UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
[X] EXCHANGE ACT OF 1934
For the quarterly period ended OCTOBER 3, 1999
--------------------------------
Commission File Number 0-9286
-----------------------------------------
COCA-COLA BOTTLING CO. CONSOLIDATED
-----------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 56-0950585
------------------------------ -------------------------------
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) Number)
4100 COCA-COLA PLAZA, CHARLOTTE, NORTH CAROLINA 28211
-----------------------------------------------------
(Address of principal executive offices) (Zip Code)
(704) 551-4400
-----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 1, 1999
----- ---------------------------------
Common Stock, $1 Par Value 6,392,252
Class B Common Stock, $1 Par Value 2,341,077
<PAGE>
PART I - FINANCIAL INFORMATION
Item l. Financial Statements
Coca-Cola Bottling Co. Consolidated
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
In Thousands (Except Share Data)
<TABLE>
<CAPTION>
Oct. 3, Jan. 3, Sept. 27,
1999 1999 1998
------- ------- ---------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash $ 8,381 $ 6,691 $ 5,944
Accounts receivable, trade, less allowance for
doubtful accounts of $1,200, $600 and $529 67,160 57,217 60,839
Accounts receivable from The Coca-Cola Company 10,910 10,091 13,870
Accounts receivable, other 7,823 7,997 6,818
Inventories 47,663 41,010 44,207
Prepaid expenses and other current assets 17,359 15,545 15,463
---------- ---------- ----------
Total current assets 159,296 138,551 147,141
---------- ---------- ----------
Property, plant and equipment, net 451,000 258,329 257,483
Leased property under capital leases, net 11,531
Investment in Piedmont Coca-Cola Bottling Partnership 61,838 62,847 64,047
Other assets 67,376 51,576 50,298
Identifiable intangible assets, less accumulated
amortization of $124,425, $116,015 and $113,303 283,762 253,156 254,977
Excess of cost over fair value of net assets of
businesses acquired, less accumulated
amortization of $32,568, $30,850 and $30,278 59,051 60,769 61,341
---------- ---------- ----------
Total $1,093,854 $ 825,228 $ 835,287
========== ========== ==========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
Coca-Cola Bottling Co. Consolidated
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
In Thousands (Except Share Data)
<TABLE>
<CAPTION>
Oct. 3, Jan. 3, Sept. 27,
1999 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Portion of long-term debt payable within one year $ 25,530 $ 30,115 $ 30,205
Current portion of obligations under capital leases 4,860
Accounts payable and accrued liabilities 74,022 72,623 78,287
Accounts payable to The Coca-Cola Company 5,028 5,194 5,726
Due to Piedmont Coca-Cola Bottling Partnership 207 435 1,733
Accrued compensation 7,660 10,239 8,090
Accrued interest payable 16,001 15,325 9,295
----------- ----------- -----------
Total current liabilities 133,308 133,931 133,336
Deferred income taxes 119,886 120,659 119,446
Deferred credits 3,195 4,838 5,405
Other liabilities 64,216 58,780 57,281
Obligations under capital leases 5,041
Long-term debt 729,314 491,234 502,898
----------- ----------- -----------
Total liabilities 1,054,960 809,442 818,366
----------- ----------- -----------
Shareholders' Equity:
Convertible Preferred Stock, $100 par value:
Authorized-50,000 shares; Issued-None
Nonconvertible Preferred Stock, $100 par value:
Authorized-50,000 shares; Issued-None
Preferred Stock, $.01 par value:
Authorized-20,000,000 shares; Issued-None
Common Stock, $1 par value:
Authorized - 30,000,000 shares;
Issued- 9,454,626, 9,086,113 and 10,107,421 shares 9,454 9,086 10,107
Class B Common Stock, $1 par value:
Authorized - 10,000,000 shares;
Issued- 2,969,191, 2,969,222 and 1,947,914 shares 2,969 2,969 1,948
Class C Common Stock, $1 par value:
Authorized-20,000,000 shares; Issued-None
Capital in excess of par value 109,936 94,709 96,800
Accumulated deficit (22,211) (29,724) (30,680)
----------- ----------- -----------
100,148 77,040 78,175
Less-Treasury stock, at cost:
Common - 3,062,374 shares 60,845 60,845 60,845
Class B Common-628,114 shares 409 409 409
----------- ----------- -----------
Total shareholders' equity 38,894 15,786 16,921
----------- ----------- -----------
Total $ 1,093,854 $ 825,228 $ 835,287
=========== =========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
Coca-Cola Bottling Co. Consolidated
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
In Thousands (Except Per Share Data)
<TABLE>
<CAPTION>
Third Quarter First Nine Months
--------------------- ---------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales (includes sales to Piedmont of
$19,953, $21,979, $55,263 and $52,881) $ 260,284 $ 248,533 $ 741,584 $ 693,279
Cost of sales, excluding depreciation
shown below (includes $15,592, $17,088,
$45,328 and $41,544 related to sales to
Piedmont) 142,928 143,081 416,430 398,515
--------- --------- --------- ---------
Gross margin 117,356 105,452 325,154 294,764
--------- --------- --------- ---------
Selling expenses, excluding depreciation
shown below 56,148 53,553 163,022 153,299
General and administrative expenses 19,151 17,177 55,360 50,698
Depreciation expense 15,521 9,381 44,435 27,273
Amortization of goodwill and intangibles 3,519 3,246 10,127 9,687
--------- --------- --------- ---------
Income from operations 23,017 22,095 52,210 53,807
Interest expense 12,971 10,723 37,116 29,069
Other income (expense), net (1,082) (611) (3,536) (2,964)
--------- --------- --------- ---------
Income before income taxes 8,964 10,761 11,558 21,774
Federal and state income taxes 3,137 3,766 4,045 7,852
--------- --------- --------- ---------
Net income $ 5,827 $ 6,995 $ 7,513 $ 13,922
========= ========= ========= =========
Basic net income per share $ .67 $ .84 $ .88 $ 1.66
Diluted net income per share $ .66 $ .82 $ .87 $ 1.64
Weighted average number of common
shares outstanding 8,733 8,365 8,539 8,365
Weighted average number of common
shares outstanding-assuming dilution 8,860 8,499 8,662 8,496
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
Coca-Cola Bottling Co. Consolidated
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
In Thousands
<TABLE>
<CAPTION>
Capital
Class B in
Common Common Excess of Accumulated Treasury
Stock Stock Par Value Deficit Stock
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance on
December 28, 1997 $ 10,107 $ 1,948 $103,074 $(44,602) $ 61,254
Net income 13,922
Cash dividends
paid (6,274)
-------- -------- -------- -------- --------
Balance on
September 27, 1998 $ 10,107 $ 1,948 $ 96,800 $(30,680) $ 61,254
======== ======== ======== ======== ========
Balance on
January 3, 1999 $ 9,086 $ 2,969 $ 94,709 $(29,724) $ 61,254
Net income 7,513
Cash dividends
paid (6,366)
Issuance of Common
Stock 368 21,593
-------- -------- -------- -------- --------
Balance on
October 3, 1999 $ 9,454 $ 2,969 $109,936 $(22,211) $ 61,254
======== ======== ======== ======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
Coca-Cola Bottling Co. Consolidated
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
In Thousands
First Nine Months
---------------------
1999 1998
--------- ---------
Cash Flows from Operating Activities
Net income $ 7,513 $ 13,922
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation expense 44,435 27,273
Amortization of goodwill and intangibles 10,127 9,687
Deferred income taxes 4,045 7,852
Losses on sale of property, plant and equipment 2,120 1,964
Amortization of debt costs 606 445
Amortization of deferred gain related to terminated
interest rate swaps (423) (423)
Undistributed losses (earnings) of Piedmont Coca-Cola
Bottling Partnership 1,009 (721)
Increase in current assets less current liabilities (19,177) (9,889)
Increase in other noncurrent assets (12,298) (7,562)
Increase (decrease) in other noncurrent liabilities (2,042) 494
Other 74 83
--------- ---------
Total adjustments 28,476 29,203
--------- ---------
Net cash provided by operating activities 35,989 43,125
--------- ---------
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt, net 238,081 9,109
Increase (decrease) in current portion of long-term debt (4,585) 18,205
Cash dividends paid (6,366) (6,274)
Payments on capital lease obligations (3,675)
Proceeds from interest rate swap termination 6,480
Debt fees paid (3,228) (41)
Other (897) (438)
--------- ---------
Net cash provided by financing activities 219,330 27,041
--------- ---------
Cash Flows from Investing Activities
Additions to property, plant and equipment (234,743) (34,639)
Proceeds from the sale of property, plant and equipment 130 755
Acquisitions of companies, net of cash acquired (19,016) (34,765)
--------- ---------
Net cash used in investing activities (253,629) (68,649)
--------- ---------
Net increase in cash 1,690 1,517
Cash at beginning of period 6,691 4,427
--------- ---------
Cash at end of period $ 8,381 $ 5,944
========= =========
Significant noncash investing and financing activities:
Issuance of Common Stock for business acquired $ 21,961
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)
1. Accounting Policies
The consolidated financial statements include the accounts of Coca-Cola Bottling
Co. Consolidated and its majority owned subsidiaries (the "Company"). All
significant intercompany accounts and transactions have been eliminated.
The information contained in the financial statements is unaudited. The
statements reflect all adjustments which, in the opinion of management, are
necessary for a fair statement of the results for the interim periods presented.
All such adjustments are of a normal, recurring nature.
The accounting policies followed in the presentation of interim financial
results are the same as those followed on an annual basis. These policies are
presented in Note 1 to the consolidated financial statements included in the
Company's Annual Report on Form 10-K for the year ended January 3, 1999 filed
with the Securities and Exchange Commission.
Certain prior year amounts have been reclassified to conform to current year
classifications.
<PAGE>
Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)
2. Summarized Income Statement Data of Piedmont Coca-Cola Bottling Partnership
On July 2, 1993, the Company and The Coca-Cola Company formed Piedmont Coca-Cola
Bottling Partnership ("Piedmont") to distribute and market soft drink products
primarily in portions of North Carolina and South Carolina. The Company and The
Coca-Cola Company, through their respective subsidiaries, each beneficially owns
a 50% interest in Piedmont. The Company provides a portion of the soft drink
products to Piedmont at cost and receives a fee for managing the business of
Piedmont pursuant to a management agreement. Summarized income statement data
for Piedmont is as follows:
Third Quarter First Nine Months
---------------------- --------------------------
In Thousands 1999 1998 1999 1998
- --------------------------------------------------------------------------------
Net sales $76,195 $74,415 $214,166 $202,941
Gross margin 35,304 32,552 97,044 88,818
Income from operations 4,336 5,207 7,717 10,850
Net income (loss) 1,072 2,096 (2,018) 1,442
3. Inventories
Inventories are summarized as follows:
Oct. 3, Jan. 3, Sept. 27,
In Thousands 1999 1999 1998
- --------------------------------------------------------------------------------
Finished products $30,229 $26,300 $29,720
Manufacturing materials 12,012 10,382 10,543
Plastic pallets and other 5,422 4,328 3,944
------- ------- -------
Total inventories $47,663 $41,010 $44,207
======= ======= =======
The amounts included above for inventories valued by the LIFO method were
greater than replacement or current cost by approximately $3.2 million, $3.2
million and $2.8 million on October 3, 1999, January 3, 1999 and September 27,
1998, respectively, as a result of inventory premiums associated with certain
acquisitions.
<PAGE>
Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)
4. Property, Plant and Equipment
The principal categories and estimated useful lives of property, plant and
equipment were as follows:
<TABLE>
<CAPTION>
Oct 3, Jan. 3, Sept. 27, Estimated
In Thousands 1999 1999 1998 Useful Lives
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Land $ 11,845 $ 11,781 $ 10,099
Buildings 83,900 81,527 80,652 10-50 years
Machinery and equipment 91,721 84,047 81,909 5-20 years
Transportation equipment 123,340 60,620 60,593 4-10 years
Furniture and fixtures 32,682 26,395 25,180 7-10 years
Vending equipment 283,982 152,163 149,538 6-13 years
Leasehold and land improvements 37,565 33,894 32,342 5-20 years
Construction in progress 20,450 4,532 6,428
- -------------------------------------------------------------------------------------------------------------
Total property, plant and equipment, at cost 685,485 454,959 446,741
Less: Accumulated depreciation 234,485 196,630 189,258
- -------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net $451,000 $258,329 $257,483
- -------------------------------------------------------------------------------------------------------------
</TABLE>
On January 15, 1999, the Company purchased approximately $155 million of
equipment (principally vehicles and vending equipment) previously leased under
various operating lease agreements. The assets purchased will continue to be
used in the distribution and sale of the Company's products and will be
depreciated over their remaining useful lives, which range from three years to
12.5 years. The Company used a combination of its revolving credit facility and
its informal lines of credit with certain banks to finance this purchase.
5. Leased Property Under Capital Leases
The category and terms of the capital leases were as follows:
In Thousands Oct. 3, 1999 Terms
- ------------------------------------------------------------------
Transportation equipment $13,576 1-4 years
Less: Accumulated amortization 2,045
-------
Leased property under capital leases, net $11,531
=======
<PAGE>
Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)
6. Long-Term Debt
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
Fixed(F) or
Interest Variable Interest Oct. 3, Jan. 3, Sept. 27,
In Thousands Maturity Rate (V) Rate Paid 1999 1999 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Lines of Credit 2002 5.61% - V Varies $49,800 $36,400 $48,034
5.65%
Term Loan Agreement 2004 6.20% V Varies 85,000 85,000 85,000
Term Loan Agreement 2005 6.20% V Varies 85,000 85,000 85,000
Medium-Term Notes 1999 7.99% F Semi- - 28,585 28,585
annually
Medium-Term Notes 2000 10.00% F Semi- 25,500 25,500 25,500
annually
Medium-Term Notes 2002 8.56% F Semi- 47,000 47,000 47,000
annually
Debentures 2007 6.85% F Semi- 100,000 100,000 100,000
annually
Debentures 2009 7.20% F Semi- 100,000 100,000 100,000
annually
Debentures 2009 6.375% F Semi- 250,000
annually
Other notes payable 1999 - 5.75% - F Varies 12,544 13,864 13,984
2001 10.00% ------- ------- -------
754,844 521,349 533,103
Less: Portion of long-term
debt payable within one year 25,530 30,115 30,205
- --------------------------------------------------------------------------------------------------------------------------------
Long-term debt $729,314 $491,234 $502,898
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)
6. Long-Term Debt (cont.)
It is the Company's intent to renew its lines of credit and borrowings under the
revolving credit facility as they mature. To the extent that these borrowings do
not exceed the amount available under the Company's $170 million revolving
credit facility, they are classified as noncurrent liabilities.
On October 12, 1994, a $400 million shelf registration for debt and equity
securities filed with the Securities and Exchange Commission became effective
and the securities thereunder became available for issuance. On November 1,
1995, the Company issued $100 million of 6.85% debentures due 2007 pursuant to
such registration. In July 1997, the Company issued $100 million of 7.20%
debentures due 2009. On April 26, 1999, the Company issued $250 million of
10-year debentures at a fixed interest rate of 6.375% under the Company's $800
million shelf registration filed in January 1999. The net proceeds from these
issuances were used for refinancing a portion of existing public debt that had
matured with the remainder used to repay other debt.
The Company has guaranteed a portion of the debt for two cooperatives in which
the Company is a member. The amounts guaranteed were $30.3 million, $30.7
million and $31.1 million as of October 3, 1999, January 3, 1999 and September
27, 1998, respectively.
<PAGE>
Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)
7. Derivative Financial Instruments
The Company uses derivative financial instruments to modify risk from interest
rate fluctuations in its underlying debt. The Company has historically altered
its fixed/floating interest rate mix based upon anticipated operating cash flows
of the Company relative to its debt level and the Company's ability to absorb
increases in interest rates. These derivative financial instruments are not used
for trading purposes.
The Company had weighted average interest rates for its debt portfolio of
approximately 6.8%, 7.3% and 7.0% as of October 3, 1999, January 3, 1999 and
September 27, 1998, respectively. The Company's overall weighted average
interest rate on its long-term debt decreased from an average of 7.0% during the
first nine months of 1998 to an average of 6.6% during the first nine months of
1999. After taking into account the effect of all of the interest rate swap
activities, approximately 31%, 23% and 25% of the total debt portfolio was
subject to changes in short-term interest rates as of October 3, 1999, January
3, 1999 and September 27, 1998, respectively.
A rate increase of 1% on the floating rate component of the Company's debt would
have increased interest expense for the first nine months of 1999 by
approximately $1.6 million and net income for the nine months ended October 3,
1999 would have decreased by approximately $1.0 million.
Derivative financial instruments were as follows:
<TABLE>
<CAPTION>
October 3, 1999 January 3, 1999 September 27, 1998
------------------------------------------------------------------
Remaining Remaining Remaining
In Thousands Amount Term Amount Term Amount Term
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest rate swaps-floating $60,000 4 years $60,000 4.75 years $60,000 5 years
Interest rate swaps-floating 50,000 9.5 years
Interest rate swaps-floating 50,000 9.5 years
Interest rate swaps-fixed 60,000 4 years 60,000 4.75 years 60,000 5 years
Interest rate swaps-fixed 50,000 5.25 years 50,000 6 years 50,000 6.25 years
Interest rate cap 35,000 .75 years 35,000 1.5 years 35,000 1.75 years
</TABLE>
The Company entered into 10-year floating interest rate swap agreements for $100
million in April, 1999 related to the 6.375% 10-year debentures issued on April
26, 1999.
<PAGE>
Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)
7. Derivative Financial Instruments (cont.)
The carrying amounts and fair values of the Company's balance sheet and
off-balance-sheet instruments were as follows:
<TABLE>
<CAPTION>
October 3, 1999 January 3, 1999 September 27, 1998
--------------- --------------- ------------------
Carrying Fair Carrying Fair Carrying Fair
In Thousands Amount Value Amount Value Amount Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Instruments
Public debt $522,500 $499,554 $301,085 $312,118 $301,085 $330,884
Non-public variable rate
long-term debt 219,800 219,800 206,400 206,400 218,034 218,034
Non-public fixed rate
long-term debt 12,544 12,718 13,864 14,476 13,984 14,944
Off-Balance-Sheet Instruments
Interest rate swaps (6,273) (2,030) (2,551)
Interest rate cap 5 10 4
</TABLE>
The fair values of the interest rate swaps at October 3, 1999, January 3, 1999
and September 27, 1998 represent the estimated amounts the Company would have
had to expense to terminate these agreements. The fair values of the interest
rate cap at October 3, 1999, January 3, 1999 and September 27, 1998 represent
the estimated amount the Company would have received upon termination of this
agreement.
<PAGE>
Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)
8. Supplemental Disclosures of Cash Flow Information
Changes in current assets and current liabilities affecting cash, net of effect
of acquisition, were as follows:
First Nine Months
-------------------------
In Thousands 1999 1998
- --------------------------------------------------------------------------------
Accounts receivable, trade, net $ (8,576) $ (4,925)
Accounts receivable, The Coca-Cola Company (819) (9,180)
Accounts receivable, other 282 2,042
Inventories (5,782) (5,247)
Prepaid expenses and other current assets (1,808) (2,696)
Accounts payable and accrued liabilities (177) 6,505
Accounts payable, The Coca-Cola Company (166) 1,618
Accrued compensation (2,579) 2,995
Accrued interest payable 676 (4,743)
Due to (from) Piedmont Coca-Cola Bottling Partnership (228) 3,742
-------- --------
Increase in current assets less current liabilities $(19,177) $ (9,889)
======== ========
9. Acquisition
On May 28, 1999, the Company acquired substantially all of the outstanding
capital stock of Carolina Coca-Cola Bottling Company, Inc. ("Carolina") in
exchange for 368,482 shares of the Company's Common Stock, installment notes and
cash. The purchase price for all of the outstanding capital stock of Carolina
was $36.6 million, as adjusted for required shareholders' equity of Carolina as
of the acquisition date. The Company used its informal lines of credit for the
cash portion of the acquisition. The acquisition has been accounted for under
the purchase method of accounting.
10. Subsequent Event
On October 29, 1999, the Company acquired substantially all of the outstanding
capital stock of Lynchburg Coca-Cola Bottling Company, Inc. ("Lynchburg"). The
purchase price for all of the outstanding capital stock of Lynchburg was $24.6
million, as adjusted for net working capital of Lynchburg as of the acquisition
date. The Company used its informal lines of credit to finance this acquisition.
The acquisition will be accounted for under the purchase method of accounting.
<PAGE>
Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)
11. Earnings Per Share
The following table sets forth the computation of basic net income per share and
diluted net income per share:
<TABLE>
<CAPTION>
Third Quarter First Nine Months
------------- -----------------
In Thousands (Except Per Share Data) 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Numerator:
Numerator for basic net income and diluted
net income $5,827 $6,995 $7,513 $13,922
Denominator:
Denominator for basic net income per share -
weighted average common shares 8,733 8,365 8,539 8,365
Effect of dilutive securities - stock options 127 134 123 131
-------- -------- -------- --------
Denominator for diluted net income per share -
adjusted weighted average common shares 8,860 8,499 8,662 8,496
======== ======== ======== ========
Basic net income per share $ .67 $ .84 $ .88 $ 1.66
======== ======== ======== ========
Diluted net income per share $ .66 $ .82 $ .87 $ 1.64
======== ======== ======== ========
</TABLE>
12. Estimates and Assumptions
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 and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
13. Commitments and Contingencies
The Company is involved in various claims and legal proceedings which have
arisen in the ordinary course of business. The Company believes that the
ultimate disposition of these claims will not have a material adverse effect on
the financial condition, cash flows or results of operations of the Company.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Introduction:
The following discussion presents management's analysis of the results of
operations for the third quarter and first nine months of 1999 compared to the
third quarter and first nine months of 1998 and changes in financial condition
from September 27, 1998 and January 3, 1999 to October 3, 1999.
The Company reported net income of $5.8 million or $.67 per share for the third
quarter of 1999 compared with net income of $7.0 million or $.84 per share for
the same period in 1998. For the first nine months of 1999, net income was $7.5
million or $.88 per share compared to net income of $13.9 million or $1.66 per
share for the first nine months of 1998. The third quarter and year-to-date
results in 1999 are highlighted by strong growth in gross margin and increased
net selling prices. Net selling prices increased by almost 3% in the third
quarter of 1999 over the same period in 1998. Net income declined for both the
third quarter and first nine months of 1999 over 1998 periods, due primarily to
increased costs related to the Company's ongoing investment in infrastructure to
support future growth.
The Company's infrastructure investments include additional sales personnel,
vehicles, cold drink equipment and additional support personnel required to
service the cold drink equipment. The Company continues to work on a Value Chain
initiative which will change its core logistics processes related to
manufacturing and transportation of finished products. The Company plans to test
the redesigned processes with a pilot project in the first half of 2000. Despite
strong growth in gross margin, these significant infrastructure investments have
adversely affected short-term operating results.
On November 4, 1999, the Company announced a restructuring in some of its
operating units, which will result in a fourth quarter 1999 after-tax charge of
up to $3 million. The charge relates primarily to severance and other
restructuring costs. Beginning in 1997, the Company significantly increased its
targeted growth rate and outpaced the U.S. soft drink industry in volume growth,
up 8% and 11% in 1997 and 1998, respectively. To support the accelerated growth
rate, the Company increased its investment in cold drink equipment, route
vehicles, additional sales personnel and additional service personnel to
maintain its cold drink equipment. In 1999, the Company planned for another year
of solid volume growth. However, the entire U.S. soft drink industry has been
soft. While the Company's volume growth in 1999 is leading the U.S. industry
average, volume has increased only 4% in the first nine months of 1999 and was
flat in the third quarter of 1999.
The Company acquired Carolina Coca-Cola Bottling Company, a Coca-Cola bottler
with operations in central South Carolina, in May 1999. The Company also
purchased the bottling rights and operating assets of a small Coca-Cola bottler
in central North Carolina in May 1999. The Company acquired substantially all of
the outstanding capital stock of Lynchburg Coca-Cola Bottling Co., Inc., a
Coca-Cola bottler with operations in central Virginia, on October 29, 1999. On
November 5, 1999, the Company signed a letter of intent to acquire The Coca-Cola
Company's
<PAGE>
50% interest in Piedmont Coca-Cola Bottling Partnership ("Piedmont"). If the
acquisition of The Coca-Cola Company's interest in Piedmont is completed, the
Company would then own 100% of this partnership. It is the Company's intention
to continue to grow through acquisitions of other Coca-Cola bottlers.
Acquisition related costs including interest expense and non-cash charges such
as amortization of intangible assets may be incurred. To the extent these
expenses are incurred and are not offset by cost savings or increased sales, the
Company's acquisition strategy may depress short-term earnings. The Company
believes that continued growth through acquisitions will enhance long-term
shareholder value.
The results for interim periods are not necessarily indicative of the results to
be expected for the year due to seasonal factors.
RESULTS OF OPERATIONS:
The Company experienced strong growth in gross margin for the third quarter and
first nine months of 1999. Excluding the effect of acquisitions, gross margin
increased by 9% for the third quarter and the first nine months of 1999 over the
same periods in 1998. The growth in gross margin for the first nine months of
1999 was attributable to volume growth of approximately 4% and an increase in
net selling price of 1.7%. Net selling prices for the third quarter of 1999
increased by nearly 3% over 1998 net selling prices.
Excluding the effect of acquisitions, net sales for the third quarter and first
nine months increased 2% and 6%, respectively, over the same periods in 1998.
Cost of sales, as a percentage of net sales, declined from approximately 58% in
the third quarter of 1998 to approximately 55% in the third quarter of 1999.
This decline was primarily due to reductions in the cost of sweetener used in
the manufacturing of many of the Company's products.
Volume growth for the first nine months of 1999 was led by Sprite and
non-carbonated beverages including DASANI, The Coca-Cola Company's bottled water
that was introduced in April 1999. Non-carbonated beverage growth was 12% for
the third quarter and 32% for the first nine months of 1999. The growth in
non-carbonated beverages (excluding bottled water), including POWERaDE,
Fruitopia, Minute Maid Juices To Go and Cool from Nestea, is on top of 70%
volume growth for all of 1998. Bottled water sales increased 53% over the first
nine months of 1999. Non-carbonated products, including bottled water, now
account for over 7% of the Company's total sales volume.
Selling expenses for the third quarter and first nine months of 1999 increased
by 4.8% and 6.3%, respectively, from 1998 levels. The increase in selling costs
reflects additional expenses related to the Company's higher sales volume and
sales infrastructure development. Significant components of the increased costs
include employment costs for additional sales personnel, increased commission
costs related to higher sales volume, additional personnel costs for employees
to support the Company's accelerated cold drink program and additional marketing
expenses related to the Company's sales development programs. The Company has
made a significant investment in its sales force and anticipates that over time,
the increases in sales revenue from this investment will outpace the growth in
costs.
<PAGE>
During January 1999, the Company purchased $155 million of equipment that had
previously been leased. As a result of this transaction, lease expense for the
third quarter and first nine months of 1999 declined by $3.7 million and $11.4
million, respectively. Additionally, the terms of certain leases that were
previously recorded as operating leases were amended during the first quarter of
1999. Due to the amendments in the terms of the leases, they are now reflected
in the Company's financial statements as capital leases. As of October 3, 1999,
leased property under capital leases, net of accumulated amortization, is $11.5
million.
The Company relies extensively on advertising and sales promotion in the
marketing of its products. The Coca-Cola Company and other beverage companies
that supply concentrate, syrups and finished products to the Company make
substantial advertising expenditures to promote sales in the local territories
served by the Company. The Company also benefits from national advertising
programs conducted by The Coca-Cola Company and other beverage companies.
Certain of the marketing expenditures by The Coca-Cola Company and other
beverage companies are made pursuant to annual arrangements. Although The
Coca-Cola Company has advised the Company that it intends to provide marketing
funding support through 1999, it is not obligated to do so under the Company's
Master Bottle Contract. Also, The Coca-Cola Company has agreed to provide
additional marketing funding under a multi-year program to support the Company's
cold drink infrastructure. Total marketing funding and infrastructure support
from The Coca-Cola Company and other beverage companies in the first nine months
of 1999 and 1998 was $41.3 million and $40.2 million, respectively.
General and administrative expenses for the third quarter and first nine months
of 1999 increased by 11% and 9% respectively over 1998 levels. The increase in
general and administrative expenses was due to hiring of additional support
personnel, higher employment costs in certain of the Company's labor markets and
costs related to remediation and testing of Year 2000 issues. The increase in
general and administrative expenses for the third quarter also reflects
additional bad debt reserve costs due to the bankruptcy of a large grocery chain
customer.
Depreciation expense increased 65% and 63% between the third quarter and first
nine months of 1999 and the comparable periods in 1998. This increase was due
primarily to the repurchase of previously leased equipment, as discussed above,
significant investments the Company continues to make in cold drink equipment
and additional manufacturing equipment acquired to produce its new bottled
water, DASANI.
Interest expense during the third quarter increased 21% from the third quarter
of 1998. Interest expense for the first nine months of 1999 increased by 28%
over the first nine months of 1998. The increase in interest expense for both
the third quarter and the first nine months of 1999 is attributable to the
purchase of assets that were previously leased, as discussed above, additional
debt related to acquisitions of other Coca-Cola bottlers during 1998 and 1999
and the significant level of capital expenditures during 1999. The Company's
overall weighted average interest rate decreased from an average of 7.0% during
the first nine months of 1998 to an average of 6.6% during the first nine months
of 1999.
<PAGE>
The Company owns a 50% interest in Piedmont. Piedmont's bottling territory
includes parts of eastern North Carolina that were subjected to severe flooding
during Hurricane Floyd in September 1999. Piedmont recorded an accrual in the
third quarter of 1999 for estimated losses of vending equipment and other
related expenses. While Piedmont expects some of its losses to be covered by
insurance, the amount of recovery has not been determined at this time. The
Company has reflected its share of Piedmont's net loss in its third quarter
operating results.
The Company has been advised by The Coca-Cola Company that it intends to
increase concentrate pricing in 2000 significantly higher than the trend in the
past several years. The increase in concentrate pricing in 2000 is expected to
be approximately $8 million higher than the recent historical annual trend. The
Company is actively reviewing opportunities to increase its net selling prices
in 2000 in order to maintain its margins.
CHANGES IN FINANCIAL CONDITION:
Working capital increased $21.4 million from January 3, 1999 and $12.2 million
from September 27, 1998 to October 3, 1999. The increase from January 3, 1999 is
attributable to acquisitions, sales volume growth and seasonal increases in
accounts receivable ($9.9 million) and inventory ($6.7 million).
The working capital increase of $12.2 million from September 27, 1998 to October
3, 1999 is attributable to an increase in trade accounts receivable of $6.3
million, an increase in inventory of $3.5 million, a decrease in the current
portion of long-term debt of $4.7 million and a decrease in accounts payable and
accruals of $4.3 million, partially offset by increases in the current portion
of obligations under capital leases of $4.9 million and accrued interest of $6.7
million. The decrease in the current portion of long-term debt reflects the
refinancing of maturing Medium-Term Notes and other short-term borrowings. The
increase in accounts receivable is due to the higher sales volume the Company
has experienced. The increase in accrued interest expense is due to increased
long-term debt associated with the buyout of leased equipment and acquisitions
of other Coca-Cola bottlers.
Capital expenditures in the first nine months of 1999 were $234.7 million
compared to $34.6 million in the first nine months of 1998. The significant
increase in capital expenditures in the first nine months of 1999 relates
primarily to the purchase of $155 million of previously leased equipment. In
addition, the Company is purchasing its fleet requirements in 1999. The Company
leased additions to fleet during 1998.
Long-term debt increased by $226.4 million from September 27, 1998 and $238.1
million from January 3, 1999. The increases from September 27, 1998 and January
3, 1999 are due primarily to the buyout of $155 million of leased equipment
discussed above, and acquisitions of other Coca-Cola bottlers.
It is the Company's intent to renew any borrowings under its $170 million
revolving credit facility and the informal lines of credit as they mature and,
to the extent that any borrowings under the revolving credit facility and the
informal lines of credit do not exceed the amount available under the Company's
$170 million revolving credit facility, they are classified as noncurrent
liabilities. As of October 3, 1999, the Company had no amounts outstanding under
the revolving credit facility and $49.8 million outstanding under the informal
lines of credit.
On April 26, 1999 the Company issued $250 million of 10-year debentures at a
fixed rate of 6.375% under the Company's $800 million shelf registration filed
in January 1999. The Company
<PAGE>
subsequently entered into 10-year floating interest rate swap agreements on $100
million of the newly issued debentures. The proceeds from the issuance of
debentures were used to refinance borrowings related to the buyout of the
operating leases discussed above, refinance certain Medium-Term Notes that
matured and repay other corporate borrowings.
As of October 3, 1999 the debt portfolio had a weighted average interest rate of
approximately 6.8% and approximately 31% of the total portfolio of $754.8
million was subject to changes in short-term interest rates.
On May 28, 1999 the Company acquired substantially all of the outstanding
capital stock of Carolina Coca-Cola Bottling Company, Inc. ("Carolina") in
exchange for 368,482 shares of the Company's Common Stock, installment notes and
cash. The purchase price for all the capital stock of Carolina was $36.6
million, as adjusted for required shareholders' equity of Carolina as of the
acquisition date. The Company used its informal lines of credit for the cash
portion of the acquisition. The acquisition has been accounted for under the
purchase method of accounting.
Management believes that the Company, through the generation of cash flow from
operations and the utilization of unused borrowing capacity, has sufficient
financial resources available to maintain its current operations and provide for
its current capital expenditure requirements. The Company considers the
acquisition of additional bottling territories on an ongoing basis.
YEAR 2000:
Since many computer systems and other equipment with embedded chips or
processors (collectively, "business systems") use only two digits to represent
the year, these business systems may be unable to process accurately certain
data before, during or after the year 2000. As a result, business and
governmental entities are at risk for possible miscalculations or systems
failures causing disruptions in their business operations. This is commonly
known as the Year 2000 issue. The Year 2000 issue can arise at any point in the
Company's supply, manufacturing, distribution and financial chains.
The Company began work on the Year 2000 compliance issue in 1997. The scope of
the project includes: ensuring the compliance of all applications, operating
systems and hardware on mainframe, PC, local area network and wide area network
platforms; addressing issues related to non-IT embedded software and equipment;
and addressing the compliance of key suppliers and customers. The project has
four phases: assessment of systems and equipment affected by the Year 2000
issue; definition of strategies to address affected systems and equipment;
remediation or replacement of affected systems and equipment; and testing that
each is Year 2000 compliant.
With respect to ensuring the compliance of all applications, operating systems
and hardware on the Company's various computer platforms, all four phases of the
Year 2000 project have been completed. The Company continues to re-test and
monitor business critical systems and will do so through the end of the year.
Approximately 80% of the internal application development resources were
committed to Year 2000 remediation and testing efforts in 1997 and 1998 and the
first nine months of 1999. The
<PAGE>
Company expects that approximately 75% of its internal application development
resources will be committed to re-testing and monitoring of business critical
systems during the fourth quarter of 1999. The Company has also utilized
contract programmers to identify Year 2000 non-compliance problems and modify
code.
With respect to addressing issues related to non-IT embedded software and
equipment, which principally exists in the Company's four manufacturing plants,
the assessment and definition of strategies phases have been completed. Also,
the remediation or replacement of affected systems and equipment phase has been
completed. Testing is approximately 98% complete and will be finished at the end
of November.
The Company relies on third party suppliers for raw materials, water, utilities,
transportation and other key services. Interruption of supplier operations due
to Year 2000 issues could affect Company operations. The Company intends to
accumulate additional finished goods inventory in its warehouses as a means of
somewhat mitigating the risk of business interruption due to supplier failures.
The Company has reviewed and evaluated the Year 2000 readiness of its critical
suppliers. As a result of this review and evaluation, the Company believes there
is a low probability of its operations being disrupted as a result of Year 2000
issues with its mission critical suppliers.
The Company is also dependent upon its customers for sales and cash flow. Year
2000 interruptions in the Company's customers' operations could result in
reduced sales, increased inventory or receivable levels, increased bad debt
write-offs and cash flow reductions. While these events are possible, the
Company's customer base is broad enough to minimize the effects of a single
occurrence.
The Company has developed contingency plans for those areas that are critical to
its business. These contingency plans have been designed to mitigate serious
disruptions to its business flow beyond the end of 1999, where possible.
Contingency plan information will be provided to all key managers in the Company
during November and early December.
It is currently estimated that the aggregate cost of the Company's Year 2000
efforts will be approximately $5.0 million to $5.5 million, of which
approximately $4.7 million has been spent to date. These costs are being
expensed as they are incurred and are being funded through operating cash flow.
These costs do not include any costs associated with the implementation of
contingency plans. The costs associated with the replacement of computerized
systems, hardware or equipment (currently estimated to be $4.5 million),
substantially all of which would be capitalized, are not included in the above
estimates.
The Company's Year 2000 program is an ongoing process and the estimates of costs
for various components of the program described above are subject to change.
The failure to correct a material Year 2000 issue could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Year 2000 issue, resulting in part from the
uncertainty of the Year
<PAGE>
2000 readiness of third-party suppliers and customers, the Company is unable to
determine at this time whether the consequences of Year 2000 failures will have
a material impact on the Company's results of operations, liquidity or financial
condition.
FORWARD-LOOKING STATEMENTS:
This Quarterly Report on Form 10-Q, as well as information included in, or
incorporated by reference from, future filings by the Company with the
Securities and Exchange Commission and information contained in written
material, press releases and oral statements issued by or on behalf of the
Company, contains, or may contain, certain statements that may be deemed to be
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. Such "forward-looking statements"
include information relating to, among other matters, the Company's future
prospects, developments and business strategies for its operations. These
forward-looking statements are identified by their use of terms and phrases such
as "expect", "estimate", "project", "believe" and similar terms and phrases.
Such forward-looking statements are contained in various sections of this
Quarterly Report.
These statements are based on certain assumptions and analyses made by the
Company in light of its experience and perception of historical trends, current
conditions, expected future developments and other factors believed to be
appropriate under the circumstances, and involve risks and uncertainties that
may cause actual future activities and results of operations to be materially
different from that suggested or described in this Quarterly Report or in such
other documents. These risks include, but are not limited to (A) risks
associated with any changes in the historical level of marketing funding support
which the Company receives from The Coca-Cola Company, (B) risks associated with
interruptions in the Company's business operations as a result of any failure to
adequately correct the Year 2000 computer problem in any systems or equipment of
the Company or one of its major suppliers or customers and (C) other risks
detailed from time to time in the Company's filings with the Securities and
Exchange Commission. You are cautioned that any such statements are not
guarantees of future performance. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary from those expected, estimated or projected.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 10-Q
(a) Exhibits
Exhibit
Number Description
------ -----------
4.1 The Registrant, by signing this report, agrees to
furnish the Securities and Exchange Commission, upon
its request, a copy of any instrument which defines
the rights of holders of long-term debt of the
Registrant and its subsidiaries for which
consolidated financial statements are required to be
filed, and which authorizes a total amount of
securities not in excess of 10 percent of total
assets of the Registrant and its subsidiaries on a
consolidated basis.
10.1 Agreement and Plan of Merger dated as of September
29, 1999, by and among Lynchburg Coca-Cola Bottling
Co., Inc., Coca-Cola Bottling Co. Consolidated, LCCB
Merger Co., Certain Shareholders of Lynchburg
Coca-Cola Bottling Co., Inc. and George M. Lupton,
Jr. as the shareholders' representative.
27 Financial data schedule for period ended October 3,
1999.
(b) Reports on Form 8-K
A current report on Form 8-K was filed on October 22, 1999 related to
the Company's intent to purchase The Coca-Cola Company's 50 percent
interest in Piedmont Coca-Cola Bottling Partnership, a partnership with
bottling territories in much of South Carolina and portions of eastern
North Carolina.
A current report on Form 8-K was filed on November 8, 1999 announcing a
restructuring which will result in a 4th quarter 1999 after-tax charge
of up to $3 million.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COCA-COLA BOTTLING CO. CONSOLIDATED
(REGISTRANT)
Date: Novemeber 17,1999 By: /s/ DAVID V. SINGER
--------------------------------
David V. Singer
Principal Financial Officer of the Registrant
and
Vice President - Chief Financial Officer
AGREEMENT AND PLAN OF MERGER
DATED AS OF SEPTEMBER 29, 1999
BY AND AMONG
LYNCHBURG COCA-COLA BOTTLING CO., INC.,
COCA-COLA BOTTLING CO. CONSOLIDATED,
LCCB MERGER CO.,
CERTAIN SHAREHOLDERS OF LYNCHBURG
COCA-COLA BOTTLING CO., INC.
LISTED ON THE SIGNATURE PAGES HERETO
AND
GEORGE M. LUPTON, JR., AS THE SHAREHOLDERS'
REPRESENTATIVE
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
Page #
ARTICLE I DEFINITIONS ............................................................................................2
ARTICLE II THE MERGER ............................................................................................6
2.1 The Merger.........................................................................6
2.2 Effective Time.....................................................................6
2.3 Effects of the Merger..............................................................6
2.4 Articles of Incorporation and Bylaws...............................................6
2.5 Directors and Officers.............................................................6
2.6 Conversion of Shares...............................................................7
2.7 Merger Consideration and Payment...................................................7
2.8 Shareholder Consent...............................................................10
2.9 Dissenting Shares.................................................................10
2.10 Further Assurances................................................................10
ARTICLE III MERGER CONSIDERATION ADJUSTMENT................................................10
3.1 Audited Closing Date Balance Sheet................................................10
3.2 Final Merger Consideration........................................................11
3.3 Payment of Positive Merger Consideration Adjustment...............................11
3.4 Repayment of Negative Merger Consideration Adjustment.............................11
3.5 Review by the Shareholders'Representative.........................................11
3.6 Settlement Procedure..............................................................12
ARTICLE IV CLOSING.........................................................................12
ARTICLE V REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY.............................12
5.1 Corporate Existence, Authority and Binding Effect.................................12
5.2 Organizational Documents..........................................................13
5.3 No Violation or Conflict..........................................................13
5.4 No Consents.......................................................................14
5.5 Capitalization....................................................................14
5.6 Financial Statements..............................................................14
5.7 Case Sales Reports................................................................14
5.8 Accounts Receivable...............................................................14
5.9 Taxes.............................................................................15
5.10 Absence of Undisclosed Claims and Liabilities.....................................15
5.11 Absence of Change.................................................................15
5.12 Material Contracts and Commitments................................................16
5.13 Good Title and Encumbrances.......................................................17
5.14 Real Estate.......................................................................18
5.15 No Litigation.....................................................................18
5.16 Compliance with Laws..............................................................18
5.17 Antitrust Matters.................................................................18
5.18 Employee Matters..................................................................19
5.19 No Brokers or Finders.............................................................19
i
<PAGE>
5. 20 No Environmental Representations..................................................20
5. 21 Termination of Participation in Mid-Atlantic Canners Association, Inc.............20
5. 22 Payment of Certain Bonuses........................................................20
5. 23 No Material Omission..............................................................20
ARTICLE VI REPRESENTATIONS AND WARRANTIES REGARDING THE CONSENTING SHAREHOLDERS............20
6.1 Authority and Binding Effect......................................................20
6.2 No Violation or Conflict..........................................................20
6.3 Stock Ownership...................................................................21
6.4 Termination of Shareholders Agreement.............................................21
6.5 Satisfaction of Agreement with John Minor.........................................21
ARTICLE VII MERGER SUB'S REPRESENTATIONS AND WARRANTIES....................................21
7.1 Formation, Good Standing and Power................................................21
7.2 No Violation Or Conflict..........................................................21
7.3 No Litigation.....................................................................22
7.4 No Brokers or Finders.............................................................22
7.5 Financial Ability.................................................................22
7.6 Acknowledgement Regarding Condition of Certain Assets.............................22
7.7 Acknowledgement Regarding Location of Certain Assets..............................22
ARTICLE VIII COVENANTS OF THE COMPANY AND CONSENTING SHAREHOLDERS..........................22
8.1. Conduct of Business...............................................................22
8.2 Access to Properties and Records; Discovered Breaches.............................23
8.3 Refrain From Negotiations With Others.............................................24
8.4 Nondisclosure of Proprietary Information..........................................24
8.5 Nondisclosure of Terms............................................................24
8.6 No Change to Governing Documents..................................................25
8.7 Settlement of Related Party Transactions..........................................25
8.8 Distribution of Certain Assets and Payments.......................................25
8.9 Satisfaction of Closing Conditions................................................25
ARTICLE IX COVENANTS OF MERGER SUB AND PARENT..............................................26
9.1 Medical Insurance.................................................................26
9.2 Nondisclosure of Proprietary Information..........................................26
9.3 Nondisclosure of Terms............................................................26
9.4 Records Retention.................................................................26
9.5 Satisfaction of Closing Conditions................................................26
9.6 Satisfaction of Lease and Transfer of Vehicle.....................................27
9.7 Return of the Company's Distributions and Patronage Dividends to the
Shareholders'Representative.......................................................27
ARTICLE X CONDITIONS PRECEDENT TO MERGER SUB'S AND PARENT'S OBLIGATIONS TO CLOSE..........27
10.1 Accuracy of Representations and Warranties........................................27
ii
<PAGE>
10.2 Performance of Covenants..........................................................27
10.3 Certified Copy of Authorizing Resolutions.........................................27
10.4 No Impairment to Assets...........................................................27
10.5 Licenses and Permits Necessary For Merger Sub to Conduct Business.................28
10.6 Opinion of Company's Counsel......................................................28
10.7 No Litigation.....................................................................28
10.8 Legality..........................................................................28
10.9 Consents..........................................................................28
10.10 Certificates of Good Standing.....................................................28
10.11 Compliance With the HSR Act.......................................................28
10.12 Resignations......................................................................28
10.13 Consenting Shareholders Approval and Tender of Shares.............................29
10.14 Termination of Employment Letter with William C. Sampson..........................29
10.15 Non-Competition Agreement.........................................................29
10.16 Termination Deferred Compensation Plan............................................29
10.17 Other Transaction Documents.......................................................29
ARTICLE XI CONDITIONS PRECEDENT TO THE COMPANY'S AND SHAREHOLDERS'OBLIGATIONS TO
CLOSE.............................................................................29
11.1 Accuracy of Representations and Warranties........................................29
11.2 Performance of Covenants..........................................................29
11.3 Opinion of Merger Sub's Counsel...................................................30
11.4 No Litigation.....................................................................30
11.5 Legality..........................................................................30
11.6 Certificates of Good Standing.....................................................30
11.7 Compliance with the HSR Act.......................................................30
11.8 Certified Copy of Authorizing Resolutions.........................................30
11.9 Non-Competition Agreement.........................................................30
11.10 Initial Merger Consideration......................................................30
11.11 Other Transaction Documents.......................................................30
ARTICLE XII TERMINATION....................................................................30
12.1 Conditions of Termination.........................................................30
12.2 Effect of Termination.............................................................31
ARTICLE XIII INDEMNIFICATION...............................................................31
13.1 Indemnification by the Company and Shareholders...................................31
13.2 Indemnity Claims by Merger Sub, the Surviving Corporation or Parent...............32
13.3 Indemnification by Merger Sub, the Surviving Corporation and Parent...............32
13.4 Claim Procedure...................................................................32
13.5 Economic Loss Defined.............................................................33
13.6 Time Limitations; Survival........................................................34
iii
<PAGE>
ARTICLE XIV GUARANTY.......................................................................34
ARTICLE XV MISCELLANEOUS...................................................................35
15.1 Shareholders'Representative.......................................................35
15.2 Joinder of Additional Shareholders................................................37
15.3 Termination of Shareholders Agreement.............................................37
15.4 Risk of Loss......................................................................37
15.5 Simultaneous Closing..............................................................37
15.6 Counterparts......................................................................37
15.7 Interpretation....................................................................37
15.8 Notices...........................................................................38
15.9 Entire Agreement, Modification....................................................39
15.10 Assignment........................................................................40
15.11 Binding Effect and Benefit........................................................40
15.12 Partial Invalidation..............................................................40
15.13 Waiver............................................................................40
15.14 Exhibits and Schedules............................................................40
15.15 No Third Party Beneficiaries......................................................40
15.16 Governing Law.....................................................................40
15.17 Attorney's and Accountant's Fees, Etc.............................................40
15.18 Construction......................................................................41
</TABLE>
Exhibit A - Form of Virginia Articles of Merger
Exhibit B - Form of Promissory Note
Exhibit C - Form of Company Resolutions
Exhibit D - Form of Merger Sub Resolutions
Exhibit E - Form of Company Counsel Opinion
Exhibit F Form of Noncompetition Agreement
Exhibit G - Form of Merger Sub and Parent Counsel Opinion
Exhibit H - Form of Transmittal Letter and Joinder
Schedule 2.7(a) Record Title Owners of Company Common Shares
Schedule 2.7(b) Agreed Upon Procedures
Schedule 2.7(d)(ii) Company Transaction Fees
Schedule 2.7(d)(iii)Closing Date Merger Consideration
Schedule 5.2(a) Corporate Organizational Documents, Minute and Stock Books
Schedule 5.2(b) Officers and Directors of the Company
Schedule 5.4 Consents
Schedule 5.5 Voting Agreements
Schedule 5.6 Company Financial Statements
Schedule 5.7 Case Sales Reports
Schedule 5.9 Taxes
Schedule 5.10 Undisclosed Claims and Liabilities
Schedule 5.11 Changes
Schedule 5.12 Material Contracts and Commitments
Schedule 5.13(a) Encumbrances Upon Equipment
Schedule 5.13(b) Equipment
iv
<PAGE>
Schedule 5.14 Real Estate
Schedule 5.15 Litigation
Schedule 5.17 Antitrust Matters
Schedule 5.18(a) Benefit Plans and Employment Agreements
Schedule 5.18(b) Labor Relations
Schedule 6.2 Consenting Shareholder Conflicting Agreements
Schedule 8.8(a) Distributed Memorabilia
Schedule 8.8(b) Distributed Vehicles
Schedule 8.8(c) Certain Bonuses and Payments
Schedule 8.8(d) Life Insurance Policy
Schedule 9.1 Retiree HealthCare Enrollment Form
Schedule 10.12 Resignations
v
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER is made as of the ____ day of
September, 1999 by and among the following:
(i) Lynchburg Coca-Cola Bottling Co., Inc., a Virginia corporation
(the "COMPANY"),
(ii) Coca-Cola Bottling Co. Consolidated, a Delaware corporation
("PARENT"),
(iii) LCCB Merger Co., a Virginia corporation and wholly-owned
subsidiary of Parent ("MERGER SUB"),
(iv) the shareholders of the Company executing this Agreement on
the signature pages hereto,
(v) the shareholders of the Company who join in the execution of
this Agreement pursuant to Section 15.2 hereof, and
(vi) George M. Lupton, Jr., as the Shareholders' Representative
(the "SHAREHOLDERS' REPRESENTATIVE").
All such above referenced parties to this Agreement are collectively referred to
as the "PARTIES" and are individually referred to as a "PARTY". The
Shareholders' Representative joins in the execution of this Agreement for the
purpose of acknowledging the same and committing to carry out the Shareholders'
Representative's duties and obligations hereunder.
W I T N E S S E T H:
WHEREAS, each of the Company and the Parent are engaged in the
manufacture, distribution or sale of soft drink products of The Coca-Cola
Company and other soft drink franchises; and
WHEREAS, the Boards of Directors of the Company, Parent and Merger Sub
have determined that it is advisable and in the best interests of their
respective shareholders for Parent and Merger Sub to enter into a business
combination with the Company, by means of the merger (the "MERGER") of Merger
Sub with and into the Company, upon the terms and subject to the conditions set
forth herein;
NOW, THEREFORE, in consideration of the mutual promises and conditions
contained herein, and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Parties hereto agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
-----------
"Affiliates" means, with respect to a particular Party, Persons
controlling, controlled by or under common control with that Party, and any
officers and directors of that Party and of its Affiliates. For the purposes of
the foregoing, ownership, directly or indirectly, of 20% or more of the voting
stock or other equity interests shall be deemed to constitute control.
"Agreement" means this Agreement and the Exhibits and Disclosure
Schedules hereto.
"Annual Case Sales Reports" is defined in Section 5.7
"Articles of Merger" is defined in Section 2.2.
"Assets" means all of the assets, properties, goodwill and rights of
every kind and description, real and personal, tangible and intangible, wherever
situated and whether or not reflected in the Company Financial Statements, that
are owned or possessed by the Company.
"Audited Closing Date Balance Sheet" is defined in Section 3.1.
"Business" means the Company's entire business, operations and
facilities.
"Business Day" means any day when the Federal Reserve Bank of Richmond,
Virginia is open for business.
"CBH" is defined in Section 2.7(b).
"Charter Documents" means any Person's certificate or articles of
incorporation, certificate defining the rights and preferences of securities,
articles of organization, general or limited partnership agreement, certificate
of limited partnership, joint venture agreement, operating agreement or similar
document governing such Person.
"Claim Response" is defined in Section 13.4 (a).
"Closing" means the consummation of the Transactions in accordance with
this Agreement.
"Closing Date" means the Effective Time of the Merger.
"Closing Date Merger Consideration" is defined in Section 2.7(d)(iii).
"Company" is defined in the preamble.
"Company Common Share" means a share of the common stock, par value
$4-1/6, of the Company.
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"Company Financial Statements" is defined in Section 5.6.
"Company Transaction Fees" is defined in Section 2.7(d)(ii).
"Confidential Information" means any confidential information or Trade
Secrets of the Company, including personnel information, know-how and other
technical information, customer lists, customer information and supplier
information.
"Consenting Shareholders" means collectively (i) the shareholders of
the Company executing this Agreement on the signature pages hereto and (ii) the
shareholders of the Company who join in the execution of this Agreement pursuant
to Section 15.2 hereof.
"Contracts" is defined in Section 5.12.
"Disclosure Schedule" means any of the Schedules containing information
relating to the Company pursuant to Article V and other provisions hereof that
has been provided to the other Parties and made an Exhibit or Schedule to this
Agreement on the date hereof.
"Discovered Breach" is defined in Section 8.2.
"Dissenting Shareholder" is defined in Section 2.9.
"Dissenting Shares" is defined in Section 2.9.
"Economic Loss" is defined in Section 13.5.
"Effective Time" is defined in Section 2.2.
"Encumbrances" means any lien, mortgage, security interest, pledge,
restriction on transferability, defect of title or other claim, charge or
encumbrance of any nature whatsoever on any property or property interest.
"Equipment" is defined in Section 5.13.
"ERISA" is defined in Section 5.18(c).
"Escrow Quotient" is defined in Section 2.7(d)(i).
"Expense Quotient" is defined in Section 2.7(d)(ii).
"Escrow Funds" is defined in Section 2.7(d)(i).
"Final Merger Consideration" is defined in Section 3.2.
"GAAP" means generally accepted accounting principles consistently
applied with past practices of the Company.
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"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976 or any successor law, and rules and regulations issued pursuant to that Act
or any successor law.
"Indemnified Party" is defined in Section 13.4(a).
"Indemnitor" is defined in Section 13.4(a).
"Indemnity Claim" is defined in Section 13.4(a)
"Initial Merger Consideration" is defined in Section 2.7(a).
"Insurance Plan" is defined in Section 9.1.
"Interim Case Sales Reports" is defined in Section 5.7.
"Inventory" means all inventory, including raw materials, spare parts,
supplies, work in process and finished goods.
"Law" means any statute, law, ordinance, regulation, order or rule of
any federal, state, local, foreign or other governmental agency or body or of
any other type of regulatory body, including those covering energy, safety,
health, transportation, bribery, recordkeeping, zoning, antidiscrimination,
antitrust, labor, employment, wage and hour, and price and wage control matters,
but excluding environmental laws.
"Memorabilia" means any Coca-Cola memorabilia, desks or other personal
property of the Company.
"Merger" is defined in the recitals.
"Merger Consideration" is defined in Section 2.6(a).
"Merger Sub" is defined in the preamble.
"Negative Merger Consideration Adjustment" is defined in Section 3.4.
"Net Working Capital" is defined in Section 2.7(b).
"Noncompetition Agreement" is defined in Section 10.15.
"Notice of Claim" is defined in Section 13.4(a).
"Outstanding Company Common Shares" is defined in Section 2.7(a).
"Parent" is defined in the preamble.
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"Parties" is defined in the preamble.
"Person" means any natural person, corporation, partnership, limited
liability company, proprietorship, association, trust or other legal entity.
"Positive Merger Consideration Adjustment" is defined in Section 3.3.
"Pre-Closing Date" is defined in Article IV.
"Prime Rate" means the prime lending rate as announced from time to
time in The Wall Street Journal.
"Promissory Note" is defined in Section 2.7(c).
"Real Estate" is defined in Section 5.14(a).
"Response Period" is defined in Section 13.4(a).
"Shareholders" is defined in the preamble.
"Shareholders' Representative" is defined in Section 15.1(a).
"Surviving Corporation" is defined in Section 2.1.
"Tax" and "Taxes" means all income, gross receipt, gains, sales, use,
employment, franchise, license, school, profits, property, ad valorem, excise or
other taxes, estimated tax payments and import duties, fees, stamps, taxes and
assessments or charges of any kind whatsoever (whether payable directly or by
withholding), together with any deficiencies, additional charges, interest and
any penalties, additions to tax or additional amounts imposed by any taxing
authority with respect thereto, or any charges, interest or penalties imposed by
any taxing authority as the result of the failure to file any return.
"Third Party Claim" is defined in Section 13.4(d).
"Trade Secrets" means all know-how, trade secrets, confidential
information, customer lists, software, technical information, data, process
technology, plans, drawings and blue prints, owned, used or licensed (as
licensor or licensee) by the Company, except for any such item that is generally
available to the public.
"Transaction Documents" means this Agreement and the Promissory Note.
"Transactions" means the Merger and the other transactions contemplated
by the Transaction Documents.
"VSCA" is defined in Section 2.1.
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ARTICLE II
THE MERGER
----------
2.1 THE MERGER. Upon the terms and subject to the conditions hereof,
and in accordance with the relevant provisions of the Virginia Stock Corporation
Act (the "VSCA"), Merger Sub shall be merged with and into the Company as soon
as practicable, but in any event within the time limitations specified in
Article IV. Following the Merger, the Company shall continue as the surviving
entity (the "SURVIVING CORPORATION") under the name "Lynchburg Coca-Cola
Bottling Co., Inc." and shall continue its existence under the Laws of the
Commonwealth of Virginia, and the separate corporate existence of the Merger Sub
shall cease.
2.2 EFFECTIVE TIME. The Merger shall be consummated by filing with the
Clerk of the State Corporation Commission of Virginia the articles of merger,
executed in accordance with the VSCA, substantially in the form of Exhibit A
attached hereto (the "ARTICLES OF MERGER") and filing any other appropriate
documents in accordance with the VSCA. The Merger shall be effective at the
later of (A) the effective date specified in the Articles of Merger or (B) the
effective time of the last of such filings (the "EFFECTIVE TIME").
2.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth
in the VSCA and the Articles of Merger.
2.4 ARTICLES OF INCORPORATION AND BYLAWS. The Articles of Incorporation
of the Company at the Closing Date shall be the Articles of Incorporation of the
Surviving Corporation, until duly amended. The Bylaws of the Company at the
Closing Date, as amended as follows, shall be the Bylaws of the Surviving
Corporation, until duly amended. The Bylaws shall be amended effective as of the
Closing Date as follows:
Article IV, Section 1 shall be amended and restated in its entirety as
follows:
SECTION 1. ELECTION AND NUMBER OF DIRECTORS. The
affairs of the Corporation shall be managed by a Board of
Directors consisting of two members. The number of directors
may be increased or decreased from time to time by amendment
of these Bylaws. Directors shall be elected annually at the
annual meeting of the stockholders or at any meeting held in
place thereof. Each director shall hold office until his
successor is duly elected and qualified. Directors need not be
residents of the Commonwealth of Virginia or stockholders of
the Corporation.
2.5 DIRECTORS AND OFFICERS. Any directors and officers of Merger Sub at
the Closing Date shall become the directors and officers (in the same
capacities), respectively, of the Surviving Corporation, until successors or
additional directors and officers are appointed in accordance with the terms of
the Surviving Corporation's Bylaws. Each Consenting Shareholder holding any
officer or director position with the Company hereby resigns from the same
effective on the Closing Date.
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2.6 CONVERSION OF SHARES.
---------------------
(A) AUTOMATIC CONVERSION. At the Closing Date, each Company Common
Share issued and outstanding immediately prior to the Closing Date shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into the right to receive a net amount in cash that shall be
determined and paid according to Section 2.7 (the "MERGER CONSIDERATION") or
Section 2.9, as applicable. Any Company Common Share held in the treasury of the
Company shall be cancelled. Each share of capital stock of Merger Sub issued and
outstanding immediately prior to the Closing Date shall be converted by virtue
of the Merger into one share of capital stock of the Surviving Corporation.
(B) DELIVERY AND CANCELLATION OF CERTIFICATES; NO FURTHER TRANSFERS. At
the Pre-Closing Date, each Consenting Shareholder shall deliver: (i)
certificates representing all of the Company Common Shares owned by such holder
duly endorsed for transfer to the Surviving Corporation or accompanied by other
appropriate surrender documentation and surrendered in accordance herewith upon
delivery and (ii) an executed Transmittal Letter and Joinder. All such Common
Company Shares shall be cancelled at the Closing Date. After the Pre-Closing
Date, there shall be no transfers of Company Common Shares that were outstanding
immediately prior to the Pre-Closing Date on the stock transfer books of the
Company. If, after the Pre-Closing Date and until the first anniversary of the
Closing Date, certificates representing Company Common Shares are presented for
transfer in the manner required at the Pre-Closing Date, accompanied by, at the
holder's option either (i) an executed Transmittal Letter and Joinder or (ii)
such documentation as may be required by the Surviving Corporation or Parent in
their sole discretion, they shall be cancelled and exchanged for the Merger
Consideration (without interest) in a similar manner as provided in this Article
II with respect to certificates delivered at the Pre-Closing Date (i.e., with
application of the Escrow Quotient and Expense Quotient, as defined in Section
2.7(d) below). At the Closing Date, the stock ledger of the Company shall be
closed.
2.7 MERGER CONSIDERATION AND PAYMENT.
---------------------------------
(A) AMOUNT. The Merger Consideration with respect to each Company
Common Share owned by a Consenting Shareholder and delivered in accordance
herewith shall be equal to the sum of (i) the Initial Merger Consideration, plus
or minus (ii) the difference (if any) between the Initial Merger Consideration
and the Final Merger Consideration (as defined in Section 3.2). The "INITIAL
MERGER CONSIDERATION" shall be an amount equal to the quotient (rounded to the
nearest $0.01) obtained by dividing (i) an amount equal to Twenty Four Million
Six Hundred Thousand Dollars ($24,600,000) plus the estimated Net Working
Capital (as defined below) on the Closing Date by (ii) the total number of
Company Common Shares issued and outstanding immediately prior to the Closing
Date (the "OUTSTANDING COMPANY COMMON SHARES"). The record title owners, number
of Outstanding Company Common Shares owned and the certificate numbers of those
Outstanding Company Common Shares are set forth on Schedule 2.7(a).
(B) NET WORKING CAPITAL. Since the actual Net Working Capital will not
be known at the Closing Date, an estimate of the same as of the Pre-Closing Date
will be made for purposes of payment of the Initial Merger Consideration at the
Closing Date. The estimated Net Working Capital will be computed by the Company,
and such estimate shall be reviewed by
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Cherry Bekaert & Holland ("CBH"). CBH shall confirm that such estimate is
materially correct based upon procedures agreed upon by the Company and Merger
Sub as set forth in Schedule 2.7(b). Such estimated Net Working Capital shall be
provided to Merger Sub and Parent two (2) Business Days prior to the Pre-Closing
Date and so confirmed again by CBH to have had no material changes on the
Closing Date. Costs related to such computation of estimated Net Working Capital
shall be borne by the Consenting Shareholders as a Company Transaction Fee (as
defined in Section 2.7(d)(ii) below). "NET WORKING CAPITAL" means current assets
of the Company less current liabilities of the Company, all at the Closing Date,
determined in accordance with GAAP; provided, however, that such current
liabilities shall not include the current portion of any amounts due under the
lease of the 1998 Cadillac Seville automobile currently used by George M.
Lupton, Jr., which shall not effect a reduction in Net Working Capital.
(C) PROMISSORY NOTE. At the Closing Date, Merger Sub shall execute a
promissory note in favor of the Shareholders' Representative on behalf of the
Consenting Shareholders in the form attached hereto as Exhibit B (the
"PROMISSORY NOTE"), the principal amount of which shall be the aggregate amount
of the Escrow Funds (as defined in Section 2.7(d)(i)), which shall be
unconditionally guaranteed by Parent. The principal amount of the Promissory
Note shall be reduced from time to time effective as of the times set forth
below by the amount of (i) any Negative Merger Consideration Adjustment that
exceeds the funds then available for Company Transaction Fees, (ii) any
undisputed Indemnity Claims against the Company or the Consenting Shareholders
and (iii) any disputed Indemnity Claims against the Company or the Consenting
Shareholders that are finally resolved (pursuant to Article XIII) in favor of
the Surviving Corporation, Merger Sub or Parent. The principal amount of the
Promissory Note may be increased from time to time effective as of the time set
forth below in the event that additional Escrow Funds are received after the
Closing Date pursuant to Section 15.2 and 2.6(b) hereof. Any reduction or
increase to the principal amount of the Promissory Note is referred to as an
"ADJUSTMENT." Adjustments shall be effective (i) for the Negative Merger
Consideration Adjustment as of the date presented to the Shareholders'
Representative and (ii) for any Indemnity Claims, as of the date such Indemnity
Claim is made. In the event that an Adjustment occurs, the Promissory Note will
be replaced in the following manner: The Surviving Corporation shall deliver to
the Shareholders' Representative's counsel a replacement note bearing the issue
date of the original note, which will be held in escrow until the Shareholders'
Representative's counsel has obtained the original note from the Shareholders'
Representative. The replacement note shall provide for interest to be computed
on the Principal Amount, as adjusted by the Adjustment as of the date such
Adjustment was effective. The Shareholders' Representative agrees to promptly
surrender the promissory note it has held to its counsel. The surrendered note
shall be marked "canceled," and dispatched to the Surviving Corporation's
counsel by a guaranteed overnight courier service (simultaneously sending to the
Surviving Corporation's counsel a facsimile of the canceled note along with the
airbill tracking number). Upon dispatch, the Shareholders' Representative's
counsel shall be authorized to release the replacement note to the Shareholders'
Representative.
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(D) PAYMENT. In conjunction with the delivery of certificates
representing all of the Company Common Shares owned by each Consenting
Shareholder, duly endorsed for transfer to the Surviving Corporation or
accompanied by appropriate transfer and surrender documentation, the Merger
Consideration shall be paid to or for the benefit of each such Consenting
Shareholder as follows:
(i) On the Closing Date, the Promissory Note shall be
delivered to the Shareholders' Representative in the principal
amount of the "ESCROW FUNDS," which shall mean a portion of
the Initial Merger Consideration (determined based on
estimated Net Working Capital) equal to (A) the quotient of
One Million Dollars ($1,000,000) divided by the Outstanding
Company Common Shares (the "ESCROW QUOTIENT") multiplied by
(B) the number of Company Common Shares tendered in accordance
with Section 2.6(b) at or prior to the Closing Date.
(ii) On the Closing Date, a portion of the Initial
Merger Consideration (determined based on estimated Net
Working Capital) equal to (A) the quotient of One Million Five
Hundred Thousand Dollars ($1,500,000) divided by the
Outstanding Company Common Shares (the "EXPENSE QUOTIENT")
multiplied by (B) the number of Company Common Shares tendered
in accordance with Section 2.6(b) at or prior to the Closing
Date, shall be paid by wire transfer of immediately available
funds to the Shareholders' Representative in accordance with
the instructions set forth on Schedule 2.7(d)(ii), which
amounts are to be applied by the Shareholders' Representative
in payment of the fees and expenses of the Company and the
Consenting Shareholders incurred and to be incurred in
connection with the Transactions, including any amounts that
may be required pursuant to Section 3.4 (the "COMPANY
TRANSACTION FEES");
(iii) On the Closing Date, the balance of the Initial
Merger Consideration (determined based on estimated Net
Working Capital) (the "CLOSING DATE MERGER CONSIDERATION")
multiplied by the number of Company Common Shares tendered in
accordance with Section 2.6(b) at or prior to the Closing Date
shall be paid at the Closing Date by wire transfer of
immediately available funds to the Shareholders'
Representative in accordance with the instructions set forth
on Schedule 2.7(d)(iii); and
(iv) The Positive Merger Consideration Adjustment (as
defined in Section 3.3) (if any) shall be paid as provided in
Article III hereof.
Holders of Company Common Shares other than Consenting Shareholders shall be
paid consideration for such Company Common Shares only as provided in Sections
2.6(b) and 2.9 hereof, as applicable.
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2.8 SHAREHOLDER CONSENT. Each Consenting Shareholder hereby (i) agrees
to vote all of such Consenting Shareholder's Company Common Shares in favor of
the Merger, this Agreement and the Transactions, and in favor of the adoption of
resolutions of the shareholders of the Company approving the same and (ii)
otherwise agrees to take any and all actions necessary to effect the
Transactions. None of the Consenting Shareholders shall rescind, revoke or
modify such vote prior to the Closing Date.
2.9 DISSENTING SHARES. Any shareholder of the Company who shall have
lawfully dissented from the Merger in accordance with the VSCA and who has
properly exercised such shareholder's rights to demand payment of the fair value
of the shareholder's Company Common Shares (the "DISSENTING SHARES") as provided
in the VSCA (the "DISSENTING SHAREHOLDER") shall thereafter have only such
rights as are provided a Dissenting Shareholder in accordance with the VSCA and
shall have no other rights under this Agreement; provided, that if a Dissenting
Shareholder shall withdraw the demand for appraisal or shall become ineligible
for such appraisal, then such Dissenting Shareholder's Dissenting Shares
automatically shall cease to be Dissenting Shares and shall be converted into
and represent only the right to receive from the Surviving Corporation the
Merger Consideration provided for in Section 2.7, without interest thereon, upon
surrender of the certificate or certificates representing the Dissenting Shares,
and execution of a Transmittal Letter and Joinder in accordance with Section
15.2, whereby the Dissenting Shareholder becomes a Consenting Shareholder and a
party to the Transaction Documents, for purposes of indemnification hereunder.
2.10 FURTHER ASSURANCES. If, at any time after the Closing, Parent,
Merger Sub or the Surviving Corporation shall consider or be advised that any
further deeds, assignments or assurances in law or any other actions are
necessary, desirable or proper to vest, perfect or confirm of record or
otherwise, in the Surviving Corporation, the title to any property or rights of
the Company acquired or to be acquired by reason of, or as a result of, the
Transactions, the Company and the Consenting Shareholders will cause the
Company's proper officers and directors (as constituted prior to the Closing
Date) to execute and deliver all such proper deeds, assignments and assurances
in law and do all things necessary, desirable or proper to vest, perfect or
confirm title to such property or rights in the Surviving Corporation and
otherwise to carry out the purpose of this Agreement, and the proper officers
and directors of the Surviving Corporation are fully authorized and directed in
the name of the Company and the Consenting Shareholders or otherwise to take any
and all such actions.
ARTICLE III
MERGER CONSIDERATION ADJUSTMENT
-------------------------------
3.1 AUDITED CLOSING DATE BALANCE SHEET. A balance sheet for the Company
as of the Closing Date at 11:59 p.m. will be prepared by the Surviving
Corporation in accordance with GAAP and audited by CBH (the "AUDITED CLOSING
DATE BALANCE SHEET") within one hundred twenty (120) days immediately following
the Closing Date and presented to the Shareholders' Representative for review
and comment. The cost of the audit shall be borne by the Surviving Corporation.
The Audited Closing Date Balance Sheet shall include and set forth a computation
of the actual Net Working Capital.
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3.2 FINAL MERGER CONSIDERATION. The "FINAL MERGER CONSIDERATION" shall
be an amount equal to the quotient (rounded to the nearest $0.01) obtained by
dividing (i) an amount equal to the sum of Twenty-Four Million Six Hundred
Thousand Dollars ($24,600,000) plus actual Net Working Capital (determined in
accordance with Section 2.7(b)) by (ii) Outstanding Company Common Shares.
3.3 PAYMENT OF POSITIVE MERGER CONSIDERATION ADJUSTMENT. If the Initial
Merger Consideration (as determined based on estimated Net Working Capital) is
less than the Final Merger Consideration (as determined based on actual Net
Working Capital) then an amount equal to the Positive Merger Consideration
Adjustment (as defined below) multiplied by the number of Company Common Shares
tendered in accordance with Section 2.6(b) at or prior to the Closing Date shall
be paid by wire transfer of immediately available funds to the Shareholders'
Representative within five (5) Business Days immediately following the later of
(i) the Shareholders' Representatives' approval of the Audited Closing Date
Balance Sheet or (ii) a final determination of the same pursuant to Section 3.6
hereof. The "POSITIVE MERGER CONSIDERATION ADJUSTMENT" means the amount by which
the Final Merger Consideration exceeds the Initial Merger Consideration.
3.4 REPAYMENT OF NEGATIVE MERGER CONSIDERATION ADJUSTMENT. If the
Initial Merger Consideration exceeds the Final Merger Consideration then an
amount equal to the Negative Merger Consideration Adjustment (as defined below)
multiplied by the number of Company Common Shares tendered in accordance with
Section 2.6(b) will be paid to the Surviving Corporation by the Shareholders'
Representative from the Merger Consideration transferred to the Shareholders'
Representative pursuant to Section 2.7(d)(ii) with respect to Company
Transaction Fees, with any balance to be paid from the Escrow Funds (resulting
in a decrease in the principal amount of the Promissory Note in the amount of
the decrease in the Escrow Funds). If the Negative Merger Consideration
Adjustment, so determined, is an amount that exceeds the sum of (i) funds then
available for payment of Company Transaction Fees and (ii) the Escrow Funds,
then to the extent of such difference, the Consenting Shareholders shall remit
payment of the difference, each in proportion to their ownership of the Company
Common Shares, within five (5) Business Days immediately following written
notice of demand for such repayment given by the Surviving Corporation to the
Shareholders' Representative. The "NEGATIVE MERGER CONSIDERATION ADJUSTMENT"
means the amount by which the Initial Merger Consideration exceeds the Final
Merger Consideration.
3.5 REVIEW BY THE SHAREHOLDERS' REPRESENTATIVE. During the preparation
of the Audited Closing Date Balance Sheet, the Shareholders' Representative (and
the Shareholders' Representative's accounting representatives) shall be
permitted to be present to review the details of such preparation, to examine
the working papers in connection therewith and to discuss the preparation of the
Audited Closing Date Balance Sheet, the Net Working Capital calculation and the
conduct of the audit. Such discussions shall be held by telephone or at places
mutually agreeable to the Shareholders' Representative (and the Shareholders'
Representative's accounting representatives) and the Surviving Corporation. All
such review activities by the Shareholders' Representative shall be at the
expense of the Shareholders.
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3.6 SETTLEMENT PROCEDURE. In the event that the Shareholders'
Representative disagrees with the Net Working Capital computation, the
Shareholders' Representative shall deliver to the Surviving Corporation (no
later than thirty (30) Business Days after delivery to the Shareholders'
Representative of the Audited Closing Date Balance Sheet) a written description
of any such disagreements, and the Shareholders' Representative and the
Surviving Corporation shall negotiate in good faith to resolve any disagreement
with respect thereto. If, after a period of fifty (50) Business Days following
the date on which the Surviving Corporation delivers to the Shareholders'
Representative the Audited Closing Date Balance Sheet, the Surviving Corporation
and the Shareholders' Representative have not resolved any such disagreement,
then the Shareholders' Representative shall select within five (5) Business Days
following the end of such period one firm from the following accounting firms:
Arthur Andersen L.L.P., KPMG L.L.P. or BDO Seidman L.L.P. The resolution of the
disagreement shall be made by the selected accounting firm within twenty (20)
Business Days after the date on which such firm of accountants was selected or
as soon thereafter as possible and shall be binding upon the Parties. The costs
and expenses for the services of such firm of accountants shall be borne equally
by the Consenting Shareholders and the Surviving Corporation.
ARTICLE IV
CLOSING
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The delivery of the Transaction Documents and other instruments,
certificates and legal opinions required hereunder shall take place at the
offices of Kennedy Covington Lobdell & Hickman, L.L.P, 100 North Tryon Street,
Suite 4200, Charlotte, North Carolina, commencing at 10:00 a.m. Eastern Standard
Time on October 26, 1999 or on such other date or such other time or place as
the Parties shall mutually agree (the "PRE-CLOSING DATE"). On the Pre-Closing
Date, Merger Sub and the Company shall deliver to the Clerk of the State
Corporation Commission of Virginia duly executed Articles of Merger as required
by the VSCA and the Parties shall take all such other and further actions as may
be required by the VSCA to make the Merger effective upon the terms and subject
to the conditions hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
----------------------------------------------------
As a material inducement to Merger Sub and Parent entering into this
Agreement and consummating the Transactions, the Company and each Consenting
Shareholder hereby make the following representations and warranties to Merger
Sub and Parent, each of which shall be continuing, shall be true at the date of
execution hereof and on the Closing Date, with the same force and effect as if
made on the Closing Date, and shall survive the Closing as provided in Section
13.6 below. Where a particular representation or warranty is limited to the
Company's knowledge, or to the knowledge of the Company, it shall refer to (i)
the actual knowledge of George M. Lupton, Jr., George M. Lupton, III, Mary B.
Hunt, William C. Sampson or James A. Lowery and (ii) knowledge that such persons
reasonably should have had, given their respective positions and involvement
with the Company.
5.1 CORPORATE EXISTENCE, AUTHORITY AND BINDING EFFECT. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the
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Commonwealth of Virginia. The Company has full power and authority to own its
properties and conduct the Business as now being conducted. The Company has full
corporate power and authority to execute each Transaction Document and
consummate the Transactions, and its Board of Directors, and as of the Closing
Date, its shareholders, have properly approved the Transactions. True and
correct copies of the resolutions of the Board of Directors of the Company, and
the form of resolutions that will be adopted as of the Closing Date by its
shareholders, authorizing the Company to enter into and consummate the
Transactions, properly certified by the Secretary of the Company, are attached
hereto as Exhibit C. Upon execution and delivery, each Transaction Document
shall be the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except to the extent that the
same may be limited by laws concerning insolvency, bankruptcy or similar laws or
equitable principles affecting the enforcement of creditors' rights generally.
5.2 ORGANIZATIONAL DOCUMENTS.
-------------------------
(a) Delivered Documents. Company has provided to Merger Sub (i) the
Certificate of Incorporation of Lynchburg Coca-Cola Bottling Works,
Incorporated, dated June 21, 1908; (ii) Articles of Amendment Restating the
Articles of Incorporation of Lynchburg Coca-Cola Bottling Works, Incorporated
(Under the Name of Lynchburg Coca-Cola Bottling Co. Inc.); (iii) Bylaws of the
Company, as amended June 30, 1996; (iv) copies of minute books for Board of
Directors meetings of the Company from March 8, 1984 through July 28, 1999; and
(v) a list of record title holders of Company Common Shares, certificate numbers
and number of shares (which is attached as Schedule 2.7(a)) and a copy of the
stock book receipts for currently issued and outstanding Company Common Shares.
Copies of each of these documents are attached hereto as Schedule 5.2(a).
(b) Effect of Disclosure. These documents are true and complete and
contain (i) all amendments thereto to date, (ii) a record of all material
corporate proceedings of the Company for the period from March 8, 1984 to July
28, 1999 (in the case of the minute books) and (iii) a copy of the stock book
receipts for currently issued and outstanding Company Common Shares.
Specification or limitation of such disclosure is not intended to and shall not
affect, diminish or limit in any way any other representations or warranties
made in Article V or Article VI hereof. Schedule 5.2(b) contains a true and
complete list of all of the current officers and directors of the Company.
5.3 NO VIOLATION OR CONFLICT. Neither the execution and delivery of the
Transaction Documents, the consummation by the Company of the Transactions, nor
the fulfillment and compliance with the terms and provisions hereof or thereof
will (i) conflict with or result in a breach of or default under any of the
terms, conditions or provisions of any loan, note, bond, mortgage, lease,
indenture, license, contract, agreement or other instrument or obligation to
which the Company is a party or by which any of its properties or assets are
bound (excluding the franchise agreements issued by or under the authority of
The Coca-Cola Company or its related entities to which the Company is a party
that automatically terminate upon a change of control in accordance with their
terms), (ii) conflict with any provision of the Company's Charter Documents,
Bylaws or other corporate agreement binding on the Company or (iii) violate any
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judgment, order, decree, Law or judicial or governmental restriction to which
the Company is subject or otherwise constitute an ultra vires act.
5.4 NO CONSENTS. Except as set forth in Schedule 5.4, no consent or
approval of, or declaration, filing or registration with, any non-governmental
third party or any governmental authority is required to be obtained by the
Company (i) in connection with the execution of this Agreement or any other
Transaction Document, (ii) for the consummation of the Transactions or (iii) for
the continued operation of the Business.
5.5 CAPITALIZATION. The authorized capital stock of the Company
consists of Three Thousand Six Hundred (3,600) shares of Company Common Shares,
of which One Thousand Five Hundred Ninety Three (1,593) shares are outstanding.
All of such Company Common Shares are owned of record by the shareholders set
forth in Schedule 2.7(a). All of such shares are validly issued, fully paid and
non-assessable. There are no securities presently outstanding, and at the
Closing Date there will not be any outstanding securities, which are convertible
into, exchangeable for or carry the right to acquire, equity securities of the
Company, or subscriptions, warrants, options, calls, convertible securities,
registration or other rights, arrangements or commitments obligating the Company
to issue any of its equity securities or any ownership interest or rights
therein. Except as set forth on Schedule 5.5, there are no voting trusts or
other agreements or understandings to which the Company is bound with respect to
the voting of the Company Common Shares. Immediately following the Closing Date,
by virtue of the Merger, Parent will hold one hundred percent (100%) of the
issued and outstanding capital stock of the Surviving Corporation free and clear
of any Encumbrances.
5.6 FINANCIAL STATEMENTS. Attached as Schedule 5.6 are copies of the
audited financial statements of the Company for the fiscal years ended December
31, 1997 and December 31, 1998 (the "COMPANY FINANCIAL STATEMENTS"). Each of the
Company Financial Statements has been prepared in accordance with GAAP (except
as set forth in Note 8 to the Company Financial Statements) and fairly presents
the financial position and results of operations of the Company as of the
applicable dates and for the applicable periods then ended in a materially
correct manner.
5.7 CASE SALES REPORTS. Attached hereto as Schedule 5.7 are copies of
case sales reports (i) for the fiscal years of the Company ended December 31,
1997 and December 31, 1998 (together, the "ANNUAL CASE SALES REPORTS") and (ii)
monthly reports for the portion of the fiscal year ended July 31, 1999 (the
"INTERIM CASE SALES REPORTS"). The Annual Case Sales Reports are materially
correct. The Interim Case Sales Report have been prepared in a manner consistent
with past practices.
5.8 ACCOUNTS RECEIVABLE. All accounts receivable reflected on the
Audited Closing Date Balance Sheet will have arisen from transactions in the
ordinary course of business, credit being extended in a manner consistent with
the Company's regular credit practices. All of the accounts receivable included
on the Audited Closing Date Balance Sheet will be collectible in full within one
hundred eighty (180) days from the respective dates of sale. There are no facts
or circumstances (other than general economic conditions) that are likely to
result in any increase in the uncollectability of such accounts receivable, nor
has the Company been notified by any
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customer that such customer disputes or otherwise intends not to pay its debt,
as reflected in such accounts receivable, in the ordinary course of business.
5.9 TAXES. Except as set forth in Schedule 5.9:
(A) RETURNS AND PAYMENT OF TAXES. All tax returns required to be filed
on or prior to the Closing Date by the Company with all taxing authorities have
been, or prior to the Closing Date will have been, filed and are true, complete
and correct. All Taxes shown to be due and payable on such returns (or otherwise
due and payable) and all other Taxes payable by the Company have been, or prior
to the Closing Date will have been, paid in full on a timely basis. Such Taxes
include, without limitation, Taxes imposed by any federal, territorial, state,
local or foreign government, subdivision or regulatory agency. True and complete
copies of all tax returns, reports and other filings of the Company that have
been filed for any periods since December 31, 1997 are attached as Schedule 5.9.
(B) AUDITS. None of the Company's tax returns for any period subsequent
to December 31, 1997 has been audited by the appropriate taxing authorities. All
issues arising out of prior audits have been resolved, the Company has made all
payments required as a result of such resolutions, and such payments were
reflected in the Company Financial Statements for periods prior to December 31,
1997. The Company has not agreed to any extensions of time of any applicable
statutes of limitation in connection with the filing of tax returns or payment
of taxes. No audit or examination, or claim or proposed assessment, by any
taxing authority is now pending or to Company's knowledge threatened against the
Company.
(C) WITHHOLDING OF TAXES. The Company has withheld, collected and paid
to the proper tax depositories or collecting authorities all amounts required to
be so withheld and collected from employees, creditors, stockholders or third
parties, including without limitation, backup withholding and withholding from
each payment made to each employee of the Company the amount of all Taxes
(including without limitation federal income taxes, Federal Insurance
Contributions Act taxes and state and local income, payroll and wage taxes)
required to be withheld or collected therefrom.
5.10 ABSENCE OF UNDISCLOSED CLAIMS AND LIABILITIES. Except as set forth
on Schedule 5.10 and Schedule 5.12, the Company has no material liability
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due and regardless of when asserted), except for
(i) liabilities reflected in the liabilities section of the latest Company
Financial Statement, (ii) liabilities under agreements, contracts, purchase
orders and other similar arrangements that have arisen in the ordinary course of
business (none of which relates to a breach of contract) and (iii) liabilities
that have arisen since the date of the latest Company Financial Statement in the
ordinary course of business (none of which relates to breach of contract, breach
of warranty, tort, infringement, violation of Law, or any action, suit or
proceeding, including any liability under any health and safety Laws).
5.11 ABSENCE OF CHANGE. From December 31, 1998 through the
Closing Date, except as disclosed in Schedule 5.11 or as contemplated by this
Agreement:
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(A) the Business has been conducted in the ordinary course
consistent with historical methods of operation;
(B) the Inventory of the Business has been maintained at ordinary,
normal and customary levels, and no extraordinary change in purchases or sales
has occurred;
(C) the Company has not sold, contracted to sell, conveyed,
transferred, assigned, distributed or otherwise disposed of any Assets of the
Business, or any rights thereto, except for (i) the sale of Inventory in the
ordinary and customary course of business, (ii) the Transactions and (iii)
matters set forth on Schedule 8.8(a), Schedule 8.8(b) and Schedule 8.8(d);
(D) the Company has not caused any Encumbrance to be placed
against any Assets of the Business;
(E) except as set forth on Schedule 8.8(c), the Company has not granted
an increase in any bonus, fringe benefit, incentive or other compensation
payable, or to become payable (except normal and customary salary increases and
performance bonuses consistent with past practice), to any employee or agent of
the Business, nor made any oral or written commitment to adopt or grant any
bonus, incentive compensation, deferred compensation, profit sharing, pension,
post employment or severance benefit (including insurance), golden parachute
agreement, change of control agreement or other employee benefit;
(F) except as provided in clauses (c) and (e) above, the Company has
not made any declaration, setting aside or payment of any dividend or other
distribution of Assets (whether in cash, stock or property) with respect to the
capital stock of the Company, or any direct or indirect redemption, purchase or
other acquisition of such capital stock;
(G) the Company has not canceled, compromised, waived or released any
right or claim (or series of related rights and claims) relating to the Business
outside the ordinary course of business; and
(H) the Company has not granted any license or sublicense of any rights
with respect to any of its contract rights.
5.12 MATERIAL CONTRACTS AND COMMITMENTS. Except as set forth on
Schedule 5.12 or entered into after the date hereof with the consent of Merger
Sub, the Company is not a party to any:
(A) contract for employment of any officer, individual employee, or
other person or entity on a full-time, part-time, consulting or other basis, or
agreement relating to loans to officers, directors or Affiliates, other than
advances in the ordinary course of business;
(B) agreement or indenture relating to the borrowing of money or to the
mortgaging, pledging or otherwise placing an Encumbrance on any Asset or group
of Assets of the Company;
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(C) guarantee of any obligation for borrowed money or otherwise;
(D) agreement with respect to the lending or investing of funds;
(E) lease or agreement under which it is lessee of or holds or operates
any property, real or personal, owned by any other Person;
(F) lease or agreement under which it is lessor of or permits any third
party to hold or operate any property, real or personal, owned or controlled by
the Company;
(G) assignment, license, indemnification or agreement with respect to
any form of intangible property, including any patent, trademark, trade name,
copyright, know-how, Trade Secret or Confidential Information;
(H) contract or group of related contracts with the same party
(excluding purchase orders entered into in the ordinary course of business) that
are either exclusive arrangements for the purchase or sale of products or
services or for the purchase or sale of products or services under which the
delivered balance of such products and services has a selling price in excess of
$50,000;
(I) contract that prohibits the Company from freely engaging in
business anywhere in its franchise territory;
(J) contract relating to the distribution, marketing or sales of
the Company's products;
(K) contract with any officer, director or shareholder, or other
insider; or
(L) other agreement material to the Company not entered into in the
ordinary course of business.
Those agreements, leases, contracts, commitments or other agreements
set forth on Schedule 5.12 are referred to as "CONTRACTS."
Except as disclosed in Schedule 5.12, the Company has performed in all
material respects all obligations required to be performed by it and is not in
material default under, or in material breach of nor in receipt of any claim of
material default or breach under, any such Contract. No event has occurred which
with the passage of time or the giving of notice or both would result in a
material default, breach or event of noncompliance under any such Contract. To
the knowledge of the Company, each of the Contracts is valid, in full force and
effect, and enforceable in accordance with its terms, except to the extent that
the same may be limited by laws concerning insolvency, bankruptcy, or similar
laws or equitable principles affecting the enforcement of creditors' rights
generally.
5.13 GOOD TITLE AND ENCUMBRANCES. Except as set forth in Schedule
5.13(a), the Company has good and marketable title to, or valid and subsisting
leasehold interests in, all of
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the Assets, free and clear of any and all Encumbrances. Schedule 5.13(b) sets
forth a complete and accurate list of all equipment (including vehicles) that
are used in the Business (the "EQUIPMENT").
5.14 REAL ESTATE.
(A) GENERAL. Except for the real estate listed on Schedule 5.14 (the
"REAL ESTATE"), there is no real property owned or continuously occupied by the
Company and used or connected with the Business.
(B) UTILITY CONNECTIONS. To the Company's knowledge, all public utility
connections serving the Business have been completed, installed, activated, and
paid for and are in compliance with applicable codes, rules and regulations.
(C) TAXES AND UTILITIES. To the Company's knowledge, no condition
exists that would result in an increase in tax assessments covering the Real
Estate or utility rates affecting the Real Estate or the Business.
(D) ACCESS. To the Company's knowledge, the Company presently has the
unencumbered right to use (and following the Transactions the Surviving
Corporation will continue to have the unencumbered right to use) all accesses
from the Real Estate to and from public thoroughfares, as such accesses are
presently configured and utilized.
(E) RIGHT TO OPERATE. To the Company's knowledge, the Company has the
legal right to operate all parts of the Real Estate.
(F) DISCLAIMER OF CERTAIN WARRANTIES. Merger Sub and Parent acknowledge
that except as set forth in this Section 5.14 and except as to matters relating
to title and Encumbrances, the condition of the Real Estate is warranted only AS
IS - WHERE IS.
5.15 NO LITIGATION. Except as set forth in Schedule 5.15, there is no
governmental or private litigation, investigation, proceeding, claim, action,
suit or audit of any kind whatsoever pending or, to the Company's knowledge,
threatened against the Company, the Business, or any of the Assets. The Company
has no knowledge or reason to believe that there is any private person, other
entity, or governmental agency which has any basis for any cause of action that
would cause the Company, the Business, the Surviving Corporation, Merger Sub or
Parent to suffer any loss or liability not disclosed herein.
5.16 COMPLIANCE WITH LAWS. To the Company's knowledge, neither the
Company nor the Business is in violation of, or has received a notice of
potential violation of, any applicable Law relating to or affecting the
ownership of the Assets or the operation or conduct of the Business, including
those relating to antitrust, trade regulation, licensing and protection of the
health and safety of persons (whether or not employees).
5.17 ANTITRUST MATTERS. The Company and the Business are, and
throughout the applicable statutory period of limitations have been, in
compliance with all Laws pertaining
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or relating in any way to the regulation of competition or trade among or
between business entities, including but not limited to, Sections 1 and 2 of the
Sherman Act, Section 3 of the Clayton Act, the Robinson-Patman Act, the Lanham
Act, Section 5 of the Federal Trade Commission Act and applicable state
antitrust and trade Laws. The Business has been conducted in full and complete
compliance with any and all such Laws. To Company's knowledge, except as set
forth on Schedule 5.17, there is, and has been, no grand jury or other federal
or state investigation pending with regard to any antitrust matters involving
the Company or the Business.
5.18 EMPLOYEE MATTERS.
(A) BENEFIT PLANS AND EMPLOYMENT AGREEMENTS. Schedule 5.18(a) sets
forth a complete and accurate list and description of all employee benefit plans
of any kind or nature and all agreements between the Company and any of its
employees (or representatives thereof including any applicable union),
consultants, officers and directors, and all other persons performing services
for the Company, relating to their employment by, or performance of services
for, the Company or their compensation therefor, other than oral employment
agreements with employees terminable at will. Such plans and agreements include,
without limitation, any deferred compensation agreements, change in control
agreements, golden parachute agreements, profit-sharing plans and any bonus,
option, share purchase or other similar plan. The Company is in compliance in
all material respects with all its obligations under, and all applicable Laws
relating to, such plans and agreements, and there are no pending or anticipated
claims against the Company relating thereto.
(B) LABOR RELATIONS. Except as disclosed on Schedule 5.18(b),
subsequent to December 31, 1997, neither the Company nor the Business is, or has
been, involved in any labor discussion with any unit or group seeking to become
the bargaining unit for any of its employees, nor does the Company have any
notice or knowledge that any such unit or group has announced an intention to
commence any organizational activities among the employees of the Business.
Except as disclosed on Schedule 5.18(b), the Company has not been accused,
notified or made aware of any pending unfair labor or employment practice or
discriminatory act or omissions, nor is there any pending or threatened strike,
work stoppage, or other labor dispute affecting the Company or the Business.
(C) ERISA COMPLIANCE. Without limiting the generality of the foregoing,
all plans of the Company subject to the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") are in compliance with ERISA. Neither the Company
nor any fiduciary as defined in Section 3(21) of ERISA has taken any action or
failed to take any action which would result in any liability to the Surviving
Corporation after the Closing Date with respect to any such plans or any welfare
benefit plan within the meaning of Section 3(1) of ERISA maintained or
contributed to by the Company.
5.19 NO BROKERS OR FINDERS. With the exception of Glover Capital, Inc.
(whose fee will be paid by the Consenting Shareholders in accordance with
Section 15.17), neither the Company nor any Shareholder nor anyone acting on
their behalf has had discussions or negotiated with, been represented by or
employed any broker or finder or incurred any liability
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for any brokerage fees, commission or finder's fees to any Person in connection
with this Agreement or any of the Transactions.
5. 20 NO ENVIRONMENTAL REPRESENTATIONS. Notwithstanding anything to the
contrary in this Agreement, the Articles of Merger or the other Transaction
Documents, neither the Company nor any Consenting Shareholder makes any
representation or gives any warranty to any person, including without limitation
Merger Sub, the Surviving Corporation or Parent, with regard to compliance with
any environmental law, statute, rule, regulation or ordinance, whether federal,
state or local.
5. 21 TERMINATION OF PARTICIPATION IN MID-ATLANTIC CANNERS ASSOCIATION,
INC. The Company and the Consenting Shareholders have taken all action necessary
to terminate the Company's participation in the Mid-Atlantic Canners
Association, Inc. ("MACA") and to effect the repurchase by MACA of the shares in
MACA held by the Company.
5. 22 PAYMENT OF CERTAIN BONUSES. The Company has paid all bonuses set
forth on Schedule 8.8(c) to the persons set forth therein, and the Company has
made no other agreements, whether written or oral, to pay any bonuses in
connection with the Transactions.
5. 23 NO MATERIAL OMISSION. To the Company's knowledge, the
representations and warranties in this Article V do not contain any untrue
statement of material fact or omit to state any material fact necessary to make
the statements herein not misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES REGARDING THE CONSENTING
SHAREHOLDERS
As a material inducement to Merger Sub and Parent entering into this
Agreement and consummating the Transactions, each Consenting Shareholder, as to
itself only, hereby makes the following representations and warranties to Merger
Sub and Parent, each of which shall be continuing, shall be true at the date of
execution hereof and on the Closing Date and shall survive the Closing Date as
provided in Section 13.6 below.
6.1 AUTHORITY AND BINDING EFFECT. Such Consenting Shareholder has full
power and authority to execute each Transaction Document and consummate the
Transactions. Upon execution and delivery, each Transaction Document shall be
the legal, valid and binding obligation of such Consenting Shareholder,
enforceable against such Consenting Shareholder in accordance with its terms
except to the extent that the same may be limited by laws concerning insolvency,
bankruptcy or similar laws or equitable principles affecting the enforcement of
creditors' rights generally.
6.2 NO VIOLATION OR CONFLICT. Except as set forth in Schedule 6.2,
neither the execution and delivery of the Transaction Documents, the
consummation by such Consenting Shareholder of the Transactions, nor the
fulfillment and compliance with the terms and provisions hereof or thereof will
(i) conflict with or result in a breach of or default under any of the terms,
conditions or provisions of any loan, note, bond, mortgage, lease, indenture,
license,
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contract, agreement or other instrument or obligation to which such Consenting
Shareholder is a party or by which any of such Consenting Shareholder's
properties or assets are bound or (ii) violate any Law, judgment, decree, or
other judicial or governmental restriction to which such Consenting Shareholder
is subject.
6.3 STOCK OWNERSHIP. Such Consenting Shareholder is the sole record and
beneficial owner of all of the Company Common Shares on the Closing Date
specified with respect to such Consenting Shareholder on Schedule 2.7(a), free
and clear of all Encumbrances. Upon consummation of the Merger, such Consenting
Shareholder will transfer good and marketable title to such Company Common
Shares to the Surviving Corporation free and clear of all Encumbrances.
6.4 TERMINATION OF SHAREHOLDERS AGREEMENT. The Shareholders Agreement
referenced in Section 15.3 hereof shall have been terminated in accordance with
its terms effective on the Closing Date, shall have no further force or effect
as of the Closing Date and shall not impair the intent or purposes of the
Transactions.
6.5 SATISFACTION OF AGREEMENT WITH JOHN MINOR. All obligations of the
Company or the Consenting Shareholders to John Minor resulting from or related
to the Transactions and Mr. Minor's agreements with the Company or the
Consenting Shareholders have been satisfied.
ARTICLE VII
MERGER SUB'S REPRESENTATIONS AND WARRANTIES
As a material inducement to the Company and the Consenting Shareholders
entering into this Agreement and consummating the Transactions, Merger Sub
hereby makes the following representations and warranties to the Company and
each Consenting Shareholder, each of which shall be continuing, shall be true at
the date of execution hereof and on the Closing Date with the same force and
effect as if made on the Closing Date and shall survive the Closing Date as
provided in Section 13.6 below:
7.1 FORMATION, GOOD STANDING AND POWER. Merger Sub is a corporation
duly organized, validly existing, and in good standing under the laws of the
Commonwealth of Virginia with full power and authority to execute this Agreement
and consummate the Transactions. True and correct copies of resolutions of the
Board of Directors and sole shareholder of Merger Sub authorizing Merger Sub to
execute this Agreement and consummate the transactions contemplated hereby,
properly certified by the Secretary of Merger Sub are attached hereto as Exhibit
D. Upon execution, each Transaction Document shall be the valid, legal and
binding obligation of Merger Sub, enforceable against Merger Sub in accordance
with its terms, except to the extent that the same may be limited by laws
concerning insolvency, bankruptcy, or similar laws or equitable principles
affecting the enforcement of creditors' rights generally.
7.2 NO VIOLATION OR CONFLICT. Neither the execution and delivery of the
Transaction Documents, the consummation by the Merger Sub of the Transactions,
nor the fulfillment and
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compliance with the terms and provisions hereof or thereof will (i) conflict
with or result in a breach of or default under any of the terms, conditions or
provisions of any loan, note, bond, mortgage, lease, indenture, license,
contract, agreement or other instrument or obligation to which the Merger Sub is
a party or by which any of its properties or assets are bound, (ii) conflict
with any provision of the Merger Sub's Charter Documents, Bylaws, or other
corporate agreement binding on the Merger Sub or (iii) violate any judgment,
order, decree, Law or judicial or governmental restriction to which the Merger
Sub is subject or otherwise constitute an ultra vires act.
7.3 NO LITIGATION. There is no governmental or private litigation,
investigation, proceeding, claim, suit or audit of any kind whatsoever pending
nor, to Merger Sub's knowledge, is there any basis for such litigation or claim,
whether by private person, other entity, or governmental agency, where such
litigation or claim would adversely affect the Transactions.
7.4 NO BROKERS OR FINDERS. Neither Merger Sub nor anyone acting on its
behalf has had discussions or negotiated with, been represented by or employed
any broker or finder, or done anything to cause or incur any liability to any
Person for any broker's or finder's fees or the like in connection with this
Agreement or any of the Transactions.
7.5 FINANCIAL ABILITY. Merger Sub has the financial ability to
consummate the Transactions.
7.6 ACKNOWLEDGEMENT REGARDING CONDITION OF CERTAIN ASSETS. Merger Sub
and Parent hereby acknowledge that, except as otherwise provided herein, the
physical condition of all tangible assets of the Company, including without
limitation the plant, property, Inventory and Equipment, are warranted only
AS-IS WHERE-IS.
7.7 ACKNOWLEDGEMENT REGARDING LOCATION OF CERTAIN ASSETS. Merger Sub
and Parent acknowledge that although vending equipment, cold drink equipment,
merchandising items and comparable assets may be listed in the books and records
of Company, the physical location, and therefore the existence, of such assets
may not be determinable. Merger Sub and Parent acknowledge that the failure by
Merger Sub, Surviving Corporation or Parent to locate or determine the existence
of such assets will not provide the basis of, or result in, an Indemnity Claim
(as defined in Section 13.4(a)) against Company or the Shareholders.
ARTICLE VIII
COVENANTS OF THE COMPANY AND CONSENTING SHAREHOLDERS
----------------------------------------------------
The Company and the Consenting Shareholders, as applicable, covenant
and agree with Merger Sub as follows:
8.1. CONDUCT OF BUSINESS . From the date hereof through and including
the Closing Date, the Company agrees, and the Consenting Shareholders agree to
cause the Company to act as follows:
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(A) the Company shall operate the Business diligently and only in the
usual, ordinary and customary manner as a going business concern and use its
commercially reasonable efforts to preserve its present business organization
intact so as to keep available the services of its present employees and agents,
and to preserve its present business relationship with customers, suppliers and
others having business dealings with the Company;
(B) the Company shall maintain its books, records and accounts in the
usual manner on a basis consistent with prior periods utilizing historical
accounting practices;
(C) the Company shall duly comply with all Laws relevant to the conduct
of the Business;
(D) the Company shall not enter into any contract, commitment, lease or
sublease relating to or affecting the Business, other than in the ordinary
course of business, without the prior written approval of Merger Sub;
(E) the Company shall maintain insurance upon the Assets consistent
with past practice, and, unless Merger Sub elects to terminate this Agreement
pursuant to Article XII, the Company shall transfer and convey to Merger Sub all
amounts received under such insurance for an insured loss, such amounts to be
included in the Assets and treated as current assets if the Asset it replaces
was a current asset;
(F) the Company shall take all action reasonably necessary to maintain
the utility services being provided to the Real Estate;
(G) except in the ordinary course of business, the Company will not
create or assume any Encumbrance of any kind (including vendor's rights under
conditional sales agreements or other title retention agreements) upon the
Assets, whether owned or hereafter acquired without the prior written approval
of Merger Sub;
(H) except as set forth on Schedule 8.8(a), Schedule 8.8(b) and
Schedule 8.8(c) or otherwise in the ordinary course of business, the Company
shall not sell, remove or otherwise dispose of any of the Assets without the
prior written approval of Merger Sub; and
(I) except as set forth on Schedule 8.8(a), Schedule 8.8(b) and
Schedule 8.8(c) or otherwise in the ordinary course of business, the Company
shall not make any distribution of its Assets to any of its shareholders or
otherwise without prior written approval of Merger Sub.
8.2 ACCESS TO PROPERTIES AND RECORDS; DISCOVERED BREACHES. From the
date hereof through and including the Closing Date, the Company shall give to
Merger Sub and its financial advisors, counsel, accountants, lenders and other
representatives, during normal business hours, access to all properties, books,
contracts, documents and records with respect to the Company's business and
affairs as Merger Sub may request to conduct due diligence and as shall be
necessary to effectuate full disclosure to Merger Sub of all facts affecting the
financial condition, business operations and Assets of the Business that a
reasonably prudent business person knowledgeable in transactions of this nature
would consider to be material. No investigation by
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Merger Sub shall, however, diminish or limit in any way the representations or
warranties of the Company and the Consenting Shareholders as set forth in
Article V and Article VI hereof; provided, that in the event prior to the
Closing, Merger Sub or Parent becomes aware of a breach or potential breach by
the Company or the Consenting Shareholders of a representation, warranty,
covenant or other obligation or duty arising from this Agreement, the
Transactions or other Transaction Documents (a "DISCOVERED BREACH"), Merger Sub
or Parent shall give notice to Company and Shareholders' Representative of all
facts then known to Merger Sub or Parent relating to such Discovered Breach and
provide the Company or Shareholders' Representative the period until the
Pre-Closing Date to cure such Discovered Breach. If the Discovered Breach is a
material breach of which the Company had no prior knowledge, the Company may at
its option, elect to terminate the Agreement prior to the Pre-Closing Date
pursuant to Section 12.1(e) at no cost to the Company or Shareholders; provided,
however, that if the Company so elects, Merger Sub shall have the option to
waive such breach, in which event the Company shall not be permitted to
terminate this Agreement and the Agreement shall continue to operate in
accordance with its terms with the exception that Merger Sub, Parent and the
Surviving Corporation shall be precluded from making any Indemnity Claims for
Losses arising from such breach.
8.3 REFRAIN FROM NEGOTIATIONS WITH OTHERS. From the date hereof through
and including the Closing Date, the Company, the Consenting Shareholders and
their respective agents shall negotiate and deal exclusively with Merger Sub and
its agents in connection with the Transactions, and the Company and the
Consenting Shareholders shall not entertain, solicit or consider any other
offers from a third party for the acquisition of any of the stock or assets of
the Company.
8.4 NONDISCLOSURE OF PROPRIETARY INFORMATION. All proprietary and
Confidential Information of Merger Sub or Parent made available to the Company
or the Consenting Shareholders shall remain the property of Merger Sub or
Parent, as applicable. Prior to the Closing Date (and also in the event there is
no Closing), the Consenting Shareholders and the Company shall restrict their
use of any and all information received from Merger Sub or Parent for the
purposes specified herein and to prepare the filings and take such actions as
are required by applicable Law, including but not limited to the provisions of
the HSR Act.
8.5 NONDISCLOSURE OF TERMS.
-----------------------
(A) Prior to the Closing Date, the Company and the Consenting
Shareholders shall not, without the prior written approval of the Merger Sub or
Parent, disclose the Merger Consideration or any other economic terms of this
Agreement or the Transactions to any third party, other than as required by Law,
including but not limited to the Securities Act of 1933, other state or federal
securities Law or in connection with compliance with the HSR Act.
(B) In the event that Company or the Consenting Shareholders are
ordered to make a disclosure by virtue of a subpoena, civil investigative or
discovery demand, criminal investigative demand or similar order lawfully issued
by a court of competent jurisdiction, then the Company or Consenting
Shareholders shall promptly notify the Merger Sub or the Surviving
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Corporation and cooperate with Merger Sub or the Surviving Corporation to quash
or otherwise limit the scope of such disclosure.
(C) The Company and the Consenting Shareholders acknowledge that since
Parent is a publicly traded company they will not at any time (including after
the Closing Date) issue any press release or make any announcement relating to
the subject matter of this Agreement or the Transactions without the prior
written approval of Parent or the Surviving Corporation. The Company and the
Consenting Shareholders shall at all times, including after the Closing Date,
and shall cause their respective agents and representatives to, keep the terms
and conditions of this Agreement confidential unless otherwise approved by
Parent or Merger Sub in writing.
8.6 NO CHANGE TO GOVERNING DOCUMENTS. Prior to the Closing Date, the
Company shall not amend its Articles of Incorporation or Bylaws.
8.7 SETTLEMENT OF RELATED PARTY TRANSACTIONS. Prior to the Closing
Date, all obligations owed to the Company by any Consenting Shareholder,
employee, Affiliate or other related party of the Company shall be settled in
full either in cash or in such other manner acceptable to Merger Sub, such that
there are no Assets reflected on the Audited Closing Date Balance Sheet that
arise out of or are related to amounts owed to the Company by any such Person.
8.8 DISTRIBUTION OF CERTAIN ASSETS AND PAYMENTS. Prior to the Closing
Date, the Company will have duly authorized and made distributions or payments
of the following:
(A) certain Memorabilia of the Company to the shareholders as
set forth in Schedule 8.8(a), the aggregate fair market value of such
memorabilia together with the vehicles set forth on Schedule 8.8(b) not
exceeding Two Hundred Fifty Thousand Dollars ($250,000);
(B) certain vehicles and other assets of the Company
as set forth in Schedule 8.8(b);
(C) certain bonuses and other payments as set forth in
Schedule 8.8(c); and
(D) the life insurance policy set forth on Schedule 8.8(d) or
an annuitized product thereof.
8.9 SATISFACTION OF CLOSING CONDITIONS. The Company and each of the
Consenting Shareholders shall each use their commercially reasonable efforts to
satisfy the conditions precedent in Article X by the Closing Date and in any
event by the date set forth in Section 12.1(c).
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ARTICLE IX
COVENANTS OF MERGER SUB AND PARENT
----------------------------------
Merger Sub hereby covenants and agrees with the Company as follows:
9.1 MEDICAL INSURANCE. The Surviving Corporation shall provide family
medical insurance benefits for George M. Lupton, Jr. and his wife, Leland B.
Lupton, for the period beginning on the Closing Date and ending for each of Mr.
and Mrs. Lupton, respectively, on the date that each reaches age 65. Mr. and
Mrs. Lupton have been provided with a detailed copy of Parent's Retiree Health
Care Insurance plan (the "INSURANCE PLAN") and will be covered by such Insurance
Plan from and after the Closing Date, subject to and in accordance with the
terms and conditions of such Insurance Plan. Mr. and Mrs. Lupton will not be
responsible for payment of premiums under the Insurance Plan. The completed
election form is as set forth on Schedule 9.1.
9.2 NONDISCLOSURE OF PROPRIETARY INFORMATION. All proprietary and
Confidential Information of the Company made available to Merger Sub shall
remain the property of the Company prior to the Closing Date. Prior to the
Closing Date (and also in the event there is no Closing), Merger Sub shall
restrict its use of any and all information received from the Company for the
purposes specified herein and to prepare the filings and take such actions as
are required by applicable Law, including but not limited to the provisions of
the HSR Act.
9.3 NONDISCLOSURE OF TERMS. Prior to the Closing Date, Merger Sub shall
not, without the prior written approval of the Company, disclose the Merger
Consideration or any other economic terms of this Agreement or the transactions
contemplated hereby to any third party, other than as required by Law, including
but not limited to the Securities Act of 1933, other state or federal securities
Law or in connection with compliance with the HSR Act. Prior to the Closing
Date, in the event that Merger Sub is ordered to make a disclosure by virtue of
a subpoena, civil investigative or discovery demand, criminal investigative
demand or similar order lawfully issued by a court of competent jurisdiction,
then Merger Sub shall promptly notify the Company and cooperate with the Company
to quash or otherwise limit the scope of such disclosure.
9.4 RECORDS RETENTION. Merger Sub covenants that from the Closing Date
through the first anniversary of the Closing Date, Merger Sub and the Surviving
Corporation shall not intentionally destroy or discard the financial, business
and other records of the Company, and shall allow the Consenting Shareholders to
have access to said records upon reasonable notice and during normal business
hours in Lynchburg, Virginia. If after the first anniversary of the Closing
Date, the Surviving Corporation desires to destroy or discard such records, it
shall give written notice to the Shareholders' Representative to such effect,
and the Shareholders' Representative shall have the option for thirty (30) days
following the date of such notice to give written notice that the Consenting
Shareholders desire to take possession of such records.
9.5 SATISFACTION OF CLOSING CONDITIONS. Merger Sub and Parent shall
each use commercially reasonable efforts to satisfy the conditions precedent in
Article XI by the Closing Date and in any event by the date set forth in Section
12.1(c).
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9.6 SATISFACTION OF LEASE AND TRANSFER OF VEHICLE. On the first
business day after the Effective Time, the Surviving Corporation shall satisfy
in full the lease obligation then outstanding on the 1998 Cadillac Seville
automobile currently in the possession of George M. Lupton, Jr., and then
without further consideration, immediately transfer ownership of that vehicle to
Mr. George M. Lupton, Jr., free and clear of any and all lease or financing
obligations or any Encumbrances, as compensation income from the Surviving
Corporation.
9.7 RETURN OF THE COMPANY'S DISTRIBUTIONS AND PATRONAGE DIVIDENDS TO
THE SHAREHOLDERS' REPRESENTATIVE. The Surviving Corporation shall use its
commercially reasonable efforts to pursue payment or credit of any patronage
dividends or distributions related to the repurchase by MACA of shares of MACA
owned by the Company. Promptly upon receipt after the Closing Date of any
patronage dividends or distributions related to the repurchase by MACA of shares
of MACA owned by the Company, the Surviving Corporation shall pay an amount
equal to the funds or credit so received (net of any taxes due on such receipts)
to the Shareholders' Representative following such receipt for the benefit of
all holders of Company Common Shares. No amounts for such patronage
distributions or dividends shall be accrued or reflected on the Audited Closing
Date Balance Sheet or taken into account in computing Net Working Capital.
ARTICLE X
CONDITIONS PRECEDENT TO MERGER SUB'S AND
----------------------------------------
PARENT'S OBLIGATIONS TO CLOSE
-----------------------------
The obligations of Merger Sub and Parent to complete the Closing are
subject to the satisfaction on or before the Closing Date (unless otherwise
expressly provided) of each of the following conditions precedent.
10.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Company and the Consenting Shareholders set forth in
Article V and of the Consenting Shareholders set forth in Article VI shall have
been true and correct in all material respects on the date made and shall be
true and correct on the Closing Date, with the same force and effect as if made
on the Closing Date. Merger Sub shall have received a certificate to that effect
signed by an officer of the Company.
10.2 PERFORMANCE OF COVENANTS. The Company and the Consenting
Shareholders shall have performed and complied with all the covenants,
obligations, and conditions required to be performed or complied with by the
Company or the Consenting Shareholders on or before the Closing Date pursuant to
this Agreement. Merger Sub shall have received a certificate to that effect
signed by an officer of the Company.
10.3 CERTIFIED COPY OF AUTHORIZING RESOLUTIONS. Merger Sub shall have
received a copy of the Company's Board of Directors and shareholder resolutions
approving the Transactions, duly certified by the Secretary of the Company.
10.4 NO IMPAIRMENT TO ASSETS. None of the Assets or the Business shall
have been adversely impaired (whether by fire, accident, act of war, casualty,
labor disturbance, legislation,
27
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regulation, or any other adverse circumstance) to the extent that, in Merger
Sub's reasonable opinion, such impairment would render it substantially unable
to conduct the Business on the Closing Date.
10.5 LICENSES AND PERMITS NECESSARY FOR MERGER SUB TO CONDUCT BUSINESS.
Merger Sub shall have received all licenses and permits necessary for it to
conduct its business and affairs utilizing the Assets subsequent to the Closing;
provided, that Merger Sub shall use reasonable commercial efforts to obtain such
licenses and permits.
10.6 OPINION OF COMPANY'S COUNSEL. Merger Sub shall have received the
opinion of the Company's counsel, Edmunds & Williams, P.C. substantially in the
form attached hereto as Exhibit E.
10.7 NO LITIGATION. No action, suit or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state or local jurisdiction, or before any arbitrator, wherein an
unfavorable injunction, judgment, order, decree, ruling or charge would (i)
prevent the consummation of any of the Transactions or (ii) cause any of the
Transactions to be rescinded following consummation.
10.8 LEGALITY. No Law or court order shall have been enacted, entered,
promulgated or enforced by any court or governmental authority that is in effect
and has the effect of making the Transactions illegal or otherwise prohibiting
the consummation of the Transactions.
10.9 CONSENTS. Merger Sub shall have received all consents of any
non-governmental third party or governmental authority that are required to be
obtained in connection with the Transactions (including such consents as are set
forth on Schedule 5.4 and such consents as are required to continue in force the
franchise agreements with The Coca-Cola Company referenced in Section 5.3
hereof); provided, that the consent of any soft drink franchisor other than The
Coca-Cola Company shall not be deemed a required consent.
10.10 CERTIFICATES OF GOOD STANDING. Merger Sub shall have received
from the Company a certificate of existence and good standing of the Company
from the office of the Clerk of the State Corporation Commission of Virginia
dated not earlier than ten (10) days prior to the Closing Date and certificates
of existence and good standing from any state where the Company is qualified to
do business as a foreign corporation.
10.11 COMPLIANCE WITH THE HSR ACT. All required consents under the HSR
Act shall have been obtained and all applicable waiting periods thereunder shall
have expired or otherwise been terminated.
10.12 RESIGNATIONS. Merger Sub shall have received resignations of all
of the officers and directors of the Company, together with a release from such
Persons of all claims other than with respect to the Transactions against the
Company and the Surviving Corporation, and Merger Sub shall have received the
resignations of any Consenting Shareholders that are employees of the Company,
except as otherwise provided on Schedule 10.12.
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10.13 CONSENTING SHAREHOLDERS APPROVAL AND TENDER OF SHARES. This
Agreement and the Transactions shall have been approved by shareholders of the
Company owning no less than eighty percent (80%) of the outstanding Company
Common Shares, and such shareholders shall be Consenting Shareholders, at or
prior to the Pre-Closing Date. Each such Consenting Shareholder shall have
delivered certificates representing all of the Company Common Shares owned by
such Consenting Shareholder, duly endorsed for transfer to the Surviving
Corporation or accompanied by other appropriate surrender documentation on or
before the Pre-Closing Date.
10.14 TERMINATION OF EMPLOYMENT LETTER WITH WILLIAM C. SAMPSON. The
employment letter agreement dated August 5, 1986, and accepted and agreed to as
of August 11, 1986, between the Company and William C. Sampson shall have been
terminated, with the Company having no residual liability or obligation with
respect to the same.
10.15 NON-COMPETITION AGREEMENT. Merger Sub and George M. Lupton, Jr.
shall have entered into a non-competition agreement substantially in the form
attached hereto as Exhibit F (the "NON-COMPETITION Agreement").
10.16 TERMINATION DEFERRED COMPENSATION PLAN. The deferred compensation
plan dated October 1, 1991 referenced on Schedule 5.18(a) shall have been
terminated on or before the Pre-Closing Date, and the Audited Closing Date
Balance Sheet shall not reflect or account for any assets or liabilities related
to such plan.
10.17 OTHER TRANSACTION DOCUMENTS. The other Parties shall have
tendered executed copies of the respective Transaction Documents to which they
are an intended party.
ARTICLE XI
CONDITIONS PRECEDENT TO THE COMPANY'S AND SHAREHOLDERS'
-------------------------------------------------------
OBLIGATIONS TO CLOSE
--------------------
The obligations of the Company and the Consenting Shareholders to
complete the Closing are subject to the satisfaction on or before the Closing
Date of each of the following conditions precedent.
11.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Merger Sub set forth in Article VII shall have been true and
correct in all material respects on the date made, and shall be true and correct
on the Closing Date, with the same force and effect as if made on the Closing
Date. The Company shall have received a certificate to that effect signed by a
duly authorized officer of Merger Sub.
11.2 PERFORMANCE OF COVENANTS. Merger Sub shall have performed and
complied with all covenants, obligations and conditions required to be performed
or complied with by Merger Sub on or before the Closing Date pursuant to this
Agreement. The Company shall have received a certificate to that effect signed
by a duly authorized officer of Merger Sub.
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11.3 OPINION OF MERGER SUB'S COUNSEL. The Company shall have received
an opinion of Kennedy Covington Lobdell & Hickman, L.L.P., counsel to Merger Sub
and Parent, substantially in the form attached hereto as Exhibit G.
11.4 NO LITIGATION. No action, suit or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state or local jurisdiction, or before any arbitrator, wherein an
unfavorable injunction, order, decree, ruling or charge would (i) prevent the
consummation of any of the Transactions or (ii) cause any of the Transactions to
be rescinded following consummation.
11.5 LEGALITY. No Law or court order shall have been enacted, entered,
promulgated or enforced by any court or governmental authority that is in effect
and has the effect of making the Transactions illegal or otherwise prohibiting
the consummation of the Transactions.
11.6 CERTIFICATES OF GOOD STANDING. The Company shall have received
from Merger Sub a certificate of existence from the office of the Clerk of the
State Corporation Commission of Virginia certifying the existence and good
standing of Merger Sub in the Commonwealth of Virginia, and a certificate of
good standing from the office of the Clerk of the State Corporation Commission
of Virginia dated not earlier than ten (10) days prior to the Closing Date.
11.7 COMPLIANCE WITH THE HSR ACT. All required consents under the HSR
Act shall have been obtained and all applicable waiting periods thereunder shall
have expired or otherwise been terminated.
11.8 CERTIFIED COPY OF AUTHORIZING RESOLUTIONS. The Company shall have
received a copy of Merger Sub's Board of Directors and shareholder resolutions
approving the Transactions, duly certified by the Secretary of Merger Sub.
11.9 NON-COMPETITION AGREEMENT. Merger Sub and George M. Lupton, Jr.
shall have entered into the Non-Competition Agreement.
11.10 INITIAL MERGER CONSIDERATION. Merger Sub shall deliver the
Initial Merger Consideration in accordance with Section 2.7(d).
11.11 OTHER TRANSACTION DOCUMENTS. The other Parties shall have
tendered executed copies of the respective Transaction Documents to which they
are an intended party.
ARTICLE XII
TERMINATION
-----------
12.1 CONDITIONS OF TERMINATION. The obligations of the Parties with
respect to the Closing shall terminate:
(A) at the written election of Merger Sub or Parent, at or prior to the
Closing Date, if any of the conditions precedent set forth in Article X have not
been fulfilled as required, or if any
30
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other circumstance shall have occurred entitling Merger Sub or Parent to
terminate this Agreement pursuant to the terms hereof;
(B) at the written election of the Company, at or prior to the Closing
Date, if any of the conditions precedent set forth in Article XI have not been
fulfilled as required, or if any other circumstance shall have occurred
entitling the Company to terminate this Agreement pursuant to the terms hereof;
(C) at the written election of the Company, Merger Sub or Parent, if
the Closing shall not have occurred by November 30, 1999, for any reason other
than delay or non performance of the Party seeking such termination;
(D) at the mutual agreement of Company and Merger Sub; or
(E) at the written election of the Company as provided in, and subject
to the terms of, Section 8.2 hereof.
12.2 EFFECT OF TERMINATION. In the event of termination in accordance
with Section 12.1, (i) this Agreement shall terminate, except as otherwise
provided herein, (ii) no Party shall have further liability to any other Party
because of the failure to consummate the Transactions, (iii) the provisions of
Sections 8.4, 8.5, 9.2 and 9.3 shall survive termination of this Agreement and
(iv) each party shall pay its own costs and expenses incurred by it in
connection with this Agreement and the Transactions.
ARTICLE XIII
INDEMNIFICATION
---------------
13.1 INDEMNIFICATION BY THE COMPANY AND SHAREHOLDERS. Subject to the
procedures and limitations set forth in this Article XIII:
(A) the Company and the Shareholders, jointly and severally, hereby
agree that they will indemnify and save harmless (subject to the limitations of
Section 13.2(b) below) Merger Sub, the Surviving Corporation and Parent from and
against any and all Economic Loss (as defined in Section 13.5) incurred by
Merger Sub, the Surviving Corporation or Parent arising after the Closing out of
(i) the falsity or incorrectness of any representation or warranty made by the
Company or any Consenting Shareholder in Article V or (ii) a breach by the
Company or any Consenting Shareholder of any covenant, agreement or obligation
of the Company or any Consenting Shareholder under this Agreement or under any
Transaction Document; and
(B) each Consenting Shareholder, severally, hereby agrees that he, she
or it will indemnify and save harmless Merger Sub, the Surviving Corporation and
Parent from and against any and all Economic Loss incurred by Merger Sub, the
Surviving Corporation or Parent arising after the Closing Date out of any
falsity or incorrectness of any representation or warranty made by such
Consenting Shareholder in Article VI.
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13.2 INDEMNITY CLAIMS BY MERGER SUB, THE SURVIVING CORPORATION OR
PARENT.
(A) DEDUCTIBLE LOSSES. The Consenting Shareholders and the Company,
collectively, shall not have any liability for any Economic Loss arising out of
the matters referenced in Section 13.1(a) above, otherwise indemnifiable
hereunder pursuant to Section 13.1, to the extent of the first Economic Losses
which aggregate, on a cumulative basis, Two Hundred Fifty Thousand Dollars
($250,000). No such deductible shall apply to any Economic Loss arising out of
the matters referenced in Section 13.1(b) above.
(B) LIMITATION ON AMOUNT. Unless an Indemnity Claim is attributable to
fraud or intentional misrepresentation by the Company or any Consenting
Shareholder, neither any Consenting Shareholder nor the Company shall have any
liability to Merger Sub, the Surviving Corporation or Parent (collectively) for
any Economic Loss arising out of matters referenced in Section 13.1(a), on a
cumulative aggregate basis, in excess of the amount represented by the sum of
(i) the initial amount of the Escrow Funds and (ii) any additional Escrow Funds
received, nor shall any Consenting Shareholder have any liability to Merger Sub,
the Surviving Corporation or Parent (collectively), for any Economic Loss
arising out of matters referenced in Section 13.1(b), on a cumulative aggregate
basis, in excess of the portion of the Merger Consideration allocated,
distributed or paid to or for the benefit of that Consenting Shareholder.
(C) RECOVERY FROM ESCROW FUNDS. Merger Sub, the Surviving Corporation
or Parent may recover from the Escrow Funds for any Economic Loss arising out of
matters referenced in Section 13.1(a) and on a proportionate basis for claims
arising out of matters referenced in Section 13.1(b), with the principal of the
Promissory Note being adjusted accordingly. The procedures of this Article XIII
are not applicable to claims against the Escrow Funds set forth in Section 3.4,
which provision shall govern in accordance with its terms.
(D) EXCLUSIVE REMEDY. Except as otherwise provided herein, the remedies
provided in this Article XIII shall be the exclusive remedy of Merger Sub, the
Surviving Corporation and Parent against the Company or the Consenting
Shareholders for all matters arising from or out of the Transactions.
13.3 INDEMNIFICATION BY MERGER SUB, THE SURVIVING CORPORATION AND
PARENT. After the Closing, Merger Sub, the Surviving Corporation and Parent
agree that they will indemnify and save harmless each Consenting Shareholder
from and against any and all Economic Loss (as defined below) incurred by such
Consenting Shareholder arising out of Merger Sub's, the Surviving Corporation's
or Parent's breach of any of their respective representations, warranties,
covenants and agreements in this Agreement or in any document delivered by
Merger Sub, the Surviving Corporation or Parent to the Company or such
Consenting Shareholder hereunder.
13.4 CLAIM PROCEDURE.
----------------
(A) NOTICE OF CLAIM. If any matter arises that constitutes or may give
rise to an Economic Loss subject to indemnification as provided herein (an
"INDEMNITY CLAIM"), the Person that desires to seek indemnification under any
part of this Article XIII (each, an
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"INDEMNIFIED PARTY") shall give prompt notice (a "NOTICE OF CLAIM") to each
Party responsible or alleged to be responsible for indemnification hereunder (an
"INDEMNITOR"). In the case of a claim made by Merger Sub, the Surviving
Corporation or Parent (i) pursuant to Section 13.1(a), such notice shall be
given to the Shareholders' Representative or (ii) pursuant to Section 13.1(b),
such notice shall be given to the appropriate Consenting Shareholder. The
Indemnified Party shall give continuing notice promptly thereafter as to
developments coming to the Indemnified Party's attention materially affecting
any matter relating to such Indemnity Claim. Each Indemnitor to which a Notice
of Claim is given shall respond to any Indemnified Party that has given a Notice
of Claim (a "CLAIM RESPONSE") within forty five (45) Business Days (the
"RESPONSE PERIOD") after the date that the Notice of Claim is given. Any Notice
of Claim or Claim Response shall be given in accordance with the notice
requirements hereunder, and any Claim Response shall specify whether or not the
Indemnitor giving the Claim Response disputes the claim described in the Notice
of Claim. If any Indemnitor fails to give a Claim Response within the Response
Period, such Indemnitor shall be deemed not to dispute the Indemnity Claim
described in the related Notice of Claim. Nothing herein shall be deemed to
prevent a Party from making a claim for indemnification hereunder for potential
or contingent claims or demands provided the Notice of Claim sets forth the
specific basis for any such potential or contingent claim or demand to the
extent then feasible and the notifying party has reasonable grounds to believe
that such a claim or demand may be made.
(B) DISPUTED INDEMNITY CLAIMS. If there shall be a dispute as to the
amount or manner of indemnification under this Article XIII, the Indemnified
Party may pursue whatever equitable and legal remedies are available for
recovery of Economic Losses from any Indemnitor.
(C) PAYMENT. If Merger Sub, the Surviving Corporation or Parent shall
be the Indemnified Party entitled to be indemnified, it shall first obtain
payment of the related Economic Loss from the Escrow Funds (with corresponding
reduction to the principal amount of the Promissory Note) and thereafter shall
seek indemnification directly from the Shareholders to the extent provided
herein, subject to the limitations of Section 13.2(b).
(D) THIRD PARTY CLAIMS. If any Indemnity Claim is based upon any claim,
demand, suit or action of any third party against an Indemnified Party (a "THIRD
PARTY CLAIM"), then the Indemnified Person shall undertake to defend such Third
Party Claim itself and shall conduct such defense as would a reasonable and
prudent person to whom no indemnity were available, with the costs and expenses
of such defense being included in the Economic Loss.
13.5 ECONOMIC LOSS DEFINED. As used in this Agreement, the term
"ECONOMIC LOSS" means the amount of any loss, liability, damage, cost or expense
(but excluding any loss, liability, claim or damage to the extent the
Indemnified Party's actions proximately caused such loss, liability, claim or
damage) incurred by the Indemnified Party (including costs of investigation and
defense and reasonable attorneys' fees but excluding any consequential damages
unless arising in connection with a claim by a third party), proximately caused
by or in connection with: (a) any breach of any representation or warranty made
by the Indemnitor in this Agreement; (b) any breach by the Indemnitor of any
covenant or obligation of the Indemnitor in this Agreement; or (c) any claim by
any person for brokerage or finder's fees or
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commissions or similar payments based upon any agreement or understanding
alleged to have been made by such person with the Indemnitor (or any person
acting on their behalf) in connection with any of the Transactions.
13.6 TIME LIMITATIONS; SURVIVAL.
---------------------------
(A) TIME LIMIT. No Party shall have any liability for any Economic Loss
otherwise indemnifiable hereunder with respect to which a Notice of Claim has
not been given in accordance with Section 13.4(a) prior to the first anniversary
of the Closing Date with respect to claims arising out of matters referenced in
Section 13.1(a) or 13.3. Notices of Claim with respect to claims arising out of
matters referenced in Section 13.1(b) may be made without time limitation.
(B) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties and agreements of each Party made in this Agreement or in any
Transaction Document shall survive the Closing to the extent, but only to the
extent, of the liability of that Party for indemnity with respect thereto as
provided for in this Article XIII.
ARTICLE XIV
GUARANTY
--------
In order to induce the Company to enter into this Agreement, Parent
hereby unconditionally guarantees the full and prompt payment and performance of
all obligations of Merger Sub under this Agreement, as Parent's own debt and
obligation. Parent hereby waives any right to require the Company to take any
action against Merger Sub prior to enforcing this guaranty against Parent.
Parent agrees that the Company may grant one or more extensions to fulfill such
obligations or release or reach a compromise with any Person liable for such
obligations without giving Parent notice or without obtaining Parent's consent.
This guaranty is absolute, unconditional, continuing, primary and irrevocable
under any and all circumstances and shall not be released, in whole or in part,
by any action or thing that might, but for this provision, be deemed a legal or
equitable discharge of a surety or guarantor, or by reason of any waiver,
omission, action or failure to act by the Company (whether or not Parent's risk
is varied or increased or its rights or remedies are affected thereby), or by
reason of any further dealings between the Company and Merger Sub, and Parent
hereby expressly waives and surrenders any defense to its liability hereunder
based upon, and shall be deemed to have consented to, the foregoing. This
guaranty is a guaranty of payment and performance, not merely of collection.
This guaranty is subject to Parent's right to assert any defense that could be
asserted by Merger Sub. Under no circumstances shall Parent's liability to the
Company exceed the liability of Merger Sub to the Company hereunder; provided,
that the discharge in bankruptcy of Merger Sub shall not act to discharge
Parent's obligations hereunder.
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ARTICLE XV
MISCELLANEOUS
-------------
15.1 SHAREHOLDERS' REPRESENTATIVE.
-----------------------------
(A) APPOINTMENT OF SHAREHOLDERS' REPRESENTATIVE AND CLAIM PROCESSING.
The Consenting Shareholders hereby appoint George M. Lupton, Jr. and Mr. Lupton
hereby accepts such appointment, as the Shareholders' Representative for the
purpose of doing or refraining from doing all such acts and things, and to
execute all such documents, as the Shareholders' Representative shall deem
necessary or appropriate in connection with any of the transactions contemplated
under this Agreement, including the following specific powers:
(i) to receive, hold and deliver to Merger Sub the
certificates evidencing the shares of Company Common Stock held by Consenting
Shareholders accompanied by executed stock powers, signature guarantees,
Transmittal Letter and Joinders and any other documents relating thereto on
behalf of the Consenting Shareholders, including the power to endorse and
present any such certificate or stock power on behalf of the Consenting
Shareholders;
(ii) to receive, receipt for and allocate to the Consenting
Shareholders all payments made by Merger Sub pursuant to this Agreement and
other funds payable to, for or on behalf of the Consenting Shareholders and
establish an expense account in which to deposit all payments received and from
which to pay transaction costs;
(iii) to incur expenses of sale (including broker fees and
fees of attorneys and accountants) incurred pursuant to the Merger and any other
fees and expenses allocable or in any way relating to this transaction, the
preparation of the Audited Closing Date Balance Sheet or any indemnification
proceedings pursuant to Article XIII and retain in the expense account
$1,500,000.00 (the "Expense Fund") from payments received from Merger Sub and
from which Shareholders' Representative may pay such expenses;
(iv) to contest Indemnity Claims by Merger Sub, Surviving
Corporation or Parent when considered appropriate by the Shareholders'
Representative;
(v) to represent the Consenting Shareholders with regard to
all matters related to the Escrow Funds;
(vi) to administer procedures relating to the Promissory Note;
(vii) to review the Audited Closing Date Balance Sheet
pursuant to Section 3.5, and if deemed appropriate by the Shareholders'
Representative, disagree pursuant to Section 3.6, with the Closing Date Balance
Sheet;
(viii) to pay from or reduce any funds received on behalf of
the Consenting Shareholders prior to their distribution, his, her or its pro
rata portion of the expenses arising from or related to any of the transactions
contemplated by this Agreement;
35
<PAGE>
(ix) to amend this Agreement and to do or refrain from doing
any and all things and execute any and all agreements as the Shareholders'
Representative shall consider necessary or appropriate.
(B) NOTICE. Merger Sub, the Surviving Corporation or Parent shall give
notice under Section 13.4(a) of any Indemnity Claims against the Consenting
Shareholders or the Company pursuant to Section 13.1(a) (or for matters
referenced in Section 3.5) to the Shareholders' Representative, and only the
Shareholders' Representative shall be empowered following such notice to respond
to or take any other action on behalf of the Consenting Shareholders with
respect to the Indemnity Claim or the review of the Audited Closing Date Balance
Sheet (pursuant to Section 3.5). The Consenting Shareholders shall be bound by
any and all actions taken by the Shareholders' Representative on their behalf in
accordance with this Agreement.
(C) RELIANCE. With respect to matters arising out of Section 13.1(a)
and arising out of or related to Section 3.5, each of Merger Sub, the Surviving
Corporation and Parent shall be entitled to rely exclusively upon any
communications or writings given or executed by the Shareholders' Representative
and shall not be liable in any manner whatsoever for any action taken or not
taken in reliance upon the actions taken or not taken or communications or
writings given or executed by the Shareholders' Representative, and each of
Merger Sub, the Surviving Corporation and Parent shall be entitled to disregard
any notices or communications with respect to such matters given or made by the
Consenting Shareholders unless given or made through the Shareholders'
Representative. With respect to matters arising out of Section 13.1(b),
Shareholders' Representative will provide reasonable assistance to Merger Sub,
the Surviving Corporation and Parent in contacting the Consenting Shareholders.
After contact with the appropriate Consenting Shareholder has been established
by Merger Sub, the Surviving Corporation or Parent, further communications shall
be made directly with such Consenting Shareholder, and the Shareholders'
Representative shall have no further assistance obligation.
(D) DEATH OR INABILITY. In the event of the death of the Shareholders'
Representative or his inability to perform his functions hereunder, the
Consenting Shareholders who immediately prior to the Closing owned a majority of
the Company Common Shares shall choose another Shareholders' Representative.
With respect to each Consenting Shareholder who is a natural person, the
authority conferred by such Consenting Shareholder upon the Shareholders'
Representative shall not be revoked in the event of such Consenting
Shareholder's death or physical or mental disability.
(E) LIABILITY. The Shareholders' Representative shall not be liable to
any Party for any action taken or omitted to be taken by him as Shareholders'
Representative except, in the case of willful misconduct or gross negligence.
The Consenting Shareholders shall jointly indemnify the Shareholders'
Representative and hold him harmless from and against any loss, liability or
expense of any nature incurred by the Shareholders' Representative arising out
of or in connection with the administration of his duties as Shareholders'
Representative, including reasonable legal fees and other costs and expenses of
defending or preparing to defend against any claim or liability in the premises,
unless such loss, liability or expense shall be caused by the Shareholders'
Representative's willful misconduct or gross negligence.
36
<PAGE>
(F) RECEIPT OF MERGER CONSIDERATION. Payment of any Merger
Consideration or other transfers contemplated hereunder to any Consenting
Shareholder shall be deemed satisfied when made to the Shareholders'
Representative.
15.2 JOINDER OF ADDITIONAL SHAREHOLDERS. Any shareholder of the Company
executing the Transmittal Letter and Joinder, in the form attached hereto as
Exhibit H, shall become a Party to this Agreement and be deemed a Consenting
Shareholder hereunder and subject to all of the terms and conditions hereof.
15.3 TERMINATION OF SHAREHOLDERS AGREEMENT. The Consenting Shareholders
that are parties to that certain Shareholders Agreement dated October 14, 1991
among certain shareholders of the Company and the Company (attached hereto as
part of Schedule 5.4) (the "SHAREHOLDERS AGREEMENT") do hereby terminate the
Shareholders Agreement effective on the Closing Date. From and after the Closing
Date, the Shareholders Agreement shall have no further force or effect.
15.4 RISK OF LOSS. The risk of loss or damage to the Assets from fire,
storm, act of God or other casualty shall be borne by the Company through the
Closing Date.
15.5 SIMULTANEOUS CLOSING. All transactions at Closing including
execution of ancillary Transaction Documents referenced herein shall be deemed
to take place simultaneously and none shall be deemed to take place until all
shall have taken place.
15.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument. Each Party hereto agrees
that it will be bound by its own facsimile signature and that it accepts the
facsimile signatures of the other Parties hereto. Original executed signature
pages will be exchanged by the Parties promptly after such facsimile signature
pages are sent.
15.7 INTERPRETATION. Unless the context of this Agreement clearly
requires otherwise, (i) references to the plural include the singular, the
singular the plural, the part the whole, (ii) references to any gender include
all genders, (iii) "or" has the inclusive meaning frequently identified with the
phrase "and/or," (iv) "including" has the inclusive meaning frequently
identified with the phrase "but not limited to" and (v) references to
"hereunder" or "herein" relate to this Agreement. The section and other headings
contained in this Agreement are for reference purposes only and shall not
control or affect the construction of this Agreement or the interpretation
thereof in any respect. Section, subsection, Schedule and Exhibit references are
to this Agreement unless otherwise specified. Each accounting term used herein
that is not specifically defined herein shall have the meaning given to it under
GAAP. Any reference to a Party's being satisfied with any particular item or to
a Party's determination of a particular item presumes that such standard will
not be achieved unless such Party shall be satisfied or shall have made such
determination in its sole or complete discretion.
37
<PAGE>
15.8 NOTICES. Any notice, demand, request, consent, approval or other
communications required or permitted to be given hereunder shall be in writing
and shall be delivered personally or sent either by facsimile transmission, or
nationally recognized overnight courier (utilizing guaranteed next business
morning or day delivery), addressed to the Party to be notified at the following
address, or to such other address as such Party shall specify by like notice:
If to the Shareholders, then to the Shareholders' Representative:
George M. Lupton, Jr.
1450 Trents Ferry Rd.
Lynchburg, VA 24503
Telephone: 804-384-7321
With a copy to:
Harman, Owens, Saunders & Sweeney
1900 Peachtree Center Tower
230 Peachtree Street N.W.
Atlanta, GA 30303
Attention: Frederick F. Saunders
Facsimile: (404) 525-4347
Edmunds & Williams
Suite 400
800 Main Street
P.O. Box 958
Lynchburg, VA 24505-0958
Attention: Eric J. Sorenson, Jr.
Facsimile: (804) 846-0337
If to the Company then to:
<TABLE>
<CAPTION>
<S> <C> <C>
Before the Closing: After the Closing:
Lynchburg Coca-Cola Bottling Company, Inc. George M. Lupton, Jr.
3720 Cohen Place 1450 Trents Ferry Rd.
Lynchburg, Virginia 24501 Lynchburg, VA 24503
Attention: George M. Lupton, Jr. Telephone: 804-384-7321
Facsimile: 804-846-0835
38
<PAGE>
With a copy to:
Harman, Owens, Saunders & Sweeney Harman, Owens, Saunders & Sweeney
1900 Peachtree Center Tower 1900 Peachtree Center Tower
230 Peachtree Street N.W. 230 Peachtree Street N.W.
Atlanta, GA 30303 Atlanta, GA 30303
Attention: Frederick F. Saunders Attention: Frederick F. Saunders
Facsimile: (404) 525-4347 Facsimile: (404) 525-4347
Edmunds & Williams Edmunds & Williams
Suite 400 Suite 400
800 Main Street 800 Main Street
P.O. Box 958 P.O. Box 958
Lynchburg, VA 24505-0958 Lynchburg, VA 24505-0958
Attention: Eric J. Sorenson, Jr. Attention: Eric J. Sorenson, Jr.
Facsimile: (804) 846-0337 Facsimile: (804) 846-0337
If to Merger Sub then to:
LCCB Merger Co.
4100 Coca-Cola Plaza
Charlotte, North Carolina 28211
Attention: Umesh M. Kasbekar
Facsimile: (704) 551-4030
If to Parent then to:
Coca-Cola Bottling Co. Consolidated
4100 Coca-Cola Plaza
Charlotte, North Carolina 28211
Attention: Umesh M. Kasbekar
Facsimile: (704) 551-4030
</TABLE>
Notices given as provided shall be deemed effective upon receipt if by personal
delivery, upon confirmed reception of transmission if by facsimile, or if by
recognized overnight courier, on the date delivery is acknowledged to said
courier.
15.9 ENTIRE AGREEMENT, MODIFICATION. This Agreement, together with the
other Transaction Documents described herein, contains the entire agreement of
the Parties with respect to the subject matter hereof, all previous agreements
and discussions relating to the same or similar subject matter being merged
herein, including without limitation the letter of intent between Parent and the
Company dated July 26, 1999. The Parties acknowledge that neither of them has
made any representations with respect to the subject matter of this Agreement or
any representations inducing the execution and delivery hereof except as
specifically set forth herein. This Agreement may not be changed, amended, or
modified except by a writing signed by both Parties hereto. The provisions of
this Section 15.9 may not be changed, amended, modified,
39
<PAGE>
terminated or waived as a result of any failure to enforce any provision or the
waiver of any specific breach or breaches thereof or any course of conduct of
the Parties.
15.10 ASSIGNMENT. This Agreement and the rights, obligations and duties
of the Parties hereto shall not be assignable or otherwise transferable;
provided, that the rights, obligations and duties of Merger Sub may be assigned
to an Affiliate of Merger Sub. In the event of assignment by Merger Sub, the
assignee shall expressly assume, in writing delivered to the Company, the
liabilities and obligations of Merger Sub hereunder, and Merger Sub and Parent
shall remain liable for the full performance of all of the assigned liabilities
and obligations under this Agreement, which liabilities and obligations of
Merger Sub and Parent shall be a primary liability and obligation for full and
prompt performance and payment. Merger Sub shall promptly notify the Company of
any such assignment.
15.11 BINDING EFFECT AND BENEFIT. This Agreement shall inure to the
benefit of, and shall be binding upon, the Parties, their heirs, executors and
administrators, successors and permitted assigns.
15.12 PARTIAL INVALIDATION. If any portion of this Agreement is held
invalid, illegal or unenforceable, such determination shall not impair the
enforceability of the remaining terms and provisions contained herein. In such
event, this Agreement shall be construed and interpreted as if such invalid,
illegal or unenforceable terms were limited to the minimum extent whereby such
terms would be valid, legal and enforceable, and, if such limitation is not
possible, this Agreement shall be construed and interpreted as if such invalid,
illegal or unenforceable terms were severed and not included herein unless the
result of such limitation or severance would result in such a material change as
to cause completion of the transactions contemplated hereby to be unreasonable.
15.13 WAIVER. No waiver of a breach or violation of any provision of
this Agreement shall operate or be construed as a waiver of any subsequent
breach.
15.14 EXHIBITS AND SCHEDULES. All Exhibits, Schedules and documents
specified in this Agreement shall be deemed to be incorporated herein by any
reference thereto as if fully set out.
15.15 NO THIRD PARTY BENEFICIARIES. This Agreement shall not create any
rights for the benefit of any third party other than as expressly provided for
herein.
15.16 GOVERNING LAW. This Agreement shall be interpreted and construed
in accordance with the laws of the Commonwealth of Virginia, without regard to
its conflicts of laws provisions.
15.17 ATTORNEY'S AND ACCOUNTANT'S FEES, ETC. Merger Sub and Parent
shall pay their own attorney's and accountant's fees and fees of other
applicable professionals retained by them. The Consenting Shareholders shall pay
for the Company's and their own attorney's and accountant's fees and fees of
other applicable professionals retained by them, and the Consenting Shareholders
shall be solely responsible for the fee of Glover Capital, Inc. and any other
broker or finder retained by the Company or such Consenting Shareholders. All of
such fees of the
40
<PAGE>
Company and the Shareholders shall be paid by the Shareholders' Representative
out of the funds held by the Shareholders' Representative for such purpose
pursuant to Section 2.7(d)(ii). Notwithstanding the foregoing, Merger Sub agrees
to reimburse the Company for all of its actual out-of-pocket costs, expenses and
fees (including reasonable attorney's fees) incurred by the Company in complying
with the provisions of the HSR Act as required by the Transactions.
15.18 CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. Therefore, in the event of any
ambiguity in the construction or interpretation of this Agreement, no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day and
year first above written.
THE COMPANY:
Lynchburg Coca-Cola Bottling Co., Inc.
By: _________________________________________
_______________, Chief Executive Officer
Attest: _________________________________
_____________________, Secretary
MERGER SUB:
LCCB Merger Sub
By:______________________________________________
Attest:_________________
_________________, _______ Secretary
PARENT:
Coca-Cola Bottling Co. Consolidated
By:______________________________________________
Attest:____________________________
_________________, _______ Secretary
41
<PAGE>
SHAREHOLDERS' REPRESENTATIVE:
- ----------------------
George M. Lupton, Jr.
SHAREHOLDERS:
- ----------------------
Print Name:
- ----------------------
Print Name:
- ----------------------
Print Name:
- ----------------------
Print Name:
- ----------------------
Print Name:
- ----------------------
Print Name:
- ----------------------
Print Name:
- ----------------------
Print Name:
- ----------------------
Print Name:
42
<PAGE>
- ----------------------
Print Name:
- ----------------------
Print Name:
- ----------------------
Print Name:
- ----------------------
Print Name:
- ----------------------
Print Name:
- ----------------------
Print Name:
- ----------------------
Print Name:
- ----------------------
Print Name:
- ----------------------
Print Name:
- ----------------------
Print Name:
- ----------------------
Print Name:
43
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTHS ENDED OCTOBER 3, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000317540
<NAME> Coca-Cola Bottling Co. Consolidated
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-02-2000
<PERIOD-START> JAN-04-1999
<PERIOD-END> OCT-03-1999
<EXCHANGE-RATE> 1
<CASH> 8,381
<SECURITIES> 0
<RECEIVABLES> 68,360
<ALLOWANCES> 1,200
<INVENTORY> 47,663
<CURRENT-ASSETS> 159,296
<PP&E> 685,485
<DEPRECIATION> 234,485
<TOTAL-ASSETS> 1,093,854
<CURRENT-LIABILITIES> 133,308
<BONDS> 729,314
0
0
<COMMON> 12,423
<OTHER-SE> 26,471
<TOTAL-LIABILITY-AND-EQUITY> 1,093,854
<SALES> 741,584
<TOTAL-REVENUES> 741,584
<CGS> 416,430
<TOTAL-COSTS> 416,430
<OTHER-EXPENSES> 272,944
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,116
<INCOME-PRETAX> 11,558
<INCOME-TAX> 4,045
<INCOME-CONTINUING> 7,513
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,513
<EPS-BASIC> 0.88
<EPS-DILUTED> 0.87
</TABLE>
