISTRIBUTOR an amount equal to five percent (5%) of the net
invoice amount of all sales of the Products by MONARCH to customers described in
the first sentence of paragraph 4 (regardless of whether such customers are
customers of DISTRIBUTOR at such time), which sales were derived from MONARCH'S
indirect activities described in subparagraph 13(a). Payment of such amount
shall be made within forty-five (45) days following the end of each calendar
quarter with respect to such sales during such calendar quarter.
(d) MONARCH shall deliver to DISTRIBUTOR, simultaneously with the
payment described in subparagraphs 13(b) or 13(c), (i) a summary report showing
the name, address and sales amount with respect to sales described in
subparagraphs 13(b) or 13(c), (ii) copies of MONARCH'S invoices for all such
sales, or (iii) such other evidence of such sales as is satisfactory to
DISTRIBUTOR.
(e) As used in this paragraph 13, the term "net invoice amount"
shall mean the gross invoice amount for products sold, less amounts shown on
such invoice, if any, for applicable taxes and freight charges.
-8-
<PAGE>
14. Other Distributors. MONARCH agrees that during the term of this
------------------
Agreement, MONARCH shall not appoint any other person, firm or corporation a
MONARCH distributor for resale of the Products to the food industry if such
DISTRIBUTOR'S principal office is in the states of Maine, New Hampshire,
Vermont, Massachusetts, Connecticut or Rhode Island.
15. Assistance by Monarch. MONARCH agrees to furnish a sales
---------------------
representative whose primary responsibility will be to work with DISTRIBUTOR.
Such sales representative 5 salary and expenses shall be paid by MONARCH. Such
representative, under the direction of MONARCH, will work with DISTRIBUTOR'S
salesmen through sales training programs and in demonstrating equipment to
customers. The representative will assist DISTRIBUTOR'S salesmen in helping
customers to establish procedures to mark merchandise properly and, in general,
expand the use of MONARCH systems for the benefit of the DISTRIBUTOR and
MONARCH.
16. Advertising.
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(a) MONARCH will assist the DISTRIBUTOR by providing advertising
material to DISTRIBUTOR at MONARCH'S cost or assist DISTRIBUTOR in preparing its
own material. Proper copyright notices must be shown if new MONARCH copyrights
are used. MONARCH will contribute to DISTRIBUTOR'S advertising programs an
amount equal to One Thousand Dollars ($1,000) per year, with MONARCH reserving
the right to determine the programs for which MONARCH'S payment may be used.
-9-
<PAGE>
(b) MONARCH shall, prior to mailing, publishing or otherwise
distributing to customers or potential customers in the states of Maine, New
Hampshire, Vermont, Massachusetts, Connecticut or Rhode Island any advertising,
catalogues or promotional material regarding the Products, deliver to
DISTRIBUTOR a copy or original of such advertising, catalogues or promotional
material.
17. Production and Shipments. DISTRIBUTOR agrees to use its best efforts
------------------------
to project requirements to assist MONARCH in proper scheduling of production and
equipment. DISTRIBUTOR agrees to place orders in such a manner that full
truckloads will be shipped to DISTRIBUTOR for not less than eighty percent (80%)
of total annual requirements. Full truckload shipments will be F.O.B.
destination. Less than full truckload shipments will be F.O.B. Dayton, except
that shipments resulting from failure of MONARCH to meet scheduled delivery
dates on full truckload shipments shall be F.O.B. destination. Provided
DISTRIBUTOR keeps MONARCH advised as to its anticipated requirements, MONARCH
agrees on DISTRIBUTOR orders of stock merchandise to ship full truckload
shipments within seven (7) working days of receipt of order and to ship less
than truckload shipments within ten (10) working days of receipt of
DISTRIBUTOR'S order.
18. Sales Targets. Recognizing the benefits to accrue both to MONARCH and
-------------
DISTRIBUTOR, the parties agree that DISTRIBUTOR and MONARCH shall, in good
faith, establish a unit label sales target for each calendar year, beginning in
1983, by February
-10-
<PAGE>
15th of such year. The parties shall consider the historic share of the
realizable market achieved in the prior year adjusted for known changes in
DISTRIBUTOR'S customers marking practices, competitive products and other
factors that normally have an effect on market share. Although the unit label
sales target shall be established by mutual agreement, each year's unit label
sales target will be increased or decreased by no more than 10% of the unit
label sales target applicable to the prior year. For purposes of subparagraph
20(b)(i) only, (i) the unit label sa1es target applicable to 1982 is hereby
deemed to be six billion two hundred million (6,200,000,000) labels, and (ii)
DISTRIBUTOR is hereby deemed to have achieved actual label sales in excess of
the unit label sales targets applicable to all years prior to 1982. In the event
the parties cannot reach mutual agreement on a unit label sales target by March
1st of the calendar year involved, the unit label sales target for such year
shall be established by arbitration, which the parties agree to forthwith
request. The arbitrator shall consider the historical share of the realizable
market achieved in the prior years adjusted for known changes in DISTRIBUTOR'S
customers marking practices, competitive products and other factors that
normally affect market share.
19. Meetings. The parties agree to meet during September,
--------
1983 and during every other September thereafter to discuss the conduct of
business pursuant to this Agreement.
-11-
<PAGE>
20. Termination. This Agreement shall become effective as of January 1,
------------
1982 and shall continue, subject to the provisions of paragraph 21, until
terminated:
(a) Upon ninety (90) days written notice from DISTRIBUTOR to MONARCH
after the occurrence of any of the following:
(i) Delivery by MONARCH to DISTRIBUTOR of defective products,
notice of which has been brought to the attention of MONARCH and MONARCH has
failed to make corrections or to institute a program to make corrections within
sixty (60) days after receipt of such notice;
(ii) Failure of MONARCH to deliver eighty percent (80%) of the
label volume of an order on the normal schedule provided that such failure to
deliver was not the result of an act of God or other reason beyond the control
of MONARCH; or
(iii) Any other failure of MONARCH to comply with the terms and
conditions of this Agreement; or
(b) Upon ninety (90) days written notice from MONARCH to DISTRIBUTOR
after the occurrence of any of the following:
(i) Failure of DISTRIBUTOR to achieve a ninety percent (90%)
level or better of the unit label sales target established under paragraph 18 in
any two (2) of the three (3) preceding years.
(ii) Failure of DISTRIBUTOR to pay eighty percent (80%) of
invoiced amounts when due in accordance with the
-12-
<PAGE>
terms hereof and such failure continues more than ten (10) days thereafter,
unless the item not paid is in dispute and DISTRIBUTOR has notified MONARCH in
writing of such dispute.
(iii) Any other failure of DISTRIBUTOR to comply with the terms
and conditions of this Agreement.
In the event that this agreement is terminated, DISTRIBUTOR shall provide
MONARCH within 30 days of the date of final termination with DISTRIBUTOR'S
customer list and sales history of all customers who have purchased MONARCH
labelers or supplies from DISTRIBUTOR in the twelve months preceding the
effective date of termination, showing name, address, telephone number and name
of contact together with the volume of the last twelve months sales. This
information shall be supplied without cost to MONARCH.
21. Resolution of Disputes.
----------------------
(a) In the event that either party believes that there is a dispute
under this Agreement or that a cause for termination exists then, in that event,
and prior to the sending of any notice of termination, such party shall send
written notice to the other of such dispute. Thereafter, the other party shall
have forty-five (45) days to resolve the problem or to devise a program to solve
the problem.
(b) In the event that the parties are unable to resolve a dispute
within such forty-five (45) day period, the parties agree to submit such dispute
to arbitration at Cincinnati, Ohio in accordance with the rules of the American
Arbitration Association.
-13-
<PAGE>
(c) Notwithstanding anything to the contrary contained in this
Agreement, neither party may send a notice of termination of this Agreement with
respect to such dispute, alleged breach or default hereunder until at least four
(4) months after the matter has been submitted to arbitration.
22. Prior Agreement. Reference is made to an Agreement made and entered
---------------
into as of September 1, 1976 by and between DISTRIBUTOR and MONARCH (the "1976
Agreement"). The parties hereby agree that the 1976 Agreement shall,
simultaneously with the execution of this Agreement, terminate effective as of
the close of business on December 31, 1981.
23. Notices. Any notices required or permitted to be sent under this
-------
Agreement shall, until otherwise changed, by either party in writing, be sent as
follows:
To Distributor: President
Merco Price Marking
500 Turnpike Street
Canton, Massachusetts 02021
To Monarch: President
Monarch Marking Systems, Inc.
P.0. Box 608
Dayton, Ohio 45401
24. Entire Agreement. This Agreement sets forth the entire relationship
----------------
between the parties hereto and the terms of this Agreement may not be altered or
amended unless reduced to writing and executed by both parties. This Agreement
is not assignable by DISTRIBUTOR without the written consent of MONARCH, which
-14-
<PAGE>
consent shall not unreasonably be withheld and shall be governed by the laws of
the State of Ohio.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
MERCO PRICE MARKING, a division of Merkert
Enterprises, Inc.
By: /s/ Jack Berg
----------------------------------------
Jack Berg,
Executive Vice-President
MONARCH MARKING SYSTEMS, INC.
By: /s/ James Tschantz
----------------------------------------
James Tschantz, Vice-President
-15-
<PAGE>
EXHIBIT 10.13
AGREEMENT
AGREEMENT made as of the 30th day of October, 1997 by and between
MERKERT LABORATORIES, INC., a Massachusetts corporation with its principal
address at 500 Turnpike Street, Canton, Massachusetts 02021 ("Merkert") and
MISCO PRODUCTS CORPORATION, a Pennsylvania corporation with its principal
address at 1048 Stinson Drive, Reading, Pennsylvania 19605 ("Misco").
WHEREAS, Misco has agreed to manufacture and sell to Merkert certain
BioDegreaser products (the "BioDegreaser") in packaging agreed to by the parties
hereto, which will be resold by Merkert to both the commercial and retail trade;
and
WHEREAS, the parties acknowledge that Misco will be selling this
BioDegreaser product (in different packaging) to others in the commercial and
retail trade; and
WHEREAS, Merkert has requested, as a condition to its purchasing such
products from Misco, that Misco agree to certain noncompetition/nonsolicitation
conditions relative to the BioDegreaser product (in any packaging) as set forth
below.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Nonsolicitation. Misco agrees that so long as Merkert is purchasing
---------------
BioDegreaser from Misco, and for a period of sixty (60) days thereafter, Misco
shall not knowingly directly or indirectly sell BioDegreaser to any customer of
Merkert or contact or otherwise solicit any customer of Merkert with the
intention or effect of encouraging such customer to terminate or reduce the
volume of its BioDegreaser business with Merkert or to place any portion of such
business elsewhere. In addition, Misco agrees that it will not SELL, at any
time, the BioDegreaser in packaging similar to that sold to Merkert.
Notwithstanding the foregoing, this provision will not prohibit Misco from
selling BioDegreaser (other than in packaging similar to Merkert's) to other
distributers; provided such sales are not knowingly intended to subvert the
purposes of this provision.
2. Confidential Information. Misco and Merkert agree and acknowledge
------------------------
that all conversations, correspondence, records, customer lists, price lists,
sales data, know-how, business confidences and other information pertaining to
its business products, policies, methods, strategies, techniques and objectives,
are confidential information of the respective parties. Each party agrees that,
it shall not directly or indirectly use any such information of the other party
for its own benefit, or divulge, disclose or communicate any such information of
the other party, not previously made public or known to the recipient, to any
person, firm or entity without the prior written authorization of the other
party.
3. Enforcement. The parties acknowledge that the other party's remedies
-----------
at law would be inadequate in the event of any breach of the terms of this
Agreement The parties, therefore, agree that the nonbreaching party shall have
the right, without the posting of any bond,
<PAGE>
to enforce the provisions of this Agreement by seeking temporary, preliminary or
permanent injunctive relief or any other equitable remedy in any court or body
of competent jurisdiction with respect to any actual or threatened breach by the
other party of the terms of this Agreement. The seeking of such injunctive
relief shall not affect such non-breaching party's right to seek and obtain
damages or other equitable relief on account of any such actual or threatened
breach.
4. Miscellaneous.
-------------
(a) Notices. Any notice required or permitted to be given under this
-------
Agreement Shall be sufficient if in writing sent by certified mail, return
receipt requested, by overnight courier or by telefax, to the address of each
party as set forth above.
(b) Assignment. The rights and obligations of the parties under this
----------
Agreement shall inure to the benefit of and shall be binding upon the respective
successors and assigns.
(c) Entire Agreement. This instrument contains the entire Agreement
----------------
of the parties relating to the subject matter hereof, and supersedes and cancels
all prior understandings and agreements of the parties relating to such subject
matter. Any waiver, amendment or modification of any provision of this Agreement
shall be effective only if in writing signed by the parties hereto.
(d) Governing Law. The validity, interpretation, performance and
-------------
enforcement of this Agreement shall be governed by the laws of the Commonwealth
of Massachusetts, other than conflicts of laws provisions thereof. The parties
agree that any proceedings instituted by either party, whether as a claim,
counterclaim or otherwise shall be resolved solely by a judge of any court of
competent jurisdiction and that both parties hereby waive any right to seek or
demand a trial by jury.
IN WITNESS WHEREOF, the parties have executed this Agreement under seal as
of the date first above written.
MERKERT LABORATORIES, INC.
By: /s/ Lewis Whiffen
------------------------------------
Print name: Lewis Whiffen
Its: Vice President of Field Sales
MISCO PRODUCTS CORPORATION
By: /s/ Steven H. Gable
-------------------------------------
Print name: Steven H. Gable
Its: President
2
<PAGE>
EXHIBIT 10.14
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of May 18, 1998,
by and among Monroe, Inc., a Delaware corporation (the "Company"), and each of
the holders named on the signature pages hereto (collectively, the "Holders" and
each individually, a "Holder").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS.
-----------
As used in this Agreement, the following terms shall have the following
meanings:
"Authorizing Certificate" has the meaning set forth in Section 2(b).
-----------------------
"Business Day" means any day other than a day on which banks are authorized
------------
or required to be closed in the State of New York.
"Commission" means the Securities and Exchange Commission.
----------
"Common Shares" means (i) the 1,500 shares of Common Stock received by
-------------
Monroe & Company II, LLC pursuant to the subscription letter dated March 4, 1998
and (ii) the 300 shares of Common Stock received by Gerald R. Leonard pursuant
to the subscription letter dated April 8, 1998, together with any shares of
Common Stock or any other class of capital stock of the Company received in
respect of such shares, by stock split, stock dividend, exchange,
recapitalization, reclassification or otherwise.
"Common Stock" means the common stock, par value $.01 per share, of the
------------
Company.
"Company" has the meaning set forth in the preamble and shall include the
-------
Company's successors by merger, acquisition, reorganization or otherwise.
"Controlling Persons" has the meaning set forth in Section 7(a).
-------------------
"Damages" has the meaning set forth in Section 7(a).
-------
"Demand Registration Statement" has the meaning set forth in Section 2(a).
-----------------------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
------------
time to time, or any successor statute, and the rules and regulations of the
Commission promulgated thereunder.
1
<PAGE>
"Person" means any individual, corporation, partnership, limited liability
------
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government or other agency or political subdivision thereof.
"Prospectus" means the prospectus included in any Registration Statement
----------
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, and by all other
amendments and supplements to the prospectus, including post-effective
amendments, and in each case including all material incorporated by reference or
deemed to be incorporated by reference in such prospectus.
"Registrable Securities" means the Common Shares except for (i) Common
----------------------
Shares the sale of which is covered by a Registration Statement that has been
declared effective under the Securities Act and (ii) Common Shares which cease
to be outstanding.
"Registration Expenses" has the meaning set forth in Section 6.
---------------------
"Registration Statement" means any registration statement of the Company
----------------------
that covers any of the Registrable Securities pursuant to the provisions of this
Agreement and all amendments and supplements to any such registration statement,
including post-effective amendments, in each case including the Prospectus, all
exhibits, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
"Securities Act" means the Securities Act of 1933, as amended from time to
--------------
time, or any successor statute, and the rules and regulations of the Commission
promulgated thereunder.
"Selling Stockholders" has the meaning set forth in Section 2(a).
--------------------
"Suspension Notice" has the meaning set forth in Section 5.
-----------------
"Suspension Period" has the meaning set forth in Section 5.
-----------------
SECTION 2. DEMAND REGISTRATIONS.
--------------------
On any two (2) occasions after the date which is one hundred eighty (180)
days after the consummation by the Company of an initial public offering of
Common Stock, subject to the conditions set forth in this Agreement, including
without limitation the conditions set forth in Section 2(b) below, Holders
holding at least forty percent (40%) of the Registrable Securities then held by
all Holders may request that the Company cause to be filed with the Commission
and cause to become effective a registration statement (a "Demand Registration
Statement") under the Securities Act relating to the sale by such Holders of
their Registrable
2
<PAGE>
Securities in accordance with the terms hereof. Upon receipt of any such
request, the Company shall give written notice of such proposed registration to
all Holders of Registrable Securities. Such Holders shall have the right, by
giving written notice to the Company within fifteen (15) business days after
such notice referred to in the preceding sentence has been given by the Company,
to elect to have included in the Demand Registration Statement such of their
Registrable Securities as each Holder may request in such notice of election.
Thereupon, the Company shall as soon as practicable thereafter cause such Demand
Registration Statement to be filed and declared effective by the Commission for
all Registrable Securities which the Company has been requested to register. The
Company shall in no event be obligated to effect under this Section 2 more than
two (2) demand registrations. If the managing underwriter of an underwritten
offering with respect to which registration has been requested by any Holder
pursuant to this Section 2 has advised the Company that, in such underwriter's
good faith judgment, the number of securities to be sold in such offering by
persons other than the Company (collectively, "Selling Stockholders") is greater
than the number which can be offered without adversely affecting such offering,
then the Company may reduce the number of securities to be included in such
offering for the accounts of Selling Stockholders to a number deemed
satisfactory by the managing underwriter, provided, however, that the securities
-------- -------
to be excluded shall be determined in the following order of priority: first,
securities held by any Selling Stockholder not having contractual, incidental
registration rights; second, securities held by any Selling Stockholder (not
including the Holders) participating in such offering pursuant to the exercise
of contractual piggyback registration rights (other than pursuant to the
Registration Rights Agreement by and among the Company and the stockholders of
Merkert Enterprises, Inc. (the "Merkert Agreement"), as determined on a pro rata
basis (based upon the aggregate number of securities held by such Selling
Stockholders); and third, securities held by (i) any Selling Stockholder
participating in such offering pursuant to the exercise of piggyback
registration rights under the Merkert Agreement and (ii) any Holder
participating in such registration pursuant to the exercise of the demand
registration rights set forth in this Section 2, as determined on a pro rata
basis (based upon the aggregate number of securities held by such Selling
Stockholders and such Holders).
SECTION 3. PIGGY-BACK REGISTRATIONS.
------------------------
(a) If at any time or times after the date hereof the Company shall
determine to register under the Securities Act any shares of Common Stock (other
than in connection with a registration on Form S-4 or S-8 (or then equivalent
forms) or a registration statement filed in connection with an exchange offer or
offering of securities solely to the Company's existing securityholders) and the
form of registration statement to be used permits the registration of
Registrable Securities, then the Company shall promptly give written notice of
such proposed registration to the Holders (but in no event less than thirty (30)
days prior to the anticipated effective date of the registration statement). If
within twenty (20) days after the receipt of such notice the Company receives a
written request from any Holder for the inclusion in such registration of some
or all of the Registrable Securities held by such Holder (which request shall
specify the number of Registrable Securities intended to be disposed of by such
Holder
3
<PAGE>
and the intended method of distribution thereof), the Company shall use all
commercially reasonable efforts to cause such Registrable Securities to be
included in such registration on the same terms and conditions as any similar
securities of the Company or any other securityholder included therein and to
permit the sale or other disposition of such Registrable Securities in
accordance with the intended method of distribution thereof. The Company may
withdraw a registration under this Section 3 at any time prior to the time it
becomes effective, provided that the Company shall give prompt notice of such
withdrawal to the Holders which requested to be included in such registration.
(b) In connection with any offering under this Section 3 involving an
underwriting, the Company shall not be required to include a Holder's
Registrable Securities in the underwritten offering unless such Holder accepts
the terms of the underwriting as agreed upon between the Company and the
underwriters selected by the Company. If the managing underwriter of an
underwritten offering with respect to which registration has been requested by
any Holder pursuant to this Section 3 has advised the Company in writing that,
in such underwriter's good faith judgment, the number of securities to be sold
in such offering by Selling Stockholders is greater than the number which can be
offered without adversely affecting such offering, then the Company may reduce
the number of securities to be included in such offering for the accounts of
Selling Stockholders (including the Holders) to a number deemed satisfactory by
the managing underwriter, provided, however, that the securities to be excluded
-------- -------
shall be determined in the following order of priority: first, securities held
by any Selling Stockholder not having contractual, incidental registration
rights; and second, securities held by any Selling Stockholder (including the
Holders) participating in such offering pursuant to the exercise of contractual
piggyback registration rights, as determined on a pro rata basis (based upon the
aggregate number of securities held by such Selling Stockholders).
(c) Each Holder hereby agrees that such Holder may not participate in any
underwritten offering hereunder unless such Holder (i) agrees to sell such
Holder's Registrable Securities on the basis provided in the underwriting
arrangements for such offering, and (ii) completes and executes all customary
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of the underwriting
arrangements.
SECTION 4. REGISTRATION PROCEDURES.
-----------------------
In connection with the obligations of the Company to register Registrable
Securities pursuant to the terms and conditions of this Agreement:
(a) The Company shall prepare and file with the Commission a
Registration Statement on the appropriate form under the Securities Act,
which form shall comply as to form in all materials respects with the
requirements of the applicable form and include all financial statements
required by the Commission to be filed therewith.
4
<PAGE>
(b) The Company shall (i) prepare and file with the Commission such
amendments and post-effective amendments to any Registration Statement as
may be necessary to keep such Registration Statement effective until the
earlier of (A) one hundred eighty (180) days following the effectiveness of
such Registration Statement; provided, however, that such 180-day period
shall be extended by the number of days for which any Suspension Period is
in effect during the effectiveness of such Registration Statement, or (B)
the completion of the proposed offering of Registrable Securities pursuant
to such Registration Statement, (ii) cause the prospectus included in such
Registration Statement to be supplemented by any required prospectus
supplement, and, as so supplemented, to be filed pursuant to Rule 424 under
the Securities Act and (iii) comply with the provisions of the Securities
Act applicable to it with respect to the disposition of all Registrable
Securities covered by such Registration Statement.
(c) The Company shall furnish to any Holder, without charge, such
number of conformed copies of any Registration Statement and any post-
effective amendment thereto and such number of copies of the Prospectus
(including each preliminary Prospectus) and any amendments or supplements
thereto, as such Holder may reasonably request in order to facilitate the
sale of such Holder's Registrable Securities.
(d) The Company shall use all commercially reasonable efforts to
register or qualify the Registrable Securities covered by any Registration
Statement under such other securities or "blue sky" laws of such states of
the United States as any Holder reasonably requests; provided, however,
-------- -------
that the Company shall not be required (i) to qualify generally to do
business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 4(d), (ii) to file any general consent to
service of process, or (iii) to subject itself to taxation in any
jurisdiction where it would not otherwise be subject to taxation.
(e) The Company shall promptly notify each Holder of the happening of
any event which makes any statement made in any Registration Statement or
related Prospectus untrue or which requires the making of any changes in
such Registration Statement or Prospectus so that it will not contain any
untrue statement of a material fact or omit to state any 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,
and promptly following expiration of any Suspension Period (as defined in
Section 5), the Company shall prepare and file with the Commission and
furnish a supplement or amendment to such Prospectus so that, as thereafter
deliverable to the purchasers of Registrable Securities, such Prospectus
will 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.
(f) The Company shall use all commercially reasonable efforts to
prevent the issuance of any order suspending the effectiveness of any
Registration Statement,
5
<PAGE>
and, if one is issued, the Company shall use all commercially reasonable
efforts to obtain the withdrawal of such order as promptly as practicable.
(g) The Company shall cause the Registrable Securities included in any
Registration Statement to be listed on the New York Stock Exchange or such
other securities exchange on which similar securities issued by the Company
are then listed.
SECTION 5. SUSPENSION PERIOD.
-----------------
Each Holder, upon receipt of any notice (a "Suspension Notice") from the
Company of the happening of any event of the kind described in Section 4(e) or
of any event which, in the Company's reasonable business judgment, could become
such an event, shall immediately discontinue disposition of the Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 4(e) (the period from the date on which such
Holder receives a Suspension Notice to the date on which such Holder receives
copies of the supplemented or amended Prospectus is referred to herein as the
"Suspension Period"). If so directed by the Company, each Holder will deliver
to the Company all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Registrable Securities that
is current at the time of receipt of such notice. In the event that the Company
shall give any Suspension Notice, the Company shall use commercially reasonable
efforts and take such actions as are reasonably necessary to end the Suspension
Period as promptly as practicable.
SECTION 6. REGISTRATION EXPENSES.
---------------------
Subject to the proviso below, any and all expenses incident to the
Company's performance of or compliance with this Agreement, including without
limitation Commission and securities exchange registration and filing fees,
reasonable fees and expenses of one legal counsel for the Holders, fees and
expenses incurred in connection with compliance with state securities or "blue
sky" laws, printing expenses, fees and expenses incurred in connection with the
listing of the Registrable Securities and fees and disbursements of counsel for
the Company and of the independent certified public accountants of the Company
(all such expenses being herein called "Registration Expenses"), will be borne
by the Company; provided, however, that Registration Expenses shall not include
-------- -------
(a) underwriting discounts and commissions and transfer taxes, if any, relating
to the sale or disposition of Registrable Securities, (b) any fees or expenses
of any counsel, accountants or other persons retained or employed by the Holders
(other than the fees and expenses of one legal counsel as provided above), or
(c) out-of-pocket expenses of the Holders and their agents, including, without
limitation, any travel costs.
6
<PAGE>
SECTION 7. INDEMNIFICATION AND CONTRIBUTION.
--------------------------------
(a) Indemnification by the Company. The Company agrees to indemnify and
------------------------------
hold harmless, to the full extent permitted by law, each Holder, its officers,
directors, trustees, employees and agents and each Person, if any, which
controls such Holder within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act, (collectively, "Controlling Persons"),
from and against all losses, claims, damages, liabilities and expenses
(including without limitation any legal or other fees and expenses reasonably
incurred by any Holder or any such Controlling Person in connection with
defending or investigating any action or claim in respect thereof)
(collectively, "Damages") to which any of them may become subject under the
Securities Act or otherwise, insofar as such Damages arise out of or are based
upon (i) any untrue or alleged untrue statement of material fact contained in
any Registration Statement (including any related preliminary or final
Prospectus) pursuant to which Registrable Securities were registered under the
Securities Act, or (ii) any omission or alleged omission to state therein a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except insofar as such
Damages arise out of or are based upon any such untrue statement or omission or
alleged untrue statement or omission based upon information furnished in writing
to the Company by such Holder expressly for use therein.
(b) Indemnification by the Holders. Each Holder agrees to indemnify and
------------------------------
hold harmless, to the full extent permitted by law, the Company, its directors,
officers, employees and agents and each Controlling Person of the Company, from
and against any and all Damages to which any of them may become subject under
the Securities Act or otherwise to the same extent as the foregoing indemnity
from the Company to such Holder, but only to the extent such Damages arise out
or are based upon any untrue statement or omission or alleged untrue statement
or omission based upon information furnished to the Company in writing by such
Holder expressly for use in any Registration Statement. In no event shall the
liability of any Holder for indemnification under this Section 7(b) in its
capacity as such (and not in such Holder's capacity as an officer or director of
the Company) exceed the proceeds received by such Holder from the sale of
Registrable Securities under such Registration Statement.
(c) Indemnification Procedures. In case any proceeding (including any
--------------------------
governmental investigation) shall be instituted involving any Person in respect
of which indemnity may be sought pursuant to either paragraph (a) or (b) above,
such Person (the "indemnified party") shall promptly notify the Person against
whom such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceedings and shall pay the fees and
disbursements of such counsel relating to such proceeding. The failure or delay
of an indemnified party to notify the indemnifying party with respect to a
particular proceeding shall not relieve the indemnifying party from any
obligation or liability which it may have pursuant
7
<PAGE>
to this Agreement if the indemnifying party is not prejudiced by such failure or
delay. In any such proceeding, any indemnified party shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such indemnified party. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent. No indemnifying party shall, without the prior written consent of any
indemnified party (which consent shall not be unreasonably withheld), effect any
settlement of any pending or threatened proceeding in respect of which such
indemnified party is a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability on all claims that are the subject
matter of such proceeding.
(d) Contribution. To the extent that the indemnification provided for in
------------
paragraph (a) or (b) of this Section 7 is held by a court of competent
jurisdiction to be unavailable to an indemnified party in respect of any
Damages, then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such Damages (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand, and each Holder on the other, from the offering of
the Registrable Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company, on the one hand, and the Holders, on the
other, in connection with the statements or omissions which resulted in such
Damages, as well as any other relevant equitable considerations. The relative
fault of the Company on the one hand and of the Holders on the other hand shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by the Holders
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
If indemnification is available under paragraph (a) or (b) of this Section
7, the indemnifying parties shall indemnify each indemnified party to the full
extent provided in such paragraphs without regard to the relative benefits to or
relative fault of said indemnifying party or indemnified party or any other
equitable consideration provided for in this Section 7(d).
The Company and each Holder agrees that it would not be just or equitable
if contribution pursuant to this Section 7(d) were determined by pro rata
--- ----
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the Damages referred to in this Section 7
shall be deemed to include any legal or other expenses reasonably incurred (and
not otherwise reimbursed) by such indemnified party in connection with
investigating or defending any such action or claim. In no event shall any
Holder be required to contribute an amount under this Section 7(d) in excess of
the proceeds received by such Holder from the sale of Registrable Securities
under the relevant Registration Statement. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
8
<PAGE>
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
SECTION 8. INFORMATION FURNISHED BY HOLDERS.
--------------------------------
Each Holder shall furnish to the Company such information regarding such
Holder and such Holder's intended method of distribution of the Registrable
Securities as the Company may from time to time reasonably request in writing in
order to comply with the Securities Act and the provisions of this Agreement.
Each Holder agrees (a) to notify the Company as promptly as practicable of any
inaccuracy or change in information previously furnished by the Holder to the
Company or of the occurrence of any event, in either case as a result of which
any Prospectus contains or would contain an untrue statement of a material fact
regarding the Holder or the Holder's intended method of distribution of the
Registrable Securities or omits or would omit to state any material fact
regarding the Holder or the Holder's intended method of distribution of the
Registrable Securities required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing,
and (b) to promptly furnish to the Company any additional information required
to correct and update any previously furnished information or required so that
the Prospectus shall not contain, with respect to the Holder or the Holder's
intended method of distribution of the Registrable Securities, an 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 not misleading in
light of the circumstances then existing.
SECTION 9. MISCELLANEOUS.
-------------
(a) Amendments and Waivers. The provisions of this Agreement, including
----------------------
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given unless the Company has obtained the written consent of the Holders of a
majority in interest of the Registrable Securities then outstanding.
(b) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered personally or sent by registered or certified mail (return
receipt requested), postage prepaid or courier to the parties at their
respective addresses set forth on the signature pages hereof (or at such other
address for any party as shall be specified by like notice, provided that
notices of a change of address shall be effective only upon receipt thereof).
All such notices and communications shall be deemed to have been received: at
the time delivered by hand, if personally delivered; five Business Days after
being deposited in the mail, postage prepaid, if mailed; and on the next
Business Day if timely delivered to a courier guaranteeing overnight delivery.
9
<PAGE>
(c) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders. If any transferee of any Holder shall acquire
Registrable Securities in any manner, whether by operation of law or otherwise,
such Registrable Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable Securities such person
shall be conclusively deemed to have agreed to be bound by and to perform all of
the terms and provisions of this Agreement and such person shall be entitled to
received the benefits hereof.
(d) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(e) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(f) Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Massachusetts without regard to
principles of conflicts of law.
(g) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the Holders
shall be enforceable to the fullest extent permitted by law.
(h) Entire Agreement. This Agreement is intended by the parties as a final
----------------
expression of their agreement and is intended to be the complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
(i) Further Assurances. Each party shall cooperate and take such action as
------------------
may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
(j) Rule 144. The Company shall timely file any reports required to be
--------
filed by it under the Securities Act and the Exchange Act to the extent required
from time to time to enable the Holders to sell Registrable Securities without
registration under the Securities Act pursuant to the exemption provided by Rule
144 under the Securities Act. Upon request of any
10
<PAGE>
Holder, the Company will deliver to such Holder a written statement as to
whether it has complied with such requirements.
[End of text]
11
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the day and year first above written.
MONROE, INC.
By: /s/ James L. Monroe
----------------------------
James L. Monroe
President
Address:
-------
8 Cedar Street, Suite 54A
Woburn, MA 01801
HOLDERS:
MONROE & COMPANY II, LLC
By: MONROE & COMPANY, LLC,
its Manager
By: /s/ James L. Monroe
----------------------------
James L. Monroe
Manager
Address:
-------
8 Cedar Street, Suite 54A
Woburn, MA 01801
/s/ Gerald R. Leonard
--------------------------------
Gerald R. Leonard
Address:
-------
339 Far Reach Road
Westwood, MA 02090
<PAGE>
Exhibit 10.15
EXHIBIT E
---------
FORM OF REGISTRATION RIGHTS AGREEMENT
-------------------------------------
REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of
______________, 1998, by and among Monroe, Inc., a Delaware corporation (the
"Company"), and each of the holders named on the signature pages hereto
(collectively, the "Holders" and each individually, a "Holder").
This Agreement is contemplated by Section 8.1(e) of that certain Stock
Purchase Agreement dated as of May __, 1998 (the "Purchase Agreement") by and
among the Company, Merkert Enterprises, Inc., a Massachusetts corporation,
Eugene F. Merkert and the Holders.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS.
-----------
As used in this Agreement, the following terms shall have the following
meanings:
"Business Day" means any day other than a day on which banks are authorized
------------
or required to be closed in the State of New York.
"Closing Date" has the meaning ascribed thereto in the Purchase Agreement.
------------
"Commission" means the Securities and Exchange Commission.
----------
"Common Shares" means (i) the [___________] shares of Common Stock received
-------------
by the Holders pursuant to the Purchase Agreement and (ii) any shares of Common
Stock issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, the shares of Common
Stock described in the preceding clause (i).
"Common Stock" means the common stock, par value $.01 per share, of the
------------
Company.
"Company" has the meaning set forth in the preamble and shall include the
-------
Company's successors by merger, acquisition, reorganization or otherwise.
"Controlling Persons" has the meaning set forth in Section 6(a).
-------------------
"Damages" has the meaning set forth in Section 6(a).
-------
1
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
------------
time to time, or any successor statute, and the rules and regulations of the
Commission promulgated thereunder.
"Holder Information" has the meaning set forth in Section 8.
------------------
"Person" means any individual, corporation, partnership, limited liability
------
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government or other agency or political subdivision thereof.
"Prospectus" means the prospectus included in any Registration Statement
----------
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, and by all other
amendments and supplements to the prospectus, including post-effective
amendments, and in each case including all material incorporated by reference or
deemed to be incorporated by reference in such prospectus.
"Qualified Holder" has the meaning set forth in Section 2(a).
----------------
"Registrable Securities" means the Common Shares except for (i) Common
----------------------
Shares the sale of which is covered by a Registration Statement that has been
declared effective under the Securities Act and (ii) Common Shares which cease
to be outstanding.
"Registration Expenses" has the meaning set forth in Section 5.
---------------------
"Registration Statement" means any registration statement of the Company
----------------------
that covers any of the Registrable Securities pursuant to the provisions of this
Agreement and all amendments and supplements to any such registration statement,
including post-effective amendments, in each case including the Prospectus, all
exhibits, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
"Securities Act" means the Securities Act of 1933, as amended from time to
--------------
time, or any successor statute, and the rules and regulations of the Commission
promulgated thereunder.
"Selling Stockholders" has the meaning set forth in Section 2(b).
--------------------
"Suspension Notice" has the meaning set forth in Section 4.
-----------------
"Suspension Period" has the meaning set forth in Section 4.
-----------------
2
<PAGE>
SECTION 2. PIGGY-BACK REGISTRATIONS.
------------------------
(a) If at any time or times after the date hereof the Company shall
determine to register under the Securities Act any shares of Common Stock
(including, but not limited to, a registration statement for a secondary
offering, but excluding a registration statement on Form S-4 or S-8 (or then
equivalent forms) or a registration statement filed in connection with an
exchange offer or offering of securities solely to the Company's existing
securityholders) and the form of registration statement to be used permits the
registration of Registrable Securities, then the Company shall promptly give
written notice of such proposed registration to the Holders (but in no event
less than thirty (30) days prior to the anticipated effective date of the
registration statement) and will afford any Holder who, at the time such notice
is given, does not meet the requirements of Rule 144 promulgated under the
Securities Act for such Holder to sell all of such Holder's Registrable
Securities pursuant to such Rule during the four-week period immediately
preceding the anticipated effective date of such registration statement (a
"Qualified Holder"), the opportunity to include in such registration statement
all of the Registrable Securities held by such Qualified Holder. If within
twenty (20) days after the receipt of such notice the Company receives a written
request from any Qualified Holder for the inclusion in such registration of some
or all of the Registrable Securities held by such Qualified Holder (which
request shall specify the number of Registrable Securities intended to be
disposed of by such Qualified Holder and the intended method of distribution
thereof), the Company shall use all commercially reasonable efforts to cause
such Registrable Securities to be included in such registration on the same
terms and conditions as any similar securities of the Company or any other
securityholder included therein and to permit the sale or other disposition of
such Registrable Securities in accordance with the intended method of
distribution thereof. The Company may withdraw a registration under this
Section 2 at any time prior to the time it becomes effective, provided that the
Company shall give prompt notice of such withdrawal to the Qualified Holders
which requested to be included in such registration.
(b) In connection with any offering under this Section 2 involving an
underwriting, the Company shall not be required to include a Holder's
Registrable Securities in the underwritten offering unless such Holder accepts
the terms of the underwriting as agreed upon between the Company and the
underwriters selected by the Company. If the managing underwriter of an
underwritten offering with respect to which registration has been requested by
any Holder pursuant to this Section 2 has advised the Company in writing (a copy
of which shall be provided to the Qualified Holders requesting such
registration) that, in such underwriter's good faith judgment, the number of
securities to be sold in such offering by persons other than the Company
(collectively, "Selling Stockholders") is greater than the number which can be
offered without adversely affecting such offering, then the Company may reduce
the number of securities to be included in such offering for the accounts of
Selling Stockholders (including the Holders) to a number deemed satisfactory by
the managing underwriter, provided, however, that the securities to be excluded
-------- -------
shall be determined in the following order of priority: first, securities held
by any Selling Stockholder not having contractual, incidental registration
rights; and second, securities held by any Selling
3
<PAGE>
Stockholders (including the Holders) participating in such offering pursuant to
the exercise of contractual piggyback or demand registration rights, as
determined on a pro rata basis (based upon the aggregate number of securities
held by such Selling Stockholders). In addition, if, in the written opinion of
tax counsel to the Company or its independent auditors (a copy of which shall be
provided to the Qualified Holders requesting registration), the number of
securities to be sold by Selling Stockholders in an offering with respect to
which registration has been requested by any Holder pursuant to this Section 2
could jeopardize the status of the transactions contemplated by the Purchase
Agreement as exchanges qualifying under Section 351 of the Internal Revenue Code
of 1986, as amended, then the Company may reduce the number of securities to be
included in such offering for the accounts of Selling Stockholders (including
the Holders) to a number deemed satisfactory by such tax counsel, in the order
of priority set forth in the immediately preceding sentence.
(c) Each Holder hereby agrees that such Holder may not participate in
any underwritten offering hereunder unless such Holder (i) agrees to sell such
Holder's Registrable Securities on the basis provided in the underwriting
arrangements for such offering, and (ii) completes and executes all customary
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of the underwriting
arrangements; provided, however, that no Holder shall be required to provide any
indemnification greater in scope than the indemnification provided pursuant to
Section 6(b) of this Agreement.
SECTION 3. REGISTRATION PROCEDURES.
-----------------------
In connection with the obligations of the Company to register Registrable
Securities pursuant to the terms and conditions of this Agreement:
(a) The Company shall prepare and file with the Commission a
Registration Statement on the appropriate form under the Securities Act,
which form shall comply as to form in all materials respects with the
requirements of the applicable form and include all financial statements
required by the Commission to be filed therewith.
(b) The Company shall (i) prepare and file with the Commission such
amendments and post-effective amendments to any Registration Statement as
may be necessary to keep such Registration Statement effective until the
earlier of (A) one hundred eighty (180) days following the effectiveness of
such Registration Statement; provided, however, that such 180-day period
shall be extended by the number of days for which any Suspension Period is
in effect during the effectiveness of such Registration Statement, or (B)
the completion of the proposed offering of Registrable Securities pursuant
to such Registration Statement, (ii) cause the prospectus included in such
Registration Statement to be supplemented by any required prospectus
supplement, and, as so supplemented, to be filed pursuant to Rule 424 under
the Securities Act and
4
<PAGE>
(iii) comply with the provisions of the Securities Act applicable to it
with respect to the disposition of all Registrable Securities covered by
such Registration Statement.
(c) The Company shall furnish to any Holder, without charge, such
number of conformed copies of any Registration Statement and any post-
effective amendment thereto and such number of copies of the Prospectus
(including each preliminary Prospectus) and any amendments or supplements
thereto, as such Holder may reasonably request in order to facilitate the
sale of such Holder's Registrable Securities.
(d) The Company shall use all commercially reasonable efforts to
register or qualify the Registrable Securities covered by any Registration
Statement under such other securities or "blue sky" laws of such states of
the United States as any Holder reasonably requests; provided, however,
-------- -------
that the Company shall not be required (i) to qualify generally to do
business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d), (ii) to file any general consent to
service of process, or (iii) to subject itself to taxation in any
jurisdiction where it would not otherwise be subject to taxation.
(e) The Company shall promptly notify each Holder of the happening of
any event which makes any statement made in any Registration Statement or
related Prospectus untrue or which requires the making of any changes in
such Registration Statement or Prospectus so that it will not contain any
untrue statement of a material fact or omit to state any 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,
and promptly following expiration of any Suspension Period, the Company
shall prepare and file with the Commission and furnish a supplement or
amendment to such Prospectus so that, as thereafter deliverable to the
purchasers of Registrable Securities, such Prospectus will 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.
(f) The Company shall use all commercially reasonable efforts to
prevent the issuance of any order suspending the effectiveness of any
Registration Statement, and, if one is issued, the Company shall use all
commercially reasonable efforts to obtain the withdrawal of such order as
promptly as practicable.
(g) The Company shall cause the Registrable Securities included in any
Registration Statement to be listed on the New York Stock Exchange or such
other securities exchange on which the Common Stock is then listed.
5
<PAGE>
SECTION 4. SUSPENSION PERIOD.
-----------------
Each Holder, upon receipt of any notice (a "Suspension Notice") from the
Company of the happening of any event of the kind described in Section 3(e) or
of any event which, in the Company's reasonable business judgment, could become
such an event, shall immediately discontinue disposition of the Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 3(e) (the period from the date on which such
Holder receives a Suspension Notice to the date on which such Holder receives
copies of the supplemented or amended Prospectus is referred to herein as the
"Suspension Period"). If so directed by the Company, each Holder will deliver
to the Company all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Registrable Securities that
is current at the time of receipt of such notice. In the event that the Company
shall give any Suspension Notice, the Company shall use all commercially
reasonable efforts and take such actions as are reasonably necessary to end the
Suspension Period as promptly as practicable.
SECTION 5. REGISTRATION EXPENSES.
---------------------
Subject to the proviso below, any and all expenses incident to the
Company's performance of or compliance with this Agreement, including without
limitation Commission and securities exchange registration and filing fees, fees
and expenses incurred in connection with compliance with state securities or
"blue sky" laws, printing expenses, fees and expenses incurred in connection
with the listing of the Registrable Securities and fees and disbursements of
counsel for the Company and of the independent certified public accountants of
the Company and, in connection with any piggy-back registration under Section 2,
the reasonable fees and disbursements, not to exceed $5,000 in the aggregate for
such piggy-back registration, of one firm of counsel to the Holders (all such
expenses being herein called "Registration Expenses"), will be borne by the
Company; provided, however, that Registration Expenses shall not include (a)
-------- -------
underwriting discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of Registrable Securities (which shall be paid by the
selling Holders pro rata based on the number of Common Shares being sold by each
Holder), (b) any fees or expenses of any counsel (other than as provided above),
accountants or other persons retained or employed by the Holders, or (c) out-of-
pocket expenses of the Holders and their agents, including, without limitation,
any travel costs.
SECTION 6. INDEMNIFICATION AND CONTRIBUTION.
--------------------------------
(a) Indemnification by the Company. The Company agrees to indemnify and
------------------------------
hold harmless, to the full extent permitted by law, each Holder, its officers,
directors, trustees, employees and agents and each Person, if any, which
controls such Holder within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act, (collectively,
6
<PAGE>
"Controlling Persons"), from and against all losses, claims, damages,
liabilities and expenses (including without limitation any legal or other fees
and expenses reasonably incurred by any Holder or any such Controlling Person in
connection with defending or investigating any action or claim in respect
thereof) (collectively, "Damages") to which any of them may become subject under
the Securities Act or otherwise, insofar as such Damages arise out of or are
based upon (i) any untrue or alleged untrue statement of material fact contained
in any Registration Statement (including any related preliminary or final
Prospectus) pursuant to which Registrable Securities were registered under the
Securities Act, or (ii) any omission or alleged omission to state therein a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except insofar as such
Damages arise out of or are based upon any such untrue statement or omission or
alleged untrue statement or omission based upon information furnished in writing
to the Company by such Holder expressly for use therein.
(b) Indemnification by the Holders. Each Holder agrees to indemnify and
------------------------------
hold harmless, to the full extent permitted by law, the Company, its directors,
officers, employees and agents and each Controlling Person of the Company, from
and against any and all Damages to which any of them may become subject under
the Securities Act or otherwise to the same extent as the foregoing indemnity
from the Company to such Holder, but only to the extent such Damages arise out
or are based upon any untrue statement or omission or alleged untrue statement
or omission based upon information furnished to the Company in writing by such
Holder expressly for use in any Registration Statement. In no event shall the
liability of any Holder for indemnification under this Section 6(b) in its
capacity as such (and not in such Holder's capacity as an officer or director of
the Company) exceed the proceeds received by such Holder from the sale of
Registrable Securities under such Registration Statement.
(c) Indemnification Procedures. In case any proceeding (including any
--------------------------
governmental investigation) shall be instituted involving any Person in respect
of which indemnity may be sought pursuant to either paragraph (a) or (b) above,
such Person (the "indemnified party") shall promptly notify the Person against
whom such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceedings and shall pay the fees and
disbursements of such counsel relating to such proceeding. The failure or delay
of an indemnified party to notify the indemnifying party with respect to a
particular proceeding shall not relieve the indemnifying party from any
obligation or liability which it may have pursuant to this Agreement if the
indemnifying party is not prejudiced by such failure or delay. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent. No
indemnifying party shall, without the prior written consent of any indemnified
party (which consent shall not be unreasonably withheld), effect any settlement
of any pending or threatened proceeding in respect of which such indemnified
party is a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement
7
<PAGE>
includes an unconditional release of such indemnified party from all liability
on all claims that are the subject matter of such proceeding and such settlement
does not admit to the participation or conduct of any criminal activity.
(d) Contribution. To the extent that the indemnification provided for in
------------
paragraph (a) or (b) of this Section 6 is held by a court of competent
jurisdiction to be unavailable to an indemnified party in respect of any
Damages, then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such Damages (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand, and each Holder on the other, from the offering of
the Registrable Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company, on the one hand, and the Holders, on the
other, in connection with the statements or omissions which resulted in such
Damages, as well as any other relevant equitable considerations. The relative
fault of the Company on the one hand and of the Holders on the other hand shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or written
information supplied by the Holders and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
If indemnification is available under paragraph (a) or (b) of this Section
6, the indemnifying parties shall indemnify each indemnified party to the full
extent provided in such paragraphs without regard to the relative benefits to or
relative fault of said indemnifying party or indemnified party or any other
equitable consideration provided for in this Section 6(d).
The Company and each Holder agrees that it would not be just or equitable
if contribution pursuant to this Section 6(d) were determined by pro rata
--- ----
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the Damages referred to in this Section 6
shall be deemed to include any legal or other expenses reasonably incurred (and
not otherwise reimbursed) by such indemnified party in connection with
investigating or defending any such action or claim. In no event shall any
Holder be required to contribute an amount under this Section 6(d) in excess of
the proceeds received by such Holder from the sale of Registrable Securities
under the relevant Registration Statement. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
8
<PAGE>
SECTION 7. RESTRICTIONS ON SALES BY HOLDERS.
--------------------------------
In the event of an underwritten public offering of securities of the
Company with respect to which the piggy-back registration rights pursuant to
Section 2 apply, each Holder who beneficially owns 5% or more of the issued and
outstanding Common Stock and who either (i) elects not to exercise such piggy-
back registration rights or (ii) elects to exercise such piggy-back registration
and all of the Registrable Securities requested by such Holder to be included in
such offering are so included, then such Holder shall, if the managing
underwriter (or underwriters) of such offering requires each director, officer
and 5% stockholder of the Company to do so, agree not to effect any sale or
disposition of any securities similar to those being registered in such offering
(other than pursuant to such offering) for such period, not to exceed the 14
days immediately prior to and the 180-day period following the effective date of
the relevant Registration Statement, as such managing underwriter(s) shall
specify. Such agreement shall be in form and substance satisfactory to the
Company and such underwriter.
SECTION 8. INFORMATION FURNISHED BY HOLDERS.
--------------------------------
Each Holder shall furnish to the Company such information ("Holder
Information") regarding such Holder and such Holder's intended method of
distribution of the Registrable Securities as the Company may from time to time
reasonably request in writing in order to comply with the Securities Act and the
provisions of this Agreement. Each Holder agrees (a) to notify the Company as
promptly as practicable of any inaccuracy or change in Holder information
previously furnished by the Holder to the Company or of the occurrence of any
event, in either case as a result of which any Prospectus contains or would
contain an untrue statement of a material fact regarding the Holder or the
Holder's intended method of distribution of the Registrable Securities or omits
or would omit to state any material fact regarding the Holder or the Holder's
intended method of distribution of the Registrable Securities required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing, and (b) to promptly furnish to the
Company any additional information required to correct and update any previously
furnished Holder Information or required so that the Prospectus shall not
contain, with respect to the Holder or the Holder's intended method of
distribution of the Registrable Securities, an 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 not misleading in light of the circumstances then
existing.
SECTION 9. MISCELLANEOUS.
-------------
(a) Amendments and Waivers. The provisions of this Agreement, including
----------------------
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given except pursuant to a
9
<PAGE>
written instrument signed by the Company and the Holders of a majority in
interest of the Registrable Securities then outstanding.
(b) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered personally or sent by registered or certified mail (return
receipt requested), postage prepaid or courier to the parties at their
respective addresses set forth on the signature pages hereof (or at such other
address for any party as shall be specified by like notice, provided that
notices of a change of address shall be effective only upon receipt thereof).
All such notices and communications shall be deemed to have been received: at
the time delivered by hand, if personally delivered; five Business Days after
being deposited in the mail, postage prepaid, if mailed; and on the next
Business Day if timely delivered to a courier guaranteeing overnight delivery.
(c) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders. If any transferee of any Holder shall acquire
Registrable Securities in any manner, whether by operation of law or otherwise,
such Registrable Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable Securities such person
shall be conclusively deemed to have agreed to be bound by and to perform all of
the terms and provisions of this Agreement and such person shall be entitled to
received the benefits hereof.
(d) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(e) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(f) Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Massachusetts without regard to
principles of conflicts of law.
(g) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the Holders
shall be enforceable to the fullest extent permitted by law.
(h) Entire Agreement. This Agreement is intended by the parties as a final
----------------
expression of their agreement and is intended to be the complete and exclusive
statement of the
10
<PAGE>
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
(i) Further Assurances. Each party shall cooperate and take such action as
------------------
may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
(j) Rule 144. The Company shall timely file any reports required to be
--------
filed by it under the Securities Act and the Exchange Act to the extent required
from time to time to enable the Holders to sell Registrable Securities without
registration under the Securities Act pursuant to the exemption provided by Rule
144 under the Securities Act. Upon request of any Holder, the Company will
deliver to such Holder a written statement as to whether it has complied with
such requirements.
[END OF TEXT]
11
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed by their respective officers hereunto duly
authorized, as of the day and year first above written.
MONROE, INC.
By: ___________________________________
James L. Monroe
President
8 Cedar Street, Suite 54A
Woburn, MA 01801
HOLDERS:
________________________________________
Edward Cassorla
40 Bristol Road
West Newton, MA 02165
________________________________________
Kenneth D. Chipman
31 Robin Road
Norfolk, MA 02056
________________________________________
Robert Q. Crane
7 Mountview Road
Wellesley Hills, MA 02181
________________________________________
Manley J. Kiley, Jr.
35 Mill Pond Land
Duxbury, MA 02332
12
<PAGE>
________________________________________
Gerald R. Leonard
339 Far Reach Road
Westwood, MA 02090
MERKERT ENTERPRISES, INC. EMPLOYEE STOCK
OWNERSHIP PLAN
By: ___________________________________
James A. Schlindwein, Trustee
500 Turnpike Street
Canton, MA 02021
________________________________________
Sidney D. Rogers, Jr.
11 Day Street
Norfolk, MA 02056
________________________________________
Murray C. Rosen
11 Fairview Drive
N. Caldwell, NJ 07006
EUGENE F. MERKERT 1984 REVOCABLE TRUST
By: ___________________________________
Eugene F. Merkert, Trustee
2359 South Ocean Boulevard
Highland Beach, FL 33487-1834
EUGENE F. MERKERT 1991 CHARITABLE REMAINDER
UNITRUST
By: ___________________________________
Eugene F. Merkert, Trustee
2359 South Ocean Boulevard
Highland Beach, FL 33487-1834
13
<PAGE>
EXHIBIT 10.16
EXHIBIT C
---------
FORM OF REGISTRATION RIGHTS AGREEMENT
-------------------------------------
REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of
______________, 1998, by and among Monroe, Inc., a Delaware corporation (the
"Company"), and each of the holders named on the signature pages hereto
(collectively, the "Holders" and each individually, a "Holder").
This Agreement is contemplated by a certain Stock Purchase Agreement dated
as of May __, 1998 (the "Purchase Agreement") by and among the Company, Rogers-
American Company, Inc., a North Carolina corporation, Curt L. Rogers, Jr., as
representative, and the Holders.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS.
-----------
As used in this Agreement, the following terms shall have the following
meanings:
"Business Day" means any day other than a day on which banks are authorized
------------
or required to be closed in the State of New York.
"Closing Date" has the meaning ascribed thereto in the Purchase Agreement.
------------
"Commission" means the Securities and Exchange Commission.
----------
"Common Shares" means the [___________] shares of Common Stock received by
-------------
the Holders pursuant to the Purchase Agreement.
"Common Stock" means the common stock, par value $.01 per share, of the
------------
Company.
"Company" has the meaning set forth in the preamble and shall include the
-------
Company's successors by merger, acquisition, reorganization or otherwise.
"Controlling Persons" has the meaning set forth in Section 6(a).
-------------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
------------
time to time, or any successor statute, and the rules and regulations of the
Commission promulgated thereunder.
"Person" means any individual, corporation, partnership, limited liability
------
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government or other agency or political subdivision thereof.
<PAGE>
"Prospectus" means the prospectus included in any Registration Statement
----------
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, and by all other
amendments and supplements to the prospectus, including post-effective
amendments, and in each case including all material incorporated by reference or
deemed to be incorporated by reference in such prospectus.
"Registrable Securities" means the Common Shares except for (i) Common
----------------------
Shares the sale of which is covered by a Registration Statement that has been
declared effective under the Securities Act, (ii) Common Shares which may be
transferred pursuant to Rule 144 (or any similar provision then in force, but
not Rule 144A) under the Securities Act, including a sale pursuant to the
provisions of Rule 144(k), and (iii) Common Shares which cease to be
outstanding.
"Registration Expenses" has the meaning set forth in Section 5.
---------------------
"Registration Statement" means any registration statement of the Company
----------------------
that covers any of the Registrable Securities pursuant to the provisions of this
Agreement and all amendments and supplements to any such registration statement,
including post-effective amendments, in each case including the Prospectus, all
exhibits, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
"Securities Act" means the Securities Act of 1933, as amended from time to
--------------
time, or any successor statute, and the rules and regulations of the Commission
promulgated thereunder.
"Suspension Notice" has the meaning set forth in Section 4.
-----------------
"Suspension Period" has the meaning set forth in Section 4.
-----------------
SECTION 2. PIGGY-BACK REGISTRATIONS.
------------------------
(a) If at any time or times after the date hereof the Company shall
determine to register under the Securities Act any shares of Common Stock (other
than in connection with a registration on Form S-4 or S-8 (or then equivalent
forms) or a registration statement filed in connection with an exchange offer or
offering of securities solely to the Company's existing securityholders) and the
form of registration statement to be used permits the registration of
Registrable Securities, then the Company shall promptly give written notice of
such proposed registration to the Holders (but in no event less than thirty (30)
days prior to the anticipated effective date of the registration statement). If
within twenty (20) days after the receipt of such notice the Company receives a
written request from any Holder for the inclusion in such registration of some
or all of the Registrable Securities held by such Holder (which request
2
<PAGE>
shall specify the number of Registrable Securities intended to be disposed of by
such Holder and the intended method of distribution thereof), the Company shall
use commercially reasonable efforts to cause such Registrable Securities to be
included in such registration on the same terms and conditions as any similar
securities of the Company or any other securityholder included therein and to
permit the sale or other disposition of such Registrable Securities in
accordance with the intended method of distribution thereof. The Company may
withdraw a registration under this Section 2 at any time prior to the time it
becomes effective, provided that the Company shall give prompt notice of such
withdrawal to the Holders which requested to be included in such registration.
(b) In connection with any offering under this Section 2 involving an
underwriting, the Company shall not be required to include a Holder's
Registrable Securities in the underwritten offering unless such Holder accepts
the terms of the underwriting as agreed upon between the Company and the
underwriters selected by the Company. If the managing underwriter of an
underwritten offering with respect to which registration has been requested by
any Holder pursuant to this Section 2 has advised the Company that, in such
underwriter's good faith judgment, the number of securities to be sold in such
offering by persons other than the Company (collectively, "Selling
Stockholders") is greater than the number which can be offered without adversely
affecting such offering, then the Company may reduce the number of securities to
be included in such offering for the accounts of Selling Stockholders (including
the Holders) to a number deemed satisfactory by the managing underwriter,
provided, however, that the securities to be excluded shall be determined in the
- -------- -------
following order of priority: first, securities held by any Selling Stockholder
not having contractual, incidental registration rights; and second, securities
held by any Selling Stockholders (including the Holders) participating in such
offering pursuant to the exercise of contractual piggyback or demand
registration rights, as determined on a pro rata basis (based upon the aggregate
number of securities held by such Selling Stockholders). In addition, if, in
the opinion of tax counsel to the Company or its independent auditors, the
number of securities to be sold by Selling Stockholders in an offering with
respect to which registration has been requested by any Holder pursuant to this
Section 2 could jeopardize the status of the transactions contemplated by the
Purchase Agreement as exchanges qualifying under Section 351 of the Internal
Revenue Code, then the Company may reduce the number of securities to be
included in such offering for the accounts of Selling Stockholders (including
the Holders) to a number deemed satisfactory by such tax counsel, in the order
of priority set forth in the immediately preceding sentence.
( c) Each Holder hereby agrees that such Holder may not participate in
any underwritten offering hereunder unless such Holder (i) agrees to sell such
Holder's Registrable Securities on the basis provided in the underwriting
arrangements for such offering, and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of the underwriting
arrangements.
3
<PAGE>
SECTION 3. REGISTRATION PROCEDURES.
-----------------------
In connection with the obligations of the Company to register Registrable
Securities pursuant to the terms and conditions of this Agreement:
(a) The Company shall prepare and file with the Commission a
Registration Statement on the appropriate form under the Securities Act,
which form shall comply as to form in all materials respects with the
requirements of the applicable form and include all financial statements
required by the Commission to be filed therewith.
(b) The Company shall prepare and file with the Commission such
amendments and post-effective amendments to any Registration Statement as
may be necessary to keep such Registration Statement effective for the
lesser of (i) one hundred eighty (180) days or (ii) the period necessary to
complete the proposed offering of Registrable Securities; shall cause the
prospectus included in such Registration Statement to be supplemented by
any required prospectus supplement, and, as so supplemented, to be filed
pursuant to Rule 424 under the Securities Act; and shall comply with the
provisions of the Securities Act applicable to it with respect to the
disposition of all Registrable Securities covered by such Registration
Statement.
(c) The Company shall furnish to any Holder, without charge, such
number of conformed copies of any Registration Statement and any post-
effective amendment thereto and such number of copies of the Prospectus
(including each preliminary Prospectus) and any amendments or supplements
thereto, as such Holder may reasonably request in order to facilitate the
sale of such Holder's Registrable Securities.
(d) The Company shall use commercially reasonable efforts to register
or qualify the Registrable Securities covered by any Registration Statement
under such other securities or "blue sky" laws of such states of the United
States as any Holder reasonably requests; provided, however, that the
-------- -------
Company shall not be required (i) to qualify generally to do business in
any jurisdiction where it would not otherwise be required to qualify but
for this Section 3(d), (ii) to file any general consent to service of
process, or (iii) to subject itself to taxation in any jurisdiction where
it would not otherwise be subject to taxation.
(e) The Company shall promptly notify each Holder of the happening of
any event which makes any statement made in any Registration Statement or
related Prospectus untrue or which requires the making of any changes in
such Registration Statement or Prospectus so that it will not contain any
untrue statement of a material fact or omit to state any 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,
and promptly following expiration of any Suspension Period (as defined in
Section 4), the Company shall prepare and file with the Commission and
furnish a supplement or amendment to such Prospectus so that, as thereafter
deliverable to the
4
<PAGE>
purchasers of Registrable Securities, such Prospectus will 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.
(f) The Company shall use commercially reasonable efforts to prevent
the issuance of any order suspending the effectiveness of any Registration
Statement, and, if one is issued, the Company shall use commercially
reasonable efforts to obtain the withdrawal of such order as promptly as
practicable.
(g) The Company shall cause the Registrable Securities included in any
Registration Statement to be listed on the New York Stock Exchange or such
other securities exchange on which similar securities issued by the Company
are then listed.
SECTION 4. SUSPENSION PERIOD.
-----------------
Each Holder, upon receipt of any notice (a "Suspension Notice") from the
Company of the happening of any event of the kind described in Section 3(e) or
of any event which, in the Company's reasonable business judgment, could become
such an event, shall immediately discontinue disposition of the Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 3(e) (the period from the date on which such
Holder receives a Suspension Notice to the date on which such Holder receives
copies of the supplemented or amended Prospectus is referred to herein as the
"Suspension Period"). If so directed by the Company, each Holder will deliver
to the Company all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Registrable Securities that
is current at the time of receipt of such notice. In the event that the Company
shall give any Suspension Notice, the Company shall use commercially reasonable
efforts and take such actions as are reasonably necessary to end the Suspension
Period as promptly as practicable.
SECTION 5. REGISTRATION EXPENSES.
---------------------
Subject to the proviso below, any and all expenses incident to the
Company's performance of or compliance with this Agreement, including without
limitation Commission and securities exchange registration and filing fees, fees
and expenses incurred in connection with compliance with state securities or
"blue sky" laws, printing expenses, fees and expenses incurred in connection
with the listing of the Registrable Securities and fees and disbursements of
counsel for the Company and of the independent certified public accountants of
the Company (all such expenses being herein called "Registration Expenses"),
will be borne by the Company; provided, however, that Registration Expenses
-------- -------
shall not include (a) underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or disposition of
5
<PAGE>
Registrable Securities, (b) any fees or expenses of any counsel, accountants or
other persons retained or employed by the Holders, or (c) out-of-pocket expenses
of the Holders and their agents, including, without limitation, any travel
costs.
SECTION 6. INDEMNIFICATION AND CONTRIBUTION.
--------------------------------
(a) Indemnification by the Company. The Company agrees to indemnify and
------------------------------
hold harmless, to the full extent permitted by law, each Holder, its officers,
directors, trustees, employees and agents and each Person, if any, which
controls such Holder within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act, (collectively, "Controlling Persons"),
from and against all losses, claims, damages, liabilities and expenses
(including without limitation any legal or other fees and expenses reasonably
incurred by any Holder or any such Controlling Person in connection with
defending or investigating any action or claim in respect thereof)
(collectively, "Damages") to which any of them may become subject under the
Securities Act or otherwise, insofar as such Damages arise out of or are based
upon (i) any untrue or alleged untrue statement of material fact contained in
any Registration Statement (including any related preliminary or final
Prospectus) pursuant to which Registrable Securities were registered under the
Securities Act, or (ii) any omission or alleged omission to state therein a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except insofar as such
Damages arise out of or are based upon any such untrue statement or omission or
alleged untrue statement or omission based upon information furnished in writing
to the Company by such Holder expressly for use therein.
(b) Indemnification by the Holders. Each Holder agrees to indemnify and
------------------------------
hold harmless, to the full extent permitted by law, the Company, its directors,
officers, employees and agents and each Controlling Person of the Company, from
and against any and all Damages to which any of them may become subject under
the Securities Act or otherwise to the same extent as the foregoing indemnity
from the Company to such Holder, but only to the extent such Damages arise out
or are based upon any untrue statement or omission or alleged untrue statement
or omission based upon information furnished to the Company in writing by such
Holder expressly for use in any Registration Statement. In no event shall the
liability of any Holder for indemnification under this Section 6(b) in its
capacity as such (and not in such Holder's capacity as an officer or director of
the Company) exceed the proceeds received by such Holder from the sale of
Registrable Securities under such Registration Statement.
(c) Indemnification Procedures. In case any proceeding (including any
--------------------------
governmental investigation) shall be instituted involving any Person in respect
of which indemnity may be sought pursuant to either paragraph (a) or (b) above,
such Person (the "indemnified party") shall promptly notify the Person against
whom such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceedings and shall pay the fees and
6
<PAGE>
disbursements of such counsel relating to such proceeding. The failure or delay
of an indemnified party to notify the indemnifying party with respect to a
particular proceeding shall not relieve the indemnifying party from any
obligation or liability which it may have pursuant to this Agreement if the
indemnifying party is not prejudiced by such failure or delay. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent. No
indemnifying party shall, without the prior written consent of any indemnified
party (which consent shall not be unreasonably withheld), effect any settlement
of any pending or threatened proceeding in respect of which such indemnified
party is a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on all claims that are the subject
matter of such proceeding.
(d) Contribution. To the extent that the indemnification provided for in
------------
paragraph (a) or (b) of this Section 6 is held by a court of competent
jurisdiction to be unavailable to an indemnified party in respect of any
Damages, then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such Damages (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand, and each Holder on the other, from the offering of
the Registrable Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company, on the one hand, and the Holders, on the
other, in connection with the statements or omissions which resulted in such
Damages, as well as any other relevant equitable considerations. The relative
fault of the Company on the one hand and of the Holders on the other hand shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by the Holders
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
If indemnification is available under paragraph (a) or (b) of this Section
6, the indemnifying parties shall indemnify each indemnified party to the full
extent provided in such paragraphs without regard to the relative benefits to or
relative fault of said indemnifying party or indemnified party or any other
equitable consideration provided for in this Section 6(d).
The Company and each Holder agrees that it would not be just or equitable
if contribution pursuant to this Section 6(d) were determined by pro rata
--- ----
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the Damages referred to in this Section 6
shall be deemed to include any legal or other expenses reasonably incurred (and
not otherwise reimbursed) by such indemnified party in connection with
investigating or defending any such action or claim. In no event shall any
Holder be required
7
<PAGE>
to contribute an amount under this Section 6(d) in excess of the proceeds
received by such Holder from the sale of Registrable Securities under the
relevant Registration Statement. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
SECTION 7. RESTRICTIONS ON SALES BY HOLDERS.
--------------------------------
In the event of an underwritten public offering of securities of the
Company, each Holder shall, upon the written request of the managing underwriter
(or underwriters) of such offering, agree not to effect any sale or disposition
of any securities similar to those being registered in such offering during the
14 days immediately prior to and the 180-day period following the effective date
of the relevant Registration Statement. Such agreement shall be in form and
substance satisfactory to the Company and such underwriter.
SECTION 8. INFORMATION FURNISHED BY HOLDERS.
--------------------------------
Each Holder shall furnish to the Company such information regarding such
Holder and such Holder's intended method of distribution of the Registrable
Securities as the Company may from time to time reasonably request in writing in
order to comply with the Securities Act and the provisions of this Agreement.
Each Holder agrees (a) to notify the Company as promptly as practicable of any
inaccuracy or change in information previously furnished by the Holder to the
Company or of the occurrence of any event, in either case as a result of which
any Prospectus contains or would contain an untrue statement of a material fact
regarding the Holder or the Holder's intended method of distribution of the
Registrable Securities or omits or would omit to state any material fact
regarding the Holder or the Holder's intended method of distribution of the
Registrable Securities required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing,
and (b) to promptly furnish to the Company any additional information required
to correct and update any previously furnished information or required so that
the Prospectus shall not contain, with respect to the Holder or the Holder's
intended method of distribution of the Registrable Securities, an 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 not misleading in
light of the circumstances then existing.
SECTION 9. MISCELLANEOUS.
-------------
(a) Amendments and Waivers. The provisions of this Agreement, including
----------------------
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given unless the Company has
8
<PAGE>
obtained the written consent of the Holders of a majority in interest of the
Registrable Securities then outstanding.
(b) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered personally or sent by telecopier, registered or certified
mail (return receipt requested), postage prepaid or courier to the parties at
their respective addresses set forth on the signature pages hereof (or at such
other address for any party as shall be specified by like notice, provided that
notices of a change of address shall be effective only upon receipt thereof).
All such notices and communications shall be deemed to have been received: at
the time delivered by hand, if personally delivered; five Business Days after
being deposited in the mail, postage prepaid, if mailed; when receipt is
acknowledged, if telecopied; and on the next Business Day if timely delivered to
a courier guaranteeing overnight delivery.
(c) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders. If any transferee of any Holder shall acquire
Registrable Securities in any manner, whether by operation of law or otherwise,
such Registrable Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable Securities such person
shall be conclusively deemed to have agreed to be bound by and to perform all of
the terms and provisions of this Agreement and such person shall be entitled to
received the benefits hereof.
(d) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(e) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(f) Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Massachusetts without regard to
principles of conflicts of law.
(g) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the Holders
shall be enforceable to the fullest extent permitted by law.
(h) Entire Agreement. This Agreement is intended by the parties as a final
----------------
expression of their agreement and is intended to be the complete and exclusive
statement of the
9
<PAGE>
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
(i) Further Assurances. Each party shall cooperate and take such action as
------------------
may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed by their respective officers hereunto duly
authorized, as of the day and year first above written.
MONROE, INC.
By: _________________________
James L. Monroe
President
8 Cedar Street, Suite 54A
Woburn, MA 01801
Fax: (781) 933-3680
HOLDERS:
_________________________________
John L. Brady, Sr.
14812 Hickory View Lane
Charlotte, NC 28273
__________________________________
Danny L. Broadwater
2964 Harlinsdale Drive
Rock Hill, SC 29730
__________________________________
Marty D. Carter
11402 Pine Valley Club Drive
Charlotte, NC 28277
10
<PAGE>
__________________________________
Thomas S. Fincher
9916 Pallisers Terrace
Charlotte, NC 28210
__________________________________
Douglas H. Holstein
5710 Providence Country Club Drive
Charlotte, NC 28277
__________________________________
E. Ray Johnson
10721 Alexander Hill Drive
Charlotte, NC 28277
___________________________________
Michael G. Macalka
103 Pine Straw Way
Greenville, SC 29607
__________________________________
Robert J. Maccubbin, Sr.
2138 Granada Drive
Charlotte, NC 28270
__________________________________
Robert J. Maccubbin, Jr.
2226 Vernon Drive
Charlotte, NC 28211
____________________________________
Steven C. Reese
#10 Harvest Court
Greenville, SC 29602
11
<PAGE>
__________________________________
Curtis L. Rogers, Jr.
4801 Kuykendall Road
Charlotte, NC 28277
__________________________________
Curtis L. Rogers, III
2334 Overhill Road
Charlotte, NC 28211
12
<PAGE>
Exhibit 10.17
MONROE, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
SECTION1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS
----------------------------------------
The name of the plan is the Merkert American Corporation 1998 Stock Option
and Incentive Plan (the "Plan"). The purpose of the Plan is to encourage and
enable the officers, employees, Independent Directors and other key persons
(including consultants) of Merkert American Corporation (the "Company") and its
Subsidiaries upon whose judgment, initiative and efforts the Company largely
depends for the successful conduct of its business to acquire a proprietary
interest in the Company. It is anticipated that providing such persons with a
direct stake in the Company's welfare will assure a closer identification of
their interests with those of the Company, thereby stimulating their efforts on
the Company's behalf and strengthening their desire to remain with the Company.
The following terms shall be defined as set forth below:
"Act" means the Securities Exchange Act of 1934, as amended.
"Administrator" is defined in Section 2(a).
"Award" or "Awards," except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock
Options, Stock Appreciation Rights, Deferred Stock Awards, Restricted Stock
Awards, Unrestricted Stock Awards, Performance Share Awards and Dividend
Equivalent Rights.
"Board" means the Board of Directors of the Company.
"Change of Control" is defined in Section 16.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
"Committee" means the Committee of the Board referred to in Section 2.
"Covered Employee" means an employee who is a "Covered Employee" within the
meaning of Section 162(m) of the Code.
"Deferred Stock Award" means Awards granted pursuant to Section 8.
<PAGE>
"Dividend Equivalent Right" means Awards granted pursuant to Section 12.
"Effective Date" means the date on which the Plan is approved by
stockholders as set forth in Section 19.
"Fair Market Value" on any given date means the last reported sale price at
which Stock is traded on such date or, if no Stock is traded on such date, the
next preceding date on which Stock was traded, as reflected on the principal
stock exchange or, if applicable, any other national stock exchange on which the
Stock is traded or admitted to trading. Notwithstanding the foregoing, the Fair
Market Value on the first day of the Company's initial public offering of Stock
shall be the initial public offering price as set forth in the final prospectus
for the Company's initial public offering.
"Incentive Stock Option" means any Stock Option designated and qualified as
an "incentive stock option" as defined in Section 422 of the Code.
"Independent Director" means a member of the Board who is not also an
employee of the Company or any Subsidiary.
"Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
"Option" or "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5.
"Performance Share Award" means Awards granted pursuant to Section 10.
"Performance Cycle" means one or more periods of time, which may be of
varying and overlapping durations, as the Administrator may select, over which
the attainment of one or more performance criteria will be measured for the
purpose of determining a participant's right to and the payment of a Performance
Share Award, Restricted Stock Award or Deferred Stock Award.
"Restricted Stock Award" means Awards granted pursuant to Section 7.
"Stock" means the Common Stock, par value $.01 per share, of the Company,
subject to adjustments pursuant to Section 3.
"Stock Appreciation Right" means any Award granted pursuant to Section 6.
"Subsidiary" means any corporation or other entity (other than the Company)
in any unbroken chain of corporations or other entities beginning with the
Company if each of the corporations or entities (other than the last corporation
or entity in the unbroken chain) owns stock or other interests possessing 50
percent or more of the economic interest or the total
2
<PAGE>
combined voting power of all classes of stock or other interests in one of the
other corporations or entities in the chain.
"Unrestricted Stock Award" means any Award granted pursuant to Section 9.
SECTION 2. ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT
---------------------------------------------------------
PARTICIPANTS AND DETERMINE AWARDS
---------------------------------
(a) Committee. The Plan shall be administered by either the Board or a
---------
committee of not less than two Independent Directors (in either case, the
"Administrator"). Each member of the Committee shall be an "outside director"
within the meaning of Section 162(m) of the Code and the regulations promulgated
thereunder and a "non-employee director" within the meaning of Rule 16b-
3(b)(3)(i) promulgated under the Act, or any successor definition under said
rule.
(b) Powers of Administrator. The Administrator shall have the power and
-----------------------
authority to grant Awards consistent with the terms of the Plan, including the
power and authority:
(i) to select the individuals to whom Awards may from time to time
be granted;
(ii) to determine the time or times of grant, and the extent, if
any, of Incentive Stock Options, Non-Qualified Stock Options, Stock
Appreciation Rights, Restricted Stock Awards, Deferred Stock Awards,
Unrestricted Stock Awards, Performance Share Awards and Dividend Equivalent
Rights, or any combination of the foregoing, granted to any one or more
participants;
(iii) to determine the number of shares of Stock to be covered by
any Award;
(iv) to determine and modify from time to time the terms and
conditions, including restrictions, not inconsistent with the terms of the
Plan, of any Award, which terms and conditions may differ among individual
Awards and participants, and to approve the form of written instruments
evidencing the Awards;
(v) to accelerate at any time the exercisability or vesting of all
or any portion of any Award;
(vi) subject to the provisions of Section 5(a)(ii), to extend at
any time the period in which Stock Options may be exercised;
(vii) to determine at any time whether, to what extent, and under
what circumstances distribution or the receipt of Stock and other amounts
payable with respect to an Award shall be deferred either automatically or
at the election of the participant and whether and to what extent the
Company shall pay or credit amounts
3
<PAGE>
constituting interest (at rates determined by the Administrator) or
dividends or deemed dividends on such deferrals; and
(viii) at any time to adopt, alter and repeal such rules, guidelines
and practices for administration of the Plan and for its own acts and
proceedings as it shall deem advisable; to interpret the terms and
provisions of the Plan and any Award (including related written
instruments); to make all determinations it deems advisable for the
administration of the Plan; to decide all disputes arising in connection
with the Plan; and to otherwise supervise the administration of the Plan.
All decisions and interpretations of the Administrator shall be binding on
all persons, including the Company and Plan participants.
(c) Delegation of Authority to Grant Awards. The Administrator, in its
---------------------------------------
discretion, may delegate to the Chief Executive Officer of the Company all or
part of the Administrator's authority and duties with respect to the granting of
Awards at Fair Market Value, to individuals who are not subject to the reporting
and other provisions of Section 16 of the Act or "covered employees" within the
meaning of Section 162(m) of the Code. Any such delegation by the Administrator
shall include a limitation as to the amount of Awards that may be granted during
the period of the delegation and shall contain guidelines as to the
determination of the exercise price of any Option, the conversion ratio or price
of other Awards and the vesting criteria. The Administrator may revoke or amend
the terms of a delegation at any time but such action shall not invalidate any
prior actions of the Administrator's delegate or delegates that were consistent
with the terms of the Plan.
SECTION 3. STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
----------------------------------------------------
(a) Stock Issuable. The maximum number of shares of Stock reserved and
--------------
available for issuance under the Plan shall be such aggregate number of shares
of Stock as does not exceed the sum of (i) 234 shares; plus (ii) as of January
1, 1999, 13.0 percent of any net increase since the Company's initial public
offering in the total number of shares of Stock actually outstanding; plus (iii)
as of each January 1 thereafter, 13.0 percent of any net increase since the
preceding January 1 in the total number of shares of Stock actually outstanding.
Notwithstanding the foregoing, the maximum number of shares of Stock for which
Incentive Stock Options may be granted under the Plan shall not exceed 234
shares, reduced by the aggregate number of shares subject to outstanding Awards
granted under the Plan. For purposes of this limitation, if any portion of an
Award is forfeited, canceled, reacquired by the Company, satisfied without the
issuance of Stock or otherwise terminated, the shares of Stock underlying such
portion of the Award shall be added back to the shares of Stock available for
issuance under the Plan. Subject to such overall limitation, shares of Stock
may be issued up to such maximum number pursuant to any type or types of Award;
provided, however, that on and after the date the Company is first subject to
the provisions of Section 162(m) of the Code with respect to grants made or
compensation earned under the Plan, Stock Options or Stock Appreciation Rights
with respect to no more than 1,005.414 shares of Stock may be granted to
4
<PAGE>
any one individual participant during any one calendar year period. The shares
available for issuance under the Plan may be authorized but unissued shares of
Stock or shares of Stock reacquired by the Company.
(b) Changes in Stock. If, as a result of any reorganization,
----------------
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar change in the Company's capital stock, the outstanding
shares of Stock are increased or decreased or are exchanged for a different
number or kind of shares or other securities of the Company, or additional
shares or new or different shares or other securities of the Company or other
non-cash assets are distributed with respect to such shares of Stock or other
securities, the Administrator shall make an appropriate or proportionate
adjustment in (i) the maximum number of shares reserved for issuance under the
Plan, (ii) the number of Stock Options or Stock Appreciation Rights that can be
granted to any one individual participant, (iii) the number and kind of shares
or other securities subject to any then outstanding Awards under the Plan, and
(iv) the price for each share subject to any then outstanding Stock Options and
Stock Appreciation Rights under the Plan, without changing the aggregate
exercise price (i.e., the exercise price multiplied by the number of Stock
Options and Stock Appreciation Rights) as to which such Stock Options and Stock
Appreciation Rights remain exercisable. The adjustment by the Administrator
shall be final, binding and conclusive. No fractional shares of Stock shall be
issued under the Plan resulting from any such adjustment, but the Administrator
in its discretion may make a cash payment in lieu of fractional shares.
The Administrator may also adjust the number of shares subject to
outstanding Awards and the exercise price and the terms of outstanding Awards to
take into consideration material changes in accounting practices or principles,
extraordinary dividends, acquisitions or dispositions of stock or property or
any other event if it is determined by the Administrator that such adjustment is
appropriate to avoid distortion in the operation of the Plan, provided that no
such adjustment shall be made in the case of an Incentive Stock Option, without
the consent of the participant, if it would constitute a modification, extension
or renewal of the Option within the meaning of Section 424(h) of the Code.
(c) Mergers and Other Transactions. In the case of (i) the dissolution or
------------------------------
liquidation of the Company, (ii) the sale of all or substantially all of the
assets of the Company on a consolidated basis to an unrelated person or entity,
(iii) a merger, reorganization or consolidation in which the holders of the
Company's outstanding voting power immediately prior to such transaction do not
own a majority of the outstanding voting power of the surviving or resulting
entity immediately upon completion of such transaction, (iv) the sale of all of
the Stock of the Company to an unrelated person or entity or (v) any other
transaction in which the owners of the Company's outstanding voting power prior
to such transaction do not own at least a majority of the outstanding voting
power of the relevant entity after the transaction (in each case, a
"Transaction"), as of the effective date of such Transaction, all Options and
Stock Appreciation Rights that are not exercisable shall become fully
exercisable and all other Awards which are not vested shall become fully vested,
except as the Committee may otherwise specify with respect to particular Awards.
Upon the effectiveness of the
5
<PAGE>
Transaction, the Plan and all outstanding Options, Stock Appreciation Rights and
other Awards granted hereunder shall terminate, unless provision is made in
connection with the Transaction for the assumption of Awards heretofore granted,
or the substitution of such Awards of new Awards of the successor entity or
parent thereof, with appropriate adjustment as to the number and kind of shares
and, if appropriate, the per share exercise prices, as provided in Section 3(b)
above. In the event of such termination, each optionee shall be permitted to
exercise for a period of at least 15 days prior to the date of such termination
all outstanding Options and Stock Appreciation Rights held by such optionee
which are then exercisable or become exercisable upon the effectiveness of the
Transaction.
(d) Substitute Awards. The Administrator may grant Awards under the Plan
-----------------
in substitution for stock and stock based awards held by employees of another
corporation who become employees of the Company or a Subsidiary as the result of
a merger or consolidation of the employing corporation with the Company or a
Subsidiary or the acquisition by the Company or a Subsidiary of property or
stock of the employing corporation. The Administrator may direct that the
substitute awards be granted on such terms and conditions as the Administrator
considers appropriate in the circumstances.
SECTION 4. ELIGIBILITY
-----------
Participants in the Plan will be such full or part-time officers and other
employees, Independent Directors and key persons of the Company and its
Subsidiaries who are responsible for or contribute to the management, growth or
profitability of the Company and its Subsidiaries as are selected from time to
time by the Administrator in its sole discretion.
SECTION 5. STOCK OPTIONS
-------------
Any Stock Option granted under the Plan shall be in such form as the
Administrator may from time to time approve.
Stock Options granted under the Plan may be either Incentive Stock Options
or Non-Qualified Stock Options. Incentive Stock Options may be granted only to
employees of the Company or any Subsidiary that is a "subsidiary corporation"
within the meaning of Section 424(f) of the Code. To the extent that any Option
does not qualify as an Incentive Stock Option, it shall be deemed a Non-
Qualified Stock Option.
No Incentive Stock Option shall be granted under the Plan after May 19,
2008.
(a) Stock Options Granted to Employees and Key Persons. The
--------------------------------------------------
Administrator in its discretion may grant Stock Options to eligible employees
and key persons of the Company or any Subsidiary. Stock Options granted pursuant
to this Section 5(a) shall be subject to the following terms and conditions and
shall contain such additional terms and conditions, not inconsistent with the
terms of the Plan, as the Administrator shall deem desirable. If the
Administrator so determines, Stock Options may be granted in lieu of cash
compensation at the
6
<PAGE>
participant's election, subject to such terms and conditions as the
Administrator may establish, as well as in addition to other compensation.
(i) Exercise Price. The exercise price per share for the Stock
--------------
covered by a Stock Option granted pursuant to this Section 5(a) shall be
determined by the Administrator at the time of grant but shall not be less
than 100 percent of the Fair Market Value on the date of grant in the case
of Incentive Stock Options, or 85 percent of the Fair Market Value on the
date of grant, in the case of Non-Qualified Stock Options (other than
options granted in lieu of cash compensation). If an employee owns or is
deemed to own (by reason of the attribution rules of Section 424(d) of the
Code) more than 10 percent of the combined voting power of all classes of
stock of the Company or any parent or subsidiary corporation and an
Incentive Stock Option is granted to such employee, the option price of
such Incentive Stock Option shall be not less than 110 percent of the Fair
Market Value on the grant date.
(ii) Option Term. The term of each Stock Option shall be fixed by
-----------
the Administrator, but no Incentive Stock Option shall be exercisable more
than ten years after the date the option is granted. If an employee owns or
is deemed to own (by reason of the attribution rules of Section 424(d) of
the Code) more than 10 percent of the combined voting power of all classes
of stock of the Company or any parent or subsidiary corporation and an
Incentive Stock Option is granted to such employee, the term of such option
shall be no more than five years from the date of grant.
(iii) Exercisability; Rights of a Stockholder. Stock Options shall
---------------------------------------
become exercisable at such time or times, whether or not in installments,
as shall be determined by the Administrator at or after the grant date;
provided, however, that Stock Options granted in lieu of compensation shall
be exercisable in full as of the grant date. The Administrator may at any
time accelerate the exercisability of all or any portion of any Stock
Option. An optionee shall have the rights of a stockholder only as to
shares acquired upon the exercise of a Stock Option and not as to
unexercised Stock Options.
(iv) Method of Exercise. Stock Options may be exercised in whole or
------------------
in part, by giving written notice of exercise to the Company, specifying
the number of shares to be purchased. Payment of the purchase price may be
made by one or more of the following methods to the extent provided in the
Option Award agreement:
(A) In cash, by certified or bank check or other instrument
acceptable to the Administrator;
(B) Through the delivery (or attestation to the ownership) of
shares of Stock that have been purchased by the optionee on the open
market or that have been beneficially owned by the optionee for at
least six months and are not then subject to restrictions under any
Company plan. Such surrendered shares shall be valued at Fair Market
Value on the exercise date;
7
<PAGE>
(C) By the optionee delivering to the Company a properly executed
exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable
to the Company for the purchase price; provided that in the event the
optionee chooses to pay the purchase price as so provided, the
optionee and the broker shall comply with such procedures and enter
into such agreements of indemnity and other agreements as the
Administrator shall prescribe as a condition of such payment
procedure; or
(D) By the optionee delivering to the Company a promissory note
if the Board has expressly authorized the loan of funds to the
optionee for the purpose of enabling or assisting the optionee to
effect the exercise of his Stock Option; provided that at least so
much of the exercise price as represents the par value of the Stock
shall be paid other than with a promissory note.
Payment instruments will be received subject to collection. The delivery
of certificates representing the shares of Stock to be purchased pursuant
to the exercise of a Stock Option will be contingent upon receipt from the
optionee (or a purchaser acting in his stead in accordance with the
provisions of the Stock Option) by the Company of the full purchase price
for such shares and the fulfillment of any other requirements contained in
the Stock Option or applicable provisions of laws. In the event an
optionee chooses to pay the purchase price by previously-owned shares of
Stock through the attestation method, the shares of Stock transferred to
the optionee upon the exercise of the Stock Option shall be net of the
number of shares attested to.
(v) Annual Limit on Incentive Stock Options. To the extent required
---------------------------------------
for "incentive stock option" treatment under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the time of grant) of the
shares of Stock with respect to which Incentive Stock Options granted under
this Plan and any other plan of the Company or its parent and subsidiary
corporations become exercisable for the first time by an optionee during
any calendar year shall not exceed $100,000. To the extent that any Stock
Option exceeds this limit, it shall constitute a Non-Qualified Stock
Option.
(b) Reload Options. At the discretion of the Administrator, Options
--------------
granted under the Plan may include a "reload" feature pursuant to which an
optionee exercising an option by the delivery of a number of shares of Stock in
accordance with Section 5(a)(iv)(B) hereof would automatically be granted an
additional Option (with an exercise price equal to the Fair Market Value of the
Stock on the date the additional Option is granted and with such other terms as
the Administrator may provide) to purchase that number of shares of Stock equal
to the number delivered to exercise the original Option with an Option term
equal to the remainder of the original Option term unless the Administrator
otherwise determines in the Award agreement for the original Option grant.
(c) Stock Options Granted to Independent Directors.
----------------------------------------------
8
<PAGE>
(i) Automatic Grant of Options.
--------------------------
(A) Each person who is an Independent Director on the effective
date of the Company's initial public offering shall be granted a Non-
Qualified Stock Option to acquire 20,000 shares of Stock, provided,
however, that if such Independent Director has been appointed to serve
as Chairman of the Company's Audit Committee as of such date, such
Independent Director shall instead be granted a Non-Qualified Stock
Option to acquire 25,000 shares of Stock.
(B) Each Independent Director who is first elected to serve as a
Director after the effective date of the Company's initial public
offering shall be granted, on the fifth business day after his
election, a Non-Qualified Stock Option to acquire 20,000 shares of
Stock, provided, however, that if such Independent Director has been
appointed to serve as Chairman of the Company's Audit Committee as of
such date, such Independent Director shall instead be granted a Non-
Qualified Stock Option to acquire 25,000 shares of Stock.
(C) Each Independent Director who is serving as Director of the
Company on the fifth business day after each annual meeting of
shareholders, beginning with the 1999 annual meeting, shall
automatically be granted on such day a Non-Qualified Stock Option to
acquire 5,000 shares of Stock, provided, however, that the Independent
Director who serves as Chairman of the Company's Audit Committee on
the fifth business day after each annual meeting of shareholders shall
instead be granted a Non-Qualified Stock Option to acquire 10,000
shares of Stock.
(D) The exercise price per share for the Stock covered by a Stock
Option granted under this Section 5(c) shall be equal to the Fair
Market Value of the Stock on the date the Stock Option is granted.
(E) The Administrator, in its discretion, may grant additional
Non-Qualified Stock Options to Independent Directors. Any such grant
may vary among individual Independent Directors.
(ii) Exercise; Termination.
---------------------
(A) Unless otherwise determined by the Administrator, an Option
granted under Section 5(c) shall be exercisable as to fifty percent
(50.0%) of the shares of Stock covered thereby as of the grant date,
and shall become exercisable as to the remaining fifty percent (50.0%)
of the shares of Stock covered thereby in that number of equal annual
installments which is equal to the number of years remaining in such
Director's term as of the date of grant
9
<PAGE>
(rounded up to the nearest whole year). An Option issued under this
Section 5(c) shall not be exercisable after the expiration of ten
years from the date of grant.
(B) Options granted under this Section 5(c) may be exercised only
by written notice to the Company specifying the number of shares to be
purchased. Payment of the full purchase price of the shares to be
purchased may be made by one or more of the methods specified in
Section 5(a)(iv). An optionee shall have the rights of a stockholder
only as to shares acquired upon the exercise of a Stock Option and not
as to unexercised Stock Options.
(d) Non-transferability of Options. No Stock Option shall be transferable
------------------------------
by the optionee otherwise than by will or by the laws of descent and
distribution and all Stock Options shall be exercisable, during the optionee's
lifetime, only by the optionee. Notwithstanding the foregoing, the
Administrator, in its sole discretion, may provide in the Award agreement
regarding a given Option that the optionee may transfer, without consideration
for the transfer, his Non-Qualified Stock Options to members of his immediate
family, to trusts for the benefit of such family members, or to partnerships in
which such family members are the only partners, provided that the transferee
agrees in writing with the Company to be bound by all of the terms and
conditions of this Plan and the applicable Option.
(e) Termination. Except as may otherwise be provided by the Administrator
-----------
either in the Award agreement, or subject to Section 15 below, in writing after
the Award agreement is issued, an optionee's rights in all Stock Options shall
automatically terminate upon the participant's termination of employment (or
cessation of business relationship) with the Company and its Subsidiaries for
any reason.
SECTION 6. STOCK APPRECIATION RIGHTS.
-------------------------
(a) Nature of Stock Appreciation Rights. A Stock Appreciation Right is an
-----------------------------------
Award entitling the recipient to receive an amount in cash or shares of Stock or
a combination thereof having a value equal to the excess of the Fair Market
Value of the Stock on the date of exercise over the exercise price Stock
Appreciation Right, which price shall not be less than 85 percent of the Fair
Market Value of the Stock on the date of grant (or more than the option exercise
price per share, if the Stock Appreciation Right was granted in tandem with a
Stock Option) multiplied by the number of shares of Stock with respect to which
the Stock Appreciation Right shall have been exercised, with the Administrator
having the right to determine the form of payment.
(b) Grant and Exercise of Stock Appreciation Rights. Stock Appreciation
-----------------------------------------------
Rights may be granted by the Administrator in tandem with, or independently of,
any Stock Option granted pursuant to Section 5 of the Plan. In the case of a
Stock Appreciation Right granted in tandem with a Non-Qualified Stock Option,
such Stock Appreciation Right may be granted either at or after the time of the
grant of such Option. In the case of a Stock Appreciation
10
<PAGE>
Right granted in tandem with an Incentive Stock Option, such Stock Appreciation
Right may be granted only at the time of the grant of the Option.
A Stock Appreciation Right or applicable portion thereof granted in tandem
with a Stock Option shall terminate and no longer be exercisable upon the
termination or exercise of the related Option.
(c) Terms and Conditions of Stock Appreciation Rights. Stock Appreciation
-------------------------------------------------
Rights shall be subject to such terms and conditions as shall be determined from
time to time by the Administrator, subject to the following:
(i) Stock Appreciation Rights granted in tandem with Options shall
be exercisable at such time or times and to the extent that the related
Stock Options shall be exercisable.
(ii) Upon exercise of a Stock Appreciation Right, the applicable
portion of any related Option shall be surrendered.
(iii) All Stock Appreciation Rights shall be exercisable during the
participant's lifetime only by the participant or the participant's legal
representative.
(d) Termination. Except as may otherwise be provided by the Administrator
-----------
either in the Award agreement, or subject to Section 15 below, in writing after
the Award agreement is issued, an optionee's rights in all Stock Appreciation
Rights shall automatically terminate upon the participant's termination of
employment (or cessation of business relationship) with the Company and its
Subsidiaries for any reason.
SECTION 7. RESTRICTED STOCK AWARDS
-----------------------
(a) Nature of Restricted Stock Awards. A Restricted Stock Award is an
---------------------------------
Award entitling the recipient to acquire, at par value or such other higher
purchase price determined by the Administrator, shares of Stock subject to such
restrictions and conditions as the Administrator may determine at the time of
grant ("Restricted Stock"). Conditions may be based on continuing employment
(or other business relationship) and/or achievement of pre-established
performance goals and objectives. The grant of a Restricted Stock Award is
contingent on the participant executing the Restricted Stock Award agreement.
The terms and conditions of each such agreement shall be determined by the
Administrator, and such terms and conditions may differ among individual Awards
and participants.
(b) Rights as a Stockholder. Upon execution of a written instrument
-----------------------
setting forth the Restricted Stock Award and payment of any applicable purchase
price, a participant shall have the rights of a stockholder with respect to the
voting of the Restricted Stock, subject to such conditions contained in the
written instrument evidencing the Restricted Stock Award. Unless the
Administrator shall otherwise determine, certificates evidencing the Restricted
11
<PAGE>
Stock shall remain in the possession of the Company until such Restricted Stock
is vested as provided in Section 7(d) below, and the participant shall be
required, as a condition of the grant, to deliver to the Company a stock power
endorsed in blank.
(c) Restrictions. Restricted Stock may not be sold, assigned,
------------
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein or in the Restricted Stock Award agreement. If a
participant's employment (or other business relationship) with the Company and
its Subsidiaries terminates for any reason, the Company shall have the right to
repurchase Restricted Stock that has not vested at the time of termination at
its original purchase price, from the participant or the participant's legal
representative.
(d) Vesting of Restricted Stock. The Administrator at the time of grant
---------------------------
shall specify the date or dates and/or the attainment of pre-established
performance goals, objectives and other conditions on which the non-
transferability of the Restricted Stock and the Company's right of repurchase or
forfeiture shall lapse. Subsequent to such date or dates and/or the attainment
of such pre-established performance goals, objectives and other conditions, the
shares on which all restrictions have lapsed shall no longer be Restricted Stock
and shall be deemed "vested." Except as may otherwise be provided by the
Administrator either in the Award agreement or, subject to Section 15 below, in
writing after the Award agreement is issued, a participant's rights in any
shares of Restricted Stock that have not vested shall automatically terminate
upon the participant's termination of employment (or other business
relationship) with the Company and its Subsidiaries and such shares shall be
subject to the Company's right of repurchase as provided in Section 7(c) above.
(e) Waiver, Deferral and Reinvestment of Dividends. The Restricted Stock
----------------------------------------------
Award agreement may require or permit the immediate payment, waiver, deferral or
investment of dividends paid on the Restricted Stock.
SECTION 8. DEFERRED STOCK AWARDS
---------------------
(a) Nature of Deferred Stock Awards. A Deferred Stock Award is an Award
-------------------------------
of phantom stock units to a participant, subject to restrictions and conditions
as the Administrator may determine at the time of grant. Conditions may be
based on continuing employment (or other business relationship) and/or
achievement of pre-established performance goals and objectives. The grant of a
Deferred Stock Award is contingent on the participant executing the Deferred
Stock Award agreement. The terms and conditions of each such agreement shall be
determined by the Administrator, and such terms and conditions may differ among
individual Awards and participants. At the end of the deferral period, the
Deferred Stock Award, to the extent vested, shall be paid to the participant in
the form of shares of Stock.
(b) Election to Receive Deferred Stock Awards in Lieu of Compensation.
-----------------------------------------------------------------
The Administrator may, in its sole discretion, permit a participant to elect to
receive a portion of the cash compensation or Restricted Stock Award otherwise
due to such participant in the form of a Deferred Stock Award. Any such
election shall be made in writing and shall be delivered
12
<PAGE>
to the Company no later than the date specified by the Administrator and in
accordance with rules and procedures established by the Administrator. The
Administrator shall have the sole right to determine whether and under what
circumstances to permit such elections and to impose such limitations and other
terms and conditions thereon as the Administrator deems appropriate.
(c) Rights as a Stockholder. During the deferral period, a participant
-----------------------
shall have no rights as a stockholder; provided, however, that the participant
may be credited with Dividend Equivalent Rights with respect to the phantom
stock units underlying his Deferred Stock Award, subject to such terms and
conditions as the Administrator may determine.
(d) Restrictions. A Deferred Stock Award may not be sold, assigned,
------------
transferred, pledged or otherwise encumbered or disposed of during the deferral
period.
(e) Termination. Except as may otherwise be provided by the Administrator
-----------
either in the Award agreement or, subject to Section 15 below, in writing after
the Award agreement is issued, a participant's right in all Deferred Stock
Awards that have not vested shall automatically terminate upon the participant's
termination of employment (or cessation of business relationship) with the
Company and its Subsidiaries for any reason.
SECTION 9. UNRESTRICTED STOCK AWARDS
-------------------------
Grant or Sale of Unrestricted Stock. The Administrator may, in its sole
-----------------------------------
discretion, grant (or sell at par value or such higher purchase price determined
by the Administrator) an Unrestricted Stock Award to any participant pursuant to
which such participant may receive shares of Stock free of any restrictions
("Unrestricted Stock") under the Plan. Unrestricted Stock Awards may be granted
or sold as described in the preceding sentence in respect of past services or
other valid consideration, or in lieu of cash compensation due to such
participant.
SECTION 10. PERFORMANCE SHARE AWARDS
------------------------
(a) Nature of Performance Share Awards. A Performance Share Award is an
----------------------------------
Award entitling the recipient to acquire shares of Stock upon the attainment of
specified performance goals. The Administrator may make Performance Share
Awards independent of or in connection with the granting of any other Award
under the Plan. The Administrator in its sole discretion shall determine
whether and to whom Performance Share Awards shall be made, the performance
goals, the periods during which performance is to be measured, and all other
limitations and conditions.
(b) Rights as a Stockholder. A participant receiving a Performance Share
-----------------------
Award shall have the rights of a stockholder only as to shares actually received
by the participant under the Plan and not with respect to shares subject to the
Award but not actually received by the participant. A participant shall be
entitled to receive a stock certificate evidencing the acquisition of shares of
Stock under a Performance Share Award only upon satisfaction of all
13
<PAGE>
conditions specified in the Performance Share Award agreement (or in a
performance plan adopted by the Administrator).
(c) Termination. Except as may otherwise be provided by the Administrator
-----------
either in the Award agreement or, subject to Section 15 below, in writing after
the Award agreement is issued, a participant's rights in all Performance Share
Awards shall automatically terminate upon the participant's termination of
employment (or cessation of business relationship) with the Company and its
Subsidiaries for any reason.
(d) Acceleration, Waiver, Etc. At any time prior to the participant's
-------------------------
termination of employment (or other business relationship) by the Company and
its Subsidiaries, the Administrator may in its sole discretion accelerate, waive
or, subject to Section 15, amend any or all of the goals, restrictions or
conditions applicable to a Performance Share Award.
SECTION 11. PERFORMANCE-BASED AWARDS TO COVERED EMPLOYEES
---------------------------------------------
Notwithstanding anything to the contrary contained herein, if any
Restricted Stock Award, Deferred Stock Award or Performance Share Award granted
to a Covered Employee is intended to qualify as "Performance-based Compensation"
under Section 162(m) of the Code and the regulations promulgated thereunder (a
"Performance-based Award"), such Award shall comply with the provisions set
forth below:
(a) Performance Criteria. The performance criteria used in performance
--------------------
goals governing Performance-based Awards granted to Covered Employees may
include any or all of the following: (i) the Company's return on equity,
assets, capital or investment, (ii) pre-tax or after-tax profit levels of the
Company or any Subsidiary, a division, an operating unit or a business segment
of the Company, or any combination of the foregoing; (iii) cash flow, funds from
operations or similar measure; (iv) total shareholder return; (v) changes in the
market price of the Stock; (vi) sales or market share; or (vii) earnings per
share.
(b) Grant of Performance-based Awards. With respect to each Performance-
---------------------------------
based Award granted to a Covered Employee, the Committee shall select, within
the first 90 days of a Performance Cycle (or, if shorter, within the maximum
period allowed under Section 162(m) of the Code) the performance criteria for
such grant, and the achievement targets with respect to each performance
criterion (including a threshold level of performance below which no amount will
become payable with respect to such Award). Each Performance-based Award will
specify the amount payable, or the formula for determining the amount payable,
upon achievement of the various applicable performance targets. The performance
criteria established by the Committee may be (but need not be) different for
each Performance Cycle and different goals may be applicable to Performance-
based Awards to different Covered Employees.
(c) Payment of Performance-based Awards. Following the completion of a
-----------------------------------
Performance Cycle, the Committee shall meet to review and certify in writing
whether, and to
14
<PAGE>
what extent, the performance criteria for the Performance Cycle have been
achieved and, if so, to also calculate and certify in writing the amount of the
Performance-based Awards earned for the Performance Cycle. The Committee shall
then determine the actual size of each Covered Employee's Performance-based
Award, and, in doing so, may reduce or eliminate the amount of the Performance-
based Award for a Covered Employee if, in its sole judgment, such reduction or
elimination is appropriate.
(d) Maximum Award Payable. The maximum Performance-based Award payable to
---------------------
any one Covered Employee under the Plan for a Performance Cycle is 1,005.414
Shares (subject to adjustment as provided in Section 3(b) hereof).
SECTION 12. DIVIDEND EQUIVALENT RIGHTS
--------------------------
(a) Dividend Equivalent Rights. A Dividend Equivalent Right is an Award
--------------------------
entitling the recipient to receive credits based on cash dividends that would
have been paid on the shares of Stock specified in the Dividend Equivalent Right
(or other award to which it relates) if such shares had been issued to and held
by the recipient. A Dividend Equivalent Right may be granted hereunder to any
participant as a component of another Award or as a freestanding award. The
terms and conditions of Dividend Equivalent Rights shall be specified in the
grant. Dividend equivalents credited to the holder of a Dividend Equivalent
Right may be paid currently or may be deemed to be reinvested in additional
shares of Stock, which may thereafter accrue additional equivalents. Any such
reinvestment shall be at Fair Market Value on the date of reinvestment or such
other price as may then apply under a dividend reinvestment plan sponsored by
the Company, if any. Dividend Equivalent Rights may be settled in cash or
shares of Stock or a combination thereof, in a single installment or
installments. A Dividend Equivalent Right granted as a component of another
Award may provide that such Dividend Equivalent Right shall be settled upon
exercise, settlement, or payment of, or lapse of restrictions on, such other
award, and that such Dividend Equivalent Right shall expire or be forfeited or
annulled under the same conditions as such other award. A Dividend Equivalent
Right granted as a component of another Award may also contain terms and
conditions different from such other award.
(b) Interest Equivalents. Any Award under this Plan that is settled in
--------------------
whole or in part in cash on a deferred basis may provide in the grant for
interest equivalents to be credited with respect to such cash payment. Interest
equivalents may be compounded and shall be paid upon such terms and conditions
as may be specified by the grant.
(c) Termination. Except as may otherwise be provided by the Administrator
-----------
either in the Award agreement or, subject to Section 15 below, in writing after
the Award agreement is issued, a participant's rights in all Dividend Equivalent
Rights or interest equivalents shall automatically terminate upon the
participant's termination of employment (or cessation of business relationship)
with the Company and its Subsidiaries for any reason.
SECTION 13. TAX WITHHOLDING
---------------
15
<PAGE>
(a) Payment by Participant. Each participant shall, no later than the
----------------------
date as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Administrator regarding payment of, any Federal, state, or
local taxes of any kind required by law to be withheld with respect to such
income. The Company and its Subsidiaries shall, to the extent permitted by law,
have the right to deduct any such taxes from any payment of any kind otherwise
due to the participant. The Company's obligation to deliver stock certificates
to any participant is subject to and conditioned on tax obligations being
satisfied by the participant.
(b) Payment in Stock. Subject to approval by the Administrator, a
----------------
participant may elect to have such tax withholding obligation satisfied, in
whole or in part, by (i) authorizing the Company to withhold from shares of
Stock to be issued pursuant to any Award a number of shares with an aggregate
Fair Market Value (as of the date the withholding is effected) that would
satisfy the withholding amount due, or (ii) transferring to the Company shares
of Stock owned by the participant with an aggregate Fair Market Value (as of the
date the withholding is effected) that would satisfy the withholding amount due.
SECTION 14. TRANSFER, LEAVE OF ABSENCE, ETC.
-------------------------------
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary or from
the Company to a Subsidiary, or from one Subsidiary to another; or
(b) an approved leave of absence for military service or sickness, or for
any other purpose approved by the Company, if the employee's right to re-
employment is guaranteed either by a statute or by contract or under the policy
pursuant to which the leave of absence was granted or if the Administrator
otherwise so provides in writing.
SECTION 15. AMENDMENTS AND TERMINATION
--------------------------
The Board may, at any time, amend or discontinue the Plan and the
Administrator may, at any time, amend or cancel any outstanding Award for the
purpose of satisfying changes in law or for any other lawful purpose, but no
such action shall adversely affect rights under any outstanding Award without
the holder's consent. The Administrator may provide substitute Awards at the
same or reduced exercise or purchase price or with no exercise or purchase price
in a manner not inconsistent with the terms of the Plan, but such price, if any,
must satisfy the requirements which would apply to the substitute or amended
Award if it were then initially granted under this Plan, but no such action
shall adversely affect rights under any outstanding Award without the holder's
consent. If and to the extent determined by the Administrator to be required by
the Code to ensure that Incentive Stock Options granted under the Plan are
qualified under Section 422 of the Code or to ensure that compensation earned
16
<PAGE>
under Awards qualifies as performance-based compensation under Section 162(m) of
the Code, if and to the extent intended to so qualify, Plan amendments shall be
subject to approval by the Company stockholders entitled to vote at a meeting of
stockholders. Nothing in this Section 15 shall limit the Board's authority to
take any action permitted pursuant to Section 3(c).
SECTION 16. STATUS OF PLAN
--------------
With respect to the portion of any Award that has not been exercised and
any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Administrator shall otherwise expressly
determine in connection with any Award or Awards. In its sole discretion, the
Administrator may authorize the creation of trusts or other arrangements to meet
the Company's obligations to deliver Stock or make payments with respect to
Awards hereunder, provided that the existence of such trusts or other
arrangements is consistent with the foregoing sentence.
SECTION 17. CHANGE OF CONTROL PROVISIONS
----------------------------
Upon the occurrence of a Change of Control as defined in this Section 17:
(a) Except as otherwise provided in the applicable Award agreement, each
outstanding Stock Option and Stock Appreciation Right shall automatically become
fully exercisable.
(b) Each outstanding Restricted Stock Award, Deferred Stock Award and
Performance Share Award shall be subject to such terms, if any, with respect to
a Change of Control as have been provided by the Administrator in the Award
agreement, or subject to Section 15 above, in writing after the Award agreement
is issued.
(c) "Change of Control" shall mean the occurrence of any one of the
following events:
(i) any "person," as such term is used in Sections 13(d) and 14(d)
of the Act (other than the Company, any of its Subsidiaries, or any
trustee, fiduciary or other person or entity holding securities under any
employee benefit plan or trust of the Company or any of its Subsidiaries),
together with all "affiliates" and "associates" (as such terms are defined
in Rule 12b-2 under the Act) of such person, shall become the "beneficial
owner" (as such term is defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company representing 25 percent or more of
the combined voting power of the Company's then outstanding securities
having the right to vote in an election of the Company's Board of Directors
("Voting Securities") (in such case other than as a result of an
acquisition of securities directly from the Company); or
17
<PAGE>
(ii) persons who, as of the Effective Date, constitute the Company's
Board of Directors (the "Incumbent Directors") cease for any reason,
including, without limitation, as a result of a tender offer, proxy
contest, merger or similar transaction, to constitute at least a majority
of the Board, provided that any person becoming a director of the Company
subsequent to the Effective Date shall be considered an Incumbent Director
if such person's election was approved by or such person was nominated for
election by either (A) a vote of at least a majority of the Incumbent
Directors or (B) a vote of at least a majority of the Incumbent Directors
who are members of a nominating committee comprised, in the majority, of
Incumbent Directors; or
(iii) the stockholders of the Company shall approve (A) any
consolidation or merger of the Company where the stockholders of the
Company, immediately prior to the consolidation or merger, would not,
immediately after the consolidation or merger, beneficially own (as such
term is defined in Rule 13d-3 under the Act), directly or indirectly,
shares representing in the aggregate 50 percent or more of the voting
shares of the corporation issuing cash or securities in the consolidation
or merger (or of its ultimate parent corporation, if any), (B) any sale,
lease, exchange or other transfer (in one transaction or a series of
transactions contemplated or arranged by any party as a single plan) of all
or substantially all of the assets of the Company or (C) any plan or
proposal for the liquidation or dissolution of the Company.
Notwithstanding the foregoing, a "Change of Control" shall not be deemed to
have occurred for purposes of the foregoing clause (i) solely as the result of
an acquisition of securities by the Company which, by reducing the number of
shares of Voting Securities outstanding, increases the proportionate number of
shares of Voting Securities beneficially owned by any person to 25 percent or
more of the combined voting power of all then outstanding Voting Securities; or
(ii) any of the foregoing arising out of or in connection with the initial
public offering of the Company's common stock, provided, however, that if any
-------- -------
person referred to in this sentence shall thereafter become the beneficial owner
of any additional shares of Voting Securities (other than pursuant to a stock
split, stock dividend, or similar transaction or as a result of an acquisition
of securities directly from the Company), then a "Change of Control" shall be
deemed to have occurred for purposes of the foregoing clause (i).
SECTION 18. GENERAL PROVISIONS
------------------
(a) No Distribution; Compliance with Legal Requirements. The
---------------------------------------------------
Administrator may require each person acquiring Stock pursuant to an Award to
represent to and agree with the Company in writing that such person is acquiring
the shares without a view to distribution thereof.
No shares of Stock shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange or similar
requirements have been satisfied. The Administrator may require the placing of
such stop-orders and restrictive legends on certificates for Stock and Awards as
it deems appropriate.
18
<PAGE>
(b) Delivery of Stock Certificates. Stock certificates to participants
------------------------------
under this Plan shall be deemed delivered for all purposes when the Company or a
stock transfer agent of the Company shall have mailed such certificates in the
United States mail, addressed to the participant, at the participant's last
known address on file with the Company.
(c) Other Compensation Arrangements; No Employment Rights. Nothing
-----------------------------------------------------
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, and such arrangements may be either
generally applicable or applicable only in specific cases. The adoption of this
Plan and the grant of Awards do not confer upon any employee any right to
continued employment with the Company or any Subsidiary.
(d) Trading Policy Restrictions. Option exercises and other Awards under
---------------------------
the Plan shall be subject to such Company's insider-trading-policy-related
restrictions, terms and conditions as may be established by the Administrator,
or in accordance with policies set by the Administrator, from time to time.
SECTION 19. EFFECTIVE DATE OF PLAN
----------------------
This Plan shall become effective upon approval by the holders of a majority
of the votes cast at a meeting of stockholders at which a quorum is present.
Subject to such approval by the stockholders and to the requirement that no
Stock may be issued hereunder prior to such approval, Stock Options and other
Awards may be granted hereunder on and after adoption of this Plan by the Board.
SECTION 20. GOVERNING LAW
-------------
This Plan and all Awards and actions taken thereunder shall be governed by,
and construed in accordance with, the laws of the State of Delaware, applied
without regard to conflict of law principles.
DATE APPROVED BY BOARD OF DIRECTORS: May 19, 1998
DATE APPROVED BY STOCKHOLDERS: May 19, 1998
19
<PAGE>
Exhibit 10.18
NON-QUALIFIED STOCK OPTION AGREEMENT
FOR COMPANY EMPLOYEES
UNDER THE MONROE, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
IF THIS STOCK OPTION IS GRANTED IN TANDEM WITH STOCK
APPRECIATION RIGHTS, THEN, UPON THE EXERCISE OF ANY OF SUCH
STOCK APPRECIATION RIGHTS, AN EQUAL NUMBER OF OPTION SHARES
SHALL AUTOMATICALLY TERMINATE AND SHALL NO LONGER BE
EXERCISABLE.
Check box if granted in tandem with SAR's ..... [_]
Name of Optionee:
No. of Option Shares:
Option Exercise Price per Share:
Grant Date:
Expiration Date:
Pursuant to the Monroe, Inc. 1998 Stock Option and Incentive Plan (the
"Plan") as amended through the date hereof, Monroe, Inc. (the "Company") hereby
grants to the Optionee named above an option (the "Stock Option") to purchase on
or prior to the Expiration Date specified above all or part of the number of
shares of Common Stock, par value $.01 per share (the "Stock") of the Company
specified above at the Option Exercise Price per Share specified above subject
to the terms and conditions set forth herein and in the Plan.
1. Vesting Schedule. No portion of this Stock Option may be exercised
----------------
until such portion shall have vested. Except as set forth below, and subject to
the discretion of the Committee (as defined in Section 2 of the Plan) to
accelerate the vesting schedule hereunder, this Stock Option shall be vested and
exercisable with respect to the following number of Option Shares on the dates
indicated:
Number of
---------
Option Shares Exercisable Vesting Date
------------------------- ------------
<PAGE>
In the event of a Change of Control of the Company, as defined in Section
17 of the Plan, this Stock Option shall become immediately vested and
exercisable in full, whether or not this Stock Option or any portion hereof is
vested and exercisable at such time. Once vested, this Stock Option shall
continue to be exercisable at any time or times prior to the close of business
on the Expiration Date, subject to the provisions hereof and of the Plan.
2. Manner of Exercise.
------------------
(a) The Optionee may exercise this Option only in the following
manner: from time to time on or prior to the Expiration Date of this Option, the
Optionee may give written notice to the Committee of his or her election to
purchase some or all of the vested Option Shares purchasable at the time of such
notice. This notice shall specify the number of Option Shares to be purchased.
Payment of the purchase price for the Option Shares may be made by one or
more of the following methods: (i) in cash, by certified or bank check or other
instrument acceptable to the Committee; (ii) in the form of shares of Stock that
are not then subject to restrictions under any Company plan and that have been
held by the Optionee for at least six months; (iii) by the Optionee delivering
to the Company a properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company cash or a check
payable and acceptable to the Company to pay the option purchase price, provided
that in the event the Optionee chooses to pay the option purchase price as so
provided, the Optionee and the broker shall comply with such procedures and
enter into such agreements of indemnity and other agreements as the Committee
shall prescribe as a condition of such payment procedure; or (iv) a combination
of (i), (ii) and (iii) above. Payment instruments will be received subject to
collection.
The delivery of certificates representing the Option Shares will be
contingent upon the Company's receipt from the Optionee of full payment for the
Option Shares, as set forth above and any agreement, statement or other evidence
that the Company may require to satisfy itself that the issuance of Stock to be
purchased pursuant to the exercise of Options under the Plan and any subsequent
resale of the shares of Stock will be in compliance with applicable laws and
regulations.
(b) Certificates for shares of Stock purchased upon exercise of this
Stock Option shall be issued and delivered to the Optionee upon compliance to
the satisfaction of the Committee with all requirements under applicable laws or
regulations in connection with such issuance and with the requirements hereof
and of the Plan. The determination of the Committee as to such compliance shall
be final and binding on the Optionee. The Optionee shall not be deemed to be
the holder of, or to have any of the rights of a holder with respect to, any
shares of Stock subject to this Stock Option unless and until this Stock Option
shall have been exercised pursuant to the terms hereof, the Company shall have
issued and delivered the shares to the Optionee, and the Optionee's name shall
have been entered as the stockholder of
2
<PAGE>
record on the books of the Company. Thereupon, the Optionee shall have full
voting, dividend and other ownership rights with respect to such shares of
Stock.
(c) Notwithstanding any other provision hereof or of the Plan, no
portion of this Stock Option shall be exercisable after the Expiration Date
hereof.
3. Termination of Employment. If the Optionee's employment by the
-------------------------
Company or a Subsidiary (as defined in the Plan) is terminated, the period
within which to exercise the Option may be subject to earlier termination as set
forth below.
(a) Termination Due to Death. If the Optionee's employment terminates
------------------------
by reason of death, any Option held by the Optionee shall become fully
exercisable and may thereafter be exercised by the Optionee's legal
representative or legatee for a period of 12 months from the date of death or
until the Expiration Date, if earlier.
(b) Termination Due to Disability. If the Optionee's employment
-----------------------------
terminates by reason of Disability (as defined in the Plan), any Option held by
the Optionee shall become fully exercisable and may thereafter be exercised by
the Optionee for a period of 12 months from the date of termination or until the
Expiration Date, if earlier. The death of the Optionee during the 12-month
period provided in this Section 3(b) shall extend such period for another 12
months from the date of death or until the Expiration Date, if earlier.
(c) Termination for Cause. If the Optionee's employment terminates
---------------------
for Cause (as defined in the Plan), any Option held by the Optionee shall
terminate immediately and be of no further force and effect.
(d) Other Termination. If the Optionee's employment terminates for
-----------------
any reason other than death, Disability or Cause, and unless otherwise
determined by the Committee, any Option held by the Optionee may be exercised,
to the extent exercisable on the date of termination, for a period of three
months from the date of termination or until the Expiration Date, if earlier.
Any Option that is not exercisable at such time shall terminate immediately and
be of no further force or effect.
The Committee's determination of the reason for termination of the Optionee's
employment shall be conclusive and binding on the Optionee and his or her
representatives or legatees.
4. Incorporation of Plan. Notwithstanding anything herein to the
---------------------
contrary, this Stock Option shall be subject to and governed by all the terms
and conditions of the Plan. Capitalized terms in this Agreement shall have the
meaning specified in the Plan, unless a different meaning is specified herein.
5. Transferability. This Agreement is personal to the Optionee, is non-
---------------
assignable and is not transferable in any manner, by operation of law or
otherwise, other than by will or the laws of descent and distribution. This
Stock Option is exercisable, during the Optionee's
3
<PAGE>
lifetime, only by the Optionee, and thereafter, only by the Optionee's legal
representative or legatee.
6. Tax Withholding. The Optionee shall, not later than the date as of
---------------
which the exercise of this Stock Option becomes a taxable event for Federal
income tax purposes, pay to the Company or make arrangements satisfactory to the
Committee for payment of any Federal, state, and local taxes required by law to
be withheld on account of such taxable event. The Optionee may elect to have
such tax withholding obligation satisfied, in whole or in part, by (i)
authorizing the Company to withhold from shares of Stock to be issued, or (ii)
transferring to the Company, a number of shares of Stock with an aggregate Fair
Market Value that would satisfy the withholding amount due. If the Optionee is
a director or officer of the Company within the meaning of Section 16(b) of the
Securities Exchange Act of 1934, then the following restrictions shall apply to
such elections:
(iii) such election shall be made either at least six months prior to
the date as of which the exercise of this Stock Option becomes
a taxable event for Federal income tax purposes, or during the
period beginning on the third business day following the date
of release of quarterly or annual summary statements of sales
and earnings of the Company and ending on the twelfth business
day following such date;
(iv) such election shall be irrevocable; and
(v) such election shall be subject to the consent or disapproval of
the Committee.
7. Miscellaneous.
-------------
(a) Notice hereunder shall be given to the Company at its principal
place of business, and shall be given to the Optionee at the address set forth
below, or in either case at such other address as one party may subsequently
furnish to the other party in writing.
(b) This Stock Option does not confer upon the Optionee any rights
with respect to continuance of employment by the Company or any Subsidiary.
(c) Pursuant to Section 13 of the Plan, the Committee may at any time
amend or cancel any outstanding portion of this Stock Option, but no such action
may be taken which adversely affects the Optionee's rights under this Agreement
without the Optionee's consent.
4
<PAGE>
MONROE, INC.
By: ___________________________
Name:
Title:
The foregoing Agreement is hereby accepted and the terms and conditions thereof
hereby agreed to by the undersigned.
Dated: _________________________ _______________________________
Optionee's Signature
Optionee's name and address:
` _______________________________
_______________________________
_______________________________
5
<PAGE>
EXHIBIT 10.19
EXHIBIT H
---------
FORM OF GENERAL RELEASE
-----------------------
[TO BE EXECUTED BY THE STOCKHOLDERS, DIRECTORS AND OFFICERS OF ROGERS-AMERICAN
AND EACH SUBSIDIARY OF ROGERS-AMERICAN]
This Release is delivered by _________________________ (the "Releasing
Party") pursuant to Section 8.2(k) of the Stock Purchase Agreement dated as of
____________, 1998 by and among Monroe, Inc., a Delaware corporation ("Monroe"),
Rogers-American Company, Inc., a North Carolina corporation (the "Company"), and
the Stockholders named therein (the "Purchase Agreement"). Capitalized terms
used herein and not otherwise defined shall have the meanings provided in the
Purchase Agreement.
1. Release. For good and valuable consideration, the receipt and
-------
sufficiency of which are hereby irrevocably acknowledged by the Releasing Party,
the Releasing Party hereby releases and forever discharges (i) Monroe and the
Company, (ii) each present and former stockholder, director, officer, employee
and agent of Monroe and the Company and (iii) each subsidiary, affiliate,
successor and assign of the persons named in clauses (i) and (ii) above (each, a
"Released Party" and collectively, the "Released Parties") of and from any and
all commitments, indebtedness, suits, demands, obligations and liabilities,
whether asserted, unasserted, absolute, contingent, known or unknown, or
otherwise, of every kind and nature, including claims and causes of action both
in law and in equity, which such Releasing Party and/or such Releasing Party's
heirs, executors, administrators, beneficiaries, affiliates, successors or
assigns ever had, now has or, to the extent arising from or in connection with
any act, omission or state of facts taken or existing on or prior to the Closing
Date, may have after the Closing Date, against any Released Party[, INCLUDING,
WITHOUT LIMITATION, ALL CLAIMS RELATED TO THE RELEASING PARTY'S EMPLOYMENT BY
THE COMPANY, THE COMPENSATION PROVIDED TO THE RELEASING PARTY BY THE COMPANY,
AND THE RELEASING PARTY'S ACTIVITIES ON BEHALF OF THE COMPANY (INCLUDING,
WITHOUT LIMITATION, ANY CLAIMS OF UNLAWFUL DISCRIMINATION UNDER THE COMMON LAW
OR ANY STATUTE)], other than claims or causes of action arising under or
pursuant to the Purchase Agreement or the Registration Rights Agreement or the
Employment Agreement to which the Releasing Party and any Released Party are
parties. The provisions of this Release shall inure to the benefit of the
Released Parties.
The Releasing Party hereby represents to the Released Parties that (a) the
Releasing Party has not assigned any claim or possible claim against any
Released Party, (b) the Releasing Party fully intends to release, and by
executing this Release it is releasing, all claims against the Released Parties
including without limitation unknown and contingent claims (other than those
specifically reserved above), and (c) such Releasing Party has had the
opportunity to consult with counsel with respect to the execution and delivery
of this Release and the consequences hereof.
[IN SIGNING THIS RELEASE, THE RELEASING PARTY HEREBY ACKNOWLEDGES THAT SUCH
RELEASING PARTY HAS BEEN GIVEN THE OPPORTUNITY, IF SO DESIRED, TO CONSIDER THIS
RELEASE FOR TWENTY-ONE (21) DAYS BEFORE EXECUTING IT. IF THIS RELEASE IS NOT
SIGNED BY THE RELEASING
<PAGE>
PARTY AND RETURNED TO MONROE SO THAT IT IS RECEIVED WITHIN TWENTY-ONE (21) DAYS
OF THE RELEASING PARTY'S RECEIPT OF THE RELEASE, THE RELEASE WILL NOT BE VALID.
IN THE EVENT THAT THE RELEASING PARTY EXECUTES AND RETURNS THIS RELEASE WITHIN
TWENTY-ONE (21) DAYS OF THE DATE OF ITS DELIVERY TO THE RELEASING PARTY, THE
RELEASING PARTY WILL THEREBY ACKNOWLEDGE THAT SUCH DECISION WAS ENTIRELY
VOLUNTARY AND THAT THE RELEASING PARTY HAD THE OPPORTUNITY TO CONSIDER THIS
RELEASE FOR THE ENTIRE TWENTY-ONE (21) DAY PERIOD. MONROE ACKNOWLEDGES THAT FOR
A PERIOD OF SEVEN (7) DAYS FROM THE DATE OF THE EXECUTION OF THIS RELEASE, THE
RELEASING PARTY SHALL RETAIN THE RIGHT TO REVOKE THE RELEASE BY WRITTEN NOTICE
THAT MONROE RECEIVES BEFORE THE END OF SUCH PERIOD, AND THAT THIS RELEASE SHALL
NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE EXPIRATION OF SUCH REVOCATION
PERIOD.]
2. Governing Law. This Release shall be construed in accordance with and
-------------
governed by the laws of the State of North Carolina applicable to agreements
made and to be performed wholly within such jurisdiction.
3. Severability. If any portion of this Release is declared by a court
------------
of competent jurisdiction to be invalid or unenforceable after all appeals have
either been exhausted or the time for any appeals to be taken has expired, the
remainder of the terms, provisions, covenants and restrictions of this Release
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
EXECUTED as of the ____ day of __________, 1998.
______________________________
[NAME OF THE RELEASING PARTY]
2
<PAGE>
EXHIBIT 10.20
EXHIBIT D
---------
FORM OF INDEMNIFICATION ESCROW AGREEMENT
----------------------------------------
This ESCROW AGREEMENT (the "Agreement") is made and entered into as of
_______________, 1998, by and among Monroe, Inc., a Delaware corporation
("Monroe"), Curtis L. Rogers, Jr., an individual (the "Stockholder
Representative"), ____________________ (the "Escrow Agent"), and the parties
identified as the Rogers Stockholders on the signature pages hereto, with
reference to the following facts:
A. Pursuant to the terms and conditions of a Stock Purchase Agreement
(the "Purchase Agreement") dated as of May ___, 1998, by and among Monroe,
Rogers-American Company, Inc., a North Carolina corporation, Curtis L. Rogers,
Jr., as representative, and the Rogers Stockholders, Monroe has agreed to
acquire all of the issued and outstanding capital stock of Rogers-American
Company, Inc. Capitalized terms not otherwise defined herein have the meanings
set forth in the Purchase Agreement.
B. Under the terms of the Purchase Agreement, Monroe is entitled to
indemnification under certain circumstances as set forth in Section 10 of the
Purchase Agreement.
C. The purpose of this Agreement is to provide for the deposit into
escrow of cash and shares of Monroe's common stock, par value $.01 per share
("Monroe Common Stock"), pursuant to Section 1.8 of the Purchase Agreement to
secure, in part, the indemnification obligations of the Rogers Stockholders
under Section 10 of the Purchase Agreement.
NOW, THEREFORE, based on the above premises and for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
1. Appointment of Escrow Agent and Stockholder Representative;
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Indemnification.
- ---------------
1.1 Escrow Agent. The Escrow Agent is hereby appointed as escrow
------------
agent for the purposes set forth herein, and the Escrow Agent hereby accepts
such appointment on the terms set forth herein.
1.2 Stockholder Representative. The Stockholder Representative is
--------------------------
hereby appointed as agent and representative of the Rogers Stockholders for the
purposes set forth herein, and the Stockholder Representative accepts such
appointment on the terms set forth herein.
<PAGE>
1.3 Indemnification. The Rogers Stockholders have agreed to
---------------
indemnify and hold harmless Monroe pursuant to Section 10 of the Purchase
Agreement. The Escrow Fund (as defined in Section 2.1 hereof) shall secure, in
part, the indemnification obligations of the Rogers Stockholders in the manner
provided in this Agreement.
2. Escrow Fund.
-----------
2.1 Cash Escrow Fund; Escrowed Shares. In accordance with Section
---------------------------------
1.8 of the Purchase Agreement, on the date hereof, Monroe, on behalf of the
Rogers Stockholders, has deposited with the Escrow Agent the following: (i) One
Million Five Hundred and Fifty Thousand Dollars ($1,550,000) to be held in a
designated separate account of the Escrow Agent (inclusive of any earnings on
the same, the "Cash Escrow Fund") and (ii) a number of shares of Monroe Common
Stock (the "Escrowed Shares") equal to (a) $1,950,000 divided by (b) the price
at which shares of Monroe Common Stock will be sold to the public in the initial
underwritten public offering of shares of Monroe Common Stock (the "IPO Price").
Curtis L. Rogers, Jr. and Robert J. Maccubbin, Sr. (the "Majority Rogers
Stockholders") shall thereby contribute $1,060,000 and $490,000, respectively,
to the Cash Escrow Fund. Each of Danny L. Broadwater, John L. Brady, Sr., E.
Ray Johnson, Marty D. Carter, Curtis L. Rogers, III, Robert J. Maccubbin, Jr.,
Thomas S. Fincher and Douglas H. Holstein (the "Minority Rogers Stockholders")
shall thereby contribute a number of shares of Monroe Common Stock pro rata
based upon the ratio that the number of shares of common stock of Rogers-
American Company, Inc., par value $1.00 per share ("Rogers Common Stock"), held
by such Minority Rogers Stockholder bears to the total number of shares of
Rogers Common Stock held by all Minority Rogers Stockholders immediately prior
to the Closing. Such pro rata interest shall be referred to as such Minority
Rogers Stockholder's "Proportionate Interest." The aforementioned deposits
representing the Cash Escrow Fund and the Escrowed Shares shall be referred to
herein as the "Escrow Fund."
2.2 Amounts Earned on Cash Escrow Fund; Tax Matters. The Cash Escrow
-----------------------------------------------
Fund shall be invested from time to time in Eligible Investments (as defined in
Section 15) pursuant to (and as specified in) the written direction of the
Stockholder Representative received by the Escrow Agent (which direction shall
include maturity terms selected by the Stockholder Representative). The Escrow
Agent shall be entitled to presume that any maturity terms set forth in an
investment instruction from the Stockholder Representative have been agreed to
by Monroe. In no instance shall the Escrow Agent have any liability for any
loss on any such investment. All amounts earned, paid or distributed with
respect to the Cash Escrow Fund (whether interest, dividends or otherwise) shall
become a part of the Cash Escrow Fund and shall be held hereunder upon the same
terms as the original Cash Escrow Fund. The parties agree that (i) for tax
reporting purposes, and for any tax year, all interest or other income earned
from the investment of the Cash Escrow Fund shall be allocable to the Majority
Rogers Stockholders and (ii) to the extent permitted by applicable law,
including Section 468B(g) of the Internal Revenue Code of 1986, as amended, the
Majority Rogers Stockholders
2
<PAGE>
will include all amounts earned on the Cash Escrow Fund in their gross income
for federal, state and local income tax (collectively, "income tax") purposes
and pay any income tax resulting therefrom. The parties also agree for income
tax purposes to treat all amounts distributed to the Majority Rogers
Stockholders from the Cash Escrow Fund as payments of purchase price received by
the Majority Rogers Stockholders on the date of this Escrow Agreement. Each
Majority Rogers Stockholder agrees to provide the Escrow Agent with a certified
tax identification number by signing and returning a Form W-9 to the Escrow
Agent prior to the date on which interest or other income is first earned by the
Cash Escrow Fund. The Majority Rogers Stockholders understand that, in the event
their tax identification numbers are not certified to the Escrow Agent prior to
the date on which interest or other income is first earned on the Cash Escrow
Fund, the Internal Revenue Code, as amended from time to time, may require
withholding of a portion of any interest or other income earned on the
investment of the Cash Escrow Fund.
2.3 Escrowed Shares. Although the Escrowed Shares shall be issued in
---------------
the name of the Escrow Agent or its nominee, all Escrowed Shares shall be held
by the Escrow Agent for the benefit of the Minority Rogers Stockholders. If
during the term of this Agreement there is declared a stock dividend or stock
split, all securities thereby issuable with respect to the Escrowed Shares shall
be deposited hereunder and shall be deemed "Escrowed Shares" for the purposes of
this Agreement. If during the term of this Agreement there is paid to the
Escrow Agent any dividends in cash or other property (other than securities) in
respect of the Escrowed Shares, such dividends shall be paid currently by the
Escrow Agent to the Minority Rogers Stockholders in accordance with each
Minority Rogers Stockholder's Proportionate Interest. The Escrowed Shares shall
be held for the benefit of the Minority Rogers Stockholders and disbursed by the
Escrow Agent in accordance with the terms of this Agreement. The parties agree
that for federal income tax purposes, the Minority Rogers Stockholders will own
the Escrowed Shares as of the Closing Date.
2.3.1 Voting of Escrowed Shares. The Escrowed Shares held by
-------------------------
the Escrow Agent pursuant to this Agreement shall be deemed issued and
outstanding, shall appear as issued and outstanding on Monroe's balance
sheet, and shall be legally outstanding under applicable state law. With
respect to any matter on which stockholders of Monroe have a right to vote,
the Escrow Agent, upon receipt of written notices to such effect, on behalf
of the Minority Rogers Stockholders, acting at the written direction of
such stockholders, shall exercise the right to vote, or not vote, all
Escrowed Shares (or any portion thereof); provided, however, that the
-----------------
Escrow Agent shall at the expense of Monroe and the Rogers Stockholders
promptly forward, or cause to be forwarded, copies of any proxies, proxy
statements and other soliciting materials which it receives to the Minority
Rogers Stockholders, and shall vote the applicable portion of the Escrowed
Shares in accordance with any written instructions timely received by the
Escrow Agent from any Minority Rogers Stockholder. Absent any such written
instructions, the Escrow Agent shall not vote any Escrowed Shares.
3
<PAGE>
2.3.2 Escrowed Shares Nontransferable. The Minority Rogers
-------------------------------
Stockholders' interest in this Agreement and the Escrowed Shares (prior to
the disbursement thereof) may not be transferred, except by operation of
law or the laws of descent and distribution.
3. Application of Escrow Fund. The Cash Escrow and the Escrowed Shares
--------------------------
shall be held in escrow under the terms of this Agreement and released by the
Escrow Agent upon the following terms.
3.1 Joint Instructions. Upon joint written notice and instruction
------------------
from Monroe and the Stockholder Representative that the Escrow Fund, or any
portion thereof, should be disbursed, the Escrow Agent shall make such
disbursement in accordance with the directions set forth in such joint written
notice and instruction.
3.2 Indemnification Claim. If at any time, or from time to time, on
---------------------
or before __________, 1999 [INSERT DATE WHICH IS THE FIRST ANNIVERSARY OF THE
CLOSING DATE] (the "Termination Date"), Monroe delivers to the Escrow Agent
written notice (an "Indemnification Notice") and a copy thereof pursuant to
Section 4.1 hereof asserting that Monroe is entitled to indemnification under
Section 10 of the Purchase Agreement, which Indemnification Notice shall state
the basis and amount of such indemnification claim, then the Escrow Agent shall
disburse to Monroe from the Escrow Fund, on the thirtieth (30th) day following
receipt by the Escrow Agent of the Indemnification Notice, an amount equal to
the value of such claim. Any amount so disbursed shall be payable as follows:
(a) 45% of such amount shall be disbursed from the Cash Escrow Fund and (b) 55%
of such amount shall be disbursed in the form of a number of Escrowed Shares
(rounded to the nearest whole share) equal to (i) 55% of the amount of such
claim divided by (ii) the IPO Price (subject to appropriate adjustment after the
----------
Closing Date for any stock split or stock dividend with respect to Monroe Common
Stock, or any combination or reclassification of the Monroe Common Stock into a
greater or smaller number of shares), as certified by Monroe (the "Escrow
Payout"); provided, however, that each Minority Rogers Stockholder may elect to
-------- -------
pay its respective portion of such indemnification claim, in accordance with its
respective Proportionate Interest, in cash in lieu of Escrowed Shares (each, an
"Electing Stockholder"). In the event of any such election, Monroe and the
Stockholder Representative shall provide joint written notice and instructions
to the Escrow Agent to deliver to each Electing Stockholder a number of Escrowed
Shares (rounded to the nearest whole share) equal to (A) the amount of the cash
payment that was made by such Electing Stockholder in respect of such claim
divided by (B) the IPO Price (subject to appropriate adjustment after the
- ----------
Closing Date for any stock split or stock dividend with respect to Monroe Common
Stock, or any combination or reclassification of the Monroe Common Stock into a
greater or smaller number of shares), as certified by Monroe. Notwithstanding
the foregoing, if the Escrow Agent receives written notice from the Stockholder
Representative prior to such thirtieth (30th) day that a dispute exists with
respect to such indemnification claim (a "Dispute Notice"), which
4
<PAGE>
Dispute Notice shall state the basis of such dispute and the portion of the
Escrow Payout, if any, as to which no dispute exists, the Escrow Agent shall
continue to hold the Escrow Payout that is in dispute (but shall disburse to
Monroe the portion of the Escrow Payout as to which no dispute exists) until
directed otherwise pursuant to Section 3.4 hereof.
3.3 Fractional Shares. No fractional shares shall be issued under
-----------------
this Agreement to any of the Minority Rogers Stockholders. Any payment which
would result in the disbursement of a fractional share of Monroe Common Stock
shall be rounded to the nearest whole share.
3.4 Dispute of Indemnification Claim. If the Escrow Agent timely
--------------------------------
receives a Dispute Notice, the Escrow Agent shall retain the Escrow Payout in
dispute until the first to occur of the following:
3.4.1 the date on which the Escrow Agent receives joint written
instructions from Monroe and the Stockholder Representative, in which case the
Escrow Agent shall disburse the Escrow Payout (or applicable portions thereof)
as set forth in such joint written instructions;
3.4.2 the date on which the Escrow Agent receives a final order
of a court of competent jurisdiction (the "Indemnity Award") resolving the
dispute, in which case the Escrow Agent shall disburse the Escrow Payout (or
applicable portions thereof) as set forth in the Indemnity Award; or
3.4.3 with respect to the Escrowed Shares only, the date which is
four years and 364 days after the Closing Date.
3.5 Automatic Disbursement on Termination Date. If, on the
------------------------------------------
Termination Date, there is any amount of the Escrow Fund remaining undisbursed
and not subject to an Indemnification Notice received by the Escrow Agent, the
Escrow Agent shall disburse (a) (upon receipt of proper stock certificates from
Monroe's transfer agent) Escrowed Shares to the Minority Rogers Stockholders in
accordance with each Minority Rogers Stockholder's Proportionate Interest
(rounded to the nearest whole share) and (b) such Cash Escrow Fund to the
Majority Rogers Stockholders in proportion to their original cash contributions
to the Cash Escrow Fund (rounded to the nearest whole cent).
3.6 Payment of Indemnification Claims. Whenever this Agreement
---------------------------------
provides that the Escrow Agent may or shall disburse Escrowed Shares to Monroe,
the Escrow Agent shall deliver to the transfer agent for the Escrowed Shares the
stock certificate representing such Escrowed Shares and the transfer agent shall
deliver to the Escrow Agent one stock certificate representing the number of
shares to be delivered to Monroe and another stock certificate representing the
balance of Escrowed Shares remaining. The Escrow Agent shall
5
<PAGE>
then deliver to Monroe a stock certificate representing the appropriate number
of Escrowed Shares determined in accordance with Section 3.2.
4. Communications with Stockholder Representative.
----------------------------------------------
4.1 Notice of Indemnification Claims. Monroe shall provide a copy of
--------------------------------
any Indemnification Notice to the Stockholder Representative concurrently with
the delivery thereof to the Escrow Agent.
4.2 Additional Information Regarding Indemnification Claims. Within
-------------------------------------------------------
five (5) business days after receiving a request therefor from the Stockholder
Representative, Monroe shall furnish the Stockholder Representative with such
additional information relating to any claim made in an Indemnification Notice
as he may reasonably request from time to time for the purpose of evaluating the
merits of the claim for indemnification.
5. Scope of Undertaking. The Escrow Agent shall have no responsibility
--------------------
or obligation of any kind in connection with this Agreement and the Escrow Fund,
and shall not be required to deliver the same or any part thereof or take any
action with respect to any matters that might arise in connection therewith,
other than to receive, hold, and make delivery of the Escrow Fund as herein
expressly provided or by reason of a judgment or order of a court of competent
jurisdiction.
6. Knowledge and Sufficiency of Documents. The Escrow Agent shall not be
--------------------------------------
bound by or have any responsibility with respect to compliance with any
agreement between any of the other parties hereto, including the Purchase
Agreement, irrespective of whether the Escrow Agent has knowledge of the
existence of any such agreement or terms and provisions thereof, the Escrow
Agent's only duty, liability, and responsibility being to receive, hold and
deliver the Escrow Fund as herein provided. The Escrow Agent shall not be
required in any way to determine the validity or sufficiency, whether in form or
in substance, of the Escrow Fund or the validity, sufficiency, genuineness or
accuracy of any instrument, document, certificate, statement or notice referred
to in this Agreement or contemplated hereby, or the adequacy of any security
interest created hereunder; or the identity or authority of the persons
executing the same, and it shall be sufficient if any writing purporting to be
such instrument, document, certificate, statement or notice is delivered to the
Escrow Agent and purports on its face to be correct in form and signed or
otherwise executed by the party or parties required to sign or execute the same
under this Agreement.
7. Right of Interpleader. Should any controversy arise between Monroe,
---------------------
on one hand, and the Stockholder Representative, on the other, or any other
person, firm or entity, with respect to this Agreement, the Escrow Fund or any
part thereof, or the right of any party or other person to receive the Escrow
Fund or should such parties fail to designate another Escrow Agent as provided
in Section 12 hereof, or if the Escrow Agent should be in doubt as
6
<PAGE>
to what action to take, the Escrow Agent shall have the right (but not the
obligation) to (i) withhold delivery of the Escrow Fund until the controversy is
resolved as provided in Section 3.4 hereof or (ii) institute a bill of
interpleader in any court of competent jurisdiction to determine the rights of
the parties hereto (the right of the Escrow Agent to institute such bill of
interpleader, however, shall not be deemed to modify the manner in which the
Escrow Agent is entitled to make disbursements of the Escrow Fund as hereinabove
set forth, other than to tender the Escrow Fund into the registry of such
court). Should a bill of interpleader be instituted, or should the Escrow Agent
be threatened with litigation or become involved in litigation in any manner
whatsoever on account of this Agreement or the Cash Escrow Fund or the Escrowed
Shares, then as between themselves and the Escrow Agent, Monroe and the Rogers
Stockholders, jointly and severally, hereby bind and obligate themselves, their
successors, heirs, executors and assigns to pay the Escrow Agent its reasonable
attorneys' fees and any and all other disbursements, expenses, losses, costs and
damages of the Escrow Agent in connection with or resulting from such threatened
or actual litigation. Notwithstanding the foregoing, as between themselves,
Monroe and the Rogers Stockholders shall each pay one-half of all amounts
payable to the Escrow Agent pursuant to this Section 7.
8. Scope of Duties and Errors in Judgment. It is expressly understood
--------------------------------------
and agreed that the Escrow Agent shall be under no duty or obligation to give
any notice, or to do or to omit the doing of any action or anything with respect
to the Escrow Fund, except to hold the same and to make disbursements in
accordance with the terms of this Agreement. Without limiting the generality of
the foregoing, it is acknowledged and agreed that (i) no implied duties shall be
read into this Agreement on the part of the Escrow Agent, and (ii) the Escrow
Agent shall not be obligated to take any legal or remedial action which might in
its judgment involve it in any expense or liability for which it has not been
furnished acceptable indemnification. The Escrow Agent, its directors, officers
and employees shall not be liable for any error in judgment or any act or steps
taken or permitted to be taken in good faith, or for any mistake of law or fact,
or for anything it may do or refrain from doing in connection herewith, except
for its own willful misconduct or gross negligence.
9. Indemnity. As between themselves and the Escrow Agent, Monroe and the
---------
Rogers Stockholders, jointly and severally, agree to indemnify the Escrow Agent
against and hold the Escrow Agent and its officers, employees and directors
harmless from any and all losses, costs, damages, expenses, claims, and
attorney's fees and expenses suffered or incurred by the Escrow Agent as a
result of, in connection with or arising from or out of the acts or omissions of
the Escrow Agent in performance of or pursuant to this Agreement, except such
acts or omissions as may result from the Escrow Agent's willful misconduct or
gross negligence. In no event shall the Escrow Agent be liable for indirect,
punitive, special or consequential damages.
Monroe and the Rogers Stockholders, jointly and severally, agree to assume
any and all obligations imposed now or hereafter by any applicable tax law with
respect to the payment of
7
<PAGE>
Escrow Funds under this Agreement, and to indemnify and hold the Escrow Agent
harmless from and against any taxes, additions for late payment, interest,
penalties and other expenses, that may be assessed against the Escrow Agent in
any such distribution or other activities under this Agreement. Monroe and the
Stockholder Representative undertake to instruct the Escrow Agent in writing
with respect to the Escrow Agent's responsibility for withholding and other
taxes, assessments, or other governmental charges, certifications and
governmental reporting in connection with its acting as Escrow Agent under this
Agreement. Monroe and the Rogers Stockholders, jointly and severally, agree to
indemnify and hold the Escrow Agent harmless from any liability on account of
taxes, assessments or other governmental charges, including without limitation
the withholding or deduction or the failure to withhold or deduct the same, and
any liability for failure to obtain proper certifications or to properly report
to governmental authorities, to which the Escrow Agent may be or become subject
in connection with or which arises out of this Agreement, including costs and
expenses (including reasonable legal fees and expenses), interest and penalties.
Notwithstanding the foregoing, as between themselves, Monroe and the Rogers
Stockholders shall each pay one-half of all amounts payable to the Escrow Agent
pursuant to this Section 9.
10. Consultation with Legal Counsel. The Escrow Agent may consult with
-------------------------------
its in-house counsel or other counsel satisfactory to it in respect to questions
relating to its duties or responsibilities hereunder or otherwise in connection
herewith and shall not be liable for any action taken, suffered, or omitted by
the Escrow Agent in good faith upon the advice of such counsel. The Escrow
Agent may act through its officers, employees, agents and attorneys.
11. Reimbursement of Expenses of the Escrow Agent. The Escrow Agent shall
---------------------------------------------
be entitled to reimbursement from Monroe and the Rogers Stockholders of all its
reasonable costs and expenses, including reasonable fees and expenses of legal
counsel incurred by it in connection with the preparation, operating,
administration and enforcement of this Agreement. The Escrow Agent shall be
entitled to reimbursement on demand for all expenses incurred in connection with
the administration of this Agreement or the escrow created hereby which are in
excess of its compensation for normal services hereunder, including without
limitation, payment of any legal fees and expenses incurred by the Escrow Agent
in connection with resolution of any claim by any party hereunder.
Notwithstanding the foregoing, as between themselves, Monroe and the Rogers
Stockholders shall each pay one-half of all amounts payable to the Escrow Agent
pursuant to this Section 11.
12. Resignation. The Escrow Agent may resign upon 10 days' prior written
-----------
notice to Monroe and the Stockholder Representative, and upon written
instruction to Monroe and the Stockholder Representative, the Escrow Agent shall
deliver the Escrow Fund to any designated substitute Escrow Agent mutually
agreeable to such parties. If Monroe and the Stockholder Representative fail to
designate a substitute Escrow Agent within 10 days, the Escrow Agent,
8
<PAGE>
in its sole discretion and its sole option, either may (i) continue to hold the
Escrow Fund or (ii) institute a bill of interpleader as contemplated by Section
7 hereof.
13. Compensation. Monroe covenants and agrees to pay to the Escrow Agent
------------
the fee determined by the Escrow Agent, from time to time, to be applicable to
this escrow and bear all costs and expenses incurred by the Escrow Agent in
connection therewith. The Escrow Agent's fees, as in effect on the date hereof,
are attached hereto as Schedule A.
----------
14. Responsibilities of the Stockholder Representative.
--------------------------------------------------
14.1 General. The Stockholder Representative has been designated by
-------
the Rogers Stockholders to represent the Rogers Stockholders with respect to the
Escrow Fund pursuant to the terms of this Agreement. The duties of the
Stockholder Representative hereunder shall be limited to the observance of the
express provisions of this Agreement. The Stockholder Representative shall not
be subject to, or be obliged to recognize, any other agreement between the
parties hereto or directions or instructions not specifically set forth or
provided for herein or in the Purchase Agreement.
14.2 Reimbursement of Expenses of the Stockholder Representative.
-----------------------------------------------------------
The Rogers Stockholders shall reimburse the Stockholder Representative for
reasonable out-of-pocket expenses incurred by the Stockholder Representative in
the performance of his duties hereunder. During the period of this Agreement,
the reimbursement provided under this Section 14.2 shall be from sources of
funds other than the Escrow Fund.
14.3 Duties. The Rogers Stockholders hereby authorize the
------
Stockholder Representative to take all action necessary in connection with the
implementation of this Agreement on behalf of the Rogers Stockholders,
including, without limitation, giving and receiving all notices required to be
given under this Agreement, settling any dispute arising hereunder and executing
all such documents as the Stockholder Representative shall deem necessary or
appropriate in connection with the transactions contemplated by this Agreement.
All decisions and actions by the Stockholder Representative shall be binding
upon all of the Rogers Stockholders, and no Rogers Stockholder shall have the
right to object, dissent, protest or otherwise contest the same.
14.4 Reliance. By their execution of this Agreement, the Rogers
--------
Stockholders agree that (i) Monroe and the Escrow Agent shall be able to rely
conclusively on the instructions and decisions of the Stockholder Representative
as to any actions required or permitted to be taken by the Rogers Stockholders
or the Stockholder Representative hereunder, and no party hereto shall have any
cause of action against any other for any action taken in reliance upon the
instructions or decisions of the Stockholder Representative, (ii) all actions,
decisions and instructions of the Stockholder Representative shall be conclusive
and binding upon all of the Rogers Stockholders and no Rogers Stockholder shall
have any cause of action
9
<PAGE>
against the Stockholder Representative or any other person for any action taken,
decision made or instruction given by the Stockholder Representative under this
Agreement, except for gross negligence, breach of fiduciary duties owed to the
Rogers Stockholders, fraud or willful breach of this Agreement by the
Stockholder Representative and (iii) the provisions of this Section 14 are
independent and severable, shall constitute an irrevocable power of attorney,
coupled with an interest and surviving death, granted by the Rogers Stockholders
to the Stockholder Representative and shall be binding upon the executors,
heirs, legal representatives and successors of each Rogers Stockholder.
15. Investment. Subject to Section 2.2 of this Agreement, the available
----------
uninvested portion of the Cash Escrow Fund shall be invested (and reinvested, as
the case may be) from time to time by the Escrow Agent in any of the following
investments (collectively, "Eligible Investments"):
(i) Short term obligations issued or guaranteed by The United States
of America or any agency or instrumentality thereof; or
(ii) Certificates of deposit of or interest bearing accounts with
national banks or corporations endowed with trust powers, including the
Escrow Agent, having capital and surplus in excess of $100,000,000; or
(iii) Insured Money Market Account short term investments with
national banks or corporations endowed with trust powers, including Escrow
Agent, having capital and surplus in excess of $100,000,000; or
(iv) Corporate bond funds with a rating of at least A+ or the
equivalent thereof by Standard & Poor's Corporation, at least A+ or thereof
by Moody's Investors Service, Inc. or an equivalent rating by another
nationally recognized rating agency.
Investments pursuant to such investment instructions described above shall
in all instances be subject to availability (including any time-of-day
requirements). In no instance shall the Escrow Agent have any obligation to
provide investment advice of any kind. The Escrow Agent shall not be required
to invest any funds held hereunder except as expressly provided in written
instructions received from the Stockholder Representative pursuant to Section 2
hereof, and shall not be obligated to pay interest on uninvested funds. All
amounts received by the Escrow Agent (and any credits to the Escrow Account)
shall be conditional upon collection (and actual receipt by the Escrow Agent of
final payment). In no event shall the Escrow Agent have any obligation to
advance funds.
The Escrow Agent may be authorized at all times and from time to time to
liquidate any investment of the Cash Escrow Fund as may be necessary to provide
available cash to make
10
<PAGE>
any release, disbursement or payment called for under the terms of this
Agreement. The Escrow Agent shall have no responsibility or liability for any
losses resulting from liquidation of the Cash Escrow Fund (such as liquidation
prior to maturity).
16. Change in the Stockholder Representative. In the event that the
----------------------------------------
Stockholder Representative dies, become legally incapacitated or resigns from
such position, Douglas H. Holstein shall fill such vacancy and shall be deemed
to be the Stockholder Representative for all purposes of this Agreement;
however, no change in the Stockholder Representative shall be effective until
Monroe is given notice of such change by the Rogers Stockholders.
17. Confidentiality. All of the information provided by the parties to
---------------
this Agreement pursuant to this Agreement shall be deemed "Confidential
Information" except to the extent that such information (i) was known to the
receiving party prior to its receipt from the disclosing party, (ii) is or
becomes part of the public domain through no fault of any party hereto or (iii)
is disclosed to a party hereto by a third party that is legally free to disclose
such information. Each of the parties to this Agreement agrees that, without
the express written consent of the other parties hereto, it will (i) not use the
Confidential Information for any purpose except as required to discharge its
responsibilities under this Agreement; (ii) use reasonable efforts to prevent
the disclosure or other dissemination of the Confidential Information in its
possession to any third party; and (iii) upon discharging its responsibilities
under this Agreement, return or destroy any document in its possession
containing any Confidential Information supplied by the other parties to this
Agreement.
18. Miscellaneous.
-------------
18.1 Complete Agreement. This Agreement and any documents referred
------------------
to herein (including, without limitation, the Purchase Agreement) or executed
contemporaneously herewith constitute the parties' entire agreement with respect
to the subject matter hereof and supersede all agreements, representations,
warranties, statements, promises and understandings, whether oral or written,
with respect to the subject matter hereof. This Agreement shall be binding upon
the respective parties hereto and their heirs, executors, successors and
assigns.
18.2 Amendments and Waivers. This Agreement may be amended, modified
----------------------
and supplemented, and compliance with any provision hereof may be waived, only
by a writing signed by Monroe, the Escrow Agent and the Stockholder
Representative.
18.3 Assignment. This Agreement shall be binding upon and inure to
----------
the benefit of Monroe, the Escrow Agent, the Rogers Stockholders and the
Stockholder Representative and their respective successors and permitted
assigns. Except as expressly provided in this Agreement, none of the parties
may assign any of his or its rights or obligations under this Agreement without
the prior written consent of the other parties;
11
<PAGE>
provided, however, that Monroe may assign its rights under this Agreement in
- -------- -------
connection with a merger, consolidation or sale of substantially all of the
assets of Monroe.
18.4 Waivers Strictly Construed. With regard to any power, remedy or
--------------------------
right provided herein or otherwise available to any party hereunder (a) no
waiver or extension of time shall be effective unless expressly contained in a
writing signed by the waiving party; and (b) no alteration, modification or
impairment shall be implied by reason of any previous waiver, extension of time,
delay or omission in exercise, or other indulgence.
18.5 Severability. In case any one or more of the provisions
------------
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
18.6 Notices. All notices under this Agreement will be in writing
-------
and will be delivered by personal service or facsimile or certified mail (or, if
certified mail is not available, then by first class mail), postage prepaid, to
such address as may be designated from time to time by the relevant party, and
which will initially be as set forth below. Copies of all notices shall be
given to Monroe, the Stockholder Representative and the Escrow Agent; provided,
--------
however, that the failure to give copies of such notice shall not render the
- -------
notice invalid or unenforceable. Any notice sent by certified mail will be
deemed to have been given three (3) days after the date on which it is mailed.
Any notice transmitted by facsimile will be deemed given upon confirmation of
receipt. All other notices will be deemed given when received. No objection
may be made to the manner of delivery of any notice actually received in writing
by an authorized agent of a party. Notices will be addressed as follows or to
such other address as the party to whom the same is directed will have specified
in conformity with the foregoing:
(a) If to Monroe:
Monroe, Inc.
8 Cedar Street, Suite 54A
Woburn, MA 01801
Attn: President
Facsimile: (781) 933-3680
12
<PAGE>
(b) If to the Stockholder Representative:
Curtis L. Rogers, Jr.
4601 Kuykendall Road
Charlotte, NC 28270
With a copy to:
Johnston, Allison & Hord, P.A.
610 East Morehead Street (28202)
Post Office Box 36469
Charlotte, NC 28236
Attn: H. Morrison Johnston, Esq.
(c) If to the Escrow Agent:
___________________________
___________________________
___________________________
___________________________
18.7 Governing Law. The rights and liabilities of the parties under
-------------
this Agreement shall be governed by the laws of the State of North Carolina,
regardless of the choice of laws provisions of such state or any other
jurisdiction. Any litigation between the parties shall be conducted exclusively
in the state or federal courts of North Carolina, and each party consents to the
exclusive jurisdiction of such courts for such purposes.
18.8 Headings. The headings in this Agreement are inserted only as a
--------
matter of convenience, and in no way define, limit, or extend or interpret the
scope of this Agreement or of any particular Section.
18.9 Force Majeure. Neither Monroe, the Stockholder Representative
-------------
nor the Escrow Agent shall be responsible for delays or failures in performance
resulting from acts beyond their control. Such acts shall include but not be
limited to acts of God, strikes, lockouts, riots, acts of war, epidemics,
governmental regulations superimposed after the fact, fire, communication line
failures, computer viruses, power failures, earthquakes or other disasters.
18.10 Reproduction of Documents. This Agreement and all documents
-------------------------
relating hereto, including, without limitation, (a) consents, waivers and
modifications which may hereafter be executed, and (b) certificates and other
information previously or hereafter
13
<PAGE>
furnished, may be reproduced by any photographic, photostatic, microfilm,
optical disk, micro-card, miniature photographic or other similar process. The
parties agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.
18.11 Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
[NEXT PAGE IS SIGNATURE PAGE]
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
MONROE, INC.
______________________________________
James L. Monroe
President
_____________________, as ESCROW AGENT
______________________________________
Name:
Title:
______________________________________
Curtis L. Rogers, Jr., as Stockholder
Representative
ROGERS STOCKHOLDERS:
______________________________________
John L. Brady, Sr.
______________________________________
Danny L. Broadwater
______________________________________
Marty D. Carter
______________________________________
Thomas S. Fincher
<PAGE>
______________________________________
Douglas H. Holstein
______________________________________
E. Ray Johnson
______________________________________
Robert J. Maccubbin, Sr.
______________________________________
Robert J. Maccubbin, Jr.
______________________________________
Curtis L. Rogers, Jr.
______________________________________
Curtis L. Rogers, III
<PAGE>
Schedule A
----------
ESCROW AGENT FEES
-----------------
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included or made a part of this
registration statement.
Arthur Andersen LLP
Boston, Massachusetts
May 22, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> MAR-04-1998
<PERIOD-END> MAR-31-1998
<CASH> 500
<SECURITIES> 0
<RECEIVABLES> 289
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 789
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 789
<CURRENT-LIABILITIES> 789
<BONDS> 0
0
0
<COMMON> 0<F1>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 789
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>(1) $.01 par value - 1,500 shares issued and outstanding.
</FN>
</TABLE>
<PAGE>
Exhibit 99.1
Consent to be Named as a Director of Merkert American Corporation
-----------------------------------------------------------------
I hereby consent to be named as a person to become a director of Merkert
American Corporation, a Delaware corporation (the "Company"), in the
registration statement on Form S-1 filed by the Company with the Securities and
Exchange Commission with respect to the public offering of Common Stock of the
Company.
/s/ Edward P. Grace
------------------------
Name: Edward P. Grace
Date: May 19, 1998
<PAGE>
Exhibit 99.2
Consent to be Named as a Director of Merkert American Corporation
-----------------------------------------------------------------
I hereby consent to be named as a person to become a director of Merkert
American Corporation, a Delaware corporation (the "Company"), in the
registration statement on Form S-1 filed by the Company with the Securities and
Exchange Commission with respect to the public offering of Common Stock of the
Company.
/s/ James A. Schlindwein
------------------------------
Name: James A. Schlindwein
Date: May 19, 1998
<PAGE>
Exhibit 99.3
Consent to be Named as a Director of Merkert American Corporation
-----------------------------------------------------------------
I hereby consent to be named as a person to become a director of Merkert
American Corporation, a Delaware corporation (the "Company"), in the
registration statement on Form S-1 filed by the Company with the Securities and
Exchange Commission with respect to the public offering of Common Stock of the
Company.
/s/ Gerald R. Leonard
-----------------------
Name: Gerald R. Leonard
Date: May 19, 1998
<PAGE>
Exhibit 99.4
Consent to be Named as a Director of Merkert American Corporation
-----------------------------------------------------------------
I hereby consent to be named as a person to become a director of Merkert
American Corporation, a Delaware corporation (the "Company"), in the
registration statement on Form S-1 filed by the Company with the Securities and
Exchange Commission with respect to the public offering of Common Stock of the
Company.
/s/ Douglas H. Holstein
---------------------------
Name: Douglas H. Holstein
Date: May 19, 1998
