As filed with the Securities and Exchange Commission on October 24, 1997
Registration No. 333-________
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AQUAPENN SPRING WATER COMPANY, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 5149 25-1541772
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification Number)
incorporation or Code Number)
organization)
One AquaPenn Drive
Milesburg, Pennsylvania 16853
(814) 355-5556
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
Edward J. Lauth, III
One AquaPenn Drive
Milesburg, Pennsylvania 16853
(814) 355-5556
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-----------------
Copies to:
Brian D. Doerner, Esq. Gregory M. Shaw, Esq.
Ballard Spahr Andrews & Ingersoll Cravath, Swaine & Moore
1735 Market Street, 51st Floor Worldwide Plaza
Philadelphia, PA 19103-7599 825 Eighth Avenue
(215) 665-8500 New York, NY 10019-7475
(212) 474-1000
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Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following box. |_| _________
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering.
| |-----------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|__________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|__________
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CALCULATION OF REGISTRATION FEE
================================================================================
Title of Each Class Proposed Maxim Proposed Maximum Amount of
of Securities Amount to Offering Price Aggregate Registration
to Be Registered Be Registered Per Share (1) Offering Price Fee
- --------------------------------------------------------------------------------
Common Stock 4,437,850 $16.00 $71,005,600 $21,517
(no par value) shares (2)
================================================================================
(1) Estimated solely for the purpose of calculation of the registration
fee in accordance with Rule 457 under the Securities Act of 1933, as
amended.
(2) Includes 578,850 shares which the Underwriters have the option to
purchase to cover over-allotments, if any.
-----------------------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED , 1997
(LOGO)
Shares
AQUAPENN SPRING WATER COMPANY, INC.
Common Stock
Of the Common Stock offered hereby, 2,000,000 shares are being sold by
AquaPenn Spring Water Company, Inc. ("AquaPenn" or the "Company") and
1,859,000 shares are being sold by Weis Markets, Inc. and its subsidiaries
(the "Selling Shareholder"). See "Principal Shareholders and Selling
Shareholder." The Company will not receive any proceeds from the sale of
Common Stock by the Selling Shareholder.
Prior to this offering (the "Offering"), there has been no public market
for the Common Stock. It is currently estimated that the Offering price
will be between $14.00 and $16.00 per share. See "Underwriting" for certain
factors to be considered in determining the Offering price. The Company
intends to apply for listing of the Common Stock on the New York Stock
Exchange ("NYSE") under the symbol "___."
The shares of Common Stock offered hereby involve a high degree of risk.
See "Risk Factors" beginning on page 7 of this Prospectus for a discussion
of certain factors that should be considered by prospective investors.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
===============================================================================
Price to Underwriting Proceeds to Proceeds to Selling
Public Discounts and Company(2) Shareholder(2)
Commissions(1)
- -------------------------------------------------------------------------------
Per Share........ $ $ $ $
- -------------------------------------------------------------------------------
Total............ $ $ $ $
- -------------------------------------------------------------------------------
Total Assuming Full
Exercise of Over-
Allotment
Option (3)....... $ $ $ $
===============================================================================
(1) See "Underwriting."
(2) Before deducting expenses estimated at an aggregate of $750,000, which
are payable by the Company and the Selling Shareholder.
(3) Assuming exercise in full of the 30-day option granted by the Company to
the Underwriters to purchase up to 578,850 additional shares, on the same
terms, solely to cover over-allotments. See "Underwriting."
The shares of Common Stock are offered by the Underwriters, subject to
prior sale, when, as and if delivered to and accepted by the Underwriters,
and subject to their right to reject any order in whole or in part. It is
expected that delivery of the Common Stock will be made in New York City,
on or about , 1997.
PaineWebber Incorporated
Lazard Freres & Co. LLC
Parker/Hunter
Incorporated
The date of this Prospectus is , 1997
<PAGE>
[Photographs with the following captions:]
1. (Lauth & Paterno)
AquaPenn President and founder Edward J. Lauth, III with Joe
Paterno, Head Coach of the football team at The Pennsylvania State
University and AquaPenn spokesperson and stockholder. (Mr. Paterno
makes no representation, recommendation or guarantee to investors
with regard to the common stock of AquaPenn offered hereby.)
2. (Krones Bloc Equipment)
The Krones Bloc rinses, fills and caps AquaPenn's PET (polyethylene
terephthalate) bottles at the rate of up to 600 bottles per minute.
AquaPenn's Milesburg Facility has two units installed and a third
scheduled for delivery in October 1997.
3. (Pure American 20 oz. Case)
Pure American(R) Spring Water is AquaPenn's leading name brand.
AquaPenn's PET bottle designs in 8 oz., 20.0 oz., 24.9 oz., 1 liter
and 1.5 liter sizes are proprietary.
4. (Young Child With 8 oz. Bottle)
AquaPenn's innovative 8 oz. PET bottle is popular with parents of
young children because of its ease of handling. Introduced in
January 1997, the "single serve solution" is also served in-flight
on two major United States airlines.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF
THE COMMON STOCK, INCLUDING OVER-ALLOTMENT, ENTERING STABILIZING BIDS,
EFFECTING SYNDICATE COVERING TRANSACTIONS, AND IMPOSING PENALTY BIDS.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
PROSPECTUS SUMMARY
Unless otherwise indicated, all information in this Prospectus assumes
that the Underwriters' over-allotment option will not be exercised and
gives effect to (a) the 0.6008-for-1 reverse stock split (the "Reverse
Stock Split") of each outstanding share of Common Stock of the Company that
will occur immediately prior to this Offering, (b) an Offering price of
$15.00 per share of Common Stock, (c) no exercise of outstanding options to
purchase 832,108 shares of Common Stock, (d) the exercise of a warrant for
135,180 shares of Common Stock held by the Selling Shareholder (the "Weis
Markets Warrant") and no exercise of remaining warrants to purchase 105,140
shares of Common Stock issuable pursuant to the Company's warrant
agreements, (e) no purchase of the 76,254 shares of Common Stock subscribed
for under the Company's 1996 Employee Stock Purchase Plan (the "Stock
Purchase Plan") and (f) no conversion of the outstanding shares of Series A
Non-Voting Convertible Preferred Stock (the "Convertible Preferred Stock")
into 1,022,862 shares of Common Stock. Fiscal year references are to the
fiscal year ended September 30. Unless otherwise provided, references to
shares outstanding and to 1997 fiscal year results do not give effect to
the acquisition on October 15, 1997 of Dunsmuir Bottling Company d/b/a
Castle Rock Spring Water ("Castle Rock"). All references to the "Company"
or "AquaPenn" refer to AquaPenn Spring Water Company, Inc. and its
subsidiaries.
The Company
AquaPenn produces, bottles and sells non-sparkling natural spring water
products to regional and national customers under both retailers' and other
customers' private labels and its proprietary brands Pure American(R),
Great American(R), AquaPenn(R) and Castle Rock. The Company, founded in
1986, is one of the largest producers of private label natural spring water
products in the United States; private label products accounted for
approximately 50% of the Company's 1997 fiscal year net revenues. The
Company's private label and branded customers include, among others, Delta
Air Lines, Inc., Gerber Products Company, Sam's Club and Walgreen Co. The
Company's net revenues have grown from $9.3 million in fiscal 1993 to $38.0
million in fiscal 1997, representing a compounded annual growth rate of
42.3%. Over the same time period, the Company's net income has grown from
approximately $400,000 to approximately $2.8 million, representing a
compounded annual growth rate of 62.4%.
According to Beverage Marketing, the total U.S. market for bottled water
has grown from 1.6 billion gallons sold in 1987 to over 3.1 billion gallons
in 1996, and accounted for approximately $3.6 billion in wholesale sales
during 1996. Non-sparkling water comprises over 87% of the U.S. bottled
water market and generated $2.7 billion of wholesale sales in 1996, and is
expected to continue to grow in the future. PET (an acronym for
polyethylene terephthalate, a premium clear plastic) packaged products
comprise approximately 39% of the domestically produced non-sparkling water
market and have grown from approximately 83 million gallons in 1987 to
approximately 580 million gallons in 1996, representing a compounded annual
growth rate of approximately 24%. PET-packaged products accounted for
approximately $921 million of wholesale sales in 1996. Approximately 81% of
the Company's 1997 net revenues was generated by products packaged in PET
containers. According to Beverage Marketing, PET bottled water is among the
fastest growing beverage categories in the United States. Contributing to
the growth in consumption of non-sparkling water are consumer trends
including health and fitness awareness, municipal tap water quality concern
and maturing soft drink demand, as well as consumer demand for convenience
and innovative packaging.
The Company has adopted a strategy of producing regionally and selling
its natural spring water products to both national and regional customers.
By producing both private label and branded products in a full line of
sizes and packaging, the Company can offer its customers
"one-stop-shopping" supply arrangements. The Company's advanced packaging
capability allows it to bottle natural spring water products in a variety
of innovative packages. The Company maintains state-of-the-art production
facilities, allowing it to achieve cost efficiencies, produce superior
quality products, create innovative packaging and rapidly respond to
customer shipment and production
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<PAGE>
demands. The Company's sales and marketing staff aims to provide its
customers with exceptional customer service and market responsiveness.
AquaPenn's growth strategy includes increasing sales to existing
customers, broadening its current customer base, adding new distribution
channels and expanding its product line. The Company's active acquisition
program includes obtaining the rights to additional spring water sites and
acquiring natural spring water companies. In accordance with this strategy,
the Company recently acquired the rights to natural spring water from
Ginnie Springs, a spring located in north central Florida ("Ginnie
Springs"), adjacent to which a new production facility is expected to be
constructed and completed by the Spring of 1998. In addition, on October
15, 1997, the Company acquired Castle Rock, a bottler and distributor of
natural spring water products located in northern California. The
acquisition of the right to Ginnie Springs spring water and the acquisition
of Castle Rock will allow the Company to serve its customers more
efficiently.
The Company's executive offices are located at One AquaPenn Drive,
Milesburg, Pennsylvania 16853. The Company's telephone number is (814)
355-5556 and its web site is www.aquapenn.com.
The Offering
Common Stock Offered by:
the Company..................... 2,000,000 shares (1)
the Selling Shareholder......... 1,859,000 shares
Common Stock to be Outstanding after 6,555,888 shares (1)(2)
Use of Proceeds.................... For capital expenditures, including
funding a portion of the expansion
of the Company's Milesburg,
Pennsylvania facility and a portion
of the construction of the Ginnie
Springs facility, repayment of debt
associated with the acquisition of
Castle Rock, repayment of
outstanding balances under the
Company's credit facilities and for
other general corporate purposes.
See "Use of Proceeds."
Proposed NYSE symbol............... "___"
- --------------------
(1) Excludes the Underwriters' over-allotment option to purchase 578,850
shares of Common Stock.
(2) Excludes 2,036,364 shares of Common Stock reserved for issuance upon
exercise of outstanding options, warrants, subscriptions under the
Stock Purchase Plan and conversion of the Convertible Preferred Stock.
See "Management -- Employment Agreements," "Management -- Stock Plans"
and "Description of Capital Stock."
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<PAGE>
Summary Financial Information
The following summary financial information should be read in conjunction
with the Consolidated Financial Statements of the Company and the notes
thereto, "Selected Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Years Ended September 30,
1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues......... $9,275,537 $13,011,744 $22,956,053 $28,240,741 $38,015,315
Gross profit......... 2,136,846 3,032,276 4,802,698 6,969,428 9,698,377
Selling, general and administrative 1,389,220 1,994,812 3,290,609 4,313,480 5,126,583
Income from operations 747,626 1,037,464 1,512,089 2,655,948 4,571,794
Net income........... $ 400,562 $ 688,995 $ 638,350 $ 1,485,228 $ 2,786,755
Net income per common share (1).... $ 0.12 $ 0.18 $ 0.16 $ 0.26 $ 0.47
Weighted average number of common
shares outstanding. 3,417,391 3,785,102 3,884,708 5,620,741 5,951,844
Other Operations Data:
EBITDA (2).......... $1,260,940 $ 1,606,457 $ 2,888,231 $ 4,613,823 $ 7,285,186
</TABLE>
September 30, 1997
Actual As Adjusted (3)
Consolidated Balance Sheet Data:
Working capital ......... $ 3,096,318 $ 28,281,318
Total assets............. 26,580,185 51,765,185
Notes payable, including 4,817,467 1,817,467
current portion
Shareholders' equity..... 18,064,347 46,249,347
- --------------------
(1) For information concerning the number of shares used in the computation
of net income per common share, see Note 1 to the Consolidated
Financial Statements.
(2) "EBITDA" represents earnings before interest expense, income tax
expense, depreciation and amortization, including amortization of
leasehold improvements, acquisition and development costs, and debt
expense and discount or premium relating to any indebtedness. EBITDA is
not presented herein as an alternative measure of operating results (as
determined in accordance with generally accepted accounting principles
("GAAP")) or cash flow (as determined in accordance with GAAP).
(3) As adjusted to give effect to the sale of 2,000,000 shares of Common
Stock offered by the Company hereby assuming an Offering price of
$15.00 per share and the receipt of proceeds from the exercise of the
Weis Markets Warrant for 135,180 shares of Common Stock and after
deducting estimated underwriting discounts and commissions and Offering
expenses and the application of the estimated net proceeds therefrom.
See "Use of Proceeds" and "Capitalization."
----------------------------------
The preceding summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and Consolidated
Financial Statements of the Company and the notes thereto appearing
elsewhere in this Prospectus. This Prospectus contains forward-looking
statements that involve risks and uncertainties. Discussions containing
such forward-looking statements may be found in the material set forth
under "Prospectus Summary," "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business."
Actual events or results could differ materially from those discussed
herein. Factors that could cause or contribute to such differences include,
but are not limited to, those discussed under "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
-5-
<PAGE>
Unless otherwise noted, the source of statistical information relating to
the bottled water industry included in this Prospectus is Beverage
Marketing Corporation of New York, "Bottled Water In The United States",
1997 Edition, as updated periodically (referred to herein as "Beverage
Marketing").
--------------------
Pure American(R), Great American(R) and AquaPenn(R) are registered
trademarks of the Company. All other trademarks appearing in this
Prospectus are the property of their respective holders.
-6-
<PAGE>
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a
high degree of risk. Prospective investors should carefully consider the
following risk factors, in addition to the other information set forth in
this Prospectus, before purchasing any of the shares of Common Stock
offered hereby.
Competition
The bottled water industry is highly competitive. Many of the Company's
competitors have more experience in the U.S. bottled water market, have
greater financial and management resources and have more established
proprietary trademarks and distribution networks than the Company. The
Company currently competes with respect to bottled water with established
national companies such as The Perrier Group of America, Inc. (whose brands
include Arrowhead Mountain Spring Water, Poland Spring, Ozarka Spring
Water, Great Bear, Deer Park, Ice Mountain and Zephyrhills Natural Spring
Water) and Great Brands of Europe (whose brands include Evian Natural
Spring Water and Dannon Natural Spring Water), as well as numerous regional
bottled water companies located in the United States and Canada. The
Company competes not only with other bottled water producers, but also with
producers of other beverages, including, but not limited to, soft drinks,
coffee, juices, beer, liquor and wine. The bottled water industry also
competes for the same consumer who may, when choosing to drink water, drink
tap water or use a home filtration system to filter tap water for drinking.
There can be no assurance that the Company can compete successfully. See
"Business -- Competition."
Ability to Manage Growth
In order to achieve continued growth in its bottled water business, the
Company must meet its strategic objectives of expanding its current
capacity to produce high quality spring water products, expanding its
customer base, expanding its product line and adding new distribution
channels. The Company's ability to meet these objectives depends upon (a)
the successful development and construction of a facility adjacent to
Ginnie Springs, (b) the successful integration and operation of the
Company's recent acquisition, Castle Rock, (c) the successful expansion of
its Milesburg, Pennsylvania facility (the "Milesburg Facility"), (d) the
securing of new sources of spring water in strategic locations and
identifying and successfully acquiring and integrating existing water
companies, (e) the degree to which the Company loses sales to competing
water suppliers, (f) the availability of capital and (g) general economic
and other factors beyond the Company's control. The Company has never
operated multiple facilities in multiple states and has never completed and
integrated an acquisition of a significant existing company; the Company
may encounter unexpected difficulties operating multiple facilities or
integrating Castle Rock or other acquisitions. No assurance can be given as
to the future growth in the Company's business or as to its profitability.
Further growth of the Company will require employment and training of new
personnel, expansion of facilities and expansion of management information
systems. If the Company is unable to manage its growth effectively, the
Company's profitability and its ability to achieve its strategic objectives
may likely be materially adversely affected.
Fluctuations in Quarterly Operating Results
The Company's revenues are subject to several factors which may result
in fluctuations in the Company's operating results. The Company's business
is highly seasonal, with increased sales during warmer months. In the last
three fiscal years, an average of 41.5% of the Company's net revenues have
occurred during June, July and August. Inclement weather may negatively
impact the Company's business, particularly summers which are unusually
cool or rainy. Fluctuations in retail prices and raw material prices may
produce corresponding fluctuations in the Company's profits. See "Risk
Factors -- Raw Material Prices." In addition, the Company expects to make
significant investments from time to time in capital improvements to, among
other things, increase capacity. Costs associated with such improvements
may cause an immediate reduction in profit margins unless and until sales
volume increases. The Company's product and packaging mix may change from
time to time and, depending on certain factors, may negatively
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<PAGE>
impact profit margins. The Company is subject to competitive pricing
pressures which may affect its financial results. Due to all the foregoing
factors, it is possible that in some future quarter or quarters, the
Company's operating results would likely be below the expectations of
securities analysts and investors. In such event, the price of the Common
Stock would likely be materially adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Dependence on Key Personnel
The continued success of the Company is largely dependent on the
personal efforts and abilities of senior management, including Edward J.
Lauth, III, Chairman, President and Chief Executive Officer of the Company,
and Geoffrey F. Feidelberg, Executive Vice President, Chief Operating
Officer and Chief Financial Officer of the Company. Although the Company
has entered into employment agreements with Messrs. Lauth and Feidelberg,
the employment agreements may be terminated by either party effective at
the end of each one-year term upon six months prior notice. The employment
agreements contain a non-compete provision which extends for two years
beyond termination of the employment agreements. The loss of either
executive's services could have a material adverse effect on the Company.
See "Management -- Employment Agreements."
Dependence upon Natural Spring Sources
The Company currently obtains the natural spring water bottled at its
Milesburg Facility from a spring located in Graysville, Pennsylvania (the
"Graysville Spring"). A natural spring located in Dunsmuir, California (the
"Castle Rock Spring") provides the natural spring water for the Company's
west coast operations based in Dunsmuir and Redding, California. The loss
of the Graysville Spring, which generated 83.0% of the Company's fiscal
1997 pro forma net revenues, or the Castle Rock Spring, which generated
17.0% of the Company's fiscal 1997 pro forma net revenues, would have a
material adverse effect on the business of the Company. The Company expects
to begin bottling water from Ginnie Springs in 1998. In addition, the
Company has acquired the right to purchase natural spring water from the
Bellefonte Big Spring (the "Big Spring") located in Bellefonte,
Pennsylvania, in order to supplement or replace the Graysville Spring.
Subject to completion by the Borough of Bellefonte of a covering over the
spring and the permitting and approval process, the Company expects to
begin bottling Big Spring water in 1999. Occurrences beyond the control of
the Company including, but not limited to, drought, which prevents natural
springs from recharging themselves, and other occurrences, such as
contamination of the springs, geological changes which could interfere with
operation of the springs or failure of the water supply to comply with all
applicable governmental requirements for mineral and chemical
concentration, could have a material adverse effect on the business of the
Company. The Company believes that adequate supplemental commercial sources
of spring water exist, but there is no assurance that such commercial
sources will be available in sufficient amounts or if available, obtainable
on commercially reasonable terms. See "Business -- Spring Water Sources."
Agreements for Water Sources
The Company leases the land on which the Graysville Spring is located.
The Company has an agreement pursuant to which it has access to the source
and purchases the natural spring water it bottles under the Castle Rock
label, and has entered into similar agreements for access and purchase at
Ginnie Springs and the Big Spring. See "Business -- Spring Water Sources."
These arrangements result in the Company exercising less control over its
operations than if the Company had ownership of these assets. If the lessor
of the Graysville Spring or the owners of the Castle Rock Spring were to
become bankrupt or fail to observe the terms of its lease with the Company,
such event could have a material adverse effect on the business of the
Company, particularly with respect to the Company's Pennsylvania operations
in the period prior to the time the Big Spring becomes operational for the
Company. Castle Rock has an agreement with the City of Dunsmuir,
California, pursuant to which the City of Dunsmuir sells natural spring
water from the Castle Rock Spring to Castle Rock. The City of Dunsmuir is
not the owner of the land on which the Castle Rock Spring is located. The
deed in the chain of title that enables the City of Dunsmuir to sell
natural spring water to Castle Rock limits the City of Dunsmuir's water
rights to certain specified uses. A third party has questioned
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<PAGE>
whether the sale of natural spring water by the City of Dunsmuir to Castle
Rock is a proper use as defined in the deed. Castle Rock's agreement with
the City of Dunsmuir provides that the City will indemnify Castle Rock for
losses it sustains as a result of any claim or challenge regarding the
ability of the City to sell water to Castle Rock. While the Company intends
to vigorously oppose any challenge to the City of Dunsmuir's rights to sell
water to Castle Rock under the agreement, there can be no assurance that
such a claim would not have a material adverse effect on the Company.
Dependence on Key Suppliers
The majority of the Company's natural spring water products are offered
in premium PET bottles. PET bottles are manufactured by a limited number of
suppliers. While the Company believes that its relationships with its
suppliers are good, there can be no assurance that the Company will be able
to obtain PET bottles from its suppliers on commercially reasonable terms,
particularly at periods of peak demand. Failure to obtain the necessary
packaging materials could have a material adverse effect on the business of
the Company. In order to ensure its supply of PET bottles, the Company has
entered into an exclusive supply agreement with Schmalbach-Lubeca Plastic
Containers USA, Inc. ("Schmalbach-Lubeca") pursuant to which the Company
leases space in its Milesburg facility to Schmalbach-Lubeca for the on-site
production of PET bottles. Schmalbach-Lubeca has agreed to provide 100% of
the Company's PET bottle requirements, except for the bottle requirements
of its Castle Rock operation. Castle Rock has entered into a requirements
contract with Containers Northwest Corporation pursuant to which Castle
Rock will purchase 100% of its bottle requirements from Containers
Northwest Corporation. In the event that the agreements with
Schmalbach-Lubeca and Containers Northwest Corporation were terminated or
the Company's requirements were not met under the agreements, there may be
a material adverse effect on the Company until alternative supplies of PET
bottles are found.
Raw Material Prices
Due to the wide range of beverages available to consumers, including
bottled water products, the Company has limited ability to raise prices for
its products. From time to time, the Company has been affected by higher
prices for raw materials including PET resin and corrugated boxes. In the
past, the Company generally has not passed such higher costs on to its
customers and it generally would be unlikely to do so in connection with
any future price increases. As a result, the Company's future profitability
may be adversely affected by future increases in raw material prices.
Product Liability
The bottling and distribution of bottled water products entails a risk
of product liability, including liability due to the presence of
contaminants in its products. The Company maintains insurance coverage
against the risk of product liability and product recall. However, the
amount of the insurance carried by the Company is limited, the insurance is
subject to certain exclusions and may or may not be adequate. In addition
to direct losses resulting from product liability and product recall, the
Company may suffer adverse publicity and damage to its reputation in the
event of contamination which could have a material adverse effect on sales
and profitability.
Dependence on Trademarks
The Company owns federal registrations for many of the trademarks it
uses. The Company believes that its registered and common law trademarks
have significant value and goodwill and that some of these trademarks are
instrumental in its ability to create demand for and to market its
products. There can be no assurance that the Company's trademarks do not or
will not violate the proprietary rights of others, that they would be
upheld if challenged or that the Company would, in such an event, not be
prevented from using the trademarks, any of which could have a material
adverse effect on the Company.
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<PAGE>
Government Regulation
The Company's operations are subject to numerous federal, state and
local laws and regulations relating to its bottling operations, including
the identity, quality, packaging and labeling of its bottled water. These
laws and regulations and their interpretation and enforcement are subject
to change. There can be no assurance that additional or more stringent
requirements will not be imposed on the Company's operations in the future.
Failure to comply with such laws and regulations could result in fines
against the Company, a temporary shutdown of production, recalls of the
product, loss of certification to market the product or, even in the
absence of governmental action, loss of revenue as a result of adverse
market reaction to negative publicity. Any such event could have a material
adverse effect on the Company. See "Business -- Regulation."
Lack of Inventory
The Company maintains a limited amount of finished product inventory. An
event causing the Company's Pennsylvania or California facilities to shut
down, even for a short period, would result in an inability to fill
customer orders and accordingly would have a material adverse effect on the
Company's revenues and customer relations.
Consumer Preferences
The Company believes that the most important factor in the growth of
natural spring water products has been a change in consumer preferences.
Consumer preferences may be influenced, however, by the availability and
appeal of alternative beverages or packaging as well as general economic
conditions, among other things. No assurance can be given that consumer
demand for natural spring water will continue to grow or will not diminish
in the future.
Immediate and Substantial Dilution
Purchasers of the Common Stock offered hereby will experience immediate
and substantial dilution in the pro forma net tangible book value per share
at September 30, 1997 of $7.95 at an assumed Offering price of $15.00 per
share, after deducting estimated underwriting discounts and commissions and
after giving effect to the exercise of the Weis Markets Warrant. In
addition, as of September 30, 1997, the Company had issued warrants to
purchase 105,140 shares of Common Stock, options to purchase 832,108 shares
of Common Stock, Convertible Preferred Stock convertible into 1,022,862
shares of Common Stock and 76,254 shares of Common Stock subscribed for
under the Company's Stock Purchase Plan. If such warrants and options are
exercised in full and such Convertible Preferred Stock is converted into
Common Stock, and assuming that all shares subscribed for under the Stock
Purchase Plan are purchased and all shares issued into escrow in the Castle
Rock acquisition are released, purchasers of the Common Stock offered
hereby would experience an immediate and substantial dilution in the pro
forma net tangible book value per share of $9.43. See "Dilution."
Arbitrary Determination of Offering Price; Possible Volatility of Stock Price
The Offering price of the Common Stock has been determined by negotiation
between the Company and the Underwriters and does not necessarily bear any
relationship to the Company's assets, book value, financial condition or
any other recognized criterion of value. There can be no assurance that the
market price of the Common Stock will not decline below the Offering price.
The market price of the Common Stock could be subject to wide fluctuations
in response to actual or anticipated quarterly operating results of the
Company, announcements of the Company or its competitors as well as other
factors. In addition, the stock market has experienced from time to time
extreme price and volume fluctuations that may be unrelated to the
operating performance of particular companies.
-10-
<PAGE>
No Prior Public Market
Prior to this Offering, there has been no public trading market for the
Common Stock. Accordingly, there can be no assurance that an active trading
market in the Common Stock will develop, or if such a trading market
develops, that it will be sustained.
No Cash Dividends
Since the Company commenced operations in 1986, the Company has not paid
any cash dividends on its capital stock. The Company anticipates that its
future earnings, if any, will be retained for use in the business, or for
other corporate purposes, and it is not anticipated that any cash dividends
on the Common Stock will be paid in the foreseeable future. See "Dividend
Policy" and "Description of Capital Stock."
Control by Current Shareholders; Anti-Takeover Devices
Upon the consummation of this Offering, including the sale of Common
Stock by the Selling Shareholder, the Company's shareholders as of
September 30, 1997 will own 41.1% of the outstanding shares of Common Stock
(39.3% if the Underwriters' over-allotment option is exercised in full).
Accordingly, such persons, acting in concert, may be able to elect all of
the Company's directors, increase the Company's authorized capital,
dissolve, merge or sell the assets of the Company and generally direct the
affairs of the Company. In addition, the Board of Directors and officers of
the Company will own 18.4% of the outstanding shares of Common Stock (33.4%
upon the exercise of currently exercisable options and warrants and
conversion of the Convertible Preferred Stock owned by the Board of
Directors and officers). See "Principal Shareholders and Selling
Shareholder."
In addition, certain provisions in the Company's Articles of
Incorporation and certain provisions of applicable Pennsylvania law may,
under certain circumstances, have the effect of discouraging, delaying or
preventing a change in control of the Company. See "Description of Capital
Stock -- Preferred Stock" and "Description of Capital Stock -- Pennsylvania
Corporate Law Provisions."
Shares Eligible for Future Sale
After the completion of this Offering, 6,555,888 shares of Common
Stock will be outstanding. Of such shares, the shares sold pursuant to this
Offering will be tradable without restriction by persons other than
"affiliates" of the Company. The remaining 2,696,888 shares of Common Stock
to be outstanding after this Offering are "restricted securities" within
the meaning of Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"), and may not be publicly resold, except in compliance
with the registration requirements of the Securities Act or pursuant to an
exemption from registration, including that provided by Rule 144
promulgated under the Securities Act. shares of Common Stock will be
available for immediate resale upon the consummation of this Offering
without restriction pursuant to the exemption provided by Rule 144(k). The
directors and executive officers of the Company and other shareholders of
the Company, who collectively hold shares, or approximately % of the
outstanding shares of Common Stock prior to this Offering, have agreed not
to offer to sell, sell, contract to sell, grant any option to sell,
encumber, pledge or otherwise dispose of, or exercise any demand rights
with respect to, any Common Stock or securities convertible into or
exercisable or exchangeable for Common Stock for a period of 180 days after
the date of this Prospectus without the prior written consent of
PaineWebber Incorporated. Upon expiration of the 180-day period, shares
of Common Stock will be eligible for immediate resale under the Securities
Act, subject, in certain cases, to certain volume, manner of sale and other
requirements of Rule 144 promulgated under the Securities Act. The Company
may file one or more Registration Statements on Form S-8 immediately
following this Offering, registering under the Securities Act shares of
Common Stock covered by the Company's stock option and stock purchase
plans. No prediction can be made as to the effect, if any, that future
sales of shares, or the availability of shares for future sale, will have
on the market price of the Common Stock prevailing from time to time. Sales
of substantial amounts of Common Stock, or the perception that such sales
could occur, could adversely affect the prevailing market
-11-
<PAGE>
price of the Common Stock. See "Principal Shareholders and Selling
Shareholder," "Shares Eligible for Future Sale" and "Underwriting."
-12-
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered by the Company hereby are estimated to be
approximately $27.5 million, after deducting underwriting discounts and
commissions and estimated Offering expenses, and, together with $675,000
from the exercise of the Weis Markets Warrant, result in total proceeds of
$28.2 million. The Company intends to use $19.1 million of such proceeds to
fund a portion of the capital expenditures associated with the expansion of
the Milesburg Facility (the total estimated cost of which is $17.8 million)
and the construction of the Ginnie Springs bottling facility (the total
estimated cost of which is $6.6 million). The Company intends to use
approximately $6.0 million of the net proceeds to repay borrowings under
its credit facilities used to fund a portion of the purchase price and
repay certain liabilities associated with the acquisition of Castle Rock.
Net proceeds of $3.1 million are expected to be used to repay certain
borrowings under the Company's credit facilities which incur interest at
rates between LIBOR plus 1.0% and LIBOR plus 1.7%. At September 30, 1997,
the Company had approximately $3.1 million of such borrowings outstanding,
$2.9 million of which will begin to amortize in February 1999 and $200,000
of which is due upon demand. In connection with the acquisition of Castle
Rock, the Company made additional borrowings under its credit facilities.
The balance, if any, of the net proceeds from this Offering will be used
for working capital and general corporate purposes. Pending such uses, the
total proceeds will be invested in short-term, interest-bearing investment
grade securities or commercial paper.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its Common
Stock. The Company currently intends to retain its earnings, if any, to
provide funds for the operation and expansion of its business and,
therefore, does not anticipate declaring or paying cash dividends in the
foreseeable future. Any payment of future dividends will be at the
discretion of the Board of Directors and will depend upon, among other
things, the Company's earnings, financial condition, capital requirements,
level of indebtedness, contractual restrictions with respect to the payment
of dividends and other relevant factors. Further, pursuant to the terms of
its existing credit facilities, the Company is restricted in its ability to
pay cash dividends on its Common Stock. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
-13-
<PAGE>
DILUTION
The difference between the Offering price per share of Common Stock and
the adjusted net tangible book value per share of Common Stock after this
Offering constitutes the dilution to investors in this Offering. Net
tangible book value per share on any given date is determined by dividing
the net tangible book value (total tangible assets less total liabilities)
of the Company on such date by the number of shares of Common Stock
outstanding on such date.
The net tangible book value of the Company at September 30, 1997 was
approximately $18.1 million, or $4.09 per share of outstanding Common
Stock, excluding net tangible book value attributable to, and shares issued
in connection with, the acquisition of Castle Rock. After giving effect to
the sale of the 2,000,000 shares of Common Stock being offered by the
Company, the exercise of the Weis Markets Warrant and the application of
the net proceeds therefrom, the pro forma net tangible book value of the
Company at September 30, 1997 would have been $46.2 million, or $7.05 per
share. This represents an immediate increase in net tangible book value of
$2.96 per share to existing shareholders and an immediate dilution of $7.95
per share to new shareholders purchasing shares of Common Stock in this
Offering. The following table illustrates this per share dilution:
Assumed Offering price per share.............................. $15.00
Net tangible book value per share at September 30, 1997..... $ 4.09
Increase per share attributable to this Offering............ 2.96
------
Net tangible book value per share after this Offering......... 7.05
------
Dilution per share to new shareholders........................ $ 7.95
======
The following table sets forth the number of shares of Common Stock
purchased from the Company, the total consideration paid to the Company
(including proceeds from the exercise of the Weis Markets Warrant) and the
average price per share paid by existing shareholders, and by purchasers of
the shares offered hereby, at an assumed Offering price of $15.00 per
share, before deducting underwriting discounts and commissions and Offering
expenses, and as if this Offering had occurred as of September 30, 1997.
The following table excludes shares issued in connection with the
acquisition of Castle Rock.
Shares Purchased(1) Total Consideration Average Price
Number Percent Amount Percent Per Share
Existing shareholders... 4,555,888 69.5% $12,866,269 30.0% $ 2.82
New shareholders........ 2,000,000 30.5% 30,000,000 70.0% 15.00
--------- ----- ----------- -----
6,555,888 100.0% $42,866,269 100.0%
========= ===== =========== =====
- ---------------
(1) If the Underwriters' over-allotment option is exercised in full, the
total number of shares outstanding after this Offering held by new
investors would increase to 2,578,850 shares, or approximately 36.1%
of the total number of shares outstanding after this Offering.
The above tables exclude (i) 937,248 shares of Common Stock issuable
upon exercise of outstanding options and warrants, (ii) 1,022,862 shares of
Common Stock reserved for issuance upon conversion of the Convertible
Preferred Stock and (iii) 76,254 shares of Common Stock currently
subscribed for under the Company's Stock Purchase Plan. The exercise and
purchase of the total 2,036,364 shares would result in further dilution of
$1.48 per share to new shareholders. See "Management -- Employment
Agreements," "Management -- Stock Plans", "Certain Transactions" and
"Description of Capital Stock."
-14-
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1997 on an actual basis and on an as adjusted basis, giving
effect to the sale of 2,000,000 shares of Common Stock offered by the
Company hereby at an assumed Offering price of $15.00 per share, the
exercise of the Weis Markets Warrant and the application of the estimated
net proceeds therefrom after deducting estimated underwriting discounts and
commissions and Offering expenses. This table should be read in conjunction
with the Consolidated Financial Statements of the Company and the notes
thereto included elsewhere in this Prospectus. See "Description of Capital
Stock."
September 30, 1997
Actual As Adjusted
Notes payable:
Notes payable, current................. $ 298,966 $ 89,944
Notes payable, excluding current
portion.............................. 4,518,501 1,727,523
--------- ---------
Total notes payable.................. 4,817,467 1,817,467
Shareholders' equity:
Series A Non-Voting Convertible Preferred
Stock, $1 par value, 2,000,000 shares
authorized, 1,713,750 shares issued;
1,713,750 shares issued,
as adjusted.......................... 1,713,750 1,713,750
Common Stock, no par value,
100,000,000 shares authorized,
4,423,712 shares issued; 6,555,888 shares
issued, as adjusted (1)................ -- --
Additional paid-in capital............. 12,196,269 40,381,269
Retained earnings...................... 4,242,456 4,242,456
Less 11,250 shares of preferred
stock in treasury, at cost............ ( 11,250) ( 11,250)
Less 3,004 shares of common stock
in treasury, at cost.................. ( 5,000) ( 5,000)
Subscriptions receivable............... ( 71,878) ( 71,878)
Total shareholders' equity........... 18,064,347 46,249,347
---------- ----------
Total capitalization.............. $22,881,814 $48,066,814
=========== ===========
- ---------------
(1) Excludes (i) 937,248 shares of Common Stock issuable upon exercise of
outstanding options and warrants, (ii) 1,022,862 shares of Common
Stock reserved for issuance upon conversion of the Convertible
Preferred Stock and (iii) 76,254 shares of Common Stock currently
subscribed for under the Stock Purchase Plan. See "Management --
Employment Agreements," "Management -- Stock Plans," "Certain
Transactions" and "Description of Capital Stock."
-15-
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below as of and for
the years ended September 30, 1993, 1994, 1995, 1996 and 1997 have been
derived from the Company's financial statements, which have been audited by
KPMG Peat Marwick LLP, independent certified public accountants. The
consolidated financial statements of the Company for each of the three
years in the period ended September 30, 1997 and the related balance sheets
at September 30, 1996 and 1997, which have been audited by KPMG Peat
Marwick LLP, have been included elsewhere in this Prospectus. The selected
consolidated financial data set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Consolidated Financial Statements of the
Company and the notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Years Ended September 30,
-----------------------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues................ $9,275,537 $13,011,744 $22,956,053 $28,240,741 $38,015,315
Cost of goods sold.......... 7,138,691 9,979,468 18,153,355 21,271,313 28,316,938
--------- ----------- ----------- ----------- -----------
Gross profit................ 2,136,846 3,032,276 4,802,698 6,969,428 9,698,377
Selling, general and
administrative............ 1,389,220 1,994,812 3,290,609 4,313,480 5,126,583
--------- ---------- ----------- ----------- -----------
Income from operations ..... 747,626 1,037,464 1,512,089 2,655,948 4,571,794
Non-operating income
(expense), net............ (228,664) (226,469) (738,739) (180,720) 119,713
--------- ---------- ----------- ----------- -----------
Income before income taxes
and cumulative effect of
change in accounting
principle ................ 518,962 810,995 773,350 2,475,228 4,691,507
Income tax expense. ........ 69,400 122,000 135,000 990,000 1,904,752
--------- ---------- ----------- ----------- -----------
Income before cumulative
effect of change in
accounting principle ..... 449,562 688,995 638,350 1,485,228 2,786,755
Cumulative effect of change in
accounting for income taxes
in accordance with FASB 109 49,000 -- -- -- --
--------- ---------- ----------- ----------- ----------
Net income.................. $ 400,562 $ 688,995 $ 638,350 $1,485,228 $2,786,755
========= ========== ========== ========== ==========
Net income per common
share (1)................. $ 0.12 $ 0.18 $ 0.16 $ 0.26 $ 0.47
========== ========== ========== ========== ==========
Weighted average number of
common shares outstanding. 3,417,391 3,785,102 3,884,708 5,620,741 5,951,844
Other Operations Data:
EBITDA (2)................. $1,260,940 $1,606,457 $2,888,231 $4,613,823 $7,285,186
</TABLE>
-16-
<PAGE>
<TABLE>
<CAPTION>
September 30,
---------------------------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Working capital............... $ 901,761 $1,498,399 $ 2,068,414 $ 2,304,684 $ 3,096,318
Total assets.................. 6,101,103 7,098,447 17,916,037 19,516,355 26,580,185
Notes payable, including
current portion............. 2,220,062 2,836,604 2,830,872 1,808,464 4,817,467
Shareholders' equity.......... 2,779,804 3,507,290 12,796,169 14,649,421 18,064,347
- ---------------
</TABLE>
(1) For information concerning the number of shares used in the
computation of net income per common share, see Note 1 to the
Consolidated Financial Statements.
(2) "EBITDA" represents earnings before interest expense, income tax
expense, depreciation and amortization, including amortization of
leasehold improvements, acquisition and development costs, and debt
expense and discount or premium relating to any indebtedness. EBITDA
is not presented herein as an alternative measure of operating results
(as determined in accordance with GAAP) or cash flow (as determined in
accordance with GAAP).
-17-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations should be read in conjunction with the
Consolidated Financial Statements and the related notes thereto included
elsewhere in this Prospectus. This Prospectus contains forward-looking
statements regarding matters that involve risks and uncertainties. The
Company's actual results may differ materially from those anticipated by
the forward-looking statements as a result of certain factors, including,
but not limited to, those set forth in Risk Factors and elsewhere in this
Prospectus.
Overview
AquaPenn produces, bottles and sells non-sparkling natural spring
water. The Company has adopted a strategy of producing regionally and
selling its natural spring water products to national and regional
customers, offering both private label and branded products to allow its
customers "one-stop-shopping," creating innovative packaging, maintaining
state-of-the-art production facilities which allow it to achieve cost
effectiveness and producing superior quality products. Part of the
Company's strategy includes acquiring the rights to additional spring water
sites and acquiring natural spring water companies.
History. The Company commenced operations in fiscal 1987 as a
distributor of 5 gallon containers of natural spring water to the home and
office market, and in fiscal 1988 the Company commenced manufacturing and
selling spring water ice to supermarkets and other customers. In fiscal
1989, the Company began to refocus its product and distribution strategies
by bottling natural spring water in containers for sale directly or through
wholesalers to the off-premise retail market in 1 gallon and 2 1/2 gallon
sizes. In fiscal 1991, the Company sold assets used in its 5 gallon home
and office delivery business, and in fiscal 1994 the Company sold assets
used in its ice business. In August 1990, the Company commenced shipping
premium PET products, and since that time the Company has primarily focused
its efforts on premium PET natural spring water products, which accounted
for approximately 81% of the Company's net revenues in fiscal 1997. During
fiscal 1995 and 1996, the Company completed a private placement of Common
Stock, with proceeds of $8.9 million, which were used to build the
Milesburg Facility. This facility was expanded in February 1997, and, as
part of the use of net proceeds from this Offering, the Company expects to
spend an additional $17.8 million to add additional production capacity and
warehouse space. The current expansion is expected to be completed by the
end of the Spring of 1998.
Factors Affecting Operating Results. Because the Company has limited
ability to change the price of its products, the Company's profits are
based on generating sufficient sales volume to exceed its costs, including
its relatively high fixed costs of production. As the Company completes its
capital expenditures in the near term, its profit margins will likely be
negatively impacted until sales volumes increase. The Company's largest
variable cost is packaging, principally PET bottles, caps and corrugated
boxes. Variations in raw materials prices may cause the Company's results
to fluctuate. The Company maintains a relatively low level of raw material
and finished goods inventory averaging $1.5 million in fiscal 1997. This
inventory consists primarily of raw materials, which the Company finds cost
effective to purchase in bulk. The Company maintains a limited product
inventory because the Company tailors much of its production specifically
to customer orders. The Company's PET bottle supplier, Schmalbach-Lubeca,
produces PET bottles as needed for the Company on site at the Milesburg
Facility. Disruptions in supplies of certain raw materials may negatively
impact the Company's ability to deliver finished products to its customers.
Competitive pricing pressures may also negatively impact the Company's
performance. Finally, the mix of products and packaging sizes sold by the
Company may change, particularly as new distribution channels are obtained.
Changes in these aspects of the Company's sales profile may impact profit
margins. The Company does not believe that inflation has had a material
effect on the Company's operating results during the past three fiscal
years.
Seasonality. The Company's business is highly seasonal, with a
concentration of sales in summer months. In the past, inclement weather has
negatively impacted the Company's net revenues, particularly in summers
which are unusually cool or rainy. In the last three fiscal years, an
average of 41.5% of the Company's sales have occurred during June, July and
August.
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<PAGE>
Results of Operations
The following table sets forth for the periods indicated certain
financial data as a percentage of net revenues.
Years Ended September 30,
-------------------------
1995 1996 1997
---- ---- ----
Net revenues.................... 100.0% 100.0% 100.0%
Cost of goods sold.............. 79.1 75.3 74.5
---- ---- ----
Gross profit.................... 20.9 24.7 25.5
Selling, general and administrative 14.3 15.3 13.5
---- ---- ----
Income from operations.......... 6.6 9.4 12.0
Other income (expense).......... (3.2) (0.6) 0.3
---- ---- ----
Income before income tax expense 3.4 8.8 12.3
Income tax expense.............. 0.6 3.5 5.0
---- ---- ----
Net income...................... 2.8% 5.3% 7.3%
==== ==== ====
Fiscal 1997 Compared with Fiscal 1996
Net Revenues. The Company's net revenues increased from $28.2 million
in fiscal 1996 to $38.0 million in fiscal 1997, an increase of $9.8
million, or 34.6%. This increase resulted principally from increased sales
volume to the Company's existing customer base as well as from sales to new
customers. This increase also resulted from the introduction of the
Company's new 8 ounce product which accounted for 33.0% of the Company's
fiscal 1997 growth. During the fourth quarter of fiscal 1997, the Company
experienced a decrease in net revenues from the prior quarter which, in
part, was a result of unseasonably cool weather in select markets and the
loss of net revenues from two customers which were acquired by other
entities.
Gross Profit. Gross profit increased from $7.0 million in fiscal 1996
to $9.7 million in fiscal 1997. The gross margin increased from 24.7% in
fiscal 1996 to 25.5% in fiscal 1997. Cost of goods sold includes direct
materials, direct labor, overhead, depreciation, amortization and
transportation. This percentage increase was largely attributable to a new
bottle supply contract which went into effect on April 1, 1996. In
addition, the Company's direct labor costs and overhead were spread over a
greater sales volume, decreasing the cost per unit produced. Transportation
expenses, which represent outbound delivery costs, remained relatively
unchanged as a percentage of net revenues. Depreciation and amortization
was $1.8 million in fiscal 1996 compared to $2.4 million in fiscal 1997,
and decreased from 6.5% of net revenues in fiscal 1996 to 6.3% in fiscal
1997. During the fourth quarter of fiscal 1997, the Company experienced a
decrease in gross margins. Factors impacting this decrease included a
disproportionate increase in certain expenses in addition to a shift in
product mix. In particular, higher transportation expenses reflected, in
part, an increase in deliveries to the West and Southwest, direct labor
expenses were higher due to more labor-intensive requirements for certain
packaging and higher raw material expenses resulted from PET resin and
corrugated box price increases. Product mix shifts occurred as the Company
obtained new customers in different distribution channels, introduced new
product sizes and sold a different mix of products to existing customers.
Selling, General and Administrative. Selling, general and
administrative expenses increased from $4.3 million in fiscal 1996 to $5.1
million in fiscal 1997 but decreased from 15.3% of net revenues in fiscal
1996 to 13.5% in fiscal 1997. This decrease was primarily attributable to a
greater percentage increase in net revenues.
Other Income (Expense). Other income increased from $116,484 in fiscal
1996 to $328,180 in fiscal 1997. Other income consists primarily of rental
income from the lease of the Company's former State College location and
the lease of space in the Milesburg Facility to Schmalbach-Lubeca for
production of blow-molding products.
-19-
<PAGE>
Interest Expense, Net. Interest expense, net decreased from $297,204
in fiscal 1996 to $208,467 in fiscal 1997. This decrease was due to a lower
average outstanding revolver balance and more favorable interest rate
terms.
Income Tax Expense. The Company's effective tax rate was 40.0% for
fiscal 1996 and 40.6% for fiscal 1997.
Fiscal 1996 Compared with Fiscal 1995
Net Revenues. The Company's net revenues increased from $23.0 million
in fiscal 1995 to $28.2 million in fiscal 1996, an increase of $5.2
million, or 23.0%. This increase resulted principally from increased sales
volume to existing customers as well as from sales to new customers.
Gross Profit. Gross profit increased from $4.8 million in fiscal 1995
to $7.0 million in fiscal 1996. The gross margin increased from 20.9% in
fiscal 1995 to 24.7% in fiscal 1996. This percentage increase was largely
due to a decrease in cost of direct materials attributable to the new
bottle supply contract which went into effect on April 1, 1996.
Depreciation and amortization increased from $1.4 million in fiscal 1995 to
$1.8 million in fiscal 1996, and increased from 5.9% of net revenues in
fiscal 1995 to 6.5% in fiscal 1996. Substantially all of this increase is
attributable to the Milesburg Facility which opened in May 1995.
Selling, General and Administrative. Selling, general and
administrative expenses increased from $3.3 million in fiscal 1995 to $4.3
million in fiscal 1996, and increased from 14.3% of net revenues in fiscal
1995 to 15.3% in fiscal 1996. This increase resulted primarily from a
larger percentage increase of sales volume being sold through food brokers,
a greater percentage of net revenues attributable to sales rebates and
accruals, and an increase in personnel expenses.
Other Income (Expense). Other income increased from $7,090 in fiscal
1995 to $116,484 in fiscal 1996. This increase is the result of
commencement of the lease of the Company's former State College location
and rental income therefrom.
Interest Expense, Net. Interest expense, net decreased from $745,829
in fiscal 1995 to $297,204 in fiscal 1996 as a result of the repayment of
an $8.0 million interim loan from the proceeds of the Company's private
placement of Common Stock in fiscal 1995.
Income Tax Expense. The Company's effective tax rate was 17.5% in
fiscal 1995 and 40.0% in fiscal 1996. The effective tax rate in fiscal 1995
differed from the statutory tax rate primarily due to the use of net
operating loss carryforwards. As of September 30, 1995, substantially all
of the Company's federal net operating loss carryforwards were fully
utilized.
Quarterly Results
The following table sets forth certain quarterly information for the
Company's two most recent years. This unaudited quarterly information has
been prepared on the same basis as the audited Consolidated Financial
Statements included elsewhere in this Prospectus, and, in the opinion of
the Company, reflects a fair presentation of the financial results for the
period covered. The table should be read in conjunction with the
Consolidated Financial Statements of the Company and the notes thereto. The
operating results for any quarter may not necessarily be indicative of
results for any future periods.
-20-
<PAGE>
<TABLE>
<CAPTION>
Quarters Ended
-----------------------------------------------------------------------------------------------
Dec. 31, March 31, June 30, Sept. 30, Dec. 31, March 31, June 30, Sept. 30,
1995 1996 1996 1996 1996 1997 1997 1997
--------- --------- --------- --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues. $3,413,572 $5,788,242 $9,173,126 $9,865,801 $5,002,521 $7,419,815 $12,889,053 $12,703,926
Cost of goods sold 3,267,086 4,999,297 6,388,573 6,616,357 4,025,163 5,712,637 9,209,757 9,369,381
--------- --------- --------- --------- --------- --------- --------- ---------
Gross profit. 146,486 788,945 2,784,553 3,249,444 977,358 1,707,178 3,679,296 3,334,545
Selling, general and
administrative 832,406 876,453 1,258,246 1,346,375 943,952 1,050,679 1,504,633 1,627,319
--------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) from
operations.. (685,920) (87,508) 1,526,307 1,903,069 33,406 656,499 2,174,663 1,707,226
Non-operating
expense (income),
net......... 71,361 49,211 46,163 13,985 (38,670) (21,247) (19,302) (40,494)
--------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) before
income taxes (757,281) (136,719) 1,480,144 1,889,084 72,076 677,746 2,193,965 1,747,720
Income tax expense
(benefit)... (302,000) (54,000) 591,000 755,000 32,400 272,600 878,717 721,035
--------- --------- --------- --------- --------- --------- --------- ---------
Net income (loss) $(455,281) $ (82,719) $ 889,144 $1,134,084 $ 39,676 $ 405,146 $1,315,248 $1,206,685
========= ========= ========== ========== ========== ========== ========== ==========
Net income (loss) per
common share $ (0.$1) $ (0.02) $ 0.16 $ 0.20 $ 0.01 $ 0.17 $ 0.22 $ 0.17
========= ========= ========== ========== ========== ========== ========== ==========
Weighted average
number of common
shares outstanding(1) 4,226,985 4,259,071 5,624,606 5,642,211 5,806,796 5,811,092 5,919,765 5,951,844
========= ========= ========== ========== ========== ========== ========== ==========
- ----------------------------------
</TABLE>
(1) The weighted average number of common shares outstanding in loss
periods does not include the Convertible Preferred Stock or
Common Stock options or warrants under the treasury stock method
as outstanding since these securities have an anti-dilutive
effect on per share information.
Liquidity and Capital Resources
The Company's primary capital needs have been to fund its working
capital requirements and capital expenditures necessitated by its
growth. The Company's net cash provided by operating activities was
$2.1 million, $3.6 million and $4.8 million in fiscal 1995, 1996 and
1997, respectively.
The Company's capital expenditures totaled $7.9 million in fiscal
1997, primarily incurred for the expansion of the Milesburg Facility,
including the purchase of and progress payments on new equipment.
The Company's capital expenditures totaled $2.9 million in fiscal
1996, primarily incurred for the completion of the Milesburg Facility
and for the purchase of new box-forming and shrink-wrapping equipment.
The Company's capital expenditures totaled $10.4 million in fiscal
1995 for the purchase of property, plant and equipment, primarily
related to the opening of the Milesburg Facility in May.
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The Company utilized bridge debt financing as well as other debt
borrowings to finance the construction of the Milesburg Facility and the
procurement of new equipment. During September 1995 and the beginning of
fiscal 1996, the Company privately placed 1.8 million shares of its Common
Stock in exchange for an aggregate of $8.9 million (net of $171,042 of
aggregate offering costs). The Company used the proceeds of the private
placement, together with operating cash flow, to repay substantially all of
the debt borrowings used to finance the Milesburg Facility. In addition,
the Company borrowed $1.8 million from the Pennsylvania Industrial
Development Authority, through which the Commonwealth of Pennsylvania
provides low cost financing to job-creating enterprises. This financing
bears an annual fixed rate of interest of 5%, payable monthly, and
amortizes over a 15 year period.
The Company's future capital requirements include $6.6 million to
procure land and spring water sources and construct a new bottled water
facility in Florida, $17.8 million to expand the Milesburg Facility, to
build additional warehouse and blow-molding space, to purchase additional
production lines and equipment, to install a pipeline from Big Spring to
its facility and to purchase other equipment. In addition, the Company's
future capital requirements will require the financing and growth of
working capital items such as accounts receivable and inventories. The
Company anticipates that the funds available from this Offering should
support the Company's existing operations at least through fiscal 1998.
Long-term capital expenditures are expected to be funded through additional
debt borrowings and operating cash flow.
The Company has $22 million in revolving credit facilities, lines of
credit and demand notes which incur interest at annual rates between LIBOR
plus 1.0% and LIBOR plus 1.7%. At September 30, 1997, the Company had $3.1
million of such borrowings outstanding which are expected to be repaid with
the proceeds of this Offering.
Lease of Spring Water Sources and Acquisitions. On July 10, 1995, the
Company entered into an agreement with the Borough of Bellefonte,
Pennsylvania to purchase natural spring water from the Big Spring. The term
of the Company's agreement with the Borough of Bellefonte is 50 years with
a five year, automatic renewal unless prior notice of termination is given.
Subject to the Borough of Bellefonte obtaining certain permits,
construction of a cover over the spring and all other permits and approvals
being obtained, the Company expects to begin bottling Big Spring water in
the Spring of 1999. On July 30, 1997, the Company entered into an agreement
with Seven Springs Water Company ("Seven Springs") to purchase natural
spring water from Ginnie Springs, and to purchase land adjacent to Ginnie
Springs to construct a new bottling facility. The Company expects that the
construction of this state-of-the-art facility will require approximately
$6.6 million of capital expenditures and production will be concluded
during the Spring of 1998. On October 15, 1997, the Company acquired Castle
Rock, providing a West Coast production facility, natural spring water
source and brand name. The purchase price for all of the outstanding common
stock of Castle Rock was $3.0 million, subject to certain post-closing
adjustments, consisting of approximately $1.45 million in cash and
approximately $1.55 million in Common Stock to be valued at 75.0% of the
Offering price. One half of the cash consideration and one half of the
Common Stock consideration were paid into escrow pending adjustments based
on a final determination of Castle Rock's liabilities and the determination
of Offering price. As part of the acquisition of Castle Rock, the Company
agreed to pay down a substantial portion of the liabilities of Castle Rock.
The acquisition will be accounted for as a purchase.
Recent Accounting Pronouncements
The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of and SFAS No. 123, Accounting for
Stock- Based Compensation during fiscal 1997. SFAS No. 121 was adopted in
the beginning of fiscal 1997 and there was no impact on the consolidated
statements of operations upon the adoption of this statement. The Company
elected to adopt the disclosure requirements of SFAS No. 123 as allowed by
the Statement.
In February 1997, SFAS No. 128, Earnings Per Share, was issued and
requires dual presentation of basic and diluted earnings per share for
complex capital structures on the face of the consolidated statement of
operations. According
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<PAGE>
to SFAS No. 128, basic earnings per share, which replaces primary earnings
per share, is calculated by dividing net income available to common
stockholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share, which replaces fully diluted
earnings per share, reflects the potential dilution for the exercise or
conversion of securities into common stock. SFAS No. 128 is required to be
adopted for the Company's fiscal 1998 year end financial statements and it
is expected to have no significant impact on the Company's financial
position or results of operations.
In June 1997, SFAS No. 130, Reporting Comprehensive Income, and SFAS
No. 131, Disclosures about Segments of an Enterprise and Related
Information were issued. SFAS No. 130 establishes standards for reporting
and display of comprehensive income and its components including revenues,
expenses, gains and losses in a full set of general-purpose financial
statements and requires that all items that are required to be recognized
under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same
prominence as other financial statements. SFAS No. 130 is required to be
adopted for the Company's fiscal 1999 year end financial statements.
SFAS No. 131 establishes standards for the way that public companies
report information about operating segments in annual financial statements
and requires that those enterprises report selected information about
operating segments in interim financial reports issued to stockholders. It
also establishes standards for related disclosures about products and
services, geographic areas, and major customers. SFAS No. 131 is required
to be adopted for the Company's fiscal 1999 financial statements. The
Company is currently evaluating the impact, if any, of the adoption of this
pronouncement on the Company's existing disclosures.
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<PAGE>
BUSINESS
The Company
AquaPenn produces, bottles and sells non-sparkling natural spring
water products to regional and national customers under both retailers' and
other customers' private labels and its proprietary brands Pure American,
Great American, AquaPenn and Castle Rock. The Company, founded in 1986, is
one of the largest producers of private label natural spring water products
in the United States; private label products accounted for over 50% of the
Company's 1997 fiscal year net revenues. The Company's private label and
branded customers include, among others, Delta Air Lines, Inc., Gerber
Products Company, Sam's Club and Walgreen Co. The Company's net revenues
have grown from $9.3 million in fiscal 1993 to $38.0 million in fiscal
1997, representing a compounded annual growth rate of 42.3%. Over the same
time period, the Company's net income has grown from approximately $400,000
to approximately $2.8 million, representing a compounded annual growth rate
of 62.4%.
Industry Overview
Market Overview. The U.S. bottled water market is comprised of three
segments: domestically produced non-sparkling water, domestically produced
sparkling water and imported water, which constituted approximately 65%,
21% and 14%, respectively, of 1996 U.S. bottled water wholesale sales,
according to Beverage Marketing. The domestically produced non-sparkling
water category includes natural spring water obtained from naturally
occurring springs, well water, distilled water and purified water. Unlike
other beverages, bottled water serves both as a tap water substitute and a
refreshment beverage.
According to Beverage Marketing, the total U.S. market for bottled
water has grown from 1.6 billion gallons sold in 1987 to over 3.1 billion
gallons in 1996, and accounted for approximately $3.6 billion in wholesale
sales during 1996. Non-sparkling water comprises over 87% of the U.S.
bottled water market and generated $2.7 billion of wholesale sales in 1996,
and is expected to continue to grow in the future. PET-packaged products
comprise approximately 39% of the domestically produced non-sparkling water
market and have grown from approximately 83 million gallons in 1987 to
approximately 580 million gallons in 1996, representing a compounded annual
growth rate of approximately 24%. PET-packaged products accounted for
approximately $921 million of wholesale sales in 1996. Approximately 81% of
the Company's 1997 net revenues was generated by products packaged in PET
containers. According to Beverage Marketing, PET bottled water is among the
fastest growing beverage categories in the United States.
Consumer Trends. Contributing to the growth in consumption of
non-sparkling water are consumer trends including health and fitness
awareness, municipal tap water quality concern and maturing soft drink
demand, as well as consumer demand for convenience and innovative
packaging. Bottled water, particularly when packaged in premium PET bottles
with sport caps, appeals to consumers who are sports enthusiasts or whose
lifestyles are oriented to health and fitness. According to Beverage
Marketing, consumers' concern over the quality of municipal water supplies
has contributed to an increase in bottled water consumption.
Bottled water has also become an alternative to other beverages,
including soft drinks. According to Information Resources, Inc. ("IRI"),
total U.S. gallons sold of soft drinks through food store channels has
increased approximately 10% from 1994 through 1996. Over the same time
period, gallons sold of ready-to-drink juices have increased approximately
1%. In contrast, non-sparkling bottled water gallons sold have increased
approximately 21% from 1994 to 1996, according to Beverage Marketing.
Bottled spring water is natural and caffeine and additive free. These
attributes and the increased availability of convenient packaging for
natural spring water have contributed to the increase in bottled water
consumption.
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<PAGE>
Distribution Channels. Non-sparkling bottled water is generally sold
to end users through four channels. According to Beverage Marketing, the
total share of the bottled water market for each channel is as follows: (i)
off-premise retail, which consists of supermarket, convenience store and
drug store chains and other similar retail outlets (44.9%); (ii) home and
office delivery which primarily consists of 5 gallon containers (39.0%);
(iii) on-premise retail, which includes restaurants, delicatessens and
other similar sites (8.3%); and (iv) vending (7.8%).
Non-sparkling bottled water is generally delivered to customer
locations through direct-store-delivery ("DSD") or warehouse distribution
systems. DSD involves delivery of the product directly to the store's
location where consumers may purchase the product. Warehouse distribution
systems involve the delivery of truckloads of palletized products to the
warehouses of regional customers which, in turn, deliver the product
directly to the customer's retail sales locations.
Private Label. Private label products have become increasingly popular
among retailers and other customers. For example, supermarket sales of
private label products grew 8.5% in 1996 versus 1.4% growth among branded
products, according to IRI. Retailers benefit from having a range of
private label and branded products as well as from the customer affinity
developed from the reinforcement of the retailer's own brand. Other
non-retailing customers find it more efficient to source products from a
private label manufacturer than to produce the products themselves. Both
types of customers often choose private label bottled water producers on
the basis of price, consistent product quality, packaging capability,
distribution capability and customer service.
Consolidation. The trend toward consolidation in the bottled water
industry is evidenced by the reduction in the number of bottled water
filling locations and the corresponding increase in volume produced at most
locations over the past ten years. According to Beverage Marketing, in 1996
there were approximately 350 filling locations in the United States versus
approximately 425 in 1986, a decrease of 17.6%. The number of filling
locations with sales over $75 million doubled to eight from 1995 to 1996.
Larger companies are seeking to expand their share within a market, obtain
broader distribution and achieve economies of scale with larger volume
production.
Strategy
The Company's objective is to be the leading producer and bottler of
natural spring water for customers on a national basis. Aspects of the
Company's strategy include the following:
Focus on Premium PET Packaging. While the Company uses numerous types
of packaging, it is focused on bottling its natural spring water products
in premium PET plastic bottles which accounted for approximately 81% of its
net revenues in fiscal 1997. According to Beverage Marketing, PET is the
fastest growing segment of the bottled water market, having grown at a
compounded annual rate of approximately 24% from 1987 to 1996, representing
$921 million of wholesale sales in 1996. The Company currently offers eight
premium PET bottle sizes to its customers, with five of those sizes offered
in the Company's proprietary bottle designs.
Produce Regionally and Sell to National and Regional Customers. With
the acquisition of Castle Rock and the Ginnie Springs source, the Company
is implementing its strategy of developing regional production capacity to
provide bottled water products to national and regional customers
throughout the United States. The ability to provide products to its
customers from multiple sites allows the Company to service more
effectively national customers such as supermarket chains, drug stores,
convenience stores, hotel chains, airlines and restaurant chains, while
reducing distribution costs.
Invest in State-of-the-Art Production Facilities. The Company has
invested in state-of-the-art production facilities which it believes are
comparable or superior in sophistication to those used by its competitors.
These facilities allow the Company to produce high quality natural spring
water products in a cost efficient manner while also providing the
flexibility to respond rapidly to the changing shipment and production
demands of its customers.
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<PAGE>
Create Innovative Packaging. The Company incorporates innovative
packaging into its natural spring water products in order to differentiate
its products from those offered by its competitors and to better meet its
customers' demands. The Company is a package design leader, having been one
of the first to offer premium PET bottles with sport caps; tamper-evident
shrink wrap bands; 20 ounce sports bottles; 8 ounce bottles designed for
airlines, food service and other distribution channels; and 24.9 ounce
bottles designed to compete with the 24 ounce bottle.
Provide "One-Stop-Shopping" to Customers. By producing both private
label and branded products in a full line of sizes and packages, the
Company can offer to its customers "one-stop-shopping" supply arrangements.
Customers are able to stock their shelves with a variety of branded water
products, while also strengthening their own customer affinity with private
label. Private label customers are able to design their own packaging to
their specifications. Additionally, because the Company distributes its
products throughout the continental United States, the Company's customers
need not rely on multiple regional suppliers.
Provide Superior Customer Service. The Company is focused on providing
the highest level of service to its customers. The Company provides
flexibility to its customers in terms of order size, delivery timing and
method, and, in the case of private label, label design. The Company
believes that, by remaining responsive to its customers' needs, it will
encourage further sales penetration with existing and new customers.
Growth Strategy. AquaPenn's growth strategy is to increase sales to
existing customers, broaden its current customer base, add new distribution
channels and expand its product line. The Company's active acquisition
program includes obtaining the rights to additional spring water sites and
acquiring natural spring water companies. In accordance with this strategy,
the Company recently acquired the rights to natural spring water from
Ginnie Springs, adjacent to which a new production facility is expected to
be constructed and completed by the Spring of 1998. In addition, the
Company acquired Castle Rock, a bottler and distributor of natural spring
water products located in northern California. The acquisition of the right
to Ginnie Springs spring water and the acquisition of Castle Rock will
allow the Company to serve its customers more efficiently.
Product Categories
The Company offers both proprietary brands and private label products
in each of the categories described below. The Company estimates that
approximately 50% of fiscal 1997 net revenues were derived from its private
label business and approximately 50% of net revenues were derived from its
proprietary brands.
Natural Spring Water. The Company's natural spring water is sodium and
chlorine free. The Company estimates that natural spring water products
accounted for approximately 86% of its net revenues in fiscal 1997.
Distilled Water. The AquaPenn and Great American branded and private
label distilled water is primarily used by consumers as a water source for
batteries, humidifiers and irons, and for drinking. The Company estimates
that distilled water accounted for approximately 5% of its net revenues in
fiscal 1997.
Fluoridated Spring Water. The Company has developed spring water
products containing fluoride. AquaPenn currently packages fluoridated
spring water for Beech-Nut Nutrition Corporation under the name
Beech-Nut(R) Spring Water and for Gerber Products Company under the name
Gerber(R) Baby Water with Fluoride, which is marketed primarily to infants
and children. Fluoride-related products accounted for approximately 9% of
the Company's net revenues in fiscal 1997.
Distribution
The Company distributes nearly all of its products from its Milesburg
Facility by shipping to the regional warehouses of its customers. Unlike a
DSD distribution system in which products are delivered via a company's
local delivery
-26-
<PAGE>
trucks to individual outlets, AquaPenn distributes to warehouses that
service its customers. This approach to distribution results in reduced
distribution costs compared to DSD distribution costs, while providing
those companies that distribute via warehouse systems, according to
Beverage Marketing, access to nearly 80% of all off-premise retail
channels. The Company's Castle Rock subsidiary utilizes primarily a DSD
distribution system. The Company intends to continue to distribute natural
spring water products under the Castle Rock label through the DSD
distribution system and private label and other proprietary brands through
the warehouse distribution system. In fiscal 1997, sales to Sam's Club and
Walgreen Co. accounted for approximately 15% and 11% of net revenues,
respectively; no other customer accounted for more than 10% of the
Company's net revenues. As of September 30, 1997, the Company believes its
products were sold in all 50 states.
Marketing
The Company advertises at the wholesale level and participates in
approximately 20 trade shows annually. The Company's products are also
marketed through food wholesalers, which deliver to single and chain stores
such as convenience stores and delicatessens, and through food brokers,
which receive commissions based on a percentage of net revenues for
products sold. When possible, the Company attempts to cross-market its
private label and branded products.
The Company has full Electronic Data Interchange ("EDI") capability.
EDI is a system which permits customers to place orders and receive
invoices electronically. EDI reduces the administrative costs of the
Company's customers such as drug store chains and warehouse retailers by
eliminating paperwork and reducing processing time. Certain customers and
potential customers will only order products from EDI-capable suppliers.
The Company currently receives 21.3% of its orders via EDI. The Company
believes that its EDI capability permits it to compete better on a national
level.
Spring Water Sources
The geographical distribution of the Company's natural spring water
sources is essential to its strategy of producing regionally and selling to
national and regional customers. By developing sources in the Northeast,
Southeast and West, the Company will be able to distribute more efficiently
to the most significant population areas in the United States. The Company
believes that these sources provide high quality natural spring water.
"Spring water" is defined by the FDA as water derived from an underground
formation from which water flows naturally to the surface of the earth.
Under FDA guidelines, bottled water must contain fewer than 500 parts per
million ("ppm") in total dissolved solids. Varying amounts of solids
provide different "tastes" to water.
Graysville Spring. The Company's sources include the Graysville Spring
with an estimated flow of over 500,000 gallons per day, well in excess of
the Company's current and anticipated requirements for the Milesburg
Facility. The Company has exclusive use of the leased premises and may draw
the full amount of the flow for its bottling needs, except a minimal amount
drawn for use by two existing residences. The total dissolved solids of the
water from this spring is approximately 120 ppm. The Company leases the
spring from the owner of the land on which the spring is located pursuant
to a 20 year lease expiring in the year 2017. The Company also has the
right of first refusal to buy or lease the land expiring in the year 2026.
The land abuts state game lands which reduces the risk of contamination or
pollution from external sources. The Graysville Spring is approximately 32
miles from the Milesburg Facility and water is transported from the spring
to the facility in the Company's stainless steel tanker trucks.
Big Spring. The Company has entered into an agreement with the Borough
of Bellefonte, Pennsylvania to purchase natural spring water from the Big
Spring. The estimated total flow of the Big Spring is approximately 14
million gallons per day, and the Company has rights to purchase up to one
million gallons per day. The total dissolved solids of the water from this
spring is approximately 140 ppm. The term of the Company's agreement with
the Borough of Bellefonte is 50 years with a five year automatic renewal
unless prior notice of termination is given. The Company's rights to draw
water from the Big Spring are subject to the satisfaction of the water
demands of the Borough of Bellefonte water system. There is no restriction
on sale by the Borough of Bellefonte of Big Spring water to other
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<PAGE>
purchasers. The Company is working with the Borough of Bellefonte to obtain
the necessary permits and approvals to carry out the agreement and enable
the Company to construct an approximately five-mile pipeline to transport
water from the Big Spring to the Milesburg Facility. As part of the
process, the Borough of Bellefonte must obtain a new water allocation
permit to reflect an increase in the draw on Big Spring for both the
Borough's own needs and for the sale of spring water to the Company. In
addition, subsequent to the signing of the agreement with the Company, the
Borough of Bellefonte has been directed by the Pennsylvania Department of
Environmental Protection to construct a permanent cover over Big Spring.
Although there can be no assurance that the Borough of Bellefonte will
obtain all necessary permits or approvals, or obtain them in a timely
manner, the Company believes that such permits and approvals are
obtainable, and if obtained, the pipeline will be built and bottling of Big
Spring water will commence in the Spring of 1999.
Ginnie Springs. The Company has entered into an agreement with Seven
Springs to purchase natural spring water from Ginnie Springs. Pursuant to
the agreement, Seven Springs will sell 40 acres of land adjacent to Ginnie
Springs to the Company for the construction of a water bottling facility.
The Company also has a ten year option to purchase an additional 40 acres.
The estimated total daily flow of Ginnie Springs is 25 million gallons, and
pursuant to state regulations Seven Springs is permitted to sell an annual
average of up to 1.15 million gallons per day. The total dissolved solids
of the water from Ginnie Springs is approximately 140 ppm. The term of the
agreement between the Company and Seven Springs is 99 years. The Company
has obtained the necessary permits from the water management district and
Gilchrist County and is expected to begin construction of the new bottling
facility in the near future. The Company intends to pipe natural spring
water from Ginnie Springs to the new bottling facility and begin bottling
water in the Spring of 1998.
Castle Rock. The Company's wholly owned subsidiary, Castle Rock, has
an agreement with the City of Dunsmuir, California, pursuant to which
Castle Rock purchases natural spring water from the City of Dunsmuir's
spring source. The estimated total daily flow from the Castle Rock Spring
is approximately one million gallons per day and the total dissolved solids
of the water is approximately 95 ppm. The agreement permits Castle Rock to
capture water from the source, and then pipe it approximately 1,800 feet to
Castle Rock's bottling facility. The term of the agreement is 25 years
(until 2015) and Castle Rock has an option to renew for an additional 25
years. The Company may purchase not more than 50 million gallons per year,
provided that any daily amount drawn by the Company does not interfere with
the domestic use of the City's current and future residential users. The
deed in the chain of title that enables the City of Dunsmuir to sell
natural spring water to Castle Rock contains limiting language that may
restrict the City's ability to sell water to the Company. See "Risk
Factors."
Production
The Company has fully equipped, highly automated state-of-the-art
production facilities in Pennsylvania and California and intends to
construct a state-of-the-art facility in Florida which is scheduled for
completion in the Spring of 1998. The Company continuously upgrades and
improves its production facilities to provide high speed, flexible bottling
capabilities which permit the Company to be responsive to customers'
shipment and production demands, and to supply a premium quality product.
Spring Water Treatment and Bottling. Upon delivery to the Company's
Milesburg and Castle Rock facilities, the spring water is filtered through
0.2 micron filters and then ozonated during storage in stainless steel
storage tanks. Ozone is an unbalanced form of oxygen which, unlike regular
oxygen, kills bacteria and micro-organisms 3,000 times faster than
chlorine. Unlike chlorine, ozone naturally breaks down to simple oxygen in
a few hours and leaves no traces or residues. At the Milesburg Facility,
when the spring water leaves the storage tanks it is filtered through a one
micron absolute filter and then run through an ultraviolet (UV) light
disinfection unit. After exposure to UV light, the water is treated with
ozone again. The ozonated water is then piped to the clean room bottling
area where the various products are filled and capped. The residual ozone
in the bottled products sanitizes the containers as well as the water,
making certain the water is pure. The clean room is filled and pressurized
with air from two high-volume HEPA (High-Efficiency Particulate Air) air
handlers that filter 99.97% of particulates out of the air.
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<PAGE>
Packaging. The Company's 160,000 square foot Milesburg bottling
facility is equipped with stainless steel equipment and has several
bottling lines. The large space provides the Company with the flexibility
to operate existing bottling lines at high speeds. The Company has
equipment for multi-packing and is adding multi-pack shrink wrap equipment.
The Company's products come in a wide range of bottle sizes including PET
bottles in 8 ounce, 12 ounce, .5 liter, 20 ounce, 24.9 ounce, 1 liter, 1.5
liter and 2.0 liter sizes, and .5 gallon, 1 gallon, 2.5 gallon and 5 gallon
sizes. The Company believes that it is an industry leader and innovator in
packaging.
The manufacturing process is highly automated. Bottles are
mechanically de-palletized, cleaned, rinsed, filled and capped. The bottles
are automatically labeled, tamper banded, assembled and packed in cases.
After palletizing and stretch wrapping, the product is either loaded
directly onto a truck for immediate shipment or is stored in a warehouse
for future shipment. Most products are shipped within 48 to 72 hours after
production via outside carriers.
Quality Control. The Company maintains exacting internal quality
control standards. Each batch of bottled natural spring water is tested for
at least nine chemical and physical parameters as well as five
microbiological parameters. The Graysville Spring source and critical
points in the Milesburg Facility bottling process are evaluated weekly.
Water from the Castle Rock spring is tested daily and the spring source is
inspected weekly. In addition, the Company's spring water is tested
annually for over 140 contaminants by an independent testing laboratory.
The Company uses stainless steel equipment in order to maximize quality
control and cleanliness and maintains an in-house microbiological
laboratory at both its Milesburg and Castle Rock facilities. The Company
believes that its quality control standards are equal or superior to the
standards of most bottled water producers.
The Company's products are certified by the National Sanitation
Foundation (the "NSF"), an independent agency serving industry, government
and consumers in areas relating to public health and the environment. The
NSF conducts annual unannounced inspections and extensive product and raw
material testing. The Company was awarded the "excellence in manufacturing"
award by the International Bottled Water Association, an award which
recognizes the Company's commitment to quality and purity.
Competition
The bottled water industry is highly competitive. According to
Beverage Marketing, there are approximately 350 bottled water filling
locations in the United States with sales increasingly concentrated among
the larger firms. According to Beverage Marketing, the ten largest bottled
water companies accounted for approximately 58.4% of wholesale dollar sales
in 1996. Many of the Company's competitors are more experienced, have
greater financial and management resources and have more established
proprietary trademarks and distribution networks than the Company. On a
national basis, the Company competes with bottled water companies such as
The Perrier Group of America, Inc. (which includes Arrowhead Mountain
Spring Water, Poland Spring, Ozarka Spring Water, Zephyrhills Natural
Spring Water, Deer Park, Great Bear and Ice Mountain) and Great Brands of
Europe (which includes Evian Natural Spring Water and Dannon Natural Spring
Water). The Company also competes with numerous regional bottled water
companies located in the United States and Canada. AquaPenn has chosen to
compete by focusing on innovative packaging, customer service and pricing.
Facilities
The Company's Pennsylvania bottling facility, opened in May 1995 and
expanded in February 1997, is located in Milesburg, Pennsylvania, on a
30-acre parcel of land owned by the Company. The February 1997 addition
expanded the Company's facility by 52,000 square feet for a total facility
of 160,000 square feet. This addition has been used for the manufacture of
both PET and high density polyethylene (1 gallon) bottles. The Company is
currently increasing the size of the Milesburg Facility to 345,000 square
feet. Two new sections measuring 115,000 square feet and 70,000 square feet
will be added to each end of the existing facility. These additions are
scheduled to be completed by February 1998. The Company also leases
approximately 11,000 square feet of warehouse space located in Boggs
Township, Pennsylvania pursuant to a lease expiring on January 15, 1998.
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<PAGE>
The Company's wholly owned subsidiary, Castle Rock, leases a 26,000
square foot office and warehouse in Redding, California pursuant to a lease
expiring November 30, 1999. In addition, Castle Rock owns a 20,000 square
foot bottling facility in Dunsmuir, California. Castle Rock also separately
leases a 2,000 square foot storage space.
The Company intends to construct, own and operate a 52,500 square foot
expandable state-of-the-art water bottling facility on 40 acres adjacent to
Ginnie Springs. The new facility will feature all stainless steel
production equipment and computerized systems similar to those in place at
the Milesburg Facility. The Company expects the facility to be completed in
the Spring of 1998.
Management Information Systems
The Company utilizes a software package which runs on an IBM platform
and integrates all financial, reporting, warehousing, production, and other
applications including EDI ordering. The Company believes that its
management information systems are adequate to handle the Company's current
growth plans.
Trademarks
The Company has registrations in the U.S. Patent and Trademark Office
for many of the trademarks that it uses, including Pure American, Great
American and AquaPenn. The Company believes that its common law and
registered trademarks have significant value and goodwill and that some of
these trademarks are instrumental in its ability to create demand for and
market its products. There can be no assurance that the Company's common
law or registered trademarks do not or will not violate the proprietary
rights of others, that they would be upheld if challenged or that the
Company would, in such an event, not be prevented from using the
trademarks, any of which could have an adverse effect on the Company.
Regulation
The Company's operations are subject to numerous federal, state and
local laws and regulations relating to its bottling operations, including
the identity, quality, packaging and labeling of its bottled water. The
Company's bottled water must satisfy FDA standards, which may be
periodically revised, for chemical and biological purity. The Company's
bottling operations must meet FDA "good manufacturing practices," and the
labels affixed to the Company's products are subject to FDA restrictions on
health and nutritional claims. In addition, bottled water must originate
from an "approved source" in accordance with federal and state standards.
State health and environmental agencies also regulate water quality
and the manufacturing practices of producers. The Pennsylvania Department
of Environmental Protection ("DEP") requires the Company to submit one
finished product sample and one source sample of water from the Graysville
Spring each week to DEP from a certified microbiological lab for certified
bacteriological analysis. In California, the Department of Health Services
("DHS") is the principal agency with regulatory authority over bottled
water producers, and DHS regulations generally incorporate FDA
requirements.
The Company is a member of the International Bottled Water
Associations ("IBWA"), a trade organization which promulgates regulations
regarding the quality of water which its members may market. The Company is
currently in compliance with the IBWA regulations; however, there can be no
assurance that the spring water sourced by the Company will continue to
meet IBWA regulations.
The Company has satisfied applicable state and federal requirements
and therefore is permitted to sell its bottled water in all 50 states.
These laws and regulations are subject to change, however, and there can be
no assurance that additional or more stringent requirements will not be
imposed on the Company's operations in the future. Although the Company
believes that its water supply, products and bottling facilities are in
substantial compliance with all
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<PAGE>
applicable governmental regulations, failure to comply with such laws and
regulations could have a material adverse effect on the Company.
Legal Proceedings
The Company is not a party to any material legal proceedings.
Employees
The Company currently employs approximately 225 full-time employees,
including Castle Rock employees, none of whom are covered by collective
bargaining agreements. During peak production periods, the Company
supplements its full-time work force with part-time employees. The Company
believes that its relations with its employees are good.
-31-
<PAGE>
MANAGEMENT
Executive Officers and Directors
The officers and directors of the Company, together with their ages
and business backgrounds, are as follows:
Name Age Position with Company
---- --- ---------------------
Edward J. Lauth, III ..... 43 Chairman, President, Chief Executive
Officer and Director
Geoffrey F. Feidelberg ... 42 Executive Vice President, Chief Operating
Officer and Chief Financial Officer and
Director
Dennis B. Nisewonger ..... 49 Controller and Assistant Secretary
Calvin J. Wagner, Jr.(1) . 38 Secretary and Director
Walter Bruce(2)........... 58 Director
Nancy Jean Davis.......... 45 Director
Richard F. DeFluri(1) .... 47 Director
John H. Gutfreund......... 68 Director
James D. Hammond(1)....... 63 Director
Robert E. Poole, Jr.(1)... 46 Director
Norman S. Rich(2)......... 59 Director
Henry S. Shatkin.......... 69 Director
Matthew J. Suhey.......... 39 Director
- ---------------
(1) A member of the Compensation Committee.
(2) Assuming that the Selling Shareholder sells all of its shares of
Common Stock in this Offering, the Selling Shareholder shall cause
Messrs. Bruce and Rich to resign from the Board effective immediately
thereafter.
Edward J. Lauth, III is the founder of the Company and has been
Chairman, President, Chief Executive Officer and a director of the Company
since the Company's founding in 1986. Prior to founding the Company, Mr.
Lauth spent several years developing and selling commercial real estate, in
addition to founding and selling two businesses in State College,
Pennsylvania. Mr. Lauth received a B.S. from Rollins College. Mr. Lauth is
also a member of the Regional Board of Directors of Mid-State Bank and
Trust Company ("Mid-State Bank"), a subsidiary of Keystone Financial, Inc.
Mr. Lauth is responsible for sales, marketing and strategic planning of the
Company.
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<PAGE>
Geoffrey F. Feidelberg has been Executive Vice President and Chief
Financial Officer since 1989 and Chief Operating Officer and a director of
the Company since 1993. Prior thereto, Mr. Feidelberg was a Senior Manager
in the Fort Lauderdale office of Price Waterhouse. Mr. Feidelberg received
a B.S. in Accounting from the State University of New York at Binghamton
and is a Certified Public Accountant. Mr. Feidelberg is also currently the
President and a director of SPE Federal Credit Union. Mr. Feidelberg is
responsible for the Company's administration, finance, manufacturing and
strategic planning.
Dennis B. Nisewonger has been Controller of the Company since 1993 and
Assistant Secretary since 1995. Prior to joining the Company, Mr.
Nisewonger was the fiscal officer for Dauphin County. From 1982 to 1989,
Mr. Nisewonger was controller of Murata Electronics, Inc. Mr. Nisewonger is
responsible for the Company's internal accounting and auditing function.
Calvin J. Wagner, Jr. has been Secretary and a director of the Company
since 1988. Mr. Wagner is a Certified Public Accountant and is currently a
partner in the accounting firm of Seligman, Friedman & Co., P.C. From 1991
to 1994, Mr. Wagner was a partner in the accounting firm of Wagner, Mock
and Martella.
Walter Bruce has been a director of the Company since 1995. Mr. Bruce
has been the Vice President-Private Label for Weis Markets, Inc., a
publicly owned supermarket chain, since 1976.
Nancy Jean Davis has been a director of the Company since 1987. Since
1986, Ms. Davis has been the President and Chairman of McArthur Farms,
Inc., a corporation engaged in the distribution of dairy, citrus, beef and
feed ingredient commodities.
Richard F. DeFluri has been a director of the Company since 1987. Mr.
DeFluri has been a Senior Associate of the Pennsylvania Financial Group
since 1974. In addition, Mr. DeFluri is a director of The Abbey Company,
Aris Corporation, Nittany Health Care, Inc., Joyner Sports Medicine, Inc.
and PFG Capital.
John H. Gutfreund, former Chairman and Chief Executive Officer of
Salomon Brothers, Inc. from 1984 to 1991, has been a director of the
Company since 1995. Since 1993, Mr. Gutfreund has been President of
Gutfreund & Company, a New York-based financial consulting firm. Mr.
Gutfreund is also a director of LCA Vision, Inc.
James D. Hammond, Ph.D. has been a director of the Company since 1994.
Since 1988, Mr. Hammond has been Dean of the Smeal College of Business
Administration at Pennsylvania State University. Mr. Hammond is a director
of Atlantic Mutual Insurance Company and a trustee of the Scudder Variable
Life Fund, the Scudder Pathway Funds and the Scudder Institutional Fund.
Robert E. Poole, Jr. has been a director of the Company since 1994. He
has been the Chief Executive Officer and President of S&A Custom Built
Homes, Inc., one of the 100 largest homebuilders in the United States,
since 1992. Mr. Poole is also on the Advisory Board of PNC Bank of Central
Pennsylvania.
Norman S. Rich, a director of the Company since 1989, has been
President of Weis Markets, Inc. since 1995. He has served on Weis Markets'
Board of Directors since 1990. From 1980 to 1995 Mr. Rich was Vice
President of Operations for Weis Markets, Inc.
Henry S. Shatkin has been a director of the Company since 1995. Mr.
Shatkin has been the Chief Executive Officer of Shatkin, Arbor, Karlov, a
commodities firm in Chicago, since 1992.
Matthew J. Suhey has been a director of the Company since 1993. Mr.
Suhey has been an independent commodities trader at the Chicago Board of
Trade since 1990. In addition, Mr. Suhey has been an independent food
broker on behalf of the Company since 1992.
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<PAGE>
The directors of the Company are elected at the annual meeting of
shareholders and each director so elected holds office until his or her
successor is elected and shall qualify, or until his or her earlier
resignation or removal. The executive officers of the Company are elected
by the Board of Directors and serve at the discretion of the Board of
Directors. There are no family relationships among any of the directors or
executive officers of the Company.
Committees of the Board of Directors; Compensation Committee Interlocks
The Board of Directors will elect an Audit Committee and has a
standing Compensation Committee. Among other functions, the Audit Committee
will make recommendations to the Board of Directors regarding the selection
of independent auditors, review the results and scope of the audit and
other services provided by the Company's independent auditors, review the
Company's financial statements and review and evaluate the Company's
internal control functions. The Compensation Committee periodically reviews
and evaluates the compensation of the Company's officers and establish
guidelines for compensation and benefits for the Company's personnel. The
Compensation Committee is comprised of Messrs. DeFluri, Poole, Hammond and
Wagner. Mr. Wagner has a stock subscription payable to the Company in the
amount of $71,878.
Compensation of Directors
Each director receives 901 shares of Common Stock per year plus
reimbursement of reasonable expenses incurred to attend meetings of the
Board of Directors.
-34-
<PAGE>
Executive Compensation
The following table sets forth a summary of certain information
regarding the compensation paid or to be paid by the Company for services
rendered to the Company during the fiscal year ended September 30, 1997
with respect to the Company's Chief Executive Officer and all other
executive officers whose total annual salary and bonus exceeded $100,000
for such period (the "Named Executives").
Summary Compensation Table
Long-Term
Annual Compensation Compensation
------------------- ------------
Securities
Underlying All Other
Name and Principal Position Year Salary(1) Options(2) Compensation
- --------------------------- ---- --------- ------------ ------------
Edward J. Lauth, III 1997 $201,250 30,040 $ 41,789(3)
Chairman, President and
Chief Executive Officer
Geoffrey F. Feidelberg, 1997 $161,000 30,040 $ 27,192(4)
Executive Vice President,
Chief Operating Officer and
Chief Financial Officer
- --------------
(1) Includes deferred income of 15% of each officer's base annual salary.
(2) Granted pursuant to employment agreements which provide for such
grants each fiscal year in which the Company's after-tax profits
exceed $1 million.
(3) Includes the following amounts: $3,960 (matching 401(k) contribution);
$5,753 (life insurance premiums); $1,000 (award for annual service for
10 years); $21,711 (health insurance coverage); $5,850 (value of
shares received for Board membership); and $3,515 (long-term
disability insurance).
(4) Includes the following amounts: $3,209 (matching 401(k) contribution);
$4,739 (life insurance premium); $700 (award for annual service for 7
years); $7,537 (health insurance coverage); $5,850 (value of shares
received for Board membership); and $5,157 (long-term disability
insurance).
Option Grants in Last Fiscal Year
The following table summarizes certain information with respect to
Company stock options granted to the Named Executives during the fiscal
year ended September 30, 1997.
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------------
Percent of
Total Potential Realizable
Number of Options Value at Assumed
Securities Granted to Exercise Annual Rates of Stock
Underlying Employees or Base Price Price Appreciation for
Options in Fiscal Per Option Term(1)
Name Granted Year 1997 Share Expiration Date 5% 10%
---- ---------- ----------- ------------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Edward J. Lauth, III 30,040(2) 50% $7.07 9/30/2007 $133,757 $338,787
Geoffrey F. Feidelberg 30,040(3) 50% $7.07 9/30/2007 $133,757 $338,787
- -----------------------
</TABLE>
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<PAGE>
(1) This column shows the hypothetical gains on the options granted based
on assumed annual compound stock appreciation rates of 5% and 10% over
the full ten-year term of the options. The assumed rates of
appreciation are mandated by the rules of the Securities and Exchange
Commission (the "Commission") and do not represent the Company's
estimate or projection of future Common Stock prices.
(2) Granted pursuant to an Employment Agreement dated September 16, 1994
between the Company and Mr. Lauth which provides for a grant of an
option to purchase 30,040 shares of Common Stock to Mr. Lauth for each
fiscal year in which after-tax profits of the Company exceed $1
million.
(3) Granted pursuant to an Employment Agreement dated September 16, 1994
between the Company and Mr. Feidelberg which provides for a grant of
an option to purchase 30,040 shares of Common Stock to Mr. Feidelberg
for each fiscal year in which after-tax profits of the Company exceed
$1 million.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth information concerning the number and
value of exercisable and unexercised options to purchase Common Stock held
by the Named Executives as of September 30, 1997. No Named Executive
exercised any options for Company Stock during fiscal 1997.
Aggregated Option Exercises in the Fiscal Year ended September 30, 1997
and Option Values at September 30, 1997
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at September 30, 1997 Options at September 30,1997(1)
----------------------------- -------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Edward J. Lauth, III 90,120 -- $ 939,300 $ --
Geoffrey F. Feidelberg 330,440 -- $4,081,100 $ --
- -----------------------
</TABLE>
(1) Value determined based on the difference between an assumed fair
market value on September 30, 1997 of $15.00 per share (equal to the
assumed Offering price per share) and the option exercise price for
each above-stated option.
Employment Agreements
Edward J. Lauth, III. In September 1994, the Company and Mr. Lauth
entered into an employment agreement pursuant to which Mr. Lauth receives a
salary, adjusted as of September 1996, of $175,000 per year and deferred
compensation in the amount of 15.0% of his annual salary. The employment
agreement also provides for Mr. Lauth to receive options to purchase 30,040
shares of Common Stock for each fiscal year in which AquaPenn's after-tax
profits exceed $1 million. Such after-tax profits were attained for the
fiscal years ended September 30, 1996 and 1997. Such options are
immediately exercisable, have a term of ten years and an exercise price
equal to the fair market value of the Common Stock on the date of grant.
The initial term of the employment agreement ended December 31, 1995, but
the employment agreement automatically renews for an unlimited number of
successive one-year terms unless six months written notice of termination
is given by either party. The employment agreement contains a non-compete
provision which extends for two years beyond termination of the employment
agreement.
-36-
<PAGE>
The Company and Mr. Lauth also entered into a change in control
agreement in September 1994, which provides that if, within one year of a
"change in control" (as defined in the agreement) of AquaPenn, Mr. Lauth is
terminated or resigns because his responsibilities have diminished or been
significantly changed or his salary has been reduced by more than 15.0%,
Mr. Lauth shall be entitled to receive one year's salary and benefits and
all outstanding stock options held by Mr. Lauth shall become immediately
exercisable. The change in control agreement terminates if Mr. Lauth ceases
to be employed by the Company prior to a change in control.
Geoffrey F. Feidelberg. In September 1994, the Company and Mr.
Feidelberg entered into an employment agreement, pursuant to which Mr.
Feidelberg receives a salary, adjusted as of September 1996, of $140,000
per year and deferred compensation in the amount of 15.0% of his annual
salary. The employment agreement also provides for Mr. Feidelberg to
receive options to purchase 30,040 shares of Common Stock for each fiscal
year in which AquaPenn's after-tax profits exceed $1 million. Such
after-tax profits were attained for the fiscal years ended September 30,
1996 and 1997. Such options are immediately exercisable, have a term of ten
years and an exercise price equal to the fair market value of the Common
Stock on the date of grant. The initial term of the employment agreement
ended December 31, 1995, but the employment agreement automatically renews
for an unlimited number of successive one-year terms unless six months
written notice of termination is given by either party. The employment
agreement contains a non-compete provision which extends for two years
beyond termination of the employment agreement.
The Company and Mr. Feidelberg have also entered into a change in
control agreement in September 1994 on substantially the same terms as the
change in control agreement entered into with Mr. Lauth.
Stock Plans
The Company's 1992 Stock Option Plan (the "Option Plan") was adopted
by the Company's Board of Directors in November 1992 and approved by its
shareholders in March 1993. Options exercisable for a total of 300,400
shares of Common Stock are issuable under the Option Plan. The Option Plan
provides for the grant to employees of either "incentive stock options"
within the meaning of Sections 421 and 422 of the Internal Revenue Code of
1986, as amended (the "Code"), or nonqualified stock options. Under the
Option Plan, only employees (including officers) of the Company are
eligible to receive options under the Option Plan. The exercise price of
incentive stock options must at least equal the fair market value for the
underlying shares on the date of grant or, in the case of options granted
to holders of 10.0% or more of the outstanding Common Stock, 110.0% of the
fair market value on the date of grant. The exercise price of nonqualified
stock options must not be less than the fair market value of the underlying
shares on the date of grant. To date, no stock options have been granted
under the Option Plan.
The Option Plan is administered by a committee of four persons
appointed by the Board of Directors of the Company which determines the
terms of options granted under the Option Plan, including the exercise
price and the number of shares subject to the option. The Option Plan
provides the Board of Directors with the discretion to determine when
options granted thereunder shall become exercisable. Generally, for options
granted to employees, such options may be exercised at any time prior to
expiration, so long as the optionee continues to be employed by the
Company. No option granted under the Option Plan is transferable by the
optionee other than by will or the laws of descent and distribution, and
each option is exercisable during the life of the optionee only by the
optionee.
The Company's Stock Purchase Plan was adopted by the Company's Board
of Directors in February 1996 and approved by its shareholders in April
1996. A total of one million shares of Common Stock are issuable under the
Stock Purchase Plan. No employee will be granted an option if, immediately
after the option is granted, such employee will own 5.0% or more of the
total voting power or value of all classes of the Company's stock. In
addition, no employee will be granted an option if such employee's rights
to purchase shares exceeds $25,000 of the fair market value of such shares
for such calendar year.
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<PAGE>
Under the terms of the Stock Purchase Plan, eligible employees may
purchase shares of the Company's Common Stock at 85% of the fair market
value at the offering date. Payment for the shares must be made within one
year of the offering date. An employee may cancel his or her subscription
any time prior to payment in full for the shares. No rights under the Stock
Purchase Plan are assignable or transferrable by the employee other than by
will or the laws of descent and distribution, and only the employee may
exercise such rights during his or her lifetime. The employee's rights
under the Stock Option Plan terminate immediately in the event the
employment of the employee is terminated for any reason other than death,
temporary layoff or retirement with the consent of the Company. Upon
termination due to death or retirement with consent of the Company the
employee or the employee's estate has one year to pay any amounts due for
purchase of shares. If the employee is subjected to temporary layoff and is
subsequently rehired within six months, the employee may continue to pay
for shares subscribed to by such employee.
At September 30, 1997, approximately 76,254 shares were subscribed for
by eligible employees under the Stock Purchase Plan.
-38-
<PAGE>
CERTAIN TRANSACTIONS
The Company and Matthew J. Suhey, a director of the Company, have
entered into an agreement pursuant to which Mr. Suhey acts as an
independent food broker with the Company. Mr. Suhey received compensation
of $250,000 in fiscal year 1997 for his services as an independent food
broker on behalf of the Company. In addition, accrued commissions to Mr.
Suhey as of September 30, 1997, were $20,833. In September 1995, the Board
of Directors of the Company resolved to grant to Mr. Suhey options to
purchase 30,040 shares of Common Stock of the Company for each year in
which AquaPenn's after-tax profits exceed $1 million. Such after-tax
profits have been achieved for fiscal years 1996 and 1997.
Norman S. Rich, a Director of the Company, is the President of Weis
Markets, Inc., the ultimate parent of Aqua Works, Inc., a 42.0% shareholder
of the Company. Weis Markets, Inc., which owns and operates supermarkets,
purchases natural spring water products from the Company at market prices.
Such purchases constituted approximately 2% of the Company's total net
revenues in fiscal 1997.
On August 29, 1997 the Company entered into a Credit Agreement with
Mid-State Bank, pursuant to which Mid-State Bank has extended a $10.0
million revolving credit line and a $6.0 million line of credit to the
Company. Edward J. Lauth, III, President and a director of the Company, is
on the Regional Board of Directors of Mid-State Bank.
As of September 30, 1997, Calvin J. Wagner, Jr., a director of the
Company, had a stock subscription payable to the Company in the amount of
$71,878.
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<PAGE>
PRINCIPAL SHAREHOLDERS AND SELLING SHAREHOLDER
The table below sets forth as of October 24, 1997 certain information
regarding the beneficial ownership of shares of Common Stock (i) by each
director and executive officer of the Company, (ii) by all the directors
and officers as a group, (iii) by each person who is known by the Company
to be the owner (or beneficial owner) of 5.0% or more of the Company's
outstanding shares of Common Stock and (iv) by one of the Company's current
shareholders who is offering to sell shares in this Offering.
<TABLE>
<CAPTION>
Beneficial Ownership(1) Beneficial Ownership(1)
Prior to the Offering After the Offering
----------------------- Shares to -----------------------
Shares Percent be sold Shares Percent
------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Directors and Officers(2):
Norman S. Rich..... 1,867,587(3)(14) 42.2% 1,859,000 8,587 * %
Edward J. Lauth, III 1,249,592(4) 27.2 -- 1,249,592 18.6
Matthew J. Suhey .. 361,231(5) 7.6 -- 361,231 5.2
Geoffrey F. Feidelberg 356,876(6) 7.5 -- 356,876 5.2
Nancy Jean Davis .. 249,615(7) 5.6 -- 249,614 3.8
Calvin J. Wagner, Jr. 127,129(8) 2.9 -- 127,129 1.9
Henry S. Shatkin .. 85,013(9) 1.9 -- 85,013 1.3
Robert E. Poole ... 38,451(10) * -- 38,451 *
Richard F. DeFluri 36,048(11) * -- 36,048 *
James D. Hammond .. 24,107(12) * -- 24,107 *
John H. Gutfreund . 23,431 * -- 23,431 *
Walter Bruce ...... 1,802(13) * -- 1,802 *
All Directors and Officers as
a Group (13 persons) 4,426,144 79.8% -- 2,567,145 33.4
Other Principal and Selling
Shareholder:
Aqua Works, Inc. (14) 1,859,476(14) 42.0% 1,859,000 476 *
</TABLE>
- ---------------------
* Less than one percent.
(1) A person is deemed to be the beneficial owner of securities that can
be acquired by such person within 60 days from the date of this
Prospectus upon the exercise of options or warrants. Each beneficial
owner's percentage ownership is determined by assuming that options or
warrants that are held by such person (but not those held by any other
person) and that are exercisable within 60 days from the date of this
Prospectus have been exercised. Unless otherwise noted, the Company
believes that all persons named in the table have sole voting and
investment power with respect to all shares of Common Stock
beneficially owned by them. For purposes of the table, shares of
Common Stock are considered beneficially owned by a person if such
person has or shares voting or investment power with respect to such
stock. As a result, the same security may be beneficially owned by
more than one person and, accordingly, in some cases, the same shares
are listed opposite more than one name in the table.
(2) Address is c/o One AquaPenn Drive, Milesburg, Pennsylvania, 16853.
(3) Mr. Rich is the President of Aqua Works, Inc. and Weis Markets, Inc.,
the ultimate parent of Aqua Works, Inc., the holder of 1,859,476
shares of Common Stock. Because as President of Aqua Works, Inc. and
Weis
-40-
<PAGE>
Markets, Inc. Mr. Rich controls the voting and investment power of
such shares, for purposes of computing beneficial ownership, Mr. Rich
is considered to be the beneficial owner of the 1,859,476 shares of
Common Stock held by Aqua Works, Inc. Mr. Rich disclaims beneficial
ownership of any shares held by Aqua Works, Inc.
(4) Includes 30,653 shares held by the Lauth Family Limited Partnership,
13,067 shares in a Rabbi Trust for the benefit of Mr. Lauth, options
and warrants to purchase 165,220 shares of Common Stock and 114,512
shares of Common Stock held by ASW Investors, a Pennsylvania general
partnership which has granted Mr. Lauth a proxy to vote all of its
shares.
(5) Includes options to purchase 330,440 shares of Common Stock and 15,020
shares of Common Stock held through ASW Investors, in which Mr. Suhey
has a 13.1% general partner interest.
(6) Includes 10,814 shares in a Rabbi Trust for the benefit of Mr.
Feidelberg, 180 shares held in trusts for which Mr. Feidelberg is
trustee, 6,008 shares held by his spouse and 330,440 shares
exercisable pursuant to options.
(7) Includes 39,334 shares and warrants for 21,028 shares of Common Stock
held by the Nancy Jean Davis Trust and 189,252 shares of Convertible
Preferred Stock held by the Nancy Jean Davis Trust.
(8) Includes 12,617 shares of Convertible Preferred Stock and 114,512
shares of Common Stock held through ASW Investors, in which Mr. Wagner
has a 0.3% general partner interest and, as managing partner, has the
power to sell all of the shares.
(9) Includes 10,814 shares of Common Stock held by M-S Capital Fund and
15,020 shares of Common Stock held through ASW Investors, in which Mr.
Shatkin has a 13.1% general partner interest.
(10) Includes 10,814 shares of Common Stock and 24,032 shares of
Convertible Preferred Stock held jointly by Mr. Poole with his spouse.
(11) Includes 9,012 shares of Common Stock held by Adicus, L.P. and 27,036
shares of Convertible Preferred Stock held by Adicus, L.P.
(12) Includes warrants for 9,012 shares of Common Stock, and 4,731 shares
of Common Stock and 6,759 shares of Convertible Preferred Stock held
jointly by Mr. Hammond with his spouse.
(13) Mr. Bruce is a Vice President of Weis Markets, Inc., the ultimate
parent of Aqua Works, Inc., the holder of 1,859,476 shares of Common
Stock. Mr. Bruce disclaims beneficial ownership of any shares held by
Aqua Works, Inc.
(14) Includes warrants for 135,180 shares of Common Stock. The address of
Aqua Works, Inc. is 1000 S. Second Street, Sunbury, Pennsylvania,
17801-0471. Weis Markets, Inc. is the ultimate parent of Aqua Works,
Inc.
-41-
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description of the Company's capital stock does not
purport to be complete and is subject in all respects to applicable
Pennsylvania law and to the provisions of the Company's Articles of
Incorporation, as amended, and By-laws, copies of which have been filed as
exhibits to the Registration Statement of which this Prospectus is a part.
The authorized capital stock of the Company consists of 100,000,000
shares of Common Stock, no par value, and 2,000,000 shares of Convertible
Preferred Stock, par value $1.00 per share. Immediately following the
completion of this Offering, the Company estimates that there will be
outstanding an aggregate of 6,555,888 shares of Common Stock and 1,702,500
shares of Convertible Preferred Stock which are convertible into 1,022,862
shares of Common Stock.
Common Stock
Holders of the Common Stock are entitled to one vote per share on all
matters to be voted upon by the shareholders. Holders of Common Stock do
not have cumulative voting rights, and therefore holders of a majority of
the shares voting for the election of directors can elect all of the
directors. In such event, the holders of the remaining shares will not be
able to elect any directors.
Holders of the Common Stock are entitled to receive such dividends as
may be declared from time to time by the Board of Directors out of funds
legally available therefor, subject to the terms of the agreements
governing the Company's long-term debt. The Company does not anticipate
paying cash dividends in the foreseeable future. See "Dividend Policy." In
the event of the liquidation, dissolution or winding up of the Company, the
holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities and payments to holders of the
Convertible Preferred Stock.
Holders of the Common Stock have no preemptive, conversion or
redemption rights and are not subject to further calls or assessments by
the Company. Immediately upon consummation of this Offering, all of the
then outstanding shares of Common Stock will be validly issued, fully paid
and nonassessable.
The Transfer Agent and Registrar for the Common Stock is
______________.
Preferred Stock
The Board of Directors has the authority, without any vote or action
by the shareholders, to issue Preferred Stock in one or more series and to
fix the designations, preferences, rights, qualifications, limitations and
restrictions thereof, including the voting rights, dividend rights,
dividend rate, conversion rights, terms of redemption (including sinking
fund provisions), redemption price or prices, liquidation preferences and
the number of shares constituting any series. In addition, the issuance of
Preferred Stock by the Board of Directors could be utilized, under certain
circumstances, as a method of preventing a takeover of the Company at a
premium above the then prevailing market price.
Convertible Preferred Stock
The Convertible Preferred Stock is convertible at the option of the
holder at any time into shares of Common Stock at the rate of one share of
Convertible Preferred Stock into 0.6008 shares of Common Stock. The number
of shares of Common Stock into which the Convertible Preferred Stock is
converted shall be adjusted to take into account increases or reductions in
the number of shares of outstanding Common Stock by reason of a split,
share
-42-
<PAGE>
dividend, merger or consolidation. The Convertible Preferred Stock has no
redemption features, but does have a preference in liquidation.
Pennsylvania Corporate Law Provisions
The Company's Articles of Incorporation and By-laws contain certain
provisions which may have the effect of deterring or discouraging, among
other things, a non-negotiated tender or exchange offer for Company stock,
a proxy contest for control of the Company, the assumption of control of
the Company by a holder of a large block of the Company's stock and the
removal of the Company's management. These provisions empower the Board of
Directors, without shareholder approval, to issue Preferred Stock the terms
of which, including voting power, are set by the Board.
The Pennsylvania Business Corporation law contains certain provisions
applicable to the Company which may have similar effects. These provisions,
among other things: (1) require that, following any acquisition by any
person or group of 20% of a public corporation's voting power, the
remaining shareholders have the right to receive payment for their shares,
in cash, from such person or group in an amount equal to the "fair value"
of the shares, including an increment representing a proportion of any
value payable for control of the corporation; (2) prohibit for five years,
subject to certain exceptions, a "business combination" (which includes a
merger or consolidation of the corporation or a sale, lease or exchange of
assets) with a shareholder or group of shareholders beneficially owning 20%
or more of a public corporation's voting power; (3) suspend the voting
rights of the shares acquired by a person or group acquiring 20% or more of
the voting power of the corporation; (4) require that a person or group who
acquired, offered to acquire or publicly disclosed the intention of
acquiring at least 20% of the voting power of the corporation disgorge
"greenmail" profits or profits realized from the disposition of the
corporation's securities within 18 months after acquiring at least 20% of
the voting power if the security had been acquired by such person or group
within 24 months before or 18 months after such person or group acquired
20% of the voting power of the corporation; (5) allow the corporation to
adopt shareholders' rights plans with discriminatory provisions (sometimes
referred to as "poison pills") whereby options to acquire shares of
corporate assets are created and issued which contain terms that limit
persons owning or offering to acquire a specified percentage of outstanding
shares from exercising, converting, transferring or receiving options and
allow the exercise of options to be limited to shareholders or triggered
based upon control transactions; (6) shareholders of a corporation would no
longer have a statutory right to call special meetings of shareholders or
to propose amendments to the articles of incorporation; and (7) in
discharging the duties of their respective positions, the board of
directors, committees of the board and individual directors may, in
considering the best interests of the corporation, consider to the extent
they deem appropriate, (i) the effects of any action upon shareholders,
employees, suppliers, customers and creditors of the corporation and upon
the communities in which offices or other establishments of the corporation
are located, (ii) the short-term and long-term interests of the
corporation, including benefits that may accrue to the corporation from its
long-term plans and the possibility that these interests may be best served
by the continued independence of the corporation, (iii) the resources,
intent and conduct (past, stated and potential) of any person seeking to
acquire control of the corporation, (iv) and all other pertinent factors.
Further, the board of directors, committees of the board and individual
directors are not required, in considering the best interests of the
corporation or the effects of any action, to regard any corporate interest
or the interests of any particular group affected by such action as a
dominant or controlling interest or factor. The consideration of the
foregoing factors shall not constitute a violation of the board's
applicable standard of care.
Amendment of Articles of Incorporation. The Pennsylvania Business
Corporation Law provides that the Articles of Incorporation of a
Pennsylvania corporation may be amended by the affirmative vote of a
majority of the outstanding voting stock of such corporation, except as
otherwise provided by such corporation's Articles of Incorporation.
-43-
<PAGE>
General Effect of Anti-Takeover Provisions. The overall effect of
these provisions and the existing change in control agreements (see
"Management--Employment Agreements") may be to deter a future tender offer
or other takeover attempt that some shareholders might view to be in their
best interests as the offer might include a premium over the market price
of the Common Stock at that time. In addition, these provisions may have
the effect of assisting the Company's current management in retaining its
position and place it in a better position to resist changes which some
shareholders may want to make if dissatisfied with the conduct of the
Company's business.
-44-
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have 6,555,888
shares of Common Stock issued and outstanding (assuming the Underwriters'
over-allotment option is not exercised). Of these shares, all 3,859,000 of
the shares sold in this Offering (plus any additional shares sold upon the
exercise of the Underwriters' over-allotment option) will be freely
tradable under the Securities Act, except for shares purchased by
"affiliates" of the Company within the meaning of the rules and regulations
under the Securities Act.
The remaining 2,696,888 outstanding shares (the "Restricted Shares"),
which were issued by the Company in reliance upon the "private placement"
exemption provided by Section 4(2) of the Securities Act, will be deemed
restricted securities within the meaning of Rule 144. Restricted Shares may
not be sold unless they are registered under the Securities Act or are sold
pursuant to an applicable exemption from registration, including an
exemption under Rule 144.
In general, Rule 144 permits any person who has beneficially owned
shares of Common Stock for at least one year to sell without registration,
within any three-month period, a number of such shares not exceeding the
greater of one percent of the then outstanding shares of Common Stock or
the average weekly trading volume in the Common Stock during the four
calendar weeks preceding such sale. Sales under Rule 144 also are subject
to certain manner of sale provisions, notice requirements and the
availability of current public information about the Company. After they
have been paid for and held for more than two years, Restricted Shares held
by persons who are not affiliates of the Company may be sold without
limitation.
Certain current shareholders of the Company who in the aggregate hold
shares of Common Stock have agreed that they will not sell shares of Common
Stock prior to the expiration of 180 days from the date of this Prospectus
except with the written consent of the Representatives of the Underwriters.
See "Underwriting." Commencing , 1997, shares of Common Stock
held by such current shareholders will be eligible for sale in accordance
with Rule 144, subject to the volume limitations thereof.
Options and warrants (excluding the Weis Markets Warrant) to purchase
a total of 937,248 shares of Common Stock have been granted to certain
officers, directors and shareholders under pre-existing agreements. A total
of 300,400 shares of Common Stock are reserved for issuance under the
Option Plan, of which none will have been issued on the date of this
Prospectus. A total of 600,800 shares of Common Stock has been reserved for
issuance under the Stock Purchase Plan and as of , 1997, shares
have been purchased by employees. See "Management -- Stock Plans." The
Company may file one or more registration statements on Form S-8
immediately following this Offering, registering under the Securities Act
shares issued or to be issued pursuant to these options or the Stock
Purchase Plan. The holders of the options referred to in this paragraph
have also agreed that they will not sell any shares of Common Stock
acquired by them upon the exercise of their options during the 180 day
period following the date of this Prospectus except with the written
consent of the Representatives of the Underwriters. Thereafter, shares
issued upon exercise of outstanding stock options generally may be sold in
the open market.
Prior to this Offering, there has been no market for the Common Stock,
and no precise prediction can be made of the effect, if any, that market
sales of shares or the availability of shares for sale will have on the
market price prevailing from time to time. Nevertheless, sales of
substantial amounts of the Common Stock in the public market could
adversely affect prevailing market prices and limit the Company's ability
to raise additional capital. See "Risk Factors -- Arbitrary Determination
of Offering Price; Possible Volatility of Stock Price" and "Risk Factors --
No Prior Public Market."
-45-
<PAGE>
UNDERWRITING
The Underwriters named below, acting through PaineWebber Incorporated,
Lazard Freres & Co. LLC and Parker/Hunter Incorporated (the
"Representatives"), have severally agreed, subject to the terms and
conditions set forth in the Underwriting Agreement by and among the
Company, the Selling Shareholder and the Representatives (the "Underwriting
Agreement"), to purchase from the Company and the Selling Shareholder, and
the Company and the Selling Shareholder have agreed to sell to the
Underwriters, the number of shares of Common Stock set forth opposite the
names of such Underwriters below:
Number
Underwriter of Shares
- ------------- ---------
PaineWebber Incorporated.................
Lazard Freres & Co. LLC..................
Parker/Hunter Incorporated............... _________
Total............................... =========
The Underwriting Agreement provides that the obligations of the
Underwriters to purchase all of the shares of Common Stock are subject to
certain conditions. The Underwriters are committed to purchase, and the
Company and the Selling Shareholder are obligated to sell, all shares of
Common Stock offered by this Prospectus if any of the shares of Common
Stock being sold pursuant to the Underwriting Agreement are purchased.
The Company has been advised by the Representatives that the
Underwriters propose to offer the shares of Common Stock to the public
initially at the Offering price set forth on the cover page of this
Prospectus and to certain securities dealers at such price less a
concession not in excess of $ per share. The Underwriters may allow, and
such dealers may reallow, a discount not in excess of $ per share. After
the Offering, the Offering price and the concessions and discounts may be
changed by the Representatives.
The Company has granted an option to the Underwriters, exercisable
during the 30-day period after the date of this Prospectus, to purchase up
to 578,850 additional shares of Common Stock at the Offering price less the
underwriting discount and commissions set forth on the cover page of this
Prospectus. The Underwriters may exercise such option only to cover
over-allotments in the sale of the shares that the Underwriters have agreed
to purchase. To the extent that the Underwriters exercise such option, each
of the Underwriters will become obligated, subject to certain conditions,
to purchase approximately the same percentage of such additional shares as
is approximately the percentage of shares of Common Stock that it is
obligated to purchase of the total number of the shares under the
Underwriting Agreement as shown in the table set forth above. The
Underwriters may exercise the option only for the purposes of covering
over-allotments, if any, made in connection with the distribution of the
shares of Common Stock to the public.
The Company and the Selling Shareholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act or to contribute payments that the Underwriters may be
required to make in respect thereof.
The Company, its directors and executive officers and certain
shareholders, including the Selling Shareholder, have agreed not to offer,
sell, contract to sell or grant any option to purchase or otherwise dispose
of any shares of Common Stock owned by them prior to the expiration of 180
days from the date of this Prospectus, except: (i) for shares of Common
Stock offered hereby; (ii) with the prior written consent of PaineWebber
Incorporated; and
-46-
<PAGE>
(iii) in the case of the Company, for the issuance of shares of Common
Stock upon the exercise of options or the grant of options to purchase
shares of Common Stock.
Prior to this Offering, there has been no public market for the Common
Stock of the Company. Accordingly, the Offering price will be determined by
negotiations among the Company, the Selling Shareholder and the
Representatives of the Underwriters. Among the factors to be considered in
determining the Offering price will be the Company's record of operations,
its current financial condition, its future prospects, the market for its
products, the experience of its management, the economic conditions of the
Company's industry in general, the general condition of the equity
securities market, the demand for similar securities of companies
considered comparable to the Company and other relevant factors.
In order to facilitate this Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may over-allot in connection
with this Offering, creating a short position in the Common Stock for their
own account. In addition, to cover over-allotments or to stabilize the
price of the Common Stock, the Underwriters may bid for, and purchase,
shares of the Common Stock in the open market. The Underwriters may also
reclaim selling concessions allowed to an underwriter or a dealer for
distributing the Common Stock in transactions to cover their short
positions, in stabilization transactions or otherwise. Finally, the
Underwriters may bid for, and purchase, shares of the Common Stock in
market-making transactions and impose penalty bids. These activities may
stabilize or maintain the market price of the Common Stock above market
levels that may otherwise prevail. The Underwriters are not required to
engage in these activities, and may end any of these activities at any
time.
The Underwriters do not intend to confirm sales to any accounts over
which they exercise discretionary authority.
LEGAL MATTERS
The legality of the shares offered hereby will be passed upon for the
Company by Ballard Spahr Andrews & Ingersoll, Philadelphia, Pennsylvania.
Certain legal matters will be passed upon for the Underwriters by Cravath,
Swaine & Moore, New York, New York.
EXPERTS
The audited consolidated financial statements of AquaPenn Spring Water
Company, Inc. as of September 30, 1996 and 1997, and for each of the years
in the three-year period ended September 30, 1997, included in the
Prospectus and in the Registration Statement have been audited by KPMG Peat
Marwick LLP, independent certified public accountants, as indicated in
their report with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on
Form S-1 (together with all amendments thereto, the "Registration
Statement") under the Securities Act, with respect to the shares of Common
Stock offered hereby. This Prospectus, filed as part of the Registration
Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto, certain
portions of which
-47-
<PAGE>
have been omitted as permitted by the rules and regulations of the
Commission. For further information with respect to the Company and the
Common Stock offered hereby, reference is hereby made to the Registration
Statement and the exhibits and schedules thereto, which may be inspected
and copied at the public reference facilities maintained by the Commission
at 450 Fifth Street, N.W., Room 1024, Washington D.C. 20549, and at the
regional offices of the Commission located at 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661, and 7 World Trade Center, Suite 1300,
New York, New York 10048. Copies of such material may be obtained from the
Public Reference Section of the Commission located at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549 at prescribed rates. The Commission
maintains a web site (http://www.sec.gov) that contains material regarding
issuers that file electronically with the Commission.
Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to herein or therein, are not
necessarily complete, and in each such instance reference is made to the
copy of such contract, agreement or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all
respects by such reference.
The Company intends to furnish its stockholders with annual reports
containing financial statements audited by independent accountants and with
quarterly reports containing updated summary financial information for each
of the first three quarters of each fiscal year.
-48-
<PAGE>
AQUAPENN SPRING WATER COMPANY, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Consolidated Financial Statements of AquaPenn Spring
Water Company, Inc. and Subsidiaries
Independent Auditors' Report........................ F-2
Consolidated Balance Sheets......................... F-3
Consolidated Statements of Operations............... F-4
Consolidated Statements of Shareholders' Equity..... F-5
Consolidated Statements of Cash Flows............... F-6
Notes to Consolidated Financial Statements.......... F-7
F-1
<PAGE>
Independent Auditors' Report
To the Board of Directors and Shareholders of
AquaPenn Spring Water Company, Inc.:
We have audited the accompanying consolidated balance sheets of AquaPenn
Spring Water Company, Inc. and subsidiaries as of September 30, 1996 and
1997, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
September 30, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
AquaPenn Spring Water Company, Inc. and subsidiaries as of September 30,
1996 and 1997, and the results of their operations and their cash flows for
each of the years in the three-year period ended September 30, 1997 in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
State College, Pennsylvania
October 21, 1997, except for note 15
which is as of October 24, 1997
F-2
<PAGE>
AQUAPENN SPRING WATER COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30,
-------------------------
1996 1997
ASSETS
Current Assets:
Cash and cash equivalents........... $ 185,535 $ 687,035
Accounts receivable, net............ 2,794,776 3,604,524
Inventories......................... 1,331,388 1,533,617
Prepaid expenses and other current
assets 278,595 425,279
Deferred income taxes............... 326,900 243,400
----------- -----------
Total current assets.............. 4,917,194 6,493,855
Property, plant, and equipment, net.. 14,554,929 20,030,909
Other................................ 44,232 55,421
----------- ----------
Total assets...................... $19,516,355 $26,580,185
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of notes payable.... $ 90,840 $ 298,966
Accounts payable and accrued
liabilities 2,521,670 3,098,571
----------- ----------
Total current liabilities......... 2,612,510 3,397,537
Notes payable........................ 1,717,624 4,518,501
Deferred income taxes................ 536,800 599,800
----------- ----------
Total liabilities................. 4,866,934 8,515,838
----------- -----------
Stockholders' Equity:
Series A, non-voting convertible
preferred stock, $1 par value;
2,000,000 shares authorized,
1,713,750 shares issued............ 1,713,750 1,713,750
Common stock, no par value,
100,000,000 shares authorized;
4,283,760, and 4,423,712 shares
issued, respectively .............. -- --
Additional paid-in capital.......... 11,560,834 12,196,269
Retained earnings .................. 1,455,701 4,242,456
Less 11,250 shares of preferred stock
in treasury, at cost............... (11,250) (11,250)
Less 3,004 shares of common stock in
treasury, at cost.................. (5,000) (5,000)
Less stock subscriptions receivable. (64,614) (71,878)
----------- -----------
Total stockholders' equity........ 14,649,421 18,064,347
----------- -----------
Total liabilities and stockholders'
equity$ 19,516,355 $26,580,185
=========== ===========
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
AQUAPENN SPRING WATER COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended September 30,
1995 1996 1997
---- ---- ----
Revenues:
Product sales................. $22,617,746 $27,931,308 $37,526,028
Other sales................... 338,307 309,433 489,287
----------- ----------- -----------
Net revenues.................... 22,956,053 28,240,741 38,015,315
Cost of goods sold.............. 18,153,355 21,271,313 28,316,938
----------- ---------- ----------
Gross profit.................... 4,802,698 6,969,428 9,698,377
Selling, general and
administrative 3,290,609 4,313,480 5,126,583
----------- ---------- ----------
Income from operations.......... 1,512,089 2,655,948 4,571,794
Other income (expense):
Other income.................. 7,090 116,484 328,180
Interest expense, net......... (745,829) (297,204) (208,467)
----------- ---------- ----------
(738,739) (180,720) 119,713
----------- ---------- ----------
Income before income tax expense 773,350 2,475,228 4,691,507
Income tax expense.............. 135,000 990,000 1,904,752
----------- ---------- ----------
Net income...................... $ 638,350 $1,485,228 $2,786,755
=========== ========== ==========
Net income per common share..... $ .16 $ .26 $ .47
=========== ========== ==========
Weighted average number of
common shares
outstanding..................... 3,884,708 5,620,741 5,951,844
=========== ========== ==========
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
AQUAPENN SPRING WATER COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Number of
Shares of
Series A Common Additional Retained
Preferred Stock Paid-In Earnings Treasury Subscription
Stock Issued Capital (Deficit) Stock Receivable Total
---------- --------- ---------- ---------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30,
1994........................ $1,713,750 2,424,886 $2,529,881 $(667,877) $(16,250) $(52,214) $3,507,290
Issuance of Common Stock for
services rendered by the
Company's Board of Directors -- 10,814 54,000 -- -- -- 54,000
Common Stock Options
Exercised....... -- 24,032 40,000 -- -- -- 40,000
Issuance of Common Stock
for Private Placement -- 1,748,328 8,562,384 -- -- -- 8,562,384
Interest Accrued on
Subscription Receivable -- -- -- -- -- (5,855) (5,855)
Net Income........ -- -- -- 638,350 -- -- 638,350
---------- --------- --------- ---------- ------- --------- ----------
BALANCE, SEPTEMBER
30, 1995.......... 1,713,750 4,208,060 11,186,265 (29,527) (16,250) (58,069) 12,796,169
Issuance of Common Stock for
services rendered by the
Company's Board of Directors -- 10,814 54,000 -- -- -- 54,000
Issuance of Common Stock
in Private Placement -- 64,886 320,569 -- -- -- 320,569
Interest Accrued on
Subscription Receivable -- -- -- -- -- (6,545) (6,545)
Net Income........ -- -- -- 1,485,228 -- -- 1,485,228
---------- --------- --------- ---------- ------- --------- ----------
BALANCE, SEPTEMBER
30, 1996.......... 1,713,750 4,283,760 11,560,834 1,455,701 (16,250) (64,614) 14,649,421
Issuance of Common Stock for
services rendered by the
Company's Board of Directors -- 10,814 70,200 -- -- -- 70,200
Issuance of Common Stock
for Employee Stock
Purchase Plan... -- 105,256 445,985 -- -- -- 445,985
Issuance of Common Stock
for Rabbi Trust. -- 23,882 119,250 -- -- -- 119,250
Interest Accrued on
Subscription Receivable -- -- -- -- -- (7,264) (7,264)
Net Income........ -- -- -- 2,786,755 -- -- 2,786,755
---------- --------- --------- ---------- ------- --------- ----------
BALANCE, SEPTEMBER
30, 1997.......... $1,713,750 4,423,712 $12,196,269 $4,242,456 $(16,250) $(71,878) $18,064,347
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE>
AQUAPENN SPRING WATER COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended September 30,
1995 1996 1997
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................. $638,350 $1,485,228 $2,786,755
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ......... 1,352,826 1,831,626 2,385,212
Provision for doubtful accounts ....... 15,000 25,000 --
Provision for deferred income taxes, net (194,500) 372,000 146,500
Issuance of common stock for services . 54,000 54,000 70,200
(Increase) in accounts receivable ..... (413,298) (663,986) (809,748)
(Increase) decrease in inventories .... (959,287) 373,407 (202,229)
(Increase) decrease in prepaid expenses
and other current assets............. 107 (141,482) (146,684)
(Increase) in other assets............. (13,520) (4,615) (11,189)
Decrease in certificates of deposit -
pledged.............................. 15,814 -- --
Increase in accounts payable
and accrued liabilities.............. 1,566,843 232,674 576,901
--------- ---------- ----------
Net cash provided by operating
activities ....................... 2,062,335 3,563,852 4,795,718
----------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant, and
equipment ........................... (10,430,942) (2,949,010) (7,861,192)
----------- ---------- ----------
Net cash used in investing
activities ...................... (10,430,942) (2,949,010) (7,861,192)
----------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable............ 10,925,000 4,913,536 7,301,460
Repayments of notes payable............ (10,930,732) (5,935,944) (4,292,457)
Proceeds from exercise of stock options 40,000 -- --
Proceeds from issuance of common stock -- -- 565,235
Proceeds from private stock offering, net 8,562,384 320,569 --
Interest accrued on stock subscriptions
receivable .......................... (5,855) (6,545) (7,264)
----------- ---------- ----------
Net cash provided by (used in)
financing activities ............ 8,590,797 (708,384) 3,566,974
----------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................ 222,190 (93,542) 501,500
CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR ................................. 56,887 279,077 185,535
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $279,077 $185,535 $687,035
======== ======== ========
Supplemental disclosure of cash flow
information:
Cash paid during the period for interest,
net of $101,923 in capitalized interest
in 1995 ............................. $762,055 $307,720 $192,299
Cash paid during the year for income taxes 68,342 174,568 1,627,100
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
AQUAPENN SPRING WATER COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
Background of Business
AquaPenn Spring Water Company, Inc. (the Company), was formed as a
Pennsylvania corporation during November 1986. The Company bottles and
distributes non-sparkling natural spring water.
The Company's water products are sold to both regional and national
customers under retailers' and other customers' private labels and
under its proprietary brand labels.
Principles of Consolidation
The consolidated financial statements include the financial statements
of the Company and its wholly-owned subsidiaries.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Company considers all highly
liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market with cost
determined using the first-in first-out (FIFO) method.
Property, Plant, and Equipment
Property, plant, and equipment are recorded at cost. Depreciation and
amortization on property, plant, and equipment are provided utilizing
the straight-line method over the estimated useful lives of the
related assets.
Repairs and maintenance are charged to expense and betterments are
capitalized; any gain or loss on dispositions is recognized currently.
The Company adopted Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" (Statement No. 121) in the
beginning of fiscal 1997. There was no impact on the consolidated
statements of operations upon the adoption of Statement No. 121.
Revenue Recognition
Revenue is recognized when products are shipped.
F-7
<PAGE>
AQUAPENN SPRING WATER COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Continued
Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
Use of Estimates
The preparation of the 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 recorded amounts of
revenues and expenses during the reporting period. Actual results
could differ from these estimates.
Net Income Per Share
Net income per share is based on the weighted average number of shares
of common stock outstanding during the periods increased by
convertible preferred stock and dilutive common stock equivalents
using the treasury stock method. Common shares issued and stock
options granted within one year prior to the Offering have been
included in the calculation of shares used in computing net income per
common share as if they were outstanding for all periods presented.
Reclassification
Certain prior year amounts have been reclassified to conform with
current year presentations.
(2) Related Party Transactions
The Company has entered into the following transactions with related
parties:
o The Company sold product to a corporate investor in the Company
at normal sales prices in the amount of approximately $625,000,
$696,000 and $738,000 in fiscal 1995, 1996, and 1997,
respectively. Accounts receivable from this investor at September
30, 1996 and 1997 were approximately $75,000 and $68,000,
respectively.
o The Company recorded compensation expense to a director of
$208,305, $214,981 and $250,000 in fiscal 1995, 1996, and 1997,
respectively, for his services as an independent food broker.
Accrued commissions to this director at September 30, 1996 and
1997 were $20,833 each year.
o The Company had stock subscriptions receivable from a director of
$64,614 and $71,878 at September 30, 1996 and 1997, respectively.
In addition, the Company recorded $23,625 in fees
F-8
<PAGE>
AQUAPENN SPRING WATER COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) Continued
relating to this director's services associated with the
Company's private placement transaction (see note 13) during
fiscal 1995.
o In April 1995, the Company borrowed $8,000,000 from a corporate
investor in the Company. The loan was repaid in September 1995
out of the proceeds of the private placement transaction (see
note 13). In addition, interest expense of $292,000 was incurred
and paid by the Company on this loan. In connection with this
loan, 135,180 common stock warrants were issued to this corporate
investor exercisable at $4.99 per warrant. These warrants may be
exercised in part or in whole at any time. None of these warrants
were exercised in fiscal 1996 or 1997.
o The Company issued 105,140 common stock warrants to the President
exercisable at $4.99 per warrant. These warrants may be exercised
in part or in whole at any time. These warrants were issued as
consideration for the President's personal guarantee given on a
portion of the $8,000,000 borrowing. During fiscal 1996, 30,040
of those warrants were sold to two Directors of the Company by
the President.
(3) Accounts Receivable
Accounts receivable consist of the following:
September 30,
1996 1997
Accounts receivable - trade......... $2,868,525 $3,676,555
Other............................... 26,251 27,969
---------- ----------
2,894,776 3,704,524
Less allowance for doubtful accounts 100,000 100,000
---------- ----------
$2,794,776 $3,604,524
========== ==========
(4) Inventories
Inventories consist of the following:
September 30,
---------------------------
1996 1997
---- ----
Raw materials................... $ 910,988 $1,087,507
Finished goods.................. 420,400 446,110
---------- ----------
$1,331,388 $1,533,617
========== ==========
F-9
<PAGE>
AQUAPENN SPRING WATER COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) Property, Plant, and Equipment
Major classifications of these assets are summarized as follows:
Estimated
useful
lives in September 30,
years -----------------------------
--------- 1996 1997
---- ----
Land................... - $ 1,140,850 $ 1,190,850
Land improvements...... 20 129,819 154,121
Buildings.............. 30 5,565,101 7,729,748
Machinery and equipment 3-10 9,532,609 13,941,998
Transportation equipment 3-5 497,943 497,943
Construction in progress - 1,664,776 2,877,630
----------- -----------
18,531,098 26,392,290
Less accumulated depreciation
and amortization...... 3,976,169 6,361,381
----------- -----------
$14,554,929 $20,030,909
=========== ===========
Property held for rental is classified as property, plant, and
equipment. This property relates to the Company's former manufacturing
facility in State College, Pennsylvania which has a net book value of
approximately $1,184,000, which is net of approximately $483,000 in
accumulated depreciation at September 30, 1997.
Interest costs for the construction and purchase of certain long-term
assets relating to the Company's new facility in Milesburg,
Pennsylvania, were capitalized and are being amortized over the
related assets' estimated useful lives. The Company capitalized net
interest costs of $101,923 in fiscal 1995 and $0 in fiscal 1996 and
1997.
Total depreciation and amortization expense was $1,352,826, $1,831,626
and $2,385,212 in fiscal 1995, 1996, and 1997, respectively.
F-10
<PAGE>
AQUAPENN SPRING WATER COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) Notes Payable
September 30,
-----------------------------
1996 1997
---- ----
Unsecured note payable to a bank,
$10,000,000 revolving credit note -
interest at London Interbank Offered
Rate (LIBOR) plus 1.7% (7.325% at
September 30, 1997), requires
interest only through February 1999
with principal and interest due
monthly thereafter with maturity in
2004 -- $2,900,000
Mortgage funding payable in monthly
installments of principal and interest
to the Pennsylvania Industrial
Development Authority at 5%, due
through May 2011................ 1,785,950 1,700,383
Note payable to a bank, $6,000,000
line of credit at LIBOR plus 1.0%
(6.6875% at September 30, 1997),
payable on demand and requires a
negative pledge on the
Company's accounts receivable
and inventories -- 200,000
Various installment loan obligations
at interest rates between 9% and 10%,
due through September 1999, payable
to various companies, secured by
machinery and equipment......... 22,514 15,624
Unsecured note payable to a bank,
$6,000,000 line of credit, interest
at LIBOR plus 1.2% (6.825%
at September 30,1997), and is due
February 1998 -- 1,460
1,808,464 4,817,467
Less portion due within one year 90,840 298,966
---------- ---------
$1,717,624 $4,518,501
========== ==========
Interest expense was $762,055, $306,970 and $208,467 in 1995, 1996,
and 1997, respectively, and is recorded in other income (expense) in
the consolidated statements of operations.
F-11
<PAGE>
AQUAPENN SPRING WATER COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) Continued
Based on current payment terms, the required principal reduction of
the above debt is as follows:
Year ending
September 30, Amount
------------- ------
1998 $ 298,966
1999 237,000
2000 313,000
2001 335,000
2002 358,000
Thereafter 3,275,501
----------
$4,817,467
==========
(7) Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist of the following:
September 30,
-------------------------------
1996 1997
---- ----
Accounts payable................ $ 868,436 $1,021,471
Accrued expenses................ 874,093 860,825
Accrued payroll................. 96,513 142,224
Income taxes payable............ 595,319 822,322
Other........................... 87,309 251,729
----------- -----------
$2,521,670 $3,098,571
========== ==========
(8) Employee Benefit Plan
Effective March 1, 1994, the Company adopted a deferred 401(k) Salary
Savings Plan for the benefit of its employees and their beneficiaries.
Generally, any employee who has completed six months of service and is
over 21 years of age is eligible to participate in the Plan. Each
eligible employee may elect to contribute up to 15% of his or her
compensation for services rendered in any year. The Company matches
employee contributions in an amount equal to 100% of the first 1%, 75%
of the second 1%, and 50% of the third 1% of each participant's
contributions. The Company contributed approximately $10,000, $24,000
and $52,000 in fiscal 1995, 1996, and 1997, respectively.
F-12
<PAGE>
AQUAPENN SPRING WATER COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(9) Sales to Major Customers
During fiscal 1995 and 1996, sales to one customer accounted for
approximately 17% and 23%, respectively, of net revenues. During
fiscal 1997, sales to two customers accounted for approximately 15%
and 11% of net revenues. Accounts receivable from these customers
totaled approximately $665,000 and $459,000, respectively, at
September 30, 1997.
(10) Income Taxes
The provision for income taxes attributable to income from operations
consists of the following:
Years ended September 30,
1995 1996 1997
---- ---- ----
Currently payable:
Federal................... $ 254,500 $ 483,900 $1,452,000
State..................... 75,000 134,100 306,252
--------- ------- ---------
329,500 618,000 1,758,252
--------- ------- ---------
Deferred (benefit):
Federal................... (153,700) 274,600 108,100
State..................... (40,800) 97,400 38,400
--------- ------- ----------
(194,500) 372,000 146,500
--------- ------- ----------
$ 135,000 $ 990,000 $1,904,752
========= ======= ==========
Total income tax expense was $135,000, $990,000 and $1,904,752 for the
years ended September 30, 1995, 1996, and 1997, respectively, and
differed from the amounts computed by applying the U.S. federal income
tax rate of 35 percent to pretax income as a result of the following:
Years ended September 30,
1995 1996 1997
---- ---- ----
Computed "expected" tax expense $ 270,500 $ 866,000 $1,642,000
State income tax, net of federal
benefit 60,000 153,000 227,000
Change in valuation allowance (262,500) (27,000) --
Other, net............ 67,000 (2,000) 35,752
--------- --------- ----------
$ 135,000 $ 990,000 $1,904,752
========= ========= ==========
F-13
<PAGE>
AQUAPENN SPRING WATER COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(10) Continued
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
September 30, 1996 and 1997 are presented below:
September 30,
-----------------------
1996 1997
---- ----
Deferred tax assets:
Accounts receivable, due to
allowance for doubtful
accounts .................... $ 40,600 $40,600
Inventories.................... 78,800 70,100
Deferred compensation.......... 44,000 62,500
Net operating loss carryforwards 39,000 5,300
Alternative minimum tax credit
carryforwards 104,500 --
Other, principally due to accruals
for financial reporting
purposes..................... 72,100 131,500
------- -------
Total gross deferred tax assets. 379,000 310,000
Less valuation allowance........ -- --
------- -------
Total deferred tax assets....... 379,000 310,000
------- -------
Deferred tax liabilities:
Plant and equipment, principally
due to differences in
depreciation.................. 580,800 662,400
Other.......................... 8,100 4,000
------- -------
Total gross deferred tax liabilities 588,900 666,400
------- -------
Net deferred tax liability...... $ 209,900 $356,400
========= ========
Deferred tax assets and liabilities are reported net within deferred
income taxes on the consolidated balance sheets at September 30, 1996
and 1997.
Under Statement of Financial Accounting Standards No. 109 "Accounting
for Income Taxes" (Statement 109), a valuation allowance is recognized
if, based on the weight of the evidence, it is more likely than not
that some portion or all of the deferred tax asset will not be
recognized. Based on the weight of all available evidence, the Company
concludes that a valuation allowance is not needed.
At September 30, 1997, the Company has Pennsylvania net operating loss
carryforwards for state income tax purposes of approximately $89,000
which are available to offset future Pennsylvania taxable income, if
any, through the fiscal year ending September 30, 1998 subject to
limitation.
F-14
<PAGE>
AQUAPENN SPRING WATER COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(11) Commitments
The Company rents certain land, office equipment, and transportation
equipment under noncancellable operating leases. Rent expense for
these leases amounted to approximately $127,000, $152,000 and $138,000
for fiscal 1995, 1996, and 1997, respectively. The future minimum
annual rent commitments under these leases are approximately as
follows:
Year ending
September 30, Amount
------------- ------
1998 $110,000
1999 63,000
2000 41,000
2001 15,000
2002 16,000
Thereafter 37,000
--------
$282,000
========
At September 30, 1997, the Company has entered into a commitment to
purchase land and construct a production facility in North Central
Florida. The facility, which is expected to be completed in fiscal
1998, is estimated to cost approximately $6,588,000.
In addition, the Company has made certain commitments to expand the
Milesburg Facility. These commitments are for buildings, building
improvements and equipment. As of September 30, 1997, the open
commitments relating to this facility are approximately $8,250,000.
(12) Shareholders' Equity
Common Stock
The Company maintains various stock option agreements and plans. Stock
options have been granted at prices at or above the fair market value
as of the date of the grant. Options vest and expire according to
terms established at the grant date.
In fiscal year 1997, the Company adopted the disclosure requirements
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (Statement No. 123). As allowed by Statement No. 123,
the Company has chosen to continue to account for stock based
compensation using Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related
interpretations. Accordingly, compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the
Company's stock at the grant date over the amount employees must pay
to acquire the stock. Accordingly, no compensation cost has been
recognized. Had compensation cost for the Company's Plans been
determined under Statement No. 123, the Company's net income and net
income per share would have been reduced to the pro forma amounts
indicated below:
F-15
<PAGE>
AQUAPENN SPRING WATER COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(12) Continued
September 30,
-----------------------
1996 1997
---- ----
Net income as reported...... $1,485,000 $2,787,000
Pro forma............. 1,104,000 2,396,000
Net income per share as reported $0.26 $0.47
Pro forma............. 0.20 0.40
The 1996 and 1997 pro forma amounts include the effect of the common
shares issued under the Stock Purchase Plan as if they were accounted
for under Statement 123.
The per share weighted-average fair values of stock options granted
during fiscal years 1996 and 1997 were $4.54 and $4.41, respectively,
on the date of grant using the Black-Scholes option-pricing model with
the following weighted-average assumptions: fiscal year 1996 expected
dividend yield 0%, risk-free interest rate of 5.945%, a volatility
factor of the expected market price of the Company's common stock of
.4166, and a weighted-average expected life of approximately 9 years;
fiscal year 1997 expected dividend yield 0%, risk-free interest rate
of 5.945%, a volatility factor of the expected market price of the
Company's common stock of .4166, and a weighted-average expected life
of approximately 10 years.
The fair market value of stock options included in the pro forma
amounts for fiscal years 1996 and 1997 is not necessarily indicative
of future effects on net income and net income per share.
A summary of the status of the Company's stock option plans and
changes during the years ended on those dates is presented below:
<TABLE>
<CAPTION>
Fiscal years ended: September 30, 1995 September 30, 1996 September 30, 1997
------------------ ------------------ ------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year........ 570,760 $2.18 570,760 $1.89 696,928 $2.45
Granted......... 300,400 1.87 126,168 4.99 135,180 7.49
Exercised....... 24,032 1.66 -- -- -- --
Cancelled....... 276,368 2.50 -- -- -- --
-------- ---- ------- ----- ------- -----
Outstanding at end of
year 570,760 1.89 696,928 2.45 832,108 3.26
======== ==== ======= ==== ======= =====
Options exercisable at
year-end...... 570,760 1.69 696,928 2.45 832,108 3.26
======== ==== ======= ==== ======= =====
</TABLE>
F-16
<PAGE>
AQUAPENN SPRING WATER COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(12) Continued
The following table summarizes information about the Company's stock
option plans as of September 30, 1997:
Options outstanding Options exercisable
------------------- -------------------
Number Weighted Weighted Number Weighted
Outstanding Average Average Exercisable Average
Range of on Remaining Exercise on Exercise
exercise September Contractual September
prices 30, 1997 Life Price 30, 1997 Price
---------- ----------- ------------ -------- ------------ ----------
$ 1.90 270,360 2 years $ 1.90 270,360 $ 1.90
4.99 36,048 3 years 4.99 36,048 4.99
1.66-1.90 300,400 7 years 1.88 300,400 1.88
4.99 90,120 9 years 4.99 90,120 4.99
7.07-8.32 135,180 10 years 7.49 135,180 $7.49
------- -------
$1.66-8.32 832,108 832,108
======= =======
Series A Non-Voting Convertible Preferred Stock
Series A Non-Voting Convertible Preferred Stock (the Preferred Stock)
is convertible at the option of the holder at any time into shares of
the Company's common stock at the rate of one share of Preferred Stock
for .6008 shares of common stock (See Note 15). The Preferred Stock
has no redemption features but does have a preference in liquidation.
(13) Private Placement
In fiscal 1995, the Company sold 1,748,328 shares of its common stock
in exchange for $8,562,384, net of $167,616 of offering costs as part
of a private placement transaction. As part of the private placement
transaction during fiscal 1996, the Company also sold 64,886 shares of
its common stock in exchange for $320,569. The offering under this
private placement transaction ceased during fiscal 1996.
(14) Stock Purchase Plan
Under the terms of the Company's Stock Purchase Plan, eligible
employees may purchase shares of the Company's common stock at 85% of
the estimated fair market value at the offering date. At September 30,
1997, there were 89,565 shares set aside for eligible employees under
this plan of which 76,254 shares had been subscribed for at $5.41 per
share and 6,409 shares were purchased by employees during fiscal
September 30, 1997. The remaining 6,902 common shares were not
subscribed for by the eligible employees. Payment for the subscribed
shares must be made by January 1, 1998. Employees may choose to pay
for their subscribed shares by using the proceeds from bank loans
guaranteed by the Company. The common stock purchased with the
proceeds of the loans will serve as collateral for these loans. The
loans defer principal and interest payments for 5 years.
F-17
<PAGE>
AQUAPENN SPRING WATER COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(14) Continued
Under the terms of the Company's Stock Purchase Plan, a total of
98,847 shares of common stock which were subscribed for in fiscal 1996
and were issued during fiscal 1997 at $4.16 per share for a total of
$411,312. Of this amount, the Company is contingently liable for
$385,015 as a result of bank loans guaranteed by the Company.
(15) Reverse Stock Split
On October 24, 1997, the Company's Board of Directors approved a
0.6008-for-1 reverse stock split of each outstanding share of Common
Stock of the Company. All share and per share data, including stock
option and stock purchase plan information, have been restated to
reflect this split.
(16) Subsequent Event - Acquisition of Dunsmuir Bottling Company, Inc.
(Unaudited)
On October 15, 1997, the Company entered into a merger agreement to
purchase all of the stock of Dunsmuir Bottling Company, Inc.
("Dunsmuir", also known as Castle Rock Spring Water). Under terms of
this agreement, the Company will buy Dunsmuir for approximately
$3,000,000 plus the assumption of certain liabilities. This purchase
price consists of a combination of cash and the Company's common stock
and the assumption of up to $4,650,000 in Dunsmuir's liabilities.
The following pro forma, condensed, combined balance sheet assumes the
acquisition occurred at September 30, 1997 and the pro forma,
condensed, combined statement of operations assumes the acquisition
occurred at the beginning of fiscal 1997. This financial information
does not purport to be indicative of what would have occurred had the
acquisition been made at the beginning of fiscal 1997, or of the
results which may occur in the future.
<TABLE>
<CAPTION>
Proforma Condensed Combined Balance Sheet
(Unaudited)
September 30, 1997
Pro Forma Pro
AquaPenn Dunsmuir Adjustments Forma
<S> <C> <C> <C> <C>
Assets:
Current assets ................... $ 6,494,000 $ 1,105,000 $(1,500,000)(a) $ 6,099,000
Property, plant and equipment .... 20,031,000 3,046,000 -- 23,077,000
Other noncurrent assets .......... 55,000 30,000 (150,000)(b) 2,935,000
........................... -- -- 3,000,000(a) --
----------- ----------- ----------- -----------
........................... $26,580,000 $ 4,181,000 $ 1,350,000 $32,111,000
=========== =========== =========== ===========
Liabilities and Stockholders' Equity:
Current liabilities .............. $ 3,398,000 $ 2,618,000 -- $ 6,016,000
Long-term liabilities ............ 4,519,000 1,542,000 -- 6,061,000
Other noncurrent liabilities ..... 599,000 -- -- 599,000
Stockholders' equity 18,064,000 21,000 (150,000)(b) 19,435,000
........................... -- -- 1,500,000(a) --
----------- ----------- ----------- -----------
........................... $26,580,000 $ 4,181,000 $ 1,350,000 $32,111,000
=========== =========== =========== ===========
</TABLE>
F-18
<PAGE>
AQUAPENN SPRING WATER COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
ProForma Condensed Combined Statement of Operations
(Unaudited)
Year Ended
September 30, 1997
Pro Forma Pro
AquaPenn Dunsmuir Adjustments Forma
<S> <C> <C> <C> <C>
Sales ............ $38,015,000 $7,771,000 -- $45,786,000
Gross profit...... 9,698,000 2,221,000 -- 11,919,000
Other costs
and expenses 6,911,000 2,517,000 150,000 (b) 9,578,000
----------- ---------- --------- -----------
Net income (loss). $ 2,787,000 $(296,000)(c) $(150,000)(b) $ 2,341,000
=========== ========== ========= ===========
</TABLE>
(a)The aggregate purchase price of $3,000,000 was assumed to be paid
through the issuance of shares of the Company's Common Stock and the
remainder through cash resources.
(b)Since the purchase price allocation will not be finalized after the
Offering and the determination of the Offering price, the approximate
excess of purchase price over assets acquired is recorded in other
noncurrent assets.
(c)The net loss of Dunsmuir has been adjusted for an income tax benefit as
if its results had been consolidated with the Company's income tax
provision.
F-19
<PAGE>
[Photographs to appear on inside back cover with the following captions:]
1. (Lauth With Pure American Bottles)
AquaPenn President and founder Edward J. Lauth, III was named
Entrepreneur of the Year for Western Pennsylvania in 1996 in a
competition sponsored by Ernst & Young LLP and its co-sponsors
Entrepreneur of the Year(R) Institute and the Center for Entrepreneur
Leadership at the Ewing Marion Kauffman Foundation.
2. (Gerber Baby Water Bottle)
AquaPenn was selected by the Gerber Products Company, in June 1996 to
produce Gerber(R) Baby Water for the United States market.
3. (Steel Silos Against Sky)
Four 60,000-gallon stainless steel silos store spring water at
AquaPenn's Milesburg Facility until it is needed for bottling.
4. (Feidelberg With Pure American Vending Machine)
Geoffrey F. Feidelberg, Chief Operating Officer and Chief Financial
Officer, joined AquaPenn in 1989 following 13 years with the
international accounting firm of Price Waterhouse.
<PAGE>
No person has been authorized to give any information or to make any
representations in connection with this offering other than those contained
in this Prospectus and, if given or made, such information and
representations must not be relied upon as having been authorized by the
Company or the Underwriters. Neither the delivery of this Prospectus nor
any sale made hereunder shall under any circumstances create any
implication that there has been no change in the affairs of the Company
since the date hereof or that the information contained herein is correct
as of any time subsequent to its date. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any security other
than the registered securities to which it relates. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy such
securities in any circumstances in which such offer or solicitation is
unlawful.
--------------------
TABLE OF CONTENTS
Page
Prospectus Summary................................................... 3
Risk Factors......................................................... 7
Use of Proceeds...................................................... 13
Dividend Policy...................................................... 13
Dilution............................................................. 14
Capitalization....................................................... 15
Selected Consolidated Financial Data................................. 16
Management's Discussion and Analysis
of Financial Condition and Results of Operations................... 18
Business............................................................. 24
Management........................................................... 32
Certain Transactions................................................. 39
Principal Shareholders and Selling Shareholder....................... 40
Description of Capital Stock......................................... 42
Shares Eligible for Future Sale...................................... 45
Underwriting......................................................... 46
Legal Matters........................................................ 47
Experts.............................................................. 47
Available Information................................................ 47
Index to Consolidated Financial Statements...........................F-1
--------------------------
Until ---------------, 1997, all dealers effecting transactions in the
registered securities, whether or not participating in this distribution,
may be required to deliver a Prospectus. This is in addition to the
obligation of dealers to deliver a Prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.
[LOGO]
Shares
AQUAPENN SPRING
WATER COMPANY, INC.
Common Stock
---------------
PROSPECTUS
---------------
PaineWebber Incorporated
Lazard Freres & Co. LLC
Parker/Hunter
Incorporated
--------------------
, 1997
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated amounts of various expenses
payable by the Company and the Selling Shareholder in connection with the
registration of the Common Stock offered hereby, other than underwriting
discounts and commissions:
Selling
Company Stockholder
Securities and Exchange Commission fee $12,504 $9,013
NASD filing fee.................. * *
New York Stock Exchange listing fee * *
Printing and engraving expenses.. * *
Blue sky fees and expenses....... * *
Legal fees and expenses.......... * *
Accounting fees and expenses..... * *
Transfer agent and registrar fees * *
Miscellaneous....................
Total.......................... $ $
======= ======
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* To be provided by amendment.
Item 14. Indemnification of Directors and Officers.
The Pennsylvania Business Corporation Law of 1988 authorizes the Company
to indemnify its directors and officers in terms sufficiently broad to
permit indemnification of such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under
the Securities Act of 1933.
The Company's By-Laws provide as follows:
"Section 7.01. Indemnification of Directors and Officers. The
Corporation shall indemnify any director or officer or employee or agent of
the Corporation or any of its subsidiaries who was or is an "authorized
representative" of the Corporation (which shall mean, for the purposes of
this Article, a director or officer of the Corporation, or a person serving
at the request of the Corporation as a director, officer, partner,
fiduciary or trustee of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise) and who was or is a
"party" (which shall include for purpose of this Article the giving of
testimony or similar involvement) or is threatened to be made a party to
any "proceeding" (which shall mean for purposes of this Article any
threatened, pending or completed action, suit, appeal or other proceeding
of any nature, whether civil, criminal, administrative or investigative,
whether formal or informal, and whether brought by or in the right of the
Corporation, its shareholders or otherwise) by reason of the fact that such
person was or is an authorized representative of the Corporation to the
fullest extent permitted by law including, without limitation,
indemnification against expenses (which shall include for purposes of this
Article, attorneys' fees and disbursements), damages, punitive damages,
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by such person in
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connection with such proceeding unless the act or failure to act giving
rise to the claim is finally determined by a court to have constituted
willful misconduct or recklessness. If an authorized representative is not
entitled to indemnification with respect to a portion of any liabilities to
which such person may be subject, the Corporation shall nonetheless
indemnify such person to the maximum extent for the remaining portion of
the liabilities."
Item 15. Recent Sales of Unregistered Securities.
Within the past three years, the Company has issued and sold the
securities described below in reliance upon the exemption from registration
under Section 4(2) of the Securities Act of 1933, except as may otherwise
be noted.
In October 1994, the Company granted an option to purchase 270,360
shares at $1.90 per share to Matthew J. Suhey in consideration for the
termination of an agreement under which Mr. Suhey served as a sales
representative to the Company.
In December 1994, the Company issued 901 shares of Common Stock to each
of its nine directors for a total of 8,111 shares as compensation for
serving on the Board of Directors in 1994.
In December 1994, the Company granted an option to purchase 30,040
shares of Common Stock at $1.66 per share to Edward J. Lauth, III, to
replace shares previously transferred by Mr. Lauth to an individual for
services rendered to the Company.
In April 1995, the Company issued a warrant to purchase 105,140 shares
of Common Stock at $4.99 per share to Edward J. Lauth, III, in
consideration for Mr. Lauth's guarantee of a portion of the Company's
borrowings. Mr. Lauth subsequently assigned the rights to purchase 30,040
shares under the warrant to other individuals. To effect the assignment,
the Company issued a warrant in the amount of 75,100 to Mr. Lauth and
warrants in the amounts of 21,028 and 9,012 to the assigness.
In April 1995, the Company issued a warrant to purchase 135,180 shares
of Common Stock at an exercise price of $4.99 per share to AquaWorks, Inc.
in connection with loans to the Company from AquaWorks, Inc.
In June 1995, the Company issued 24,032 shares of Common Stock at $1.66
per share upon the exercise of options received by an individual as
compensation for services rendered to the Company.
In September 1995, the Company issued 2,704 shares of Common Stock to a
former director in consideration for past services as a member of the Board
of Directors.
In September 1995, the Company issued 1,748,328 shares of Common Stock
at $4.99 per share to purchasers in a private placement under Section 4(2)
of the Securities Act of 1933 and Rule 506 of Regulation D of the
Securities Act of 1933 for an aggregate price of $8,730,000.
In September 1995, the Company issued 901 shares of Common Stock to each
of its nine directors for a total of 8,111 shares as compensation for
serving on the Board of Directors in 1995.
In October 1995, the Company issued 21,629 shares of Common Stock for an
aggregate price of $108,000 to the Davis Trust UAD 2/5/77 in a private
placement.
In December 1995, the Company issued 10,814 shares of Common Stock to
M-S Capital Fund for an aggregate price of $54,000 in connection with a
private placement.
In January 1996, the Company issued 21,629 shares of Common Stock to an
individual for an aggregate price of $108,000 in connection with a private
placement.
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In June 1996, the Company granted an option to purchase 36,048 shares of
Common Stock at $4.99 per share to an individual as compensation for
services rendered to the Company.
In July 1996, the Company issued 901 shares of Common Stock to each of
its twelve directors for a total of 10,814 shares as compensation for
serving on the Board of Directors in 1996.
In July 1996, the Company issued 10,814 shares to individuals for an
aggregate price of $54,000 in connection with a private placement.
In September 1996, the Company granted options to purchase 30,040 shares
of Common Stock at $4.99 per share to Edward J. Lauth, III, Geoffrey F.
Feidelberg and Matthew J. Suhey in consideration for services rendered to
the Company.
In October 1996, the Company issued 13,068 shares of Common Stock to the
Lauth Rabbi Trust and 10,815 shares of Common Stock to the Feidelberg Rabbi
Trust for an aggregate price of $119,250 in connection with deferred
compensation plans.
In May 1997, the Company issued 901 shares of Common Stock to each of
its twelve directors for a total of 10,814 shares as compensation for
serving on the Board of Directors in 1997.
From March 1997 until August 1997, the Company issued 98,847 shares of
Common Stock at a price of $4.16 per share and 6,409 shares of Common Stock
at $5.41 per share to employees purchasing stock under the 1996 Employee
Stock Purchase Plan.
In September 1997, the Company granted options to purchase 30,040 shares
of Common Stock at $7.07 per share to Edward J. Lauth, III, Geoffrey F.
Feidelberg and Matthew J. Suhey in consideration for services rendered to
the Company.
In October 1997, the Company granted 186,163 shares of Common Stock to
selling shareholders in connection with a merger of a wholly owned
subsidiary of the Company with and into another company (the number of
shares subject to adjustment after completion of the Offering, currently
estimated at 137,715 shares).
In October 1997, the Company issued 1,803 shares of Common Stock and
options to purchase 12,016 shares of Common Stock at an exercise price of
$8.32 per share in connection with a real estate transaction.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibit
Exhibit
Number
1 Form of Underwriting Agreement*
3.1 Restated Articles of Incorporation of the Company*
3.2 Amended and Restated By-laws of the Company
4.1 Form of Certificate evidencing Common Stock of the Company*
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4.2 Registration and Holdback Agreement dated as of October 17, 1997
between the Company and Weis Markets, Inc., Dutch Valley Foods,
Inc. and Aqua Works, Inc.
5 Opinion of Ballard Spahr Andrews & Ingersoll regarding the
legality of the securities being registered*
10.1 Termination Agreement dated October 3, 1994 between Matthew J.
Suhey and the Company
10.2 1996 Employee Stock Purchase Plan
10.3 Form of Warrant issued to Edward J. Lauth, III, Nancy Jean Davis
and James D. Hammond and Marian I. Hammond
10.4 Employment Agreement dated September 16, 1994 between Edward J.
Lauth, III, and the Company
10.5 Employment Agreement dated September 16, 1994 between Geoffrey F.
Feidelberg and the Company
10.6 Change in Control Agreement dated September 16, 1994 between
Edward J. Lauth, III, and the Company
10.7 Change in Control Agreement dated September 16, 1994 between
Geoffrey F. Feidelberg and the Company
10.8 Amendment No. 1 to Employment Agreement dated October __, 1997
between Edward J. Lauth, III and the Company*
10.9 Amendment No. 1 to Employment Agreement dated October __, 1997
between Geoffrey F. Feidelberg and the Company*
10.10 Agreement of Lease dated July 19, 1996 between Johnson Controls,
Inc. and the Company+
10.11 Assignment of Lease dated February 28, 1997 between Johnson
Controls, Inc. and Schmalbach-Lubeca Plastic Containers USA, Inc.
10.12 Letter Agreement dated September 10, 1997 between
Schmalbach-Lubeca Plastic Containers USA, Inc. and the Company+
10.13 Agreement dated July 30, 1997 between Seven Springs Water Company
and the Company+
10.14 Water Agreement dated July 10, 1995 between Bellefonte Borough
and the Company
10.15 Amended and Restated Lease Agreement dated October 14, 1997 among
Roy Bresler and Ida Bresler and the Company+
10.16 Water Contract dated August 8, 1990 between City of Dunsmuir and
Dunsmuir Bottling Company
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10.17 Agreement and Plan of Merger dated October 15, 1997 between the
Company, Castle Rock Spring Water Company, Inc. and Dunsmuir
Bottling Company and certain shareholders of Dunsmuir Bottling
Company
10.18 1992 Stock Option Plan
21 Subsidiaries of the Company
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Ballard Spahr Andrews & Ingersoll (included in
Exhibit 5)*
24 Power of Attorney (included in signature page)
27 Financial Data Schedule
- --------------------
* To be filed by amendment.
+ Confidential treatment requested
Item 17. Undertakings.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to provide to the
underwriter at the closing specified in the Underwriting Agreement
certificates in such denominations and registered in such names required by
the underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
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jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Milesburg,
Pennsylvania, on October 24, 1997.
AQUAPENN SPRING WATER COMPANY, INC.
By:/s/ EDWARD J. LAUTH, III
-------------------------
Name: Edward J. Lauth, III
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Each person whose signature appears below in so signing also makes,
constitutes and appoints Edward J. Lauth, III and Geoffrey F. Feidelberg
and each of them, his or her true and lawful attorney-in-fact, with full
power of substitution, for him or her in any and all capacities, to execute
and cause to be filed with the Securities and Exchange Commission any and
all amendments and post-effective amendments to this Registration
Statement, with exhibits thereto and other documents in connection
therewith and hereby ratifies and confirms all that said attorney-in-fact
or his substitute or substitutes may do or cause to be done by virtue
hereof.
/s/ EDWARD J. LAUTH, III President, Chief Executive October 24, 1997
- ------------------------ Officer and Director
Edward J. Lauth, III (principal executive officer)
/s/ GEOFFREY F. FEIDELBERG Executive Vice President, October 24, 1997
- -------------------------- Chief Financial Officer,
Geoffrey F. Feidelberg Chief Operating Officer and
Director (principal financial
and accounting officer)
/s/ WALTER BRUCE Director October 24, 1997
- -------------------------
Walter Bruce
/s/ NANCY JEAN DAVIS Director October 24, 1997
- -------------------------
Nancy Jean Davis
/s/ RICHARD F. DeFLURI Director October 24, 1997
- -------------------------
Richard F. DeFluri
<PAGE>
/s/ JOHN H. GUTFREUND Director October 24, 1997
- -------------------------
John H. Gutfreund
/s/ JAMES D. HAMMOND Director October 24, 1997
- -------------------------
James D. Hammond
/s/ ROBERT E. POOLE, JR. Director October 24, 1997
- -------------------------
Robert E. Poole, Jr.
/s/ NORMAN S. RICH Director October 24, 1997
- -------------------------
Norman S. Rich
/s/ HENRY S. SHATKIN Director October 24, 1997
- -------------------------
Henry S. Shatkin
/s/ MATTHEW J. SUHEY Director October 24, 1997
- -------------------------
Matthew J. Suhey
/s/ CALVIN J. WAGNER, JR. Director October 24, 1997
- -------------------------
Calvin J. Wagner, Jr.
<PAGE>
EXHIBIT INDEX
Exhibit
Number Page
1 Form of Underwriting Agreement*
3.1 Restated Articles of Incorporation of the Company*
3.2 Amended and Restated By-laws of the Company
4.1 Form of Certificate evidencing Common Stock of the Company*
4.2 Registration and Holdback Agreement dated as of October 17, 1997 by
and between the Company and Weis Markets, Inc., Dutch Valley Foods,
Inc. and Aqua Works, Inc.
5 Opinion of Ballard Spahr Andrews & Ingersoll regarding the legality of
the securities being registered*
10.1 Termination Agreement dated October 3, 1994 between Matthew J. Suhey
and the Company
10.2 1996 Employee Stock Purchase Plan
10.3 Form of Warrant issued to Edward J. Lauth, III, Nancy Jean Davis and
James D. Hammond and Marian I. Hammond
10.4 Employment Agreement dated September 16, 1994 between Edward J. Lauth,
III, and the Company
10.5 Employment Agreement dated September 16, 1994 between Geoffrey F.
Feidelberg and the Company
10.6 Change in Control Agreement dated September 16, 1994 between Edward J.
Lauth, III, and the Company
10.7 Change in Control Agreement dated September 16, 1994 between Geoffrey
F. Feidelberg and the Company
10.8 Amendment No. 1 to Employment Agreement dated October __, 1997 between
Edward J. Lauth, III and the Company*
10.9 Amendment No. 1 to Employment Agreement dated October __, 1997 between
Geoffrey F. Feidelberg and the Company*
10.10 Agreement of Lease dated July 19, 1996 between Johnson Controls, Inc.
and the Company+
10.11 Assignment of Lease dated February 28, 1997 between Johnson Controls,
Inc. and Schmalbach-Lubeca Plastic Containers USA, Inc.
<PAGE>
10.12 Letter Agreement dated September 10, 1997 between Schmalbach-Lubeca
Plastic Containers USA, Inc. and the Company+
10.13 Agreement dated July 30, 1997 between Seven Springs Water Company and
the Company+
10.14 Water Agreement dated July 10, 1995 between Bellefonte Borough and
the Company
10.15 Amended and Restated Lease Agreement dated October 14, 1997 among Roy
Bresler and Ida Bresler and the Company+
10.16 Water Contract dated August 8, 1990 between City of Dunsmuir and
Dunsmuir Bottling Company
10.17 Agreement and Plan of Merger dated October 15, 1997 by and among the
Company, Castle Rock Spring Water Company, Inc. and Dunsmuir Bottling
Company and Certain Shareholders of Dunsmuir Bottling Company.
10.18 1992 Stock Option Plan
21 Subsidiaries of the Company
23.1 Consent of KPMG Peat Marwick
23.2 Consent of Ballard Spahr Andrews & Ingersoll (included in Exhibit 5)*
24 Power of Attorney (included in signature page)
27 Financial Data Schedule
- --------------------
* To be filed by amendment.
+ Confidential treatment requested
Exhibit 3.2
AMENDED AND RESTATED BY-LAWS
OF
AQUAPENN SPRING WATER COMPANY, INC.
A Pennsylvania Business Corporation
PREPARED BY:
Daniel E. Bright, Esquire
McQuaide, Blasko, Schwartz, Fleming & Faulkner, Inc.
811 University Drive
State College, PA 16801-6699
(814)238-4926
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - OFFICES
Section 1.01. Offices....................................... 1
Section 1.02. Additional Offices............................ 1
ARTICLE II - MEETINGS OF THE SHAREHOLDERS
Section 2.01. Time and Place................................ 1
Section 2.02. Annual Meeting................................ 2
Section 2.03. Notice of Annual Meeting...................... 2
Section 2.04. Special Meetings.............................. 2
Section 2.05. Notice of Special Meetings.................... 3
Section 2.06. Business of Special Meetings.................. 3
Section 2.07. List of Shareholders.......................... 3
Section 2.08. Quorum and Adjournments....................... 5
Section 2.09. Voting........................................ 6
Section 2.10. Action by Consent............................. 6
ARTICLE III - DIRECTORS
Section 3.01. General Powers, Number and Tenure............. 7
Section 3.02. Vacancies..................................... 7
Section 3.03. Removal or Resignation........................ 8
Section 3.04. Meetings of the Board......................... 8
Section 3.05. First Meeting of the New Board................ 8
Section 3.06. Annual Meeting................................ 9
Section 3.07. Regular Meeting............................... 9
Section 3.08. Special Meetings.............................. 9
Section 3.09. Quorum........................................ 9
Section 3.10. Compensation.................................. 10
Section 3.11. Action by Consent............................. 10
Section 3.12. Meeting by Telephone or Similar Equipment..... 10
ARTICLE IV - COMMITTEES
Section 4.01. Executive Committee........................... 11
Section 4.02. Powers........................................ 11
Section 4.03. Rules Procedure and Meetings.................. 11
Section 4.04. Quorum........................................ 12
Section 4.05. Other Committees.............................. 12
Section 4.06. Committee Changes............................. 12
Section 4.07. Compensation.................................. 12
Section 4.08. Action by Consent............................. 13
Section 4.09. Meetings by Telephone or Similar Equipment.... 13
ARTICLE V - NOTICES
Section 5.01. Form and Delivery............................. 13
Section 5.02. Waiver........................................ 14
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ARTICLE VI - OFFICERS
Section 6.01. Designations.................................. 14
Section 6.02. Term of and Removal from Office............... 15
Section 6.03. Compensation.................................. 15
Section 6.04. The Chairman of the Board..................... 16
Section 6.05. The President................................. 16
Section 6.06. The Vice President............................ 16
Section 6.07. The Secretary................................. 17
Section 6.08. The Assistant Secretary....................... 17
Section 6.09. The Treasurer................................. 18
Section 6.10. The Assistant Treasurer....................... 18
ARTICLE VII - INDEMNIFICATION AND PERSONAL LIABILITY
Section 7.01. Indemnification of Directors and Officers..... 19
Section 7.02. Advancement of Expenses....................... 20
Section 7.03. Employee Benefit Plans........................ 20
Section 7.04. Security of Indemnification Obligations....... 21
Section 7.05. Reliance Upon Provisions...................... 21
Section 7.06. Amendment or Repeal........................... 21
Section 7.07. Scope of Article.............................. 22
Section 7.08. Personal Liability of Directors............... 23
ARTICLE VIII - AFFILIATED TRANSACTIONS AND INTERESTED DIRECTORS
Section 8.01. Affiliated Transactions....................... 23
Section 8.02. Determining Quorum............................ 24
ARTICLE IX - STOCK CERTIFICATES
Section 9.01. Form and Signatures........................... 25
Section 9.02. Registration of Transfer...................... 25
Section 9.03. Registered Shareholders....................... 26
Section 9.04. Record Date................................... 26
Section 9.05. Lost, Stolen or Destroyed Certificates........ 27
ARTICLE X - GENERAL PROVISIONS
Section 10.01. Dividends.................................... 28
Section 10.02. Reserves..................................... 28
Section 10.03. Fiscal Year.................................. 28
Section 10.04. Corporate Seal............................... 28
Section 10.05. Notices...................................... 28
Section 10.06. Waiver....................................... 29
ARTICLE XI - AMENDMENTS
Section 11.01. Amendments................................... 30
CERTIFICATION................................................ 30
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AMENDED AND RESTATED BY-LAWS OF
AQUAPENN SPRING WATER COMPANY, INC.
A Pennsylvania Business Corporation
ARTICLE I
OFFICES
Section 1.01. Offices. The registered office shall be
located at One AquaPenn Drive, Milesburg, Centre County,
Pennsylvania, or at such other place as the Board of Directors
may from time to time determine.
Section 1.02. Additional Offices. The Corporation may
also have offices at such other places, both within and without
the Commonwealth of Pennsylvania, as the Board of Directors may
from time to time determine or the business of the Corporation
may require.
ARTICLE II
MEETINGS OF THE SHAREHOLDERS
Section 2.01. Time and Place. All meetings of the
shareholders shall be held at the registered office or such other
places, either within or without the Commonwealth of
Pennsylvania, as the Board of Directors may from time to time
determine and as shall be stated in the notice of the meeting or
in a duly executed waiver of notice thereof.
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Section 2.02. Annual Meeting. A meeting of the
shareholders shall be held in each calendar year for the election
of directors at such time and place as the Board of Directors
shall determine. If the annual meeting shall not be called and
held during such calendar year, any shareholder may call such
meeting at any time thereafter. Elections for directors need not
be by written ballot, except upon demand by a shareholder at the
election and before the voting begins.
Section 2.03. Notice of Annual Meeting. Written notice
of the annual meeting stating the place, date and time thereof,
shall be given to each shareholder entitled to vote at such
meeting not less than ten (10) days (unless a longer period is
required by law) nor more than sixty (60) days prior to the
meeting.
Section 2.04. Special Meetings. Special meetings of the
shareholders, for any purpose or purposes, other than those
regulated by statute or by the Articles of Incorporation, may be
called at any time by the President, or the Chairman of the
Board, if any, or the holder of not less than one-fifth (1/5) of
all the shares issued and outstanding and entitled to vote at the
particular meetings, upon written request delivered to the
Secretary of the Corporation. Such request shall state the
purpose or purposes of the proposed meeting. Upon receipt of any
such request it shall be the duty of the Secretary to call a
special meeting of the shareholders to be held at such time, not
less than ten (10) nor more than sixty (60) days thereafter, as
the Secretary may fix. If the Secretary shall neglect or refuse
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<PAGE>
to fix the date of the meeting and give notice thereof, the
person or persons calling the meeting may do so.
Section 2.05. Notice of Special Meetings. Written notice
of any special meeting of the shareholders stating the place, the
date and hour and the general nature of the business to be
transacted thereat, shall be given personally or by sending a
copy thereof through the mail, postage prepaid, to each
shareholder entitled to vote thereat at such address as appears
on the transfer books of the Corporation, not less than ten (10)
days (unless a longer period is required by law) nor more than
sixty (60) days prior to the meeting.
Section 2.06. Business of Special Meetings. Business
transacted at all special meetings shall be confined to the
business stated in the call.
Section 2.07. Presiding Officer and Order of Business.
A. Meetings of the shareholders shall be
presided over by the Chairman of the Board. If he is not present,
or if there is none, they shall be presided over by the
President, or, if he is not present or if there is none, by a
Vice President, or, if he is not present or there is none, by a
person chosen by the Board of Directors, or, if no such person is
present or has been chosen, by a chairman to be chosen by the
shareholders owning a majority of the shares of capital stock of
the Corporation issued and outstanding and entitled to vote at
the meeting and who are present in person or represented by
proxy. The Secretary of the Corporation, or, if he is not
present, an Assistant Secretary, or, if he is not present, a
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<PAGE>
person chosen by the Board of Directors, shall act as Secretary
at meetings of the shareholders; if no such person is present or
has been chosen, the shareholders owning a majority of the shares
of capital stock of the Corporation issued and outstanding and
entitled to vote at the meeting who are present in person or
represented by proxy shall choose any person present to act as
Secretary of the meeting.
B. The following order of business, unless
otherwise determined at the meeting, shall be observed as far as
practicable and consistent with the purposes of the meeting:
1. Call of the meeting to order.
2. Presentation of proof of mailing of the
notice of the meeting and, if the meeting is a special meeting,
the call thereof.
3. Presentation of proxies.
4. Announcement that a quorum is present.
5. Reading and approval of the minutes of
the previous meeting.
6. Reports, if any, of officers.
7. Election of Directors, if the meeting is
an annual meeting or a meeting called for that purpose.
8. Consideration of the specific purpose or
purposes other than the election of Directors, for which the
meeting has been called, if the meeting is a special meeting.
9. Transaction of such other business as may
properly come before the meeting.
10. Adjournment.
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Section 2.08. Quorum and Adjournments. The presence in
person or representation by proxy of the holders of a majority of
the shares of the capital stock of the Corporation issued and
outstanding and entitled to vote shall be necessary to, and shall
constitute a quorum for the transaction of business at, all
meetings of the shareholders, except as otherwise provided by
statute or by the Articles of Incorporation. If, however, a
quorum shall not be present or represented at any meeting of the
shareholders, the shareholders entitled to vote thereat who are
present in person or represented by proxy shall have the power to
adjourn the meeting from time to time until a quorum shall be
present or represented. If the time and place of the adjourned
meeting are announced at the meeting at which the adjournment is
taken, no further notice of the adjourned meeting need be given.
Even if a quorum shall be present or represented at any meeting
of the shareholders, the shareholders entitled to vote thereat
who are present in person or represented by proxy shall have the
power to adjourn the meeting from time to time for good cause to
a date that is not more than thirty (30) days after the date of
the original meeting. Further notice of the adjourned meeting
need not be given if the time and place thereof are announced at
the meeting at which the adjournment is taken. At any adjourned
meeting at which a quorum is present in person or represented by
proxy, any business may be transacted that might have been
transacted at the meeting as originally called. If the
adjournment is for more than thirty (30) days, or if, after the
adjournment, a new record date is fixed for the adjourned
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meeting, a notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote thereat.
Section 2.09. Voting.
A. At any meeting of the shareholders, every
shareholder having the right to vote shall be entitled to vote in
person or by proxy. Except as otherwise provided by law or the
Articles of Incorporation, each shareholder of record shall be
entitled to one vote for each share of capital stock registered
in his name on the books of the Corporation. Shareholders shall
not be entitled to cumulate said votes.
B. All elections shall be determined by a plurality
vote, and, except as otherwise provided by law or the Articles of
Incorporation, all other matters shall be determined by a vote of
a majority of the shares present in person or represented by
proxy and voting on such other matters.
Section 2.10. Action by Consent. Any action required or
permitted by law or the Articles of Incorporation to be taken at
any meeting of the shareholders may be taken without a meeting,
without prior notice, and without a vote, if a written consent
setting forth the action so taken, shall be signed by the holders
of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take such action at
a meeting at which all shares entitled to vote thereon were
present or represented by proxy and voted. Such written consent
shall be filed with the minutes of the meetings of the
shareholders. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent
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shall be given to those shareholders who have not consented in
writing thereto.
ARTICLE III
DIRECTORS
Section 3.01. General Powers, Number and Tenure. The
business of the Corporation shall be managed by its Board of
Directors, which may exercise all powers of the Corporation and
perform all lawful acts that are not by law, the Certificate of
Incorporation, or these By-laws directed or required to be
exercised or performed by the shareholders. The number of
directors shall be determined by the Board of Directors but in no
event shall the number of directors exceed seventeen (17); if no
such determination is made, the number of directors shall be five
(5). The directors shall be elected at the annual meeting of the
shareholders, except as provided in Section 3.02 of this Article,
and each director elected shall hold office until his successor
is elected and shall qualify. Directors need not be shareholders.
Section 3.02. Vacancies. Vacancies in the Board of
Directors, including vacancies resulting from an increase in the
number of directors, shall be filled by the remaining members of
the Board, although less than a quorum, or by a sole remaining
director. Each person so elected shall be a director until his
successor is elected by the shareholders, who may make such
election at the next annual meeting of the shareholders or at any
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special meeting duly called for that purpose and held prior
thereto.
Section 3.03. Removal or Resignation.
A. Except as otherwise provided by law or the
Articles of Incorporation, any director or the entire Board of
Directors may be removed, with or without cause, by the holders
of a majority of the shares then entitled to vote at an election
of directors.
B. Any director may resign at any time by giving
written notice to the Board of Directors, the Chairman of the
Board, if any, or the President or Secretary of the Corporation.
Unless otherwise specified in such written notice, a resignation
shall take effect upon delivery thereof to the Board of Directors
or the designated officer. It shall not be necessary for a
resignation to be accepted before it becomes effective.
Section 3.04. Meetings of the Board. The meetings of the
Board of Directors may be held at such place within the
Commonwealth of Pennsylvania, or elsewhere, as the directors may
from time to time appoint, or as may be designated in the notice
calling the meeting.
Section 3.05. First Meeting of the New Board. The first
meeting of each newly-elected board may be held at the same place
and immediately after the meeting at which such directors were
elected, and no notice need be given to the newly-elected
directors in order legally to constitute the meeting; or it may
convene at such time and place as may be fixed by the consent or
consents in writing of all the directors.
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Section 3.06. Annual Meeting. The annual meeting of each
newly-elected Board of Directors shall be held immediately
following the annual meeting of the shareholders, and no notice
of such meeting shall be necessary to the newly-elected directors
in order to constitute the meeting legally, provided a quorum
shall be present.
Section 3.07. Regular Meeting. Additional regular
meetings of the Board of Directors may be held without notice at
such time and place as may be determined from time to time by the
Board of Directors.
Section 3.08. Special Meetings. Special meetings of the
Board of Directors may be called by the Chairman of the Board,
the President, or by any director on at least two (2) days'
notice to each director, if such notice is delivered personally
or sent by telegram, or on at least three (3) days' notice if
sent by mail. Special meetings shall be called by the Chairman of
the Board, the President, the Secretary or two (2) or more
directors in like manner and on like notice on the written
request of one-half (1/2) or more of the number of directors then
in office. Any such notice need not state the purpose or purposes
of such meeting except as provided in Article XI.
Section 3.09. Quorum. At all meetings of the board, a
majority of the directors in office shall be necessary to
constitute a quorum for the transaction of business, and the act
of a majority of the directors present at a meeting at which a
quorum is present shall be the acts of the Board of Directors,
except as may be otherwise specifically provided by statute or by
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the Articles of Incorporation or by these Amended and Restated
By-Laws. If a quorum shall not be present at any meeting of
directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the
meeting at which such adjournment is taken, until a quorum shall
be present.
Section 3.10. Compensation. Directors shall be entitled
to such compensation for their services as directors and to such
reimbursement for any reasonable expenses incurred in attending
directors' meetings as may from time to time be fixed by the
unanimous action of the Board of Directors. The compensation of
directors may be on such basis as is determined by the Board of
Directors. Any director may waive compensation for any meeting.
Any director receiving compensation under these provisions shall
not be barred from serving the Corporation in any other capacity
and receiving compensation and reimbursement for reasonable
expenses for such other services.
Section 3.11. Action by Consent. Any action required or
permitted to be taken at any meeting of the Board of Directors
may be taken without a meeting if a written consent to such
action is signed by all members of the Board of Directors and
such written consent is filed with the minutes of its
proceedings.
Section 3.12. Meeting by Telephone or Similar
Communications Equipment. The Board of Directors may participate
in a meeting by means of a conference telephone or similar
communications equipment by means of which all directors
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participating in the meeting can hear each other, and
participation in such a meeting shall constitute presence in
person by any such director at such meeting.
ARTICLE IV
COMMITTEES
Section 4.01. Executive Committee. The Board of
Directors, by resolution adopted by a majority of the whole
Board, may appoint an Executive Committee consisting of one (1)
or more directors, one (1) of whom shall be designated as
Chairman of the Executive Committee. Each member of the Executive
Committee shall continue as a member thereof until the expiration
of his term as a director or his earlier resignation, unless
sooner removed as a member or as a director.
Section 4.02. Powers. The Executive Committee shall have
and may exercise those rights, powers and authority of the Board
of Directors as may from time to time be granted to it by the
Board of Directors to the extent permitted by law, and may
authorize the corporate seal to be affixed to all papers that may
require it.
Section 4.03. Rules of Procedure and Meetings. The
Executive Committee shall fix its own rules of procedure and
shall meet at such times and at such place or places as may be
provided by such rules or as the members of the Executive
Committee shall fix. The Executive Committee shall keep regular
minutes of its meetings, which it shall deliver to the Board of
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Directors from time to time. The Chairman of the Executive
Committee or, in his absence, a member of the Executive Committee
chosen by a majority of the members present shall preside at
meetings of the Executive Committee, and another member chosen by
the Executive Committee shall act as Secretary of the Executive
Committee.
Section 4.04. Quorum. A majority of the Executive
Committee shall constitute a quorum for the transaction of
business, and the affirmative vote of a majority of the members
present at any meeting at which there is a quorum shall be
required for any action of the Executive Committee; provided,
however, that when an Executive Committee of one (1) member is
authorized under the provisions of Section 4.01 of this Article,
one (1) member shall constitute a quorum.
Section 4.05. Other Committees. The Board of Directors,
by resolutions adopted by a majority of the whole Board, may
appoint such other committee or committees as it shall deem
advisable and with such rights, powers and authority as it shall
prescribe to the extent permitted by law. Each such committee
shall consist of one (1) or more directors.
Section 4.06. Committee Changes. The Board of
Directors shall have the power at any time to fill vacancies in,
to change the membership of, and to discharge any committee.
Section 4.07. Compensation. Members of any committee
shall be entitled to such compensation for their services as
members of the committee and to such reimbursement for any
reasonable expenses incurred in attending committee meetings as
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may from time to time be fixed by the Board of Directors. Any
member may waive compensation for any meeting. Any committee
member receiving compensation and reimbursement of reasonable
expenses under these provisions shall not be barred from serving
the Corporation in any other capacity and receiving compensation
and reimbursement for reasonable expenses for such other
services.
Section 4.08. Action by Consent. Any action required or
permitted to be taken at any meeting of any committee of the
Board of Directors may be taken without a meeting if a written
consent to such action is signed by all members of the committee
and such written consent is filed with the minutes of its
proceedings.
Section 4.09. Meetings by Telephone or Similar
Communications Equipment. The members of any committee designated
by the Board of Directors may participate in a meeting of such
committee by means of conference telephone or similar
communications equipment by means of which all persons
participating in such meeting can hear each other, and
participation in such a meeting shall constitute presence in
person by any such committee member at such meeting.
ARTICLE V
NOTICES
Section 5.01. Form and Delivery. Whenever a provision
of any law, the Articles of Incorporation or these Amended and
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Restated By-Laws requires that notice be given to any director or
shareholder, it shall not be construed to require personal notice
unless so specifically provided, but such notice may be given in
writing by mail addressed to the address of the director or
shareholder as it appears on the records of the Corporation, with
postage prepaid. These notices shall be deemed to be given when
they are deposited in the United States mail. Notice to a
director may also be given personally or by telegram sent to his
address as it appears on the records of the Corporation.
Section 5.02. Waiver. Whenever any notice is required to
be given under the provisions of any law, the Articles of
Incorporation or these Amended and Restated By-Laws, a written
waiver thereof signed by the person entitled to said notice,
whether before or after the time stated therein, shall be deemed
to be equivalent to such notice. In addition, any shareholder who
attends a meeting or is represented at such meeting by proxy,
without protesting at the commencement of the meeting the lack of
notice thereof to him, or any director who attends a meeting of
the Board of Directors without protesting at the commencement of
the meeting the lack of notice, shall be conclusively deemed to
have waived notice of such meeting.
ARTICLE VI
OFFICERS
Section 6.01. Designations. The officers of the
Corporation shall be chosen by the Board of Directors and shall
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be a President, a Vice-President or Vice-Presidents, a Secretary
and a Treasurer. All officers of the Corporation shall exercise
the powers and perform the duties that shall from time to time be
determined by the Board of Directors. Any number of offices may
be held by the same person, unless the Articles of Incorporation
or these Amended and Restated By-Laws provide otherwise.
Section 6.02. Term of and Removal from Office. At
its first regular meeting after each annual meeting of the
shareholders, the Board of Directors shall choose a President, a
Vice President or Vice-Presidents, a Secretary and a Treasurer.
It may also choose a Chairman of the Board, one (1) or more
Assistant Secretaries and/or Assistant Treasurers, and such other
officers and agents as it shall deem necessary or appropriate.
Each officer of the Corporation shall hold office until his
successor is chosen and shall qualify. Any officer elected or
appointed by the Board of Directors may be removed, with or
without cause, at any time by the affirmative vote of a majority
of the directors then in office. Removal from office, however,
shall not prejudice the contract rights, if any, of the person
removed. Any vacancy occurring in any office of the Corporation
may be filled for the unexpired portion of the term by the Board
of Directors.
Section 6.03. Compensation. The salaries of all officers
of the Corporation shall be fixed from time to time by the Board
of Directors and no officer shall be prevented from receiving a
salary because he is also a director of the Corporation.
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Section 6.04. The Chairman of the Board. The Chairman of
the Board, if any, shall be an officer of the Corporation and,
subject to the direction of the Board of Directors, shall perform
such executive, supervisory and management functions and duties
as may be assigned to him from time to time by the Board of
Directors. He shall, if present, preside at all meetings of the
shareholders and of the Board of Directors.
Section 6.05. The President.
A. The President shall be the chief executive
officer of the Corporation and, subject to the direction of the
Board of Directors, shall have general charge of the business
affairs and property of the Corporation and general supervision
over its other officers and agents. In general, he shall perform
all duties incident to the office of President and shall see that
all orders and resolutions of the Board are carried into effect.
B. Unless otherwise prescribed by the Board of
Directors, the President shall have full power and authority to
attend, act and vote on behalf of the Corporation at any meeting
of the security holders of other corporations in which the
Corporation may hold securities. At any such meeting, the
President shall possess and may exercise any and all rights and
powers incident to the ownership of such securities that the
Corporation might have possessed and exercised if it had been
present. The Board of Directors may from time to time confer like
powers upon any other person or persons.
Section 6.06. The Vice President. The Vice President,
if any, or in the event there be more than one (1), the Vice
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Presidents in the order of their election, shall, in the absence
of the President or in the event of his disability, perform the
duties and exercise the powers of the President and shall
generally assist the President and perform such other duties and
have such other powers as may from time to time be prescribed by
the Board of Directors.
Section 6.07. The Secretary. The Secretary shall attend
all meetings of the Board of Directors and the shareholders and
record all votes and the proceedings of the meetings in a book to
be kept for that purpose. He shall perform like duties for the
Executive Committee or other committees, if required. He shall
give or cause to be given, notice of all meetings of the
shareholders and special meetings of the Board of Directors, and
shall perform such other duties as may from time to time be
prescribed by the Board of Directors, the Chairman of the Board
or the President, under whose supervision he shall act. He shall
have custody of the corporate seal, and he, or an Assistant
Secretary, shall have authority to affix it to any instrument
requiring it and, when so affixed, the corporate seal may be
attested by his signature or by the signature of the Assistant
Secretary. The Board of Directors may give general authority to
any other officer to affix the corporate seal and to attest the
affixing thereof by his signature.
Section 6.08. The Assistant Secretary. The Assistant
Secretary, if any, or in the event there be more than one (1),
the Assistant Secretaries in the order designated, or in the
absence of any designation, in the order of their election,
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shall, in the absence of the Secretary or in the event of his
disability, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other
powers as may from time to time be prescribed by the Board of
Directors.
Section 6.09. The Treasurer. The Treasurer shall have
the custody of the corporate funds and other valuable effects,
including securities, and shall keep full and accurate account of
receipts and disbursements in books belonging to the Corporation
and shall deposit all monies and other valuable effects in the
name and to the credit of the Corporation in such depositories as
may from time to time be designated by the Board of Directors. He
shall disburse the funds of the Corporation in accordance with
the order of the Board of Directors, taking proper vouchers for
such disbursements, and shall render to the Chairman of the
Board if any, the President and the Board of Directors, whenever
they may require it or at regular meetings of the Board of
Directors, an account of all his transactions as Treasurer and of
the financial condition of the Corporation.
Section 6.10. The Assistant Treasurer. The Assistant
Treasurer, if any, or in the event there shall be more than one
(1), the Assistant Treasurers in the order designated, or in the
absence of any designation, in the order of their election,
shall, in the absence of the Treasurer or in the event of his
disability, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other
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powers as may from time to time be prescribed by the Board of
Directors.
ARTICLE VII
INDEMNIFICATION AND PERSONAL LIABILITY
Section 7.01. Indemnification of Directors and Officers.
The Corporation shall indemnify any director or officer or
employee or agent of the Corporation or any of its subsidiaries
who was or is an "authorized representative" of the Corporation
(which shall mean, for the purposes of this Article, a director
or officer of the Corporation, or a person serving at the request
of the Corporation as a director, officer, partner, fiduciary or
trustee of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise) and who was or
is a "party" (which shall include for purpose of this Article the
giving of testimony or similar involvement) or is threatened to
be made a party to any "proceeding" (which shall mean for
purposes of this Article any threatened, pending or completed
action, suit, appeal or other proceeding of any nature, whether
civil, criminal, administrative or investigative, whether formal
or informal, and whether brought by or in the right of the
Corporation, its shareholders or otherwise) by reason of the fact
that such person was or is an authorized representative of the
Corporation to the fullest extent permitted by law including,
without limitation, indemnification against expenses (which shall
include for purposes of this Article, attorneys' fees and
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disbursements), damages, punitive damages, judgments, penalties,
fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such proceeding unless
the act or failure to act giving rise to the claim is finally
determined by a court to have constituted willful misconduct or
recklessness. If an authorized representative is not entitled to
indemnification with respect to a portion of any liabilities to
which such person may be subject, the Corporation shall
nonetheless indemnify such person to the maximum extent for the
remaining portion of the liabilities.
Section 7.02. Advancement of Expenses. The Corporation
shall pay the expenses (including attorneys' fees and
disbursements) actually and reasonably incurred in defending a
proceeding on behalf of any person entitled to indemnification
under Section 7.01 of this Article in advance of the final
disposition of such proceeding upon receipt of an undertaking by
or on behalf of such person to repay such amount if it shall
ultimately be determined that such person is not entitled to be
indemnified by the Corporation as authorized in this Article and
may pay such expenses in advance on behalf of any employee or
agent on receipt of a similar undertaking. The financial ability
of such authorized representative to make such repayment shall
not be prerequisite to the making of an advance.
Section 7.03. Employee Benefit Plans. For purposes of
this Article, the Corporation shall be deemed to have requested
an officer, director, employee or agent to serve as a fiduciary
with respect to an employee benefit plan where the performance by
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such person of duties to the Corporation also imposes duties on,
or otherwise involves services by, such person as a fiduciary
with respect to the plan; excise taxes assessed on an authorized
representative with respect to any transaction with an employee
benefit plan shall be deemed "fines"; and action taken or omitted
by such person with respect to an employee benefit plan in the
performance of duties for a purpose reasonably believed to be in
the interest of the participants and beneficiaries of the plan
shall be deemed to be for a purpose which is not opposed to the
best interests of the Corporation.
Section 7.04. Security of Indemnification Obligations.
To further effect, satisfy or secure the indemnification
obligations provided herein or otherwise, the Corporation may
maintain insurance, obtain a letter of credit, act as
self-insurer, create a reserve, trust, escrow, cash collateral or
other fund or account, enter into indemnification agreements,
pledge or grant a security interest in any assets or properties
of the Corporation, or use any other mechanism or arrangement
whatsoever in such amounts, at such costs, and upon such other
terms and conditions as the Board of Directors shall deem
appropriate.
Section 7.05. Reliance Upon Provisions. Each person
who shall act as an authorized representative of the Corporation
shall be deemed to be doing so in reliance upon the rights of
indemnification provided by this Article.
Section 7.06. Amendment or Repeal. Notwithstanding
anything contained in Article XI of these Amended and Restated
By-Laws, upon approval by the shareholders of the Corporation,
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this Article shall not be repealed or amended or modified to
limit the indemnification rights provided hereunder except by
action of the shareholders. All rights to indemnification under
this Article shall be deemed a contract between the Corporation
and the person entitled to indemnification under this Article
pursuant to which the Corporation and each such person intend to
be legally bound. Any repeal, amendment or modification hereof
shall be prospective only and shall not limit, but may expand,
any rights or obligations in respect of any proceeding whether
commenced prior to or after such change to the extent such
proceeding pertains to actions or failures to act occurring prior
to such change.
Section 7.07. Scope of Article. The indemnification, as
authorized by this Article, shall not be deemed exclusive of any
other rights to which those seeking indemnification or
advancement of expenses may be entitled under any statute,
agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in an official capacity and as to
action in any other capacity while holding such office. The
indemnification and advancement of expenses provided by, or
granted pursuant to, this Article shall continue as to a person
who has ceased to be an officer, director, employee or agent in
respect of matters arising prior to such time, and shall inure to
the benefit of the heirs, executors and administrators of such
person.
Section 7.08. Personal Liability of Directors. To the
fullest extent that the laws of the Commonwealth of Pennsylvania,
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as in effect on January 27, 1987, or as thereafter amended,
permit elimination or limitation on the liability of directors, a
director shall not be personally liable as a director for
monetary damages, as such, for any action taken, or any failure
to take any action, unless:
A. The director has breached or failed to perform
the duties of his office as defined under Section 8363 of Title
42 of the Pennsylvania Consolidated Statutes (relating to
standard of care and justifiable reliance); and
B. The breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness.
Provided however, that the provisions of this section
shall not apply to the responsibility or liability of a director
pursuant to any criminal statute, or the liability of a director
for the payment of taxes pursuant to a local, state or federal
law. No amendment to or repeal of this section shall apply to or
have any effect on the liability or alleged liability of any
director for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal.
ARTICLE VIII
AFFILIATED TRANSACTIONS AND INTERESTED DIRECTORS
Section 8.01. Affiliated Transactions. No contract or
transaction between the Corporation and one (1) or more of its
directors or officers, or between the Corporation and any other
corporation, partnership, association or other organization in
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which one (1) or more of its directors or officers are directors
or officers or have a financial interest, shall be void or
voidable solely for this reason, or solely because the director
or officer is present at or participates in the meeting of the
Board of Directors thereof that authorizes the contract or
transaction or solely because his or their votes are counted for
such purpose, if:
A. The material facts as to his relationship or
interest and as to the contract or transaction are disclosed or
are known to the Board of Directors and the Board of Directors in
good faith authorizes the contract or transaction by the
affirmative vote of the disinterested directors, even though the
disinterested directors be less than a quorum; or
B. The material facts as to his relationship or
interest and as to the contract or transaction are disclosed or
are known to the shareholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by
the vote of the shareholders; or
C. The contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified
by the Board of Directors or the shareholders.
Section 8.02. Determining Quorum. Common or
interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or of a
committee thereof which authorizes the contract or transaction.
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ARTICLE IX
STOCK CERTIFICATES
Section 9.01. Form and Signatures.
A. Every holder of shares of stock of the
Corporation shall be entitled to a certificate stating the number
and class, and series, if any, of shares owned by him, signed by
the Chairman of the Board, if any, or the President and the
Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the Corporation, and bearing the corporate
seal. The signatures and the corporate seal may be facsimile. A
certificate may be signed, manually or by facsimile, by a
transfer agent or registrar other than the Corporation or its
employee. In case any officer who has signed a certificate, or
whose facsimile signature was placed on a certificate, shall have
ceased to be such officer before the certificate is issued, it
may nevertheless be issued by the Corporation with the same
effect as if he were such officer at the date of its issue.
B. All stock certificates representing shares of
capital stock that are subject to restrictions on transfer or to
other restrictions may have imprinted thereon any notation to
that effect determined by the Board of Directors.
Section 9.02. Registration of Transfer. Upon surrender
to the corporation and/or transfer agent of the Corporation of a
certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, the
Corporation or its transfer agent shall issue a new
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certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
Section 9.03. Registered Shareholders.
A. Except as otherwise provided by law, the
Corporation shall be entitled to recognize the exclusive right of
a person who is registered on its books as the owner of shares of
its capital stock to receive dividends or other distributions and
to vote or consent as such owner, and to hold liable for calls
and assessments any person who is registered on its books as the
owner of shares of its capital stock. The Corporation shall not
be bound to recognize any equitable or legal claim to, or
interest in, such shares on the part of any other person.
B. If a shareholder desires that notices and/or
dividends shall be sent to a name or address other than the name
or address appearing on the stock ledger maintained by the
Corporation, or its transfer agent or registrar, if any, the
shareholder shall have the duty to notify the Corporation, or its
transfer agent or registrar, if any, in writing of his desire and
specify the alternate name or address to be used.
Section 9.04. Record Date. In order that the Corporation
may determine the shareholders of record who are entitled to
receive notice of, or to vote at, any meeting of the shareholders
or any adjournment thereof or to express consent to corporate
action in writing without a meeting, to receive payment of any
dividend or other distribution or allotment of any rights, or to
exercise any rights in respect of any change, conversion or
exchange of stock or for the purpose of any lawful action, the
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Board of Directors may, in advance, fix a date as the record date
for any such determination. Such date shall not be more than
sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to the date of any
other action. A determination of shareholders of record entitled
to notice of, or to vote at, a meeting of the shareholders shall
apply to any adjournment of the meeting taken pursuant to Section
2.09 of Article II; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 9.05. Lost, Stolen or Destroyed Certificates.
The Board of Directors may direct that a new certificate be
issued to replace any certificate theretofore issued by the
Corporation that is claimed to have been lost, stolen or
destroyed, upon the making of an affidavit of the fact by the
person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing the issuance of a new certificate,
the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of the lost,
stolen or destroyed certificate, or his legal representative, to
advertise the same in such a manner as it shall require, and/or
to give the Corporation a bond in such sum, or other security in
such form, as it may direct as indemnity against any claim that
may be made against the corporation with respect to the
certificate claimed to have been lost, stolen or destroyed.
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ARTICLE X
GENERAL PROVISIONS
Section 10.01. Dividends. Subject to the provisions of
law and the Articles of Incorporation, dividends upon the
outstanding capital stock of the Corporation may be declared by
the Board of Directors at any regular or special meeting, and may
be paid in cash, in property or in shares of the Corporation's
capital stock.
Section 10.02. Reserves. The Board of Directors shall
have full power, subject to the provisions of law and the
Articles of Incorporation, to determine whether any, and, if so,
what part, of the funds legally available for the payment of
dividends shall be declared as dividends and paid to the
shareholders of the Corporation. The Board of Directors, in its
sole discretion, may fix a sum that may be set aside or reserved
for any proper purpose, and may, from time to time, increase,
diminish or vary such amount.
Section 10.03. Fiscal Year. The fiscal year of the
Corporation shall be determined from time to time by the Board of
Directors.
Section 10.04. Corporate Seal. The corporate seal
shall have inscribed thereon the name of the Corporation, the
year of its incorporation and the words "corporate seal" and
"Pennsylvania."
Section 10.05. Notices. Whenever, under the
provisions of the statutes or of the Articles of Incorporation or
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of these Amended and Restated By-Laws, notice is required to be
given to any person, it may be given to such person either
personally or by sending a copy thereof through the mail or by
telegram, charges prepaid, to his address appearing on the books
of the Corporation or supplied by him to the Corporation for the
purpose of notice. If the notice is sent by mail or by telegram,
it shall be deemed to have been given to the person entitled
thereto when deposited in the United States mail or with a
telegraph office for transmission to such person.
Section 10.06. Waiver. Whenever any written notice is
required to be given by statute or by the Articles of
Incorporation or by these Amended and Restated By-Laws, a waiver
thereof in writing, signed by the person or persons entitled to
such notice, whether before or after the time stated therein,
shall be deemed the equivalent to the giving of such notice.
Except in the case of a special meeting of the shareholders,
neither the business to be transacted nor the purpose of the
meeting need be specified in the waiver of notice of such
meeting. Attendance of any person entitled to notice, either in
person or by proxy, at any meeting shall constitute a waiver of
notice of such meeting, except where any person attends a meeting
for the express purpose of objecting to the transaction of any
business because the meeting was not lawfully called or convened.
-29-
<PAGE>
ARTICLE XI
AMENDMENTS
Section 11.01. Amendments. The By-Laws may be altered,
amended or repealed by a majority vote of the shareholders
entitled to vote thereon at any regular or special meeting duly
convened after notice to the shareholders of that purpose, or by
a majority vote of the members of the Board of Directors at any
regular or special meeting duly convened (excepting those matters
which are by statute reserved exclusively to the shareholders)
subject always to the power of the shareholders to change such
action by the directors.
Effective: October 2, 1995
-30-
EXHIBIT 4.2
REGISTRATION AND HOLDBACK AGREEMENT
This Registration and Holdback Agreement (the
"Agreement") is made and entered into as of October 17, 1997, by
and between AquaPenn Spring Water Company, Inc., a Pennsylvania
corporation (the "Company") and Weis Markets, Inc., Dutch Valley
Foods, Inc. and Aqua Works, Inc. (collectively, the
"Shareholder").
BACKGROUND
WHEREAS, the Company has advised the Shareholder that
the Company is contemplating an initial public offering (the
"Offering") of shares of Common Stock ("Shares") of the Company;
WHEREAS, the Shareholder desires to offer and sell in
the Offering Shares it owns or which it may acquire; and
[WHEREAS, the Company desires to limit the number of
Shares the Shareholder may sell subsequent to the completion of
the Offering;]
NOW THEREFORE, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. Definition. The term "Registrable Securities" means:
(1) all Shares owned beneficially and of record by the
Shareholder on the date hereof, (2) all Shares which Shareholder
may acquire pursuant to exercise of any warrant to purchase
Common Stock of the Company, and (3) any other securities issued
as dividends on, or by way of a split of, the Shares.
2. Registration. If the Company elects to proceed with
the Offering, the Company shall use reasonable efforts to cause
the managing underwriter of the Offering to permit the
Shareholder to include, and if so included, the Shareholder shall
sell 100% of the Registrable Securities in the Offering on the
same terms and conditions as Shares of the Company included
therein, less up to 1,500 Registrable Securities which shall
continue to be held by the Shareholder if requested by the
managing underwriter (the "Odd Lot Shares") (such number to be
equitably adjusted for any stock split or stock dividend).
Notwithstanding the foregoing, if the managing underwriter of the
Offering delivers a written opinion to the Shareholder to the
effect that the total amount of securities which the Shareholder
and the Company propose to offer and sell would materially and
adversely affect the success of the Offering, then the amount of
Registrable Securities to be offered for the account of the
Shareholder shall be reduced to the extent necessary to reduce
the total amount of securities to be included in the Offering to
the amount recommended by such managing underwriter.
<PAGE>
3. Restrictions on Sale of Registrable Securities. The
Shareholder agrees not to effect any sale or distribution of
Registrable Securities (other than the Odd Lot Shares) or any
similar security of the Company, or any securities convertible
into or exchangeable or exercisable for such securities, during
the period beginning on the date hereof and ending 180 days after
the effective date of the registration statement filed in
connection with the Offering (the "Effective Date") except as
part of the Offering or to the Company. Notwithstanding anything
else herein, in the event that the Offering is not consummated by
March 31, 1998 or is terminated by the Company, this paragraph 3
shall be null and void, provided that a temporary postponement of
the Offering shall not be deemed to be a termination of the
Offering.
4. Shareholder Obligations.
(a) The Shareholder shall furnish to the Company
such information regarding the distribution of the Registrable
Securities in the Offering as the Company may from time to time
reasonably request.
(b) The Shareholder agrees that, upon receipt of
any notice from the Company of the happening of any event
requiring discontinuance of distribution of Registrable
Securities in the Offering, the Shareholder will forthwith
discontinue disposition of Registrable Securities until such time
as Shareholder receives copies of any supplemented or amended
prospectus necessary to continue the Offering, and, if so
directed by the Company, the Shareholder will deliver to the
Company all copies of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.
(c) The Shareholder agrees to (i) sell its
Registrable Securities at the price and on the basis provided in
any underwriting arrangements approved by the Board of Directors
of the Company or its Pricing Committee, provided that such price
is at least $7 per Share (calculated on a pre-stock split basis),
(ii) complete and execute all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting
arrangements, and (iii) execute a Custody Agreement and Power of
Attorney, in customary form, in favor of Edward J. Lauth, III and
Geoffrey F. Feidelberg, or such other custodian or
attorney-in-fact as may be selected by the Company.
(d) Shareholder shall pay a portion of all the
Company's reasonable expenses related to the Offering equal to
the number of Registrable Securities sold by the Shareholder in
the Offering divided by all Shares sold in the Offering. The
Company's reasonable expenses related to the Offering shall
include without limitation all registration and filing fees, fees
and expenses of compliance with securities or blue sky laws,
2
<PAGE>
printing expenses, messenger and delivery expenses, internal
out-of-pocket expenses, the fees and expenses incurred in
connection with the listing of the Shares on any securities
exchange, fees and disbursements of counsel for the Company and
its independent certified public accountants, securities
liability insurance (if the Company elects to obtain such
insurance), and the reasonable fees and expenses of any other
persons retained by the Company in connection with the Offering.
The Shareholder shall pay the fees and expenses of its own
counsel and underwriting discounts and commissions attributable
to the sale of the Registrable Securities, and its other
out-of-pocket expenses.
(e) Shareholder agrees that in the event that (i)
Shareholder sells less than 99% of the total amount of
Registrable Securities held by Shareholder on the date hereof
(including Shares issuable upon exercise of any warrants held by
Shareholder), on or before the date of the sale of the
Registrable Securities, Shareholder shall cause Mr. Bruce to
resign from the Company's Board of Directors and (ii) in the
event that Shareholder sells 99% or more of the total amount of
Registrable Securities held by Shareholder on the date hereof
(including Shares issuable upon exercise of any warrants held by
Shareholder), Shareholder shall cause both Mr. Rich and Mr. Bruce
to resign from the Board of Directors of the Company.
(f) Shareholder agrees that any warrant held by
Shareholder for the purchase of Shares shall be exercised by
Shareholder prior to sale of the Registrable Securities and
Shareholder hereby waives any rights it has had or will have to
consent to issuances of securities by the Company. Shareholder
agrees that the Custody Agreement and Power of Attorney will
authorize the parties thereto to exercise all of Shareholder's
warrants concurrently with the Offering and deduct the exercise
price therefor from the proceeds of the Offering. Company and
Shareholder agree that any and all other agreements (other than
this Agreement) between Shareholder or any affiliate thereof and
the Company shall terminate and be null and void upon execution
of this Agreement and no party thereto shall have any further
rights or obligations under such agreements, provided that any
agreements related to sale of the Company's bottled water
products shall remain in effect pursuant to the terms thereof.
(g) Shareholder agrees that promptly after
execution of this Agreement, it shall deliver all Registrable
Securities to be sold in the Offering as set forth in Section 2
hereof (including warrants, if applicable) to McQuaide, Blasko,
Schwartz, Fleming & Faulkner, Inc., to be held in escrow by such
firm until the earlier of consummation of the Offering or
execution of the Custody Agreement and Power of Attorney referred
to in Section 4(c) above, at which time such firm shall deliver
such Registered Securities in accordance with such Custody
Agreement and Power of Attorney. In the event the Offering is
3
<PAGE>
not consummated by March 31, 1998, the Company shall instruct
escrow agent to return all Shareholder's Registrable Securities
and warrants to Shareholder.
5. Miscellaneous.
(a) Agreements and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and
waivers or consents hereof may not be given without the written
consent of the Company and the Shareholder.
(b) Notices. Any notice or other communications
required or permitted hereunder shall be deemed validly given
when delivered personally or by telecopier (except for legal
process), or upon receipt when sent by registered or certified
mail or overnight delivery service, addressed as follows or to
such other address or addresses or telecopier number as may
hereafter be furnished in writing:
To the Company:
AquaPenn Spring Water Company
One AquaPenn Drive
P.O. Box 938
Milesburg, Pennsylvania 16853
Telecopier Number: (814) 353-9108
Attention: President
To the Shareholder:
At the address set forth in the books and
records of the Company
Notice given by telecopier shall be deemed delivered on the day
the sender receives telecopier confirmation that such notice was
received at the telecopier number of the addressee. Notice given
by mail as set out above shall be deemed received three days
after the date the same is postmarked.
(c) Successors and Assigns. This Agreement shall be
binding upon the successors and assigns of each of the parties
hereto and shall inure to the benefit of their respective
successors and permitted assigns. This Agreement shall not be
assignable by the Shareholder, by operation of law or otherwise,
without the prior written consent of the Company.
(d) Governing Law. This Agreement shall be governed
by and construed in accordance with the internal laws of the
Commonwealth of Pennsylvania applicable to contracts made and to
be performed wholly therein without regard to principles of
conflict of laws.
4
<PAGE>
(e) Entire Agreement. This Agreement is intended by
the Company and the Shareholder to be a complete and exclusive
statement of their agreement and understanding in respect of the
subject matter contained herein and supersedes all prior
agreements and understandings between the parties with respect to
such subject matter.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the date first above written.
AQUAPENN SPRING WATER COMPANY, INC.
By:/s/ Geoffrey F. Feidelberg
--------------------------------
WEIS MARKETS, INC.
By:/s/ William R. Miller
--------------------------------
DUTCH VALLEY FOODS, INC.
By:/s/ William R. Miller
--------------------------------
AQUA WORKS, INC.
By:/s/ William R. Miller
--------------------------------
6
EXHIBIT 10.1
3/08/94
TERMINATION AGREEMENT
This Termination Agreement, made this 3rd day of
October, 1994, by and between AQUAPENN SPRING WATER COMPANY,
INC., a Pennsylvania Business Corporation, having its principal
place of business at 3035 Research Drive, State College,
Pennsylvania (the "Company") and
MATTHEW J. SUHEY, an individual having a principal office
at 1942 Dale Avenue, Highland Park, Illinois, (the "Broker").
RECITALS
A. On February 1, 1992, the parties hereto entered into
a Sales Representative Agreement whereby Broker agreed to act as
a sales representative of Company from the date of the agreement
until January 31, 1999.
B. The parties wish to herein terminate said Sales
Representative Agreement in accordance with the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises
herein set forth, the parties hereto, with the intent to be
legally bound hereby, agree as follows:
1. Termination of Agreement. Broker and Company hereby
agree that the Sales Representative Agreement between the parties
dated February 1, 1992 shall terminate upon the mutual agreement
of the parties effective October 3, 1994.
<PAGE>
2. Effect of Termination. By execution of this
Agreement, the Sales Representative Agreement shall become null
and void and of no further force and effect provided, however,
that
a) Paragraph 5 prohibiting Broker from disclosing
any trade secrets directly or indirectly or using them in
any way, shall continue in full force and effect, and is
hereby restated in its entirety and incorporated herein by
this reference; and
b) Paragraph 12 of the Agreement shall continue to
be in full force and effect with regard to the effect of
termination and is hereby restated in its entirety.
3. Consideration. In consideration of the agreement to
terminate the contract, the Company does hereby provide to Broker
the option to purchase 450,000 shares of common stock of Company
at a price of $1.14 per share. Broker shall be entitled to
exercise this option to purchase some or all of the shares to
which he is entitled for a period of ten (10) years from the
execution of this Agreement (the "Option Period"). In the event
that Broker has not exercised his option prior to the expiration
of the Option Period, this option shall have no further force or
effect. In the event of a stock split or reverse stock split,
Broker will be eligible to an equitable adjustment in the class
and number of shares and the purchase price to take into
consideration such additional issuance. In addition, if the
Company is a party to a merger and is not the survivor, the
<PAGE>
Company shall provide that the Broker shall be eligible to
purchase such number and types of shares as may be equitable
under the circumstances.
In consideration of the option granted hereunder, Broker
shall not during the Option Period, directly or indirectly,
either as an employee, employer, consultant, agent, principal,
partner, stockholder, corporate officer, director, or in any
other individual or representative capacity, own, operate,
control, assist, or participate in any business that is in
competition in any manner whatsoever with the business of the
Company. The foregoing prohibitions shall not apply to ownership
by Broker of less than five percent (5%) of the issued or
outstanding stock of any company whose shares are listed for
trading over any public exchange or the over-the-counter market
provided that Broker does not control any such company.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement with the intent to be legally bound hereby on the
day and year first above-written.
ATTEST: AQUAPENN SPRING WATER
COMPANY, INC.
By: /s/ C.J. Wagner By: /s/ Edward J. Lauth
--------------------- ---------------------
Secretary President
WITNESS:
/s/ C.J. Wagner /s/ Matthew J. Suhey [SEAL]
--------------------- --------------------
Matthew J. Suhey
EXHIBIT 10.2
AQUAPENN SPRING WATER COMPANY
1996 EMPLOYEE STOCK PURCHASE PLAN
(As amended through December 17, 1996)
1. Purpose. The purpose of the 1996 Employee Stock Purchase Plan
(the "Plan"), is to provide eligible employees of AquaPenn Spring Water
Company (the "Company"), and its subsidiaries, who wish to become
shareholders of the Company, an opportunity to purchase shares of the
common stock of the Company (the "Shares"). The Board of Directors of the
Company believes that employee participation in the ownership of the
Company will be to the mutual benefit of the employees and the Company. The
Plan is intended to qualify as an "employee stock purchase plan" within the
meaning of Section 423 of the Internal Revenue Code (the "Code").
2. Eligible Employees. Subject to the provisions of Section 3
below, any individual who has been continuously in the employment of the
Company (or of any of its subsidiaries (as defined in Section 424(f) of the
Code) since January 2 of the year before the year of any Offering Date (as
defined in Section 4 below), is eligible to participate in the offering of
Shares on that Offering Date, except:
(a) employees whose customary employment is 20 hours or less
per week; or
(b) employees whose customary employment is for not more
than five months in the calendar year of the Offering Date or in the
calendar year preceding that year.
All employees granted options under the Plan shall have the same
rights and privileges, except as set forth herein.
3. Limitations on Grants.
(a) No more than 1,000,000 Shares may be sold pursuant to
options granted under the Plan. If the Company engages in any mergers,
consolidations, acquisitions, stock splits, stock dividends, or other
changes in its capitalization after the effective date of the Plan, it will
make appropriate adjustments in the number of Shares in the Plan, the
number of Shares covered by outstanding options, the subscription rate, and
the maximum number of Shares an employee may purchase. (If the change
results in an option being for fractional Shares, the number of shares
subject to the option will be adjusted downward to the nearest full Share.)
Any agreement of merger or consolidation will include provisions for
protection of the then-existing rights of participating employees under the
Plan. Either authorized and unissued Shares or issued Shares reacquired by
the Company may be made subject to options under the Plan. If for any
reason any option under the Plan terminates in whole or in part, Shares
subject to the terminated option may be again subjected to an option under
the Plan.
<PAGE>
(b) No employee shall be granted an option hereunder if such
employee, immediately after the option is granted, owns stock possessing 5
percent or more of the total combined voting power or value of all classes
of stock of the Company, computed in accordance with Section 423(b)(3) of
the Code.
(c) No employee shall be granted an option which permits his
rights to purchase Shares under all employee stock purchase plans of the
Company to accrue at a rate which exceeds $25,000 (or such other maximum as
may be prescribed from time to time by the Code) of fair market value of
such Shares (determined at the time such option is granted) for each
calendar year in which such option is outstanding at any time in accordance
with the provisions of Section 423(b)(8) of the Code.
4. Offering Date. From time to time the Board of Directors may
fix a date (the "Offering Date"), on which the Company will make an offer
(an "Offering"), to all employees then eligible to participate, of options
to purchase Shares. In order to participate in an Offering, an eligible
employee must complete and deliver to Company a Subscription Agreement
within 120 days following the Offering Date. All Subscription Agreements
will be dated and will be effective as of the Subscription Date. For
purposes of this Plan, the "Subscription Date" will be the 30th day
following any Offering Date (or if the 30th day is a Saturday, Sunday or
legal holiday, then the next succeeding business day).
5. Price. The option price per Share for each Offering shall be
85 percent of the fair market value (adjusted to the nearest $.25) of the
Shares as determined by the Board of Directors of the Company on each
Offering Date.
6. Limits of Participation. Each employee who is eligible for the
first time to participate in an Offering of Shares under the Plan shall be
permitted to subscribe under the Plan on the applicable Offering Date for a
maximum total amount of Shares such that the aggregate price paid for such
Shares is no more than 20% of the employee's Cumulative Annual Compensation
from the beginning date of the employee's employment. For each employee who
has been eligible to participate in a previous Offering of Shares under the
Plan, for each Offering after such initial Offering such eligible employee
will be permitted to subscribe under the Plan on the applicable Offering
Date for a maximum total amount of Shares such that the aggregate price
paid for such Shares in such Offering is no more than 20% of the employee's
Annual Compensation for the twelve month period immediately preceding the
Offering Date for any such Offering. For purposes of the Plan, "Annual
Compensation" means the aggregate of basic regular salary (and sales
commissions where applicable) plus payments for overtime work as determined
by the Company's payroll records from the date which is one year prior to
the Offering Date through the Offering Date, but shall not include bonuses,
profit sharing, or any other forms of additional compensation. For purposes
of the Plan "Cumulative Annual Compensation" means the aggregate of basic
regular salary (and sales commissions where applicable) plus payments for
<PAGE>
overtime work as determined by the Company's payroll records from
the beginning of the date of employment but shall not include bonuses,
profit-sharing or any other forms of additional compensation. If at any
time during the term of the Plan the number of Shares subscribed for
exceeds the number of shares allocated to the Plan pursuant to Section 3 or
permitted by any applicable laws, or regulations then in effect, then the
subscription rate shall be reduced to such lower whole number percentage of
Cumulative Annual Compensation as may be necessary to eliminate such
oversubscription on a pro rata basis.
7. Method of Payment. The employee will pay for all Shares
subscribed for either in cash, by check, or by payroll deduction (if a
payroll deduction option is made available to employees). Payment must be
made within one year of the Offering Date. Share certificates for Shares
purchased under the Plan will be issued by the Company as soon as
practicable after the full purchase price has been paid.
8. Termination of Participation in Plan. A participating employee
may cancel his or her subscription under any Offering, in whole but not in
part, at any time prior to payment of the full purchase price by giving the
Company written notice thereof. Failure to pay for Shares as provided in
Section 7 shall constitute a cancellation of the subscription.
9. Employees' Rights as Shareholders. No employee shall have any
rights as a shareholder in Shares subscribed for until full payment has
been made for the Shares.
10. Rights not Transferable. An employee may not assign or
transfer rights under the Plan other than by will or the laws of descent
and distribution, and only the employee may exercise the rights during his
or her lifetime.
11. Termination of Employee. In the event that the employment of
a participating employee is terminated for any reason other than death,
temporary layoff or retirement with the consent of the Company, the
employee's rights to purchase Shares under any Subscription Agreement shall
terminate immediately. For purposes of the Plan, the employee's employment
will terminate on the date he leaves the Company or any subsidiary or on
the date notice of termination of employment is given, whichever is the
earlier. Upon the termination of employment due to death, or retirement
with the consent of the Company, the employee or his or her estate may,
within one year of the Offering Date, pay the entire amount due from the
employee under the Plan and receive the Shares so purchased. The failure to
make such payment of the entire amount due within such period shall
constitute cancellation of all subscriptions of the employee under the
Plan. If an employee is subjected to temporary layoff, and is subsequently
rehired within six months, the employee may continue to pay for the Shares
subscribed for by such employee, provided that such payment must be made in
accordance with Section 7.
<PAGE>
12. Amendments or Discontinuance of Plan. The Board of Directors
of the Company shall have the right to amend, modify or terminate this Plan
at any time without notice; provided, however, that the then existing
rights of participating employees shall not be adversely affected thereby,
except that in the case of a participating employee of a foreign subsidiary
or branch of the Company the Plan may be varied to conform with local laws,
and provided further that, subject to the provisions of Section 3(a) above,
without the consent of the shareholders of the Company possessing a
majority of the voting power, no such amendment to the Plan shall:
(a) Increase the total number of Shares which may be offered
under the Plan;
(b) Change the method, provided in Section 5, by which the
price at which the Shares shall be sold is determined; and
(c) Increase the maximum number of Shares which an eligible
employee may purchase.
13. Effective Date and Approvals. The Plan shall become effective
at a time when:
(a) The Plan has been adopted by the Board of Directors of
the Company and has been approved by the shareholders of the Company at an
annual or special meeting within 12 months before or after the date that
the Plan is adopted by the Board of Directors; and
(b) The Board of Directors shall have set the initial
Offering Date.
The Company's obligation to offer, sell and deliver Shares under
the Plan is subject to the approval of any governmental authority required
in connection with the authorized issuance or sale of such Shares and is
further subject to the Company's receiving the opinion of its counsel that
all applicable securities laws have been complied with.
14. Miscellaneous Provisions. The Company shall administer,
interpret, and apply all provisions of the Plan. The Company may waive such
provisions of the Plan as it deems necessary to meet special circumstances
not anticipated or covered expressly by the Plan. Nothing contained in this
Section shall be deemed to authorize the Company to alter or administer the
provisions of the Plan in a manner inconsistent with the provisions of
Section 423 of the Code.
EXHIBIT 10.3
11/16/95
RIGHT TO PURCHASE
125,000 SHARES
WARRANT
For the Purchase of Shares of Common Stock of
AquaPenn Spring Water Company, Inc.
Incorporated Under the Laws of the
Commonwealth of Pennsylvania
This Warrant is to certify that, for value received, Edward J.
Lauth, III (the "Holder") is entitled, subject to the terms and
conditions set forth in this Warrant, to purchase, One Hundred
Twenty-five Thousand and NO/100 (125,000) shares of the Common Stock
(the "Common Stock") of AquaPenn Spring Water Company, Inc. (the
"Corporation") from the Corporation at a purchase price per share
equal to $3.00; provided, however, that if the offering price per
share of the next completed private placement or public offering of
Common Stock by the Company after the date hereof whereby the
aggregate price of the Common Stock sold in such private placement or
public offering exceeds $2,500,000 (a "Qualifying Issuance") is less
than $3.00, then the purchase price per share hereunder shall be such
lesser price (such purchase price is hereinafter referred to as the
"Exercise Price"). In the event of a Qualifying Issuance, the Exercise
Price shall be determined pursuant to the immediately preceding
sentence, then adjusted pursuant to the provisions set forth below.
Following the exercise of this Warrant, the Holder shall be entitled
to receive a certificate or certificates for the shares of Common
Stock purchased, upon presentation and surrender to the Corporation of
this Warrant with the exercise form duly completed and executed, and
accompanied by payment of the Exercise Price of each share purchased
either in cash or immediately collectible funds payable to the order
of the Corporation.
This Warrant may be exercised in full or in part.
The Corporation covenants and agrees that all shares that may be
issued upon exercise of this Warrant shall, upon issuance, be duly and
validly issued, fully paid and nonassessable, and free of all taxes,
liens and charges with respect to the purchase and issuance of the
shares.
1
<PAGE>
The number of shares of Common Stock for which this Warrant is
exercisable, and the price at which such shares may be purchased upon
exercise of this Warrant, shall be subject to adjustment from time to
time. The Corporation shall give the Holder notice of any event
described below which requires an adjustment pursuant to this Section
at the time of such event. It is the intent of the parties hereto that
after giving effect to any exercise of this Warrant, that the Holder,
his successors or assigns or any transferee thereof would be the owner
of (or have the right to acquire pursuant hereto) a minimum of 2.5% of
the Common Stock outstanding on a fully diluted basis.
The Exercise Price and number of shares of Common Stock for which
this Warrant shall be exercisable shall be subject to adjustment from
time to time as follows:
(a) Dividends, Subdivisions, Combinations and Issuances. In
the event that the Corporation subsequent to the date of issuance
hereof shall:
(i) declare a dividend upon, or make any distribution in
respect of, any of its stock, payable in Common Stock, securities
convertible or exchangeable into Common Stock ("Convertible
Securities") or rights to purchase Common Stock ("Stock Purchase
Rights"), or
(ii) subdivide its outstanding shares of Common Stock
into a larger number of shares of Common Stock, or
(iii) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock, or
(iv) issue or sell any shares of Common Stock,
Convertible Securities or Stock Purchase Rights after the date of
issuance of this Warrant,
then (i) the number of Shares of Common Stock for which this Warrant
is exercisable immediately after the occurrence of any such event
shall be adjusted to equal the number of shares of Common Stock which
a record holder of the same number of shares of Common Stock for which
this Warrant is exercisable immediately prior to the occurrence of
such event would own or be entitled to receive after the happening of
such event (assuming the conversion of all Convertible Securities or
exercise in full of Stock Purchase Rights, as the case may be, at the
time of issuance of such Convertible Securities or Stock Purchase
Rights by the record holder thereof) and (ii) the Exercise Price shall
be adjusted to equal the Exercise Price multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to the adjustment
and the denominator of which shall be the number of shares for which
this Warrant is exercisable immediately after such adjustment.
2
<PAGE>
(b) Reorganization, Reclassification or Recapitalization of
Corporation. In case of any capital reorganization or reclassification
or recapitalization of the capital stock of the Corporation (other
than in the cases referred to in Subsection (a) above, or in case of
the consolidation or merger of the Corporation with or into another
corporation, or in case of the sale, transfer or other disposition of
all or substantially all of the business, assets or property of the
Corporation, there shall thereafter be deliverable upon the exercise
of this Warrant or any portion thereof (in lieu of or in addition to
the number of shares of Common Stock theretofore deliverable, as
appropriate) the number of shares of stock or other securities or
property to which the holder of the number of shares of Common Stock
which would otherwise have been deliverable upon the exercise of this
Warrant or any portion thereof at the time would have been entitled
upon such capital reorganization or reclassification of capital stock,
consolidation, merger or sale, and at the same aggregate Exercise
Price.
Prior to and as a condition of the consummation of any
transaction described in the preceding sentence, the Corporation shall
make equitable, written adjustments in the application of the
provisions herein set forth satisfactory to the holders of this
Warrant with respect to the rights and interests of holders of this
Warrant so that the provisions set forth herein shall thereafter be
applicable, as nearly as possible, in relation to any shares of stock
or other securities or other property thereafter deliverable upon
exercise of this Warrant. Any such adjustment shall be made by and set
forth in a supplemental agreement between the Corporation and/or the
successor entity, as applicable, which agreement shall bind each such
entity, shall be accompanied by any Opinion of Counsel as to the
enforceability of such agreement satisfactory to the Holder.
(c) Readjustment of Exercise Price. In the event the rate at
which any Convertible Securities issued by the Corporation are
convertible into or exchangeable for additional shares of Common Stock
shall change, the Exercise Price and the number of shares of Common
Stock for which this Warrant may be exercised in effect at the time of
such event shall forthwith be readjusted to the Exercise Price and the
number of shares of Common Stock which would have been in effect at
such time had such Convertible Securities provided for such conversion
rate at the time initially granted, issued or sold. On the expiration
of any such Stock Purchase Rights not exercised or of any such right
to convert or exchange under any such Convertible Securities not
exercised, (i) the Exercise Price then in effect hereunder shall
forthwith be increased to the Exercise Price which would have been in
effect at the time of such expiration or termination had such Stock
Purchase Rights or Convertible Securities never been issued, and (ii)
the number of shares of Common Stock for which this Warrant may be
exercised then in effect hereunder shall forthwith be decreased to the
number of shares of Common Stock which would have been in effect at
the time of such expiration or termination had such Stock Purchase
Rights or Convertible Securities never been issued. No readjustment of
the Exercise Price pursuant to this Subsection (c) shall have the
effect of increasing the Exercise Price by an amount in excess of the
adjustment
3
<PAGE>
originally made to the Exercise Price in respect of the issue, sale,
or grant of the applicable Stock Purchase Rights or Convertible
Securities.
(d) No Adjustments under Certain Circumstances. Anything
herein to the contrary notwithstanding, the Corporation shall not be
required to make any adjustment of the Exercise Price in the case of:
(i) the issuance of shares of Common Stock upon the exercise in
whole or part of the Warrant; or
(ii) the issuance of shares of Common Stock pursuant to
a rights offering in which all of the holders of the Warrant are
given the right to participate and elect to participate in such
offering.
The Corporation agrees at all times to reserve and hold available
a sufficient number of shares of Common Stock to cover the number of
shares issuable upon exercise of this Warrant.
This Warrant is exchangeable, upon the surrender hereof by the
new registered Holder at the principal office of the Corporation, for
new Warrants of like tenor and date representing the right to purchase
the number of shares purchasable hereunder, each of such new Warrants
to represent the right to purchase such number of shares as shall be
designated by said registered Holder at the time of such surrender.
Upon receipt by the Corporation of evidence reasonably
satisfactory to it of the loss, theft or mutilation of this Warrant,
and, in the case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the
Corporation of all reasonable expenses incidental thereto, and upon
surrender and cancellation of this Warrant, if mutilated, the
Corporation will make and deliver a new Warrant of like tenor, in lieu
of this Warrant.
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been made
when delivered or mailed by certified or registered mail first-class
postage prepaid, or delivered, to a telegraph office for transmission:
(a) if to the registered Holder of this Warrant, at 1346
Sandpiper Drive, State College, Pennsylvania or at such other address
as may be furnished in writing by the Holder to the Corporation; or
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<PAGE>
(b) if to the Corporation, at P. O. Box 938, One AquaPenn
Drive, Milesburg, Pennsylvania or at such other address as may have
been furnished to the Holder of the Warrants in writing by the
Corporation.
This Warrant shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, executors, personal
representatives, successors and assigns and shall be binding upon any
person, firm, corporation or other entity to whom this Warrant and the
heirs, executors, personal representatives, successors and assigns or
such person, firm, corporation or other entity.
IN WITNESS WHEREOF, the Corporation has executed this Warrant
this 21st day of November 1995.
ATTEST: AQUAPENN SPRING WATER
COMPANY, INC.
/s/ C. J. Wagner By: /s/ Edward J. Lauth, III
- -------------------------- -------------------------------
C. J. Wagner, Secretary Edward J. Lauth, III, President
5
<PAGE>
Exercise Form
Edward J. Lauth, III hereby: (1) irrevocably subscribes for and
offers to purchase shares of Common Stock of AquaPenn Spring Water
Company, Inc. pursuant to the Warrant to which this exhibit is
attached; (2) encloses payment of for these shares of Common Stock at
a price of $ per share; and (3) requests that a certificate for the
shares be issued in the name of Edward J. Lauth, III.
_____________________________[SEAL]
Edward J. Lauth, III
6
<PAGE>
08/27/96
RIGHT TO PURCHASE
35,000 SHARES
WARRANT
For the Purchase of Shares of Common Stock of
AquaPenn Spring Water Company, Inc.
Incorporated Under the Laws of the
Commonwealth of Pennsylvania
This Warrant is to certify that, for value received, NANCY JEAN
DAVIS (the "Holder") is entitled, subject to the terms and conditions
set forth in this Warrant, to purchase, Thirty-Five Thousand and
00/100 (35,000) shares of the Common Stock (the "Common Stock") of
AquaPenn Spring Water Company, Inc. (the "Corporation") from the
Corporation at a purchase price per share equal to $3.00; provided,
however, that if the offering price per share of the next completed
private placement or public offering of Common Stock by the Company
after the date hereof whereby the aggregate price of the Common Stock
sold in such private placement or public offering exceeds $2,500,000
(a "Qualifying Issuance") is less than $3.00, then the purchase price
per share hereunder shall be such lesser price (such purchase price is
hereinafter referred to as the "Exercise Price"). In the event of a
Qualifying Issuance, the Exercise Price shall be determined pursuant
to the immediately preceding sentence, then adjusted pursuant to the
provisions set forth below. Following the exercise of this Warrant,
the Holder shall be entitled to receive a certificate or certificates
for the shares of Common Stock purchased, upon presentation and
surrender to the Corporation of this Warrant with the exercise form
duly completed and executed, and accompanied by payment of the
Exercise Price of each share purchased either in cash or immediately
collectible funds payable to the order of the Corporation.
This Warrant may be exercised in full or in part.
The Corporation covenants and agrees that all shares that may be
issued upon exercise of this Warrant shall, upon issuance, be duly and
validly issued, fully paid and nonassessable, and free of all taxes,
liens and charges with respect to the purchase and issuance of the
shares.
The number of shares of Common Stock for which this Warrant is
exercisable, and the price at which such shares may be purchased upon
exercise of this Warrant, shall be subject to adjustment from time to
time. The Corporation shall give the Holder notice of any
1
<PAGE>
event described below which requires an adjustment pursuant to this
Section at the time of such event. It is the intent of the parties
hereto that after giving effect to any exercise of this Warrant, that
the Holder, his successors or assigns or any transferee thereof would
be the owner of (or have the right to acquire pursuant hereto) a
minimum of 2.5% of the Common Stock outstanding on a fully diluted
basis.
The Exercise Price and number of shares of Common Stock for which
this Warrant shall be exercisable shall be subject to adjustment from
time to time as follows:
a. Dividends, Subdivisions, Combinations and Issuances. In the
event that the Corporation subsequent to the date of issuance hereof
shall:
i. declare a dividend upon, or make any distribution in respect
of, any of its stock, payable in Common Stock, securities
convertible or exchangeable into Common Stock ("Convertible
Securities") or rights to purchase Common Stock ("Stock
Purchase Rights"), or
ii. subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or
iii.combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock, or
iv. issue or sell any shares of Common Stock, Convertible
Securities or Stock Purchase Rights after the date of issuance of this
Warrant,
then (i) the number of Shares of Common Stock for which this Warrant
is exercisable immediately after the occurrence of any such event
shall be adjusted to equal the number of shares of Common Stock which
a record holder of the same number of shares of Common Stock for which
this Warrant is exercisable immediately prior to the occurrence of
such event would own or be entitled to receive after the happening of
such event (assuming the conversion of all Convertible Securities or
exercise in full of Stock Purchase Rights, as the case may be, at the
time of issuance of such Convertible Securities or Stock Purchase
Rights by the record holder thereof) and (ii) the Exercise Price shall
be adjusted to equal the Exercise Price multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to the adjustment
and the denominator of which shall be the number of shares for which
this Warrant is exercisable immediately after such adjustment.
b. Reorganization, Reclassification or Recapitalization of
Corporation. In case of any capital reorganization or reclassification
or recapitalization of the capital stock of the Corporation (other
than in the cases referred to in Subsection (a) above, or in case of
the
2
<PAGE>
consolidation or merger of the Corporation with or into another
corporation, or in case of the sale, transfer or other disposition of
all or substantially all of the business, assets or property of the
Corporation, there shall thereafter be deliverable upon the exercise
of this Warrant or any portion thereof (in lieu of or in addition to
the number of shares of Common Stock theretofore deliverable, as
appropriate) the number of shares of stock or other securities or
property to which the holder of the number of shares of Common Stock
which would otherwise have been deliverable upon the exercise of this
Warrant or any portion thereof at the time would have been entitled
upon such capital reorganization or reclassification of capital stock,
consolidation, merger or sale, and at the same aggregate Exercise
Price.
Prior to and as a condition of the consummation of any
transaction described in the preceding sentence, the Corporation shall
make equitable, written adjustments in the application of the
provisions herein set forth satisfactory to the holders of this
Warrant with respect to the rights and interests of holders of this
Warrant so that the provisions set forth herein shall thereafter be
applicable, as nearly as possible, in relation to any shares of stock
or other securities or other property thereafter deliverable upon
exercise of this Warrant. Any such adjustment shall be made by and set
forth in a supplemental agreement between the Corporation and/or the
successor entity, as applicable, which agreement shall bind each such
entry, shall be accompanied by any Opinion of Counsel as to the
enforceability of such agreement satisfactory to the Holder.
c. Readjustment of Exercise Price. In the event the rate at which
any Convertible Securities issued by the Corporation are convertible
into or exchangeable for additional shares of Common Stock shall
change, the Exercise Price and the number of shares of Common Stock
for which this Warrant may be exercised in effect at the time of such
event shall forthwith be readjusted to the Exercise Price and the
number of shares of Common Stock which would have been in effect at
such item had such Convertible Securities provided for such conversion
rate at the time initially granted, issued or sold. On the expiration
of any such Stock Purchase Rights not exercised or of any such right
to convert or exchange under any such Convertible Securities not
exercised, (i) the Exercise Price then i effect hereunder shall
forthwith be increased to the Exercise Price which would have been in
effect at the time of such expiration or termination had such Stock
Purchase Rights or Convertible Securities never been issued, and (ii)
the number of shares of Common Stock for which this Warrant may be
exercised then in effect hereunder shall forthwith be decreased to the
number of shares of Common Stock which would have been in effect at
the time of such expiration or termination had such Stock Purchase
Rights or Convertible Securities never been issued. No readjustment of
the Exercise Price pursuant to this Subsection (c) shall have the
effect of increasing the Exercise Price by an amount in excess of the
adjustment originally made to the Exercise Price in respect of the
issue, sale, or grant of the applicable Stock Purchase Rights or
Convertible Securities.
3
<PAGE>
d. No Adjustments under Certain Circumstances. Anything herein to
the contrary notwithstanding, the Corporation shall not be required to
make any adjustment of the Exercise Price in the case of:
i. the issuance of shares of Common Stock upon the exercise in
whole or part of the Warrant; or
ii. the issuance of shares of Common Stock pursuant to a rights
offering in which all of the holders of the Warrant are given
the right to participate and elect to participate in such
offering.
The Corporation agrees at all times to reserve and hold available
a sufficient number of shares of Common Stock to cover the number of
shares issuable upon exercise of this Warrant.
This Warrant is exchangeable, upon the surrender hereof by the
new registered Holder at the principal office of the Corporation, for
new Warrants of like tenor and date representing the right to purchase
the number of shares purchasable hereunder, each of such new Warrants
to represent the right to purchase such number of shares as shall be
designated by said registered Holder at the time of such surrender.
Upon receipt by the Corporation of evidence reasonably
satisfactory to it of the loss, theft or mutilation of this Warrant,
and, in the case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the
Corporation of all reasonable expenses incidental thereto, and upon
surrender and cancellation of this Warrant, if mutilated, the
Corporation will make and deliver a new Warrant of like tenor, in lieu
of this Warrant.
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been made
when delivered or mailed by certified or registered mail first-class
postage prepaid, or delivered, to a telegraph office for transmission:
a. if to the registered Holder of this Warrant, at 80 Southwest
Eighth Street, Suite 2110, Miami, Florida 33130-3047, or at such other
address as may be furnished in writing by the Holder to the
Corporation; or
b. if to the Corporation, at P. O. Box 938, One AquaPenn Drive,
Milesburg, Pennsylvania 16853 or at such other address as may have
been furnished to the Holder of the Warrants in writing by the
Corporation.
4
<PAGE>
This Warrant shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, executors, personal
representatives, successors and assigns and shall be binding upon any
person, firm, corporation or other entity to whom this Warrant and the
heirs, executors, personal representatives, successors and assigns or
such person, firm, corporation or other entity.
IN WITNESS WHEREOF, the Corporation has executed this Warrant
this 28 day of August, 1996.
ATTEST: AQUAPENN SPRING WATER
COMPANY, INC.
/s/ C.J. Wagner, Jr. By: /s/ Edward J. Lauth, III
- ------------------------- ---------------------------------
Calvin J. Wagner, Jr., Secretary Edward J. Lauth, III, President
5
<PAGE>
Exercise Form
NANCY JEAN DAVIS hereby: (1) irrevocably subscribes for and
offers to purchase __________ shares of Common Stock of AquaPenn
Spring Water Company, Inc. pursuant to the Warrant to which this
exhibit is attached; (2) enclosed payment of __________ for these
shares of Common Stock at a price of $__________ per share; and (3)
requests that a certificate for the shares be issued in the name of
NANCY JEAN DAVIS.
__________________________[SEAL]
NANCY JEAN DAVIS
<PAGE>
11/16/95
RIGHT TO PURCHASE
15,000 SHARES
WARRANT
For the Purchase of Shares of Common Stock of
AquaPenn Spring Water Company, Inc.
Incorporated Under the Laws of the
Commonwealth of Pennsylvania
This Warrant is to certify that, for value received, James D.
Hammond and Marian I. Hammond (jointly referred to as the "Holder") is
entitled, subject to the terms and conditions set forth in this
Warrant, to purchase, Fifteen Thousand and NO/100 (15,000) shares of
the Common Stock (the "Common Stock") of AquaPenn Spring Water
Company, Inc. (the "Corporation") from the Corporation at a purchase
price per share equal to $3.00; provided, however, that if the
offering price per share of the next completed private placement or
public offering of Common Stock by the Company after the date hereof
whereby the aggregate price of the Common Stock sold in such private
placement or public offering exceeds $2,500,000 (a "Qualifying
Issuance") is less than $3.00, then the purchase price per share
hereunder shall be such lesser price (such purchase price is
hereinafter referred to as the "Exercise Price"). In the event of a
Qualifying Issuance, the Exercise Price shall be determined pursuant
to the immediately preceding sentence, then adjusted pursuant to the
provisions set forth below. Following the exercise of this Warrant,
the Holder shall be entitled to receive a certificate or certificates
for the shares of Common Stock purchased, upon presentation and
surrender to the Corporation of this Warrant with the exercise form
duly completed and executed, and accompanied by payment of the
Exercise Price of each share purchased either in cash or immediately
collectible funds payable to the order of the Corporation.
This Warrant may be exercised in full or in part.
The Corporation covenants and agrees that all shares that may be
issued upon exercise of this Warrant shall, upon issuance, be duly and
validly issued, fully paid and nonassessable, and free of all taxes,
liens and charges with respect to the purchase and issuance of the
shares.
The number of shares of Common Stock for which this Warrant is
exercisable, and the price at which such shares may be purchased upon
exercise of this Warrant, shall be subject to
1
<PAGE>
adjustment from time to time. The Corporation shall give the Holder
notice of any event described below which requires an adjustment
pursuant to this Section at the time of such event. It is the intent
of the parties hereto that after giving effect to any exercise of this
Warrant, that the Holder, his successors or assigns or any transferee
thereof would be the owner of (or have the right to acquire pursuant
hereto) a minimum of 2.5% of the Common Stock outstanding on a fully
diluted basis.
The Exercise Price and number of shares of Common Stock for which
this Warrant shall be exercisable shall be subject to adjustment from
time to time as follows:
(a) Dividends, Subdivisions, Combinations and Issuances. In
the event that the Corporation subsequent to the date of issuance
hereof shall:
(i) declare a dividend upon, or make any distribution in
respect of, any of its stock, payable in Common Stock, securities
convertible or exchangeable into Common Stock ("Convertible
Securities") or rights to purchase Common Stock ("Stock Purchase
Rights"), or
(ii) subdivide its outstanding shares of Common Stock
into a larger number of shares of Common Stock, or
(iii) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock, or
(iv) issue or sell any shares of Common Stock,
Convertible Securities or Stock Purchase Rights after the date of
issuance of this Warrant,
then (i) the number of Shares of Common Stock for which this Warrant
is exercisable immediately after the occurrence of any such event
shall be adjusted to equal the number of shares of Common Stock which
a record holder of the same number of shares of Common Stock for which
this Warrant is exercisable immediately prior to the occurrence of
such event would own or be entitled to receive after the happening of
such event (assuming the conversion of all Convertible Securities or
exercise in full of Stock Purchase Rights, as the case may be, at the
time of issuance of such Convertible Securities or Stock Purchase
Rights by the record holder thereof) and (ii) the Exercise Price shall
be adjusted to equal the Exercise Price multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to the adjustment
and the denominator of which shall be the number of shares for which
this Warrant is exercisable immediately after such adjustment.
(b) Reorganization, Reclassification or Recapitalization of
Corporation. In case of any capital reorganization or reclassification
or recapitalization of the capital stock of the
2
<PAGE>
Corporation (other than in the cases referred to in Subsection (a)
above, or in case of the consolidation or merger of the Corporation
with or into another corporation, or in case of the sale, transfer or
other disposition of all or substantially all of the business, assets
or property of the Corporation, there shall thereafter be deliverable
upon the exercise of this Warrant or any portion thereof (in lieu of
or in addition to the number of shares of Common Stock theretofore
deliverable, as appropriate) the number of shares of stock or other
securities or property to which the holder of the number of shares of
Common Stock which would otherwise have been deliverable upon the
exercise of this Warrant or any portion thereof at the time would have
been entitled upon such capital reorganization or reclassification of
capital stock, consolidation, merger or sale, and at the same
aggregate Exercise Price.
Prior to and as a condition of the consummation of any
transaction described in the preceding sentence, the Corporation shall
make equitable, written adjustments in the application of the
provisions herein set forth satisfactory to the holders of this
Warrant with respect to the rights and interests of holders of this
Warrant so that the provisions set forth herein shall thereafter be
applicable, as nearly as possible, in relation to any shares of stock
or other securities or other property thereafter deliverable upon
exercise of this Warrant. Any such adjustment shall be made by and set
forth in a supplemental agreement between the Corporation and/or the
successor entity, as applicable, which agreement shall bind each such
entity, shall be accompanied by any Opinion of Counsel as to the
enforceability of such agreement satisfactory to the Holder.
(c) Readjustment of Exercise Price. In the event the rate at
which any Convertible Securities issued by the Corporation are
convertible into or exchangeable for additional shares of Common Stock
shall change, the Exercise Price and the number of shares of Common
Stock for which this Warrant may be exercised in effect at the time of
such event shall forthwith be readjusted to the Exercise Price and the
number of shares of Common Stock which would have been in effect at
such time had such Convertible Securities provided for such conversion
rate at the time initially granted, issued or sold. On the expiration
of any such Stock Purchase Rights not exercised or of any such right
to convert or exchange under any such Convertible Securities not
exercised, (i) the Exercise Price then in effect hereunder shall
forthwith be increased to the Exercise Price which would have been in
effect at the time of such expiration or termination had such Stock
Purchase Rights or Convertible Securities never been issued, and (ii)
the number of shares of Common Stock for which this Warrant may be
exercised then in effect hereunder shall forthwith be decreased to the
number of shares of Common Stock which would have been in effect at
the time of such expiration or termination had such Stock Purchase
Rights or Convertible Securities never been issued. No readjustment of
the Exercise Price pursuant to this Subsection (c) shall have the
effect of increasing the Exercise Price by an amount in excess of the
adjustment originally made to the Exercise Price in respect of the
issue, sale, or grant of the applicable Stock Purchase Rights or
Convertible Securities.
3
<PAGE>
(d) No Adjustments under Certain Circumstances. Anything
herein to the contrary notwithstanding, the Corporation shall not be
required to make any adjustment of the Exercise Price in the case of:
(i) the issuance of shares of Common Stock upon the
exercise in whole or part of the Warrant; or
(ii) the issuance of shares of Common Stock pursuant to
a rights offering in which all of the holders of the Warrant are
given the right to participate and elect to participate in such
offering.
The Corporation agrees at all times to reserve and hold available
a sufficient number of shares of Common Stock to cover the number of
shares issuable upon exercise of this Warrant.
This Warrant is exchangeable, upon the surrender hereof by the
new registered Holder at the principal office of the Corporation, for
new Warrants of like tenor and date representing the right to purchase
the number of shares purchasable hereunder, each of such new Warrants
to represent the right to purchase such number of shares as shall be
designated by said registered Holder at the time of such surrender.
Upon receipt by the Corporation of evidence reasonably
satisfactory to it of the loss, theft or mutilation of this Warrant,
and, in the case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the
Corporation of all reasonable expenses incidental thereto, and upon
surrender and cancellation of this Warrant, if mutilated, the
Corporation will make and deliver a new Warrant of like tenor, in lieu
of this Warrant.
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been made
when delivered or mailed by certified or registered mail first-class
postage prepaid, or delivered, to a telegraph office for transmission:
(a) if to the registered Holder of this Warrant, at 1009
Greenbriar Drive, State College, Pennsylvania or at such other address
as may be furnished in writing by the Holder to the Corporation; or
(b) if to the Corporation, at P. O. Box 938, One AquaPenn
Drive, Milesburg, Pennsylvania or at such other address as may have
been furnished to the Holder of the Warrants in writing by the
Corporation.
This Warrant shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, executors, personal
representatives, successors and assigns and shall be binding upon any
person, firm, corporation or other entity to whom this Warrant and the heirs,
4
<PAGE>
executors, personal representatives, successors and assigns or such
person, firm, corporation or other entity.
IN WITNESS WHEREOF, the Corporation has executed this Warrant
this 21st day of November 1995.
ATTEST: AQUAPENN SPRING WATER COMPANY, INC.
/s/ C. J. Wagner By: /s/ Edward J. Lauth, III
- ------------------------- ---------------------------------
C. J. Wagner, Secretary Edward J. Lauth, III, President
5
<PAGE>
Exercise Form
James D. Hammond and Marian I. Hammond hereby: (1) irrevocably
subscribes for and offers to purchase shares of Common Stock of
AquaPenn Spring Water Company, Inc. pursuant to the Warrant to which
this exhibit is attached; (2) encloses payment of for these shares of
Common Stock at a price of $ per share; and (3) requests that a
certificate for the shares be issued in the name of James D. Hammond
and Marian I. Hammond, joint owners
_____________________________[SEAL]
James D. Hammond
_____________________________[SEAL]
Marian I. Hammond
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This Agreement, made as of this 16th day of September, 1994, by
and between, AQUAPENN SPRING WATER COMPANY, a Pennsylvania business
corporation, hereinafter called the "Employer", and EDWARD J. LAUTH,
III, an individual, hereinafter called "Employee".
Intending to be legally bound, and in consideration of the
mutual covenants contained herein, the parties hereto agree as
follows:
1. Employment. The Employer shall employ Employee for a one
(1) year term beginning on January 1, 1994 and ending on December 31,
1995. Thereafter, unless this Agreement is terminated in the manner
hereinafter provided, it shall automatically renew for an unlimited
number of successive additional terms of one (1) year duration. This
Agreement may be terminated at the end of a term, upon six (6) months
written notice from one party to the other party.
2. Employee's Duties. During the term of this Agreement,
Employee shall devote all necessary time and his best efforts to
the faithful performance of his duties as President of the
Employer as directed by the Board of Directors and appropriate
officers of the Employer. It is understood between the parties
that said duties shall concentrate in the areas of
1
<PAGE>
sales and marketing, administration and strategic planning. Employee
shall devote his entire professional time to the affairs of the
Employer. Notwithstanding anything contained herein, Employee may
render reasonable amounts of services as an independent consultant to
other organizations during the term of this Agreement as long as the
activities of such other organizations are not in competition with or
adverse to the activities of the Employer and as long as such
consulting activities do not materially interfere with Employee's
performance of his duties hereunder.
3. Salary. Employee's base salary shall be ONE HUNDRED THIRTY
THOUSAND and NO/100 ($130,000.00) DOLLARS per year, payable in equal
bi-weekly installments. On each anniversary date of this Agreement,
Employee's base salary shall be reviewed and may be increased by an
amount determined by the Employer in its sole discretion.
4. Benefits and Vacation.
a. Benefits. Employee and his dependents (if applicable)
shall be eligible to participate in the Employer's fringe benefit
plans -- both presently existing plans and those plans that may
be adopted in the future in accordance with the terms and
provisions of such plans. The Employer presently has the
following fringe benefit plans in effect:
i. Dental insurance; and
2
<PAGE>
ii. Disability insurance.
b. Vacation and Personal Days. Employee shall
be entitled to reasonable amounts of vacation and personal
time.
c. Automobile. Employee shall be entitled to an
automobile of reasonable value, of Employee's selection, for
business and/or personal use, furnished at the Employer's
expense. Such automobile shall be replaced every three (3) years
or at the expiration of a lease of appropriate term.
d. Health Insurance. Employee shall be entitled to an
Employer paid policy of health and hospital insurance including
major medical insurance coverage for Employee and his dependents.
5. Stock Options.
a. The Employer shall grant to Employee options to
purchase the common stock of the Employer under the terms set
forth in this paragraph.
b. Beginning with the fiscal year of the Employer
commencing after the date of this Employment Agreement, the
Employer shall grant Employee an option to purchase fifty
thousand (50,000) shares of the common stock of the Employer for
each fiscal year of the Employer during which the Employer's
after-tax profits exceed One Million and NO/100 ($1,000,000.00) Dollars.
3
<PAGE>
c. Options shall be issued, within thirty (30) days of
the end of each fiscal year of the Employer, if the condition of
subparagraph 5(b) is met.
d. The option price shall be the fair market value of
the Employer's stock on the date of the option grant and the term
during which the option may be exercised shall commence on the
date of the grant and extend for a period of ten (10) years
thereafter.
e. The terms of any option granted to Employee under
this paragraph shall be as set forth in this paragraph and as set
forth in an Option Agreement to be entered into between the
Employer and Employee as soon as is practicable following the
execution of this Agreement.
6. Retirement/Nonqualified Deferred Compensation
Plan.
a. The Employer shall create a bookkeeping reserve
account (the "Nonqualified Deferred Compensation Account") for
Employee which shall be credited for each fiscal year of Employer
with an amount equal to fifteen (15%) percent of the Employee's
salary for such fiscal year.
b. The terms of the Nonqualified Deferred Compensation
Account shall be as set forth in a Nonqualified Deferred
Compensation Plan to be entered into between the Employer and
Employee as soon as is practicable following the execution of
this Agreement.
4
<PAGE>
c. Nothing contained in this paragraph 6 and no action
taken pursuant to the provisions of this Agreement shall create
or be construed to create a trust of any kind, or a fiduciary
relationship between the Employer and Employee. Any funds which
may be reserved by the Employer to pay for the retirement payment
provided for hereunder shall continue for all purposes to be a
part of the general funds of the Employer and no person other
than the Employer shall by virtue of this Agreement have any
right to any interest in such funds. Any bookkeeping reserve
accounts for such payment will be maintained by the Employer
solely as a convenience in the administration of this Agreement.
To the extent that any person acquires a right to receive
payments from the Employer under this paragraph, such right shall
be no greater than the rights of any unsecured general creditor
of the Employer. Neither Employee nor his representative shall
have any right to commute, sell, assign, transfer, encumber or
otherwise dispose of the right to receive the deferred
compensation benefit provided for hereunder, which payments and
the right thereto are expressly declared to be nonassignable and
nontransferable and any attempted assignment or transfer by
Employee shall be void and of no effect. Title to and beneficial
ownership of any assets, whether cash, investments, life
insurance policies or other assets which the Employer may use to
fund its obligation hereunder shall at all times remain in the
Employer.
5
<PAGE>
7. Arbitration. Any disputes relating to the interpretation
or application of this Agreement shall be promptly resolved by an
impartial arbitrator pursuant to the rules of the American Arbitration
Association. The parties shall share equally all costs and expenses of
arbitration including the arbitrator's fees; and excluding only their
own attorney's fees, unless the arbitrator shall order either party to
pay any or all of the other's attorneys fees. The award of the
arbitrator shall be final and binding, and immediately enforceable by
either party in any court of competent jurisdiction.
8. Law Applicable. This Agreement shall be
interpreted and enforced in all circumstances according to the
laws of the Commonwealth of Pennsylvania.
9. Notices. Notices to the Employer shall be delivered to:
AquaPenn Spring Water Company
3035 Research Drive
State College, PA 16801
Notices to Employee shall be delivered to:
Edward J. Lauth, III
1346 Sandpiper Drive
State College, PA 16801
In either case the notice address above may be changed by written
notice of the addressee.
10. Entire Agreement. This Agreement fully integrates all
understandings and agreements between the parties and shall
6
<PAGE>
constitute the entire agreement between them and supersede any prior
written employment agreement between the parties or any oral
representations of any kind. This Agreement may only be modified in
writing by the voluntary signed consent of both parties. Provided,
however, that if Employee has stock options pursuant to prior
agreements with the Employer, such stock options shall continue in
effect in accordance with the terms of such prior agreement and shall
not be affected by this Agreement.
11. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective
successors in interest. Neither party hereto may assign its interest
without the prior written consent of the other party.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the day and year first written above.
ATTEST: AQUAPENN SPRING WATER COMPANY
/s/ C. J. Wagner, Jr. By: /s/ Edward J. Lauth, III
- ------------------------------ ---------------------------
, Secretary Edward J. Lauth, III
President
(SEAL)
WITNESS: EMPLOYEE:
Geoff F. Feidelberg /s/ Edward J Lauth, III(SEAL)
- ---------------------------- ------------------------------
Edward J. Lauth, III
7
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Agreement, made as of this 16th day of September, 1994,
by and between, AQUAPENN SPRING WATER COMPANY, a Pennsylvania
business corporation, hereinafter called the "Employer", and
GEOFFREY F. FEIDELBERG, an individual, hereinafter called
"Employee".
Intending to be legally bound, and in consideration of
the mutual covenants contained herein, the parties hereto agree
as follows:
1. Employment. The Employer shall employ Employee for a
one (1) year term beginning on January 1, 1994 and ending on
December 31, 1995. Thereafter, unless this Agreement is
terminated in the manner hereinafter provided, it shall
automatically renew for an unlimited number of successive
additional terms of one (1) year duration. This Agreement may be
terminated at the end of a term, upon six (6) months written
notice from one party to the other party.
2. Employee's Duties. During the term of this Agreement,
Employee shall devote all necessary time and his best efforts to
the faithful performance of his duties as Executive Vice
President and Chief Operating Officer of the Employer as directed
by the Board of Directors and appropriate officers of the
Employer. It is understood between the parties that said duties
shall concentrate in the areas of administration, finance,
1
<PAGE>
manufacturing and strategic planning. Employee shall devote his
entire professional time to the affairs of the Employer.
Notwithstanding anything contained herein, Employee may render
reasonable amounts of services as an independent consultant to
other organizations during the term of this Agreement as long as
the activities of such other organizations are not in competition
with or adverse to the activities of the Employer and as long as
such consulting activities do not materially interfere with
Employee's performance of his duties hereunder.
3. Salary. Employee's base salary shall be ONE HUNDRED
TEN THOUSAND and NO/100 ($110,000.00) DOLLARS per year, payable
in equal bi-weekly installments. On each anniversary date of this
Agreement, Employee's base salary shall be reviewed and may be
increased by an amount determined by the Employer in its sole
discretion.
4. Benefits and Vacation.
a. Benefits. Employee and his dependents (if
applicable) shall be eligible to participate in the
Employer's fringe benefit plans -- both presently existing
plans and those plans that may be adopted in the future in
accordance with the terms and provisions of such plans. The
Employer presently has the following fringe benefit plans in
effect:
i. Dental insurance; and
2
<PAGE>
ii. Disability insurance.
b. Vacation and Personal Days. Employee shall be
entitled to reasonable amounts of vacation and personal time.
c. Automobile. Employee shall be entitled to an
automobile of reasonable value, of Employee's selection, for
business and/or personal use, furnished at the Employer's
expense. Such automobile shall be replaced every three (3)
years or at the expiration of a lease of appropriate term.
d. Health Insurance. Employee shall be entitled to
an Employer paid policy of health and hospital insurance
including major medical insurance coverage for Employee and
his dependents.
5. Stock Options.
a. The Employer shall grant to Employee options to
purchase the common stock of the Employer under the terms
set forth in this paragraph.
b. Beginning with the fiscal year of the Employer
commencing after the date of this Employment Agreement, the
Employer shall grant Employee an option to purchase fifty
thousand (50,000) shares of the common stock of the Employer
for each fiscal year of the Employer during which the
Employer's after-tax profits exceed One Million and NO/100
($1,000,000.00) Dollars.
c. Options shall be issued, within thirty (30) days
of the end of each fiscal year of the Employer, if the
condition of subparagraph 5(b) is met.
3
<PAGE>
d. The option price shall be the fair market value
of the Employer's stock on the date of the option grant and
the term during which the option may be exercised shall
commence on the date of the grant and extend for a period of
ten (10) years thereafter.
e. The terms of any option granted to Employee
under this paragraph shall be as set forth in this paragraph
and as set forth in an Option Agreement to be entered into
between the Employer and Employee as soon as is practicable
following the execution of this Agreement.
6. Retirement/Nonqualified Deferred Compensation Plan.
a. The Employer shall create a bookkeeping reserve
account (the "Nonqualified Deferred Compensation Account")
for Employee which shall be credited for each fiscal year of
Employer with an amount equal to fifteen (15%) percent of
the Employee's salary for such fiscal year.
b. The terms of the Nonqualified Deferred
Compensation Account shall be as set forth in a Nonqualified
Deferred Compensation Plan to be entered into between the
Employer and Employee as soon as is practicable following
the execution of this Agreement.
c. Nothing contained in this paragraph 6 and no
action taken pursuant to the provisions of this Agreement
shall create or be construed to create a trust of any kind,
or a fiduciary relationship between the Employer and
Employee.
4
<PAGE>
Any funds which may be reserved by the Employer to pay for
the retirement payment provided for hereunder shall continue
for all purposes to be a part of the general funds of the
Employer and no person other than the Employer shall by
virtue of this Agreement have any right to any interest in
such funds. Any bookkeeping reserve accounts for such
payment will be maintained by the Employer solely as a
convenience in the administration of this Agreement. To the
extent that any person acquires a right to receive payments
from the Employer under this paragraph, such right shall be
no greater than the rights of any unsecured general creditor
of the Employer. Neither Employee nor his representative
shall have any right to commute, sell, assign, transfer,
encumber or otherwise dispose of the right to receive the
deferred compensation benefit provided for hereunder, which
payments and the right thereto are expressly declared to be
nonassignable and nontransferable and any attempted
assignment or transfer by Employee shall be void and of no
effect. Title to and beneficial ownership of any assets,
whether cash, investments, life insurance policies or other
assets which the Employer may use to fund its obligation
hereunder shall at all times remain in the Employer.
7. Arbitration. Any disputes relating to the
interpretation or application of this Agreement shall be promptly
resolved by an impartial arbitrator pursuant to the rules of the
American Arbitration Association. The parties shall share equally
all costs and expenses of arbitration including the arbitrator's
fees; and excluding only their own attorney's fees,
5
<PAGE>
unless the arbitrator shall order either party to pay any or all
of the other's attorneys fees. The award of the arbitrator shall
be final and binding, and immediately enforceable by either party
in any court of competent jurisdiction.
8. Law Applicable. This Agreement shall be interpreted
and enforced in all circumstances according to the laws of the
Commonwealth of Pennsylvania.
9. Notices. Notices to the Employer shall be delivered
to:
AquaPenn Spring Water Company
3035 Research Drive
State College, PA 16801
Notices to Employee shall be delivered to:
Geoffrey F. Feidelberg
1115 Woodberry Circle
State College, PA 16803
In either case the notice address above may be changed by written
notice of the addressee.
10. Entire Agreement. This Agreement fully integrates all
understandings and agreements between the parties and shall constitute
the entire agreement between them and supersede any prior written
employment agreement between the parties or any oral representations
of any kind. This Agreement may only be modified in writing by the
voluntary signed consent of both parties. Provided, however, that if
Employee has stock options pursuant to prior agreements with the
Employer, such stock options shall continue in
6
<PAGE>
effect in accordance with the terms of such prior agreement and
shall not be affected by this Agreement.
11. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their
respective successors in interest. Neither party hereto may
assign its interest without the prior written consent of the
other party.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the day and year first written above.
ATTEST: AQUAPENN SPRING WATER COMPANY
(Illegible Signature) By: /s/ Edward J. Lauth, III
- -------------------------- -------------------------------
, Secretary Edward J. Lauth, III
President
(SEAL)
WITNESS: EMPLOYEE:
/s/ Deborah C. Britt /s/ Geoffrey F. Feidelberg (SEAL)
- ------------------------- --------------------------
Geoffrey F. Feidelberg
7
EXHIBIT 10.6
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT, dated September 16, 1994, by and between:
AQUAPENN SPRING WATER COMPANY, a Pennsylvania Business Corporation
(the "Company"),
-AND-
EDWARD J. LAUTH, III (the "Employee").
Recitals
A. Employee is an executive of the Company with significant
policy-making and operational responsibilities in the conduct of its
business.
B. The Company recognizes that Employee is a valuable
resource for the Company and the Company desires to be assured of the
continued service of Employee.
C. The Company is concerned that upon a possible or
threatened change in control, Employee may have concerns about the
continuation of his employment and/or his status and responsibilities
and may be approached by others with employment opportunities, and
desires to provide Employee some assurance as to the continuation of
his employment status and responsibilities on a basis consistent with
that which he has earned in the event of such possible or threatened
change in control.
<PAGE>
D. The Company desires to assure that if a possible change of
control situation should arise and Employee should be involved in
deliberations or negotiations in connection therewith that Employee
will be in a secure position to consider and/or negotiate such
transaction as objectively as possible and without implied threat to
his financial well-being.
E. The Company is concerned about the possible effect on
Employee of the uncertainties created by any proposed change in
control of the Company.
F. Employee is willing to continue to serve the Company but
desires that in the event of such a change in control he will continue
to have the responsibility, status, income, benefits and perquisites
that he received immediately prior to that event.
NOW THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:
1. Change in Control. The provisions of Section 2 and 3 of
this Agreement shall become operative upon a "change in control" of
the Company, as hereinafter defined. For purposes of this Agreement, a
"change in control" shall be deemed to have occurred if and when:
(a) Any person or group of persons acting in
concert shall, subsequent to the date of this Agreement,
have acquired ownership of or the right to
-2-
<PAGE>
vote or to direct the voting of shares of capital stock of the
Company representing thirty (30%) percent or more of the total
voting power of the Company, or
(b) The Company shall have merged into or consolidated
with another corporation, or merged another corporation into the
Company, on a basis whereby less than fifty (50%) percent of the
total voting power of the surviving corporation is represented by
shares held by former shareholders of the Company prior to such
merger or consolidation, or
(c) The Company shall have sold more than fifty (50%)
percent of its assets to another corporation or other entity or
person, or
(d) As the result of, or in connection with, any cash
tender or exchange offer, merger or other business combination,
sale of assets or contested election, the persons who were
Directors of the Company before such transaction cease to
constitute a majority of Directors of the Company.
2. Termination Within One (1) Year. In the event that the
employment of Employee with the Company is terminated involuntarily
within one (1) after a change in control occurs:
(a) Employee shall be entitled to receive an amount of
cash equal to the sum of the following amounts:
(i) one (1) times his annual salary at his rate on the date of
termination of employment; and
<PAGE>
(ii) one (1) times the Company's annual retirement plan
contribution at the Employee's contribution rate on the
termination of his employment (subject to applicable
limitations of the Internal Revenue Code, which may dictate
that such amount shall not be added to the retirement plan
but shall be paid in cash).
The sum of these amounts shall be paid in equal monthly
installments over a period of twelve (12) months, the first such
installment to be paid within ten (10) days after Employee's
termination of employment.
(b) Employee shall continue for a period of twelve (12)
months from the date of his termination to be covered at the
expense of the Company by the same or equivalent hospital,
medical, accident, and disability insurance coverages as he was
enrolled in immediately prior to termination of his employment;
provided, however, that the Employee may elect to be paid in cash
within thirty (30) days after termination of his employment, an
amount equal to the Company's cost of providing such coverages
during such period.
(c) All outstanding stock options held by Employee, both
exercisable and nonexercisable, shall be immediately exercisable
regardless of the time such option has been held by Employee and
shall remain exercisable until the original expiration date of
such option, subject to applicable requirements of the Internal
Revenue Code.
<PAGE>
3. Resignation Within One (1) Year. In the event the Employee
should determine in good faith that his status or responsibilities
with the Company has or have diminished subsequent to a change in
control, and shall for that reason resign from his employment with the
Company within one year after such change in control, Employee shall
be entitled to receive all payments and enjoy all of the benefits
specified in Section 2 hereof.
4. Other Events. If Employee resigns from the Company within
one (1) year of a change of control, Employee shall be entitled to
receive all payments and enjoy all of the benefits specified in
Section 2 hereof should one or more of the following events occur
within one (1) year following a change in control:
(a) If Employee determines that there has been a
significant change in his responsibilities or duties with the
Company and, for that reason, Employee resigns from the Company;
or
(b) If the base salary paid by the Company to Employee
is reduced by more than fifteen (15%) percent from his salary
immediately prior to the change in control.
5. Agreements Not Exclusive. The specific agreements referred
to herein are not intended to exclude Employee's participation in
other benefits available to executive personnel generally or to
preclude other compensation benefits as may be authorized by the Board
of Directors of the Company at any time, and shall be in addition to
the provisions of any other employment or similar agreements.
<PAGE>
6. Enforcement Costs. The Company is aware that upon the
occurrence of a change in control, the Board of Directors or a
shareholder of the Company may then cause or attempt to cause the
Company to refuse to comply with its obligations under this Agreement,
or may cause or attempt to cause the Company to institute, or may
institute, litigation seeking to have this Agreement declared
unenforceable, or may take, or attempt to take, other action to deny
Employee the benefits intended under this Agreement. In these
circumstances, the purpose of this Agreement could be frustrated. It
is the intent of the company that Employee not be required to incur
the expenses associated with the enforcement of his rights under this
agreement by litigation or other legal action because the cost and
expense thereof would substantially detract from the benefits extended
to Employee hereunder, nor be bound to negotiate any settlement of his
rights hereunder under threat of incurring such expenses. Accordingly,
if following a change in control, it should appear to Employee that
the Company has failed to comply with any of its obligations under
this Agreement or in the event that the Company or any other person
takes any action to declare this Agreement void or unenforceable, or
institutes any litigation or other legal action designed to deny,
diminish or to recover from Employee the benefits intended to be
provided to Employee hereunder and that Employee has complied with all
of his obligations under this Agreement, the Company irrevocably
authorizes Employee from time to time to retain counsel of his choice
at the expense of the Company as provided in this Section 5, to
represent Employee in connection with the initiation or defense of any
litigation or other legal action, whether by or against the Company or
any director, officer, shareholder or
<PAGE>
other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship
between the Company and such counsel, the Company irrevocably consents
to Employee entering into an attorney-client relationship with such
counsel, and in that connection the Company and Employee agree that a
confidential relationship shall exist between Employee and such
counsel. The reasonable fees and expenses of counsel selected from
time to time by Employee as hereinabove provided shall be paid or
reimbursed to Employee by the Company on a regular, periodic basis
upon presentation by Employee of a statement or statements prepared by
such counsel in accordance with its customary practices.
7. No Set-Off. The Company shall not be entitled to set-off
against the amount payable to Employee any amounts earned by Employee
in other employment after termination of his employment with the
Company, or any amounts which might have been earned by Employee in
other employment had he sought other employment. The amounts payable
to Employee under this Agreement shall not be treated as damages but
as severance compensation to which Employee is entitled by reason of
termination of his employment in the circumstances contemplated by
this Agreement. However, a set-off may be taken by the Company against
the amounts payable to Employee for expenses covering the same or
equivalent hospital, medical, accident, and disability insurance
coverages as set forth in Section 2(c) of this Agreement if such
benefit is paid for the Employee by the employer employing such
Employee after termination by the Company or after Employee's
resignation as under the circumstances set forth in Section 3 of this
Agreement.
<PAGE>
8. Termination. This Agreement has no specific term, but
shall terminate if, prior to a change in control of the Company, the
employment of Employee with the Company shall terminate.
9. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Company and its successors and
assigns, and shall be binding upon and inure to the benefit of
Employee and his legal representatives, heirs, and assigns.
10. Severability. In the event that any Section, paragraph,
clause or other provision of this Agreement shall be determined to be
invalid or unenforceable in any jurisdiction for any reason, such
Section, paragraph, clause or other provision shall be enforceable in
any other jurisdiction in which it is valid and enforceable and, in
any event, the remaining Sections, paragraphs, clauses and other
provisions of this Agreement shall be unaffected and shall remain in
full force and effect to the fullest extent permitted by law.
11. Governing Law. This Agreement shall be interpreted,
construed and governed by the laws of the Commonwealth of
Pennsylvania.
12. Headings. The headings used in this Agreement are for
ease of reference only and are not intended to affect the meaning or
interpretation of any of the terms hereof.
13. Gender and Number. Whenever the context shall require,
all words in this Agreement in the male gender shall be deemed to
include the female or neuter gender, all singular words shall include
the plural, and all plural words shall include the singular.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed the date
and year first above written.
ATTEST: AQUAPENN SPRING WATER COMPANY
/s/ C.J. Wagner By: /s/ Edward J. Lauth
- -------------------------- ---------------------------------
Secretary Edward J. Lauth
President
/s/ Geoffrey F. Feidelberg /s/ Edward J. Lauth, III
- -------------------------------- ----------------------------------
Witness Edward J. Lauth, III
EXHIBIT 10.7
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT, dated September 16, 1994, by and between:
AQUAPENN SPRING WATER COMPANY, a Pennsylvania Business Corporation (the
"Company"),
-AND-
GEOFFREY F. FEIDELBERG (the "Employee").
Recitals
A. Employee is an executive of the Company with significant
policy-making and operational responsibilities in the conduct of its
business.
B. The Company recognizes that Employee is a valuable resource
for the Company and the Company desires to be assured of the continued
service of Employee.
C. The Company is concerned that upon a possible or threatened
change in control, Employee may have concerns about the continuation of his
employment and/or his status and responsibilities and may be approached by
others with employment opportunities, and desires to provide Employee some
assurance as to the continuation of his employment status and
responsibilities on a basis consistent with that which he has earned in the
event of such possible or threatened change in control.
<PAGE>
D. The Company desires to assure that if a possible change of
control situation should arise and Employee should be involved in
deliberations or negotiations in connection therewith that Employee will be
in a secure position to consider and/or negotiate such transaction as
objectively as possible and without implied threat to his financial
well-being.
E. The Company is concerned about the possible effect on Employee
of the uncertainties created by any proposed change in control of the
Company.
F. Employee is willing to continue to serve the Company but
desires that in the event of such a change in control he will continue to
have the responsibility, status, income, benefits and perquisites that he
received immediately prior to that event.
NOW THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:
1. Change in Control. The provisions of Section 2 and 3 of this
Agreement shall become operative upon a "change in control" of the Company,
as hereinafter defined. For purposes of this Agreement, a "change in
control" shall be deemed to have occurred if and when:
(a) Any person or group of persons acting in concert shall,
subsequent to the date of this Agreement, have acquired ownership of
or the right to
<PAGE>
vote or to direct the voting of shares of capital stock of the Company
representing thirty (30%) percent or more of the total voting power of
the Company, or
(b) The Company shall have merged into or consolidated with
another corporation, or merged another corporation into the Company,
on a basis whereby less than fifty (50%) percent of the total voting
power of the surviving corporation is represented by shares held by
former shareholders of the Company prior to such merger or
consolidation, or
(c) The Company shall have sold more than fifty (50%)
percent of its assets to another corporation or other entity or
person, or
(d) As the result of, or in connection with, any cash tender
or exchange offer, merger or other business combination, sale of
assets or contested election, the persons who were Directors of the
Company before such transaction cease to constitute a majority of
Directors of the Company.
2. Termination Within One (1) Year. In the event that the
employment of Employee with the Company is terminated involuntarily within
one (1) year after a change in control occurs:
(a) Employee shall be entitled to receive an amount of cash
equal to the sum of the following amounts:
(i) one (1) times his annual salary at his rate on the date
of termination of employment; and
<PAGE>
(ii) one (1) times the Company's annual retirement plan
contribution at the Employee's contribution rate on the
termination of his employment (subject to applicable limitations
of the Internal Revenue Code, which may dictate that such amount
shall not be added to the retirement plan but shall be paid in
cash).
The sum of these amounts shall be paid in equal monthly
installments over a period of twelve (12) months, the first such
installment to be paid within ten (10) days after Employee's
termination of employment.
(b) Employee shall continue for a period of twelve (12)
months from the date of his termination to be covered at the expense
of the Company by the same or equivalent hospital, medical, accident,
and disability insurance coverages as he was enrolled in immediately
prior to termination of his employment; provided, however, that the
Employee may elect to be paid in cash within thirty (30) days after
termination of his employment, an amount equal to the Company's cost
of providing such coverages during such period.
(c) All outstanding stock options held by Employee, both
exercisable and nonexercisable, shall be immediately exercisable
regardless of the time such option has been held by Employee and shall
remain exercisable until the original expiration date of such option,
subject to applicable requirements of the Internal Revenue Code.
<PAGE>
3. Resignation Within One Year. In the event the Employee should
determine in good faith that his status or responsibilities with the
Company has or have diminished subsequent to a change in control, and shall
for that reason resign from his employment with the Company within one year
after such change in control, Employee shall be entitled to receive all
payments and enjoy all of the benefits specified in Section 2 hereof.
4. Other Events. If Employee resigns from the Company within one
(1) year of a change of control, Employee shall be entitled to receive all
payments and enjoy all of the benefits specified in Section 2 hereof should
one or more of the following events occur within two (2) years following a
change in control:
(a) If Employee determines that there has been a significant
change in his responsibilities or duties with the Company and, for
that reason, Employee resigns from the Company; or
(b) If the base salary paid by the Company to Employee is
reduced by more than fifteen (15%) percent from his salary immediately
prior to the change in control.
5. Agreements Not Exclusive. The specific agreements referred to
herein are not intended to exclude Employee's participation in other
benefits available to executive personnel generally or to preclude other
compensation benefits as may be authorized by the Board of Directors of the
Company at any time, and shall be in addition to the provisions of any
other employment or similar agreements.
<PAGE>
6. Enforcement Costs. The Company is aware that upon the
occurrence of a change in control, the Board of Directors or a shareholder
of the Company may then cause or attempt to cause the Company to refuse to
comply with its obligations under this Agreement, or may cause or attempt
to cause the Company to institute, or may institute, litigation seeking to
have this Agreement declared unenforceable, or may take, or attempt to
take, other action to deny Employee the benefits intended under this
Agreement. In these circumstances, the purpose of this Agreement could be
frustrated. It is the intent of the company that Employee not be required
to incur the expenses associated with the enforcement of his rights under
this agreement by litigation or other legal action because the cost and
expense thereof would substantially detract from the benefits extended to
Employee hereunder, nor be bound to negotiate any settlement of his rights
hereunder under threat of incurring such expenses. Accordingly, if
following a change in control, it should appear to Employee that the
Company has failed to comply with any of its obligations under this
Agreement or in the event that the Company or any other person takes any
action to declare this Agreement void or unenforceable, or institutes any
litigation or other legal action designed to deny, diminish or to recover
from Employee the benefits intended to be provided to Employee hereunder
and that Employee has complied with all of his obligations under this
Agreement, the Company irrevocably authorizes Employee from time to time to
retain counsel of his choice at the expense of the Company as provided in
this Section 5, to represent Employee in connection with the initiation or
defense of any litigation or other legal action, whether by or against the
Company or any director, officer, shareholder or
<PAGE>
other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between
the Company and such counsel, the Company irrevocably consents to Employee
entering into an attorney-client relationship with such counsel, and in
that connection the Company and Employee agree that a confidential
relationship shall exist between Employee and such counsel. The reasonable
fees and expenses of counsel selected from time to time by Employee as
hereinabove provided shall be paid or reimbursed to Employee by the Company
on a regular, periodic basis upon presentation by Employee of a statement
or statements prepared by such counsel in accordance with its customary
practices.
7. No Set-Off. The Company shall not be entitled to set-off
against the amount payable to Employee any amounts earned by Employee in
other employment after termination of his employment with the Company, or
any amounts which might have been earned by Employee in other employment
had he sought other employment. The amounts payable to Employee under this
Agreement shall not be treated as damages but as severance compensation to
which Employee is entitled by reason of termination of his employment in
the circumstances contemplated by this Agreement. However, a set-off may be
taken by the Company against the amounts payable to Employee for expenses
covering the same or equivalent hospital, medical, accident, and disability
insurance coverages as set forth in Section 2(c) of this Agreement if such
benefit is paid for the Employee by the employer employing such Employee
after termination by the Company or after Employee's resignation as under
the circumstances set forth in Section 3 of this Agreement.
<PAGE>
8. Termination. This Agreement has no specific term, but shall
terminate if, prior to a change in control of the Company, the employment
of Employee with the Company shall terminate.
9. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Company and its successors and assigns, and
shall be binding upon and inure to the benefit of Employee and his legal
representatives, heirs, and assigns.
10. Severability. In the event that any Section, paragraph,
clause or other provision of this Agreement shall be determined to be
invalid or unenforceable in any jurisdiction for any reason, such Section,
paragraph, clause or other provision shall be enforceable in any other
jurisdiction in which it is valid and enforceable and, in any event, the
remaining Sections, paragraphs, clauses and other provisions of this
Agreement shall be unaffected and shall remain in full force and effect to
the fullest extent permitted by law.
11. Governing Law. This Agreement shall be interpreted, construed
and governed by the laws of the Commonwealth of Pennsylvania.
12. Headings. The headings used in this Agreement are for ease of
reference only and are not intended to affect the meaning or interpretation
of any of the terms hereof.
13. Gender and Number. Whenever the context shall require, all
words in this Agreement in the male gender shall be deemed to include the
female or neuter gender, all singular words shall include the plural, and
all plural words shall include the singular.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed the date and
year first above written.
ATTEST: AQUAPENN SPRING WATER COMPANY
/s/ C.J. Wagner By: /s/ Edward J. Lauth
- ------------------------ --------------------------
Secretary Edward J. Lauth
President
(Illegible Signature) /s/ Geoffrey F. Feidelberg
- ------------------------ --------------------------
Geoffrey F. Feidelberg
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT 10.10
08/12/96
AGREEMENT OF LEASE
THIS AGREEMENT made and effective as of the 19th day of July, 1996, by and
between AQUAPENN SPRING WATER COMPANY, a Pennsylvania corporation, with an
address of P. O. Box 938, Milesburg, Pennsylvania, hereinafter referred to
as "Lessor",
- A N D -
JOHNSON CONTROLS, INC., a corporation, with an address of 912 City Road,
Manchester, Michigan, hereinafter referred to as "Lessee" or "Tenant".
WITNESSETH:
1. Premises. The Lessor, for and in consideration of the payment
of the rent and the performance of the covenants and agreements of this
Lease as hereinafter set forth, does hereby demise, lease, and let unto the
Lessee and Lessee leases from Lessor, 30,000 square feet of floor space
located in the Lessor's Milesburg plant as more fully shown on the Plan
attached hereto marked Exhibit "A", which is hereinafter referred to as the
Demised Premises.
2. Term. The Lease term shall commence on December 1, 1996 or two
(2) weeks after Lessor notifies Lessee the building is ready for occupancy
(the "Commencement Date"), and shall continue until March 31, 2001 (the
"Initial Term").
1
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
3. Rent. The rent for the Demised Premises during the Initial
Term of this Lease shall be [ ] on an annual basis equaling a minimum
annual amount of [ ] Dollars payable in equal installments of [ ] Dollars
per month. All rents to be paid pursuant to this Lease shall be paid in
monthly installments, in advance, on or before the fifth (5th) day of each
calendar month. If the Commencement Date is not the first day of a calendar
month, the first and last months' rent shall be prorated on a daily basis.
4. Use. The Demised Premises shall be utilized for Lessee to
establish an on-site blowing operation for the production of Lessor's water
bottle requirements, including the procurement and set up of tooling for
such production, in accordance with the letter of understanding between
Lessor and Lessee attached hereto marked Exhibit "B". It is understood that
Lessee may blow bottles for Lessee's other customers, provided Lessee has
met Lessor's production requirements set forth in Exhibit "B". Lessee shall
at its own cost and expense obtain any and all licenses and permits for any
such use. Lessee shall comply with all valid governmental laws, ordinances
and regulations applicable to such use of the Demised Premises and shall
promptly comply with valid governmental orders and directives for the
correction, prevention and abatement of any nuisances in or upon or
connected with the Demised Premises. Lessee shall not perform any acts or
carry on or permit to exist any practices that may unreasonably injure the
building or its contents or be an unlawful nuisance or menace to the
occupants of adjacent areas or render the insurance on the building in
which the Demised Premises is located void or the insurance risk more
hazardous than the risk for the permitted usage.
2
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
5. Taxes and Assessments. In addition to the rents provided for
herein, Lessee, for the term of this Lease, shall reimburse Lessor for all
real estate taxes and Lessee's percentage share of the cost of any special
assessment or similar charge levied against the Demised Premises by any
taxing authority (an "Imposition"). Any such costs shall be amortized over
their useful lives, as determined by Lessor in accordance with generally
accepted accounting principles and only the annual amortization amount
shall be payable by Lessee in any calendar year. If, by law, any Imposition
is payable, or may at the option of the taxpayer be paid in installments,
Lessee may pay the same, together with any accrued interest on the unpaid
balance of the Imposition, in installments, as the same respectively become
due and payable, before a fine, penalty, interest or cost may be added
thereto for nonpayment thereof. Lessee shall reimburse Lessor for such
payments subject to amortization provisions herein. Further, if any
Imposition relating to a fiscal period of a taxing authority, a part of
which period is included within the term hereof, any part of which is
included in the period of time either prior to the Commencement Date or the
end of the term hereof, then such Imposition shall be adjusted between
Lessor and Lessee as of the Commencement Date or the end of the term
hereof, as the case may be. Lessee shall not be required to pay any taxes
imposed upon the income, receipts or profits of Lessor. Lessee shall have
the right to contest the amount or validity of any Imposition by
appropriate legal proceedings; provided, however, that this right shall not
relieve, modify or extend the
3
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Lessee's obligation to pay such Imposition at the time and in the manner
provided in the preceding paragraph.
6. Alterations. Lessee shall have the right to make alterations,
additions or improvements to the Demised Premises which do not adversely
affect the structural soundness or integrity of the building and without
being obligated for the payment of any additional rent, provided that
Lessee shall obtain Lessor's prior written approval of such alterations,
additions and improvements which approval shall not be unreasonably
withheld. The cost of all leasehold improvements will be the responsibility
of the Lessee. If requested by Lessee, Lessor agrees to execute any and all
documents necessary to enable Lessee to apply for building permits, zoning
approvals and any other approval required of any municipality or
governmental unit having jurisdiction over the Demised Premises or the
building or improvements to be erected thereon, provided that Lessee pays
all expenses in connection therewith. Upon termination of this Lease, all
alterations, additions or improvements to the Demised Premises which are
not removed by the Lessee pursuant to Section 14 hereof, upon such
termination will become the property of Lessor unless otherwise specified
in writing by Lessee and Lessor.
7. Utilities. Lessee shall be responsible for and shall pay, when
the same is due and payable, all utilities desired by Lessee in the use of
the Demised Premises or in the construction of any improvements on the
Demised Premises and the subsequent utilization thereof including, but not
limited to, gas, water, electricity, heat, telephone, sewage and trash
removal utilized in the Demised Premises.
4
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
8. Insurance. During the term of this Lease, Lessee shall, at its
own cost and expense, maintain comprehensive general public liability
insurance with respect to the Demised Premises and Lessee's use thereof in
at least the following amounts:
a. With respect to personal injuries (including death) [ ] for
any one occurrence.
b. With respect to property damage [ ] in any one occurrence.
With respect to the foregoing policies of insurance, Lessor shall
be designated as an additional insured with respect to liability arising
out of the operations performed by Lessee, but only to the extent of
damages directly caused by the negligence of Lessee. All insurance required
to be provided by Lessee under this Lease shall be issued by insurance
companies authorized to do business in the Commonwealth of Pennsylvania
with a financial rating of at least A- or better as rated in the most
recent edition of Best's Insurance Reports. All policies of insurance
required under this Section 8 shall provide that notice shall be given by
the insurance company to Lessor and Lessee at least ten (10) days prior to
any termination or cancellation of such policy. Lessee shall provide Lessor
with copies of certificates of insurance, or other written evidence of
insurance reasonably satisfactory to Lessor, for the initial insured period
and each renewal period for the entire term of this Lease. In addition,
Lessee shall provide or cause to be provided workers compensation coverage
for all employees of Lessee on the Demised Premises and obtain certificates
of insurance from all agents or subcontractors of Lessee indicating
workers' compensation coverage. During the term of this Lease, the Lessee
shall carry insurance coverage on its personal property and
5
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
improvements located on the Demised Premises, in amounts as shall be
satisfactory to Lessee.
9. Maintenance, Repairs and Replacement. Lessor shall be
responsible and obligated only for replacement of the roof and structural
parts of the buildings on the Demised Premises, including, but not limited
to, foundation, load-bearing and exterior walls. Lessee shall keep the
Demised Premises and fixtures therein in good order and condition and
perform all maintenance, repairs and replacements necessary to maintain the
good condition of the Premises, including, but not limited to, maintenance,
repair and replacement, if needed, of the HVAC system servicing the Demised
Premises. However, Lessee's expenses for repair and replacement shall not
exceed Five Hundred and 00/100 ($500.00) Dollars per year, except if such
repairs and replacements are necessitated by Lessee's negligence, whereupon
such repairs and replacements shall be Lessee's sole responsibility.
10. Assignment. Lessee shall not sublease or assign its rights
and obligations under this Lease or any part of the Demised Premises
without first obtaining Lessor's written consent. Lessor shall have the
right to assign any or all of its interest under this Lease, whether
incident to a sale of the real estate or otherwise; provided that any such
assignment or sale shall bind the assignee or purchaser to the terms of
this Lease.
11. Personal Property. Lessee understands and agrees that all
personal property of every kind or description which may at any time be in
the Demised Premises shall be there at Lessee's sole risk or at the risk of
those claiming under the Lessee and the Lessor shall not be liable for any
damage to said property except as may result from and be caused by the
6
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
gross negligence or wilful misconduct of Lessor, its agents or employees.
It shall be Lessee's responsibility to take whatever measures it deems
necessary and appropriate to secure and protect its personal property
situate in the Demised Property.
12. Condition of Premises. Lessee covenants and agrees to deliver
up and surrender to lessor possession of the Demised Premises upon the
expiration of this Lease or its termination as herein provided in as good
condition and repair as the same shall be at the commencement of said term
or may have been put by the Lessor during the continuance thereof, ordinary
wear and tear and condemnation or casualty excepted. It is agreed by the
parties that acceptance of delivery of the Demised Premises shall be deemed
conclusive evidence that Demised Premises were in good order and conditions
at the commencement of the term of this Lease; provided, however, that
Lessee and Lessor shall before the execution of this Lease, jointly inspect
the Demised Premises to be leased and shall list and, at Lessee's option
and expense, photograph any defects in the Demised Premises which have been
agreed shall not be Lessee's responsibility upon the expiration or sooner
termination of this Lease. Said list of defects, if any, shall be attached
hereto marked Exhibit "C".
13. Inspection. Lessee further agrees to permit the Lessor or
Lessor's agents to inspect or examine the Demised Premises at any
reasonable time during ordinary business hours and upon one (1) business
day's prior notice to Lessee and to permit the Lessor to make such repairs
to the building of which the Demised Premises are a part as the lessor may
determine desirable or necessary to comply with its obligations hereunder.
Lessee further agrees to cooperate with Lessor in making appropriate
arrangements to provide for a means of immediate emergency entrance into
7
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
the Demised Premises in the event of fire, mechanical or electrical
breakdown or similar events.
14. Removal of Lessee's Property. Lessee shall have the right, at
its sole cost and expense, to erect, install, maintain and operate on the
Demised Premises such equipment as Lessee may require in its sole
discretion and such shall remain the property of Lessee. All such
installations shall be effected in compliance with applicable governmental
laws, ordinances and regulations. At any time during the term of this Lease
and at the time of the expiration or sooner termination hereof, provided
all rents and other charges are paid in full, Lessee shall have the right
to remove, at its expense, any improvements, fixtures, machinery or
equipment upon the expiration or termination of this Lease, if such removal
shall not create substantial structural injury and all damage to the
Demised Premises occasioned by such removal is promptly repaired. Lessor
shall have the right to require the removal of any or all fixtures,
equipment or personal property of Lessee upon the expiration or sooner
termination of this Lease.
15. Lessor's Waiver. Lessor agrees to execute upon request, an
acceptable form of Lessor's waiver subordinating any claim by Lessor
against any equipment or personal or other property of Lessee to the claim
of any secured creditor of Lessee. Lessor hereby waives any right to
proceed in distraint or distress against any equipment or personal or other
property of Lessee for claims arising hereunder, whether under common law
or the provisions of the Landlord and Tenant Act of 1951, as the same may
be amended or replaced (the "Landlord and Tenant Act"), and further waives
the benefit of any statutory or common
8
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
law Lessor's lien against Lessee's equipment or personal or other property,
including, without limitation, any lien that otherwise may arise under the
Landlord and Tenant Act.
16. Signs. Lessee may, at its own risk and in accordance with
local zoning ordinances and any applicable private restrictions on the
Demised Premises, erect such signs concerning the business of Lessee at the
Demised Premises. Lessee agrees to maintain any such signs in a good state
of repair, and save Lessor harmless from any loss, cost or damage resulting
from the erection, maintenance, existence or removal of the same and shall
repair any damage caused by the erection, existence, maintenance or removal
of such signs.
17. Quiet Enjoyment. Lessor covenants and agrees that if the
Lessee shall perform all of the covenants and agreements herein stipulated
to be performed on the Lessee's part, the Lessee shall at all times during
the term of this Lease, have the peaceable and quiet enjoyment and
possession of the Demised Premises without any manner of interference or
hindrance from the Lessor or any persons lawfully claiming through the
Lessor.
18. Default. If the Lessee shall fail to keep and perform any of
the covenants, agreements or conditions of this Lease on its part to be
kept or performed (including the covenant to pay rent in the manner
specified herein); or if the Lessee shall abandon or vacate the Demised
Premises during the term hereof; or if Lessee shall make assignment for the
benefit of creditors; or if the interest of the Lessee in the Demised
Premises shall be sold under execution or other legal process; or if the
Lessee shall be adjudged a bankrupt or the leasehold seized by the trustee
in bankruptcy; or if a receiver shall be appointed for the Lessee by the
Court, then the Lessor may at Lessor's election, any time thereafter, while
9
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
such conditions exist, give thirty (30) days' notice to the Lessee of such
default, and if such default and condition is not corrected or remedied
within said thirty (30) days, then Lessor may, without prejudice to any
remedies which might otherwise be used for arrears of rent or proceedings
for breach of covenants, exercise those remedies set forth in Section 19
hereof.
19. Lessor's Remedies. If and in the event the Lessee shall be in
default of any of its obligations hereunder as more fully defined in
Section 18 hereof, the Lessor shall have the option to do one or all of the
following to the extent that they are not inconsistent:
a. declare such occurrence as a breach of the Lease and thereupon
at its option declare the Lease terminated and retake possession of
the Demised Premises;
b. terminate any right to renew or extend the Lease as may
otherwise have been herein agreed;
c. immediately re-enter and remove all persons and property from
the Demised Premises, storing said property in a public warehouse or
elsewhere at Lessee's expense without liability on the part of Lessor;
d. collect by suit or otherwise the balance of the rent due
during the residue of the term specified herein, or any other sum that
has become due; or enforce by suit or otherwise any covenant or
condition or term of the Lease required to be performed by Lessee;
e. terminate the Lease in which event Lessee agrees to
immediately surrender possession of the Demised Premises and to pay
Lessor all damages Lessor may incur
10
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
by reason of Lessee's default including the cost of recovering
possession of the Demised Premises;
f. should Lessor elect to re-enter as herein provided, or should
it take possession pursuant to legal proceedings or pursuant to any
notice provided for by law, it may either terminate the Lease, re-let
the Demised Premises, or any part thereof, for the account of Lessee
either in Lessee's name or otherwise, after using its best efforts to
mitigate its damages, upon terms and conditions and for such period
(whether longer than the balance of the term hereof or not) as Lessor
may deem advisable, with or without any equipment or fixtures that may
be situated thereon or therein, in which event, the rents received on
any such reletting during the balance of the term of the Lease or any
part thereof shall be applied first to the expenses of re-letting and
collecting, including necessary renovation and alteration of the
Demised Premises and a reasonable attorney's fee and any real estate
commission actually paid, and, thereafter, toward payment of all sums
due or to become due to Lessor hereunder, and if a sufficient sum
shall not be thus realized to pay such rent and other charges, Lessee
shall pay to Lessor monthly any deficiency; such monthly deficiencies
shall be paid punctually when due, as herein provided, but allowing
credit for rental that Lessor may have received in excess of the
monthly rental herein stipulated in previous months. No re-entry or
taking possession of the Demised Premises shall terminate the Lease
unless written notice of such intention is given to Lessee.
11
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
20. Damage. If the Demised Premises should be damaged or
destroyed by fire, flood or other casualty, Lessee shall give immediate
written notice thereof to Lessor.
a. Total Destruction. If the Demised Premises should be totally
destroyed by fire, flood or other casualty, or if it should be so
damaged that rebuilding or repairs cannot reasonably be completed
within one hundred twenty (120) days from the date of written
notification by Lessee to Lessor of the occurrence of the damage, this
Lease will terminate and rent will abate for the unexpired portion of
the Lease.
b. Partial Damage. If the Demised Premises should be damaged by
fire, flood or other casualty, but not to such an extent that
rebuilding or repairs cannot reasonably be completed within one
hundred twenty (120) days, Lessor, at Lessor's expense, shall cause
the damage to be repaired to a condition as nearly as practicable to
that existing prior to the damage, with reasonable speed and
diligence. Lessor shall not be obligated to restore or rebuild the
Demised Premises to a condition in excess of that in existence on the
commencement date of the term hereof, nor in any event to repair,
restore or rebuild any of the additions or alterations made by Lessee.
If any Mortgagee of the Demised Premises shall not permit the
application of adequate insurance proceeds for repair or restoration
of the Demised Premises, or if the casualty shall not be a type
insured against under the standard fire policy with extended coverage,
then this Lease, at the option of the Lessor, shall be terminated with
the rent to be adjusted to a mutually acceptable date, and Lessee
shall thereupon promptly vacate the Demised Premises.
12
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
21. Mortgage of Premises. Lessee hereby agrees that this Lease
shall be subordinate and inferior to any valid mortgage lien that may now
or hereafter be placed upon the Demised Premises, and Lessee shall execute
such instrument as may be reasonably necessary to evidence such
subordination and that this Lease is in full force and effect, provided
that such subordination shall be on the express condition that this Lease
shall be recognized by the mortgagee, any purchaser at the foreclosure sale
(or by deed in lieu thereof) and the rights of Lessee shall remain in full
force and effect during the term of this Lease and shall not be disturbed
or extinguished by any such foreclosure purchaser or mortgagee as long as
Lessee shall continue to perform all the covenants and conditions of this
Lease to be performed by Lessee. This paragraph shall be self-operative and
no further instrument or subordination shall be required by any mortgagee.
22. Lessor's Title. Lessor represents and warrants that, as of
the Commence Date, it has good legal title to the premises subject to only
such reservations, restrictions, liens, encumbrances, easements and/or
outstanding interests, if any, as will not restrict or interfere with
Lessee's proposed use of the Demised Premises and that Lessor is not to
obtain the consent of any third party in order to enter into and execute
and deliver this Lease.
23. Hazardous or Toxic Substances. Lessor represents and warrants
that any handling, transportation, storage, treatment or usage of hazardous
or toxic substances that has occurred or will occur on the Demised Premises
has been and will continue to be in compliance with all applicable federal,
state and local laws, regulations and ordinances. Lessor further represents
and warrants that no leak, spill, release, threatened release,
13
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
discharge, emission or disposal of hazardous or toxic substances exists or
has occurred on the Demised Premises to date and that the soil, groundwater
and soil vapor on or under the Demised Premises is free of toxic or
hazardous substances and free of underground storage tanks as of the date
that the term of this Lease commences.
Lessee shall not (either with or without negligence) cause or
permit the escape, disposal or release of any hazardous or toxic substances
in, on or under the Demised Premises, except in compliance with all
applicable federal, state and local laws, regulations and ordinances.
Lessee covenants and agrees that the Demised Premises, at all times during
its use or occupancy thereof, be kept and maintained so as to comply with
all now existing or hereafter enacted or issued statutes, laws, rules,
ordinances, orders, permits and regulations of all state, federal, local or
other governmental and regulatory authorities, agencies and bodies
applicable to the Demised Premises, pertaining to the use, storage and
disposal of all hazardous or toxic substances. Lessee shall immediately
notify Lessor in writing of any spill or discharge of hazardous or toxic
substances or of the receipt by Lessee of any notice, citation or other
communication from any agency concerning any investigation or alleged
violation of any environmental laws or regulations on the Demised Premises.
24. Indemnification Related to Toxic or Hazardous Substances.
Lessor and Lessee mutually agree to indemnify, defend and hold harmless the
other, including its officers, employees and agents from any claims,
judgments, damages, penalties, fines, costs, liabilities (including sums
paid in settlement of claims) or loss including attorneys' fees, consultant
fees and expert fees (consultants and experts to be selected by Lessor)
which arise during or after
14
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
the term of this Lease from or in connection with the presence or suspected
presence of toxic or hazardous substances in the soil, groundwater or soil
vapor on or under the Demised Premises, to the extent the toxic or
hazardous substances are present as a result of the actions of the
indemnifying party, its officers, employees or agents. Without limiting the
generality of the foregoing, the indemnification provided by this Section
24 shall specifically cover costs incurred in connection with any
investigation of site conditions or any clean-up, remedial, removal or
restoration work required by any federal, state or local governmental
agency or political subdivision because of the presence in the soil,
groundwater or soil vapor on or under the Demised Premises, to the extent
the toxic or hazardous substances are present as a result of the actions of
the indemnifying party, its officers, employees or agents. Without limiting
the generality of any of the foregoing, the indemnification provided by
this Section 24 shall also specifically cover costs incurred in connection
with:
a. toxic or hazardous substances present or suspected to be
present in the soil, groundwater or soil vapor on or under the Demised
Premises during the term of this Lease; or
b. toxic or hazardous substances that migrate, flow, percolate,
diffuse or in any way move onto or under the Demised Premises after
the term of this Lease commenced; or
c. toxic or hazardous substances present on or under the Demised
Premises as a result of any discharge, dumping, spilling (accidental
or otherwise) onto the
15
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Demised Premises during the term of this Lease by any person,
corporation, partnership or entity other than Lessor.
The foregoing indemnity shall survive the expiration or earlier
termination of this Lease.
25. Rental for Renewal Term. Landlord hereby gives Tenant two (2)
option(s) to extend its Lease for an additional period of five (5) years
each, provided Tenant gives Landlord six (6) months' written notice of its
intention to extend before the expiration of the present or succeeding
lease term. Such extension of the lease shall be upon all of the terms and
conditions herein contained, except that the rental for the extended term
shall be based on the then prevailing rental rate for this property.
26. Choice of Law. The validity, interpretation and performance
of this Lease and any dispute connected herewith shall be governed and
construed in accordance with the laws of the Commonwealth of Pennsylvania.
27. Notices. All notices herein provided for shall be considered
as having been given if sent by United States post-paid, certified mail,
addressed to the respective parties at their addresses herein set forth, or
such other addresses designated in writing for receipt of notices.
AquaPenn Spring Water Company
P. O. Box 938
Milesburg, Pennsylvania 16853
Johnson Controls, Inc.
912 City Road
Manchester, Michigan 48158
16
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
28. Entire Agreement. This Lease contains all of the agreements
and understandings of the parties hereto concerning the Lease of the
Demised Premises.
29. Time of the Essence. Time shall be of the essence with
respect to the performance of the obligations set forth in this Lease.
30. Amendment. This Lease shall be altered or amended only by a
written document executed subsequent to the date of the Agreement of each
of the parties.
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound, have hereunto set their hands and respective seals as of the day and
year first above written.
WITNESS/ATTEST: AQUAPENN SPRING WATER COMPANY
/s/ Traci Watson By: /s/ Geoffrey F. Feidelberg
- ----------------------------- -----------------------------------
JOHNSON CONTROLS, INC.
1/13/97 By: (Illegible Signature)
- ----------------------------- -----------------------------------
17
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT "A"
PLAN OF DEMISED PREMISES
[Exhibit A is a diagram setting forth the
floor space to be occupied by the Lessee.]
18
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT "B"
FEBRUARY 13, 1996 LETTER FROM
JOHNSON CONTROLS, INC.
19
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Johnson Controls, Inc.
Plastic Container Division
912 City Road
Manchester, MI 48158
Tel. 313/428 9741
[Letterhead of Johnson Controls]
February 13, 1996
Mr. Edward J. Lauth, III
AquaPenn Spring Water Company
3035 Research Drive
State College, PA 16801
Dear Ed:
This letter sets forth the basic terms of agreement between
AquaPenn and Johnson Controls, Inc. Details of the on-site operation and
responsibilities of the parties will be agreed within the body of a
separate agreement once the facilitization details have been finalized.
(See On-Site Attachment)
o TERM
The agreement is for 100% of AquaPenn's bottle requirements at
State College, Pennsylvania for five years, effective April 1,
1996 through March 31, 2001. For the first two years of the
agreement, Johnson Controls will be the exclusive supplier to
AquaPenn and AquaPenn will not consider competitive offers. The
100% bottle requirements are based on the sizes listed below.
o PRICING
Base bare bottle, per 1000, delivered
12-ounce 24 grams [ ]
0.5-liter 24 grams [ ]
20-ounce 27 grams [ ]
1-liter 37 grams [ ]
1.5-liter 42 grams [ ]
20
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
o PAYMENT TERMS
Net 30 days
o RESIN
30-day notice for the purpose of establishing adjustments to base
bare bottle pricing, either increases or decreases, due to a
change in the price of resin. The resin escalator/de-escalator
used will be:
2.2 x gram weight of the bottle x cents per pound change in resin
pricing.
o VOLUME - YEAR 1
12-ounce [ ]
0.5-liter [ ]
20-ounce [ ]
1-liter [ ]
1.5-liter [ ]
o MANUFACTURING
Johnson Controls will manufacture bottles on-site and off-line in
space supplied by AquaPenn. Bottles will be palletized for
delivery to the filling line. Details will be finalized when
on-site proposal is finalized.
o CONTAINERS
Johnson Controls will develop 1-liter and 1.5-liter bottle
designs for the State College, Pennsylvania facility to match
AquaPenn's 20-ounce bottle design. Blowmolds for these containers
will be paid for by Johnson Controls providing standard existing
preforms can be utilized. Timing will be discussed.
21
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
o LIGHTWEIGHTING
Efforts will be made to reduce the gram weight of the containers.
The resulting cost savings will be distributed as follows:
If AquaPenn chooses to pay for [ ]
will be passed through to AquaPenn,
OR
Resin savings will be shared [ ]
after Johnson Controls recoups the cost of the tooling.
o [ ].
o PARTNERSHIP TEAMS
A formalized process will be developed to establish partnership
teams at both the executive level and the plant level of our
respective companies. These teams will meet regularly to identify
mutual areas where attention should be focused. They will
discuss, among other things, improving communication, quality,
operation enhancements, and system-wide cost reductions. [ ].
o QUALITY AND SERVICE
Johnson Controls agrees that it will provide PET containers to
AquaPenn that will be merchantable and fit for the purpose for
which they are intended and will be free from defects in
materials and workmanship.
o FORCE MAJEURE
Neither party shall be liable for failure or delay in performance
under this agreement due in whole or part to causes such as an
act of God, strike, lockout or other labor dispute, civil
commotion, sabotage, fire, flood, explosion, acts of government,
unforeseen shortages or unavailability of
22
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
fuel, power, transportation, raw materials or supplies, inability
to obtain or delay in obtaining necessary equipment or
governmental approval, permits, licenses or allocations, and an
other causes which are not within the reasonable control of the
party affected, whether or not of the kind specifically
enumerated above. Either party affected by such circumstances
shall give written notice thereof to the other part. During any
such period, Johnson Controls shall allocate its available supply
among its customers in the same proportion as existed before the
occurrence of any such circumstances. Performance of this
agreement shall be resumes as quickly as reasonably possible
after the party affected by any such circumstances has notified
the other party that the condition(s) is/are remedied.
Please indicate your agreement to the above terms and conditions by signing
in the space provided below and return an originally signed copy.
Sincerely,
JOHNSON CONTROLS, INC.
/s/ James R. King
- ----------------------
James R. King
Vice President, Sales
AQUAPENN SPRING WATER CO. JOHNSON CONTROLS, INC.
BY:/s/ Edward J. Lauth, III BY:/s/ James R. King
------------------------ -----------------------------
NAME: Edward J. Lauth, III NAME: James R. King
-------------------- -----------------------------
TITLE: President TITLE: Vice President
-------------------- -----------------------------
DATE: 2/14/96 DATE: 2/14/96
-------------------- -----------------------------
cc: J. Pell
R. Johnson
23
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
ON-SITE CONCEPT
It is expected that JCI will establish an on-site blowing operation at the
AquaPenn facility in State College. AquaPenn will construct a physical
location to house the blowing operation. When JCI is prepared to establish
the operation, it will notify AquaPenn, and AquaPenn will then commence
construction and facilitization.
The parties will develop a time-line for completion of construction,
facilitization and equipment installation, and start-up with a target of
commencement of initial production within 6 months after construction
begins.
The parties will also agree upon payment and other terms for AquaPenn's
lease to JCI, supply of utilities, management systems to be provided by
AquaPenn at a cost to JCI, if needed by JCI, responsibilities for employees
and other matters relating to an on-site blowing operation. This agreement
shall be reached by the parties no later than the commencement of
construction.
JCI agrees to add capacity at State College, Pennsylvania if requirements
at said location exceed rated capacity.
24
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT "C"
LIST OF DEFECTS
[NONE OR TO BE PROVIDED]
25
EXHIBIT 10.11
ASSIGNMENT OF LEASE
This Assignment of Lease dated as of February 28, 1997 (the "Effective
Date") by and between Johnson Controls, Inc., a Wisconsin corporation
("Assignor"), and Schmalbach-Lubeca Plastic Containers USA, Inc., a
Delaware corporation ("Assignee").
WHEREAS; pursuant to a Lease Agreement, by and between Assignor and
AquaPenn Spring Water Company dated July 19, 1996 (the "Lease"), Assignor
currently leases certain premises in Milesburg, Pennsylvania, as more
particularly described in the Lease (the "Leased Premises").
WHEREAS; Assignor and Schmalbach-Lubeca AG, the parent company of
Assignee, have entered into an Acquisition Agreement (the "Agreement")
pursuant to which Assignor has agreed to sell to Assignee and Assignee has
agreed to buy from Assignor the Purchased Assets (as defined in the
Agreement) of Assignor's Plastic Container Division, which include, among
other things, the leasehold interest in the Leased Premises.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, Assignor and Assignee hereby agree as follows:
As of the Effective Date, Assignor hereby assigns to Assignee all of
Assignor's right, title and interest in and to the Lease and the Leased
Premises. As of the Effective Date, Assignee accepts this assignment and
assumes and agrees to make all payments required by said Lease from and
after the Effective Date, and to perform all covenants and conditions of
the Lease by said Assignor to be made and performed. It is expressly agreed
that Assignee shall succeed to all rights and benefits of Assignor in said
lease.
This Assignment of Lease may be executed in counterparts.
"ASSIGNOR" "ASSIGNEE"
JOHNSON CONTROLS, INC. SCHMALBACH-LUBECA PLASTIC
CONTAINERS USA, INC.
By: (Illegible Signature) By: (Illegible Signature)
--------------------- ---------------------
Title: Attorney in Fact Title: Secretary
------------------ ------------------
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
[Letterhead of Schmalbach-Lubeca]
September 10, 1997
Mr. Edward J. Lauth, III
AquaPenn Spring Water Company
One AquaPenn Drive
Milesburg, Pennsylvania 16853
Re: J. King 2/13/96 Terms of Agreement Letter
Dear Ed,
This letter sets forth the basic terms of agreement between AquaPenn and
Schmalbach-Lubeca (formerly Johnson Controls). Details of the on-site
operation and responsibilities of the parties have been agreed to within
Agreement of Lease.
o TERM
The agreement is for 100% of AquaPenn's bottle requirements
at Milesburg, Pennsylvania for five years, effective April
1, 1996 through March 31, 2001. For the first two years of
the agreement, Schmalbach-Lubeca will be the exclusive
supplier to AquaPenn and AquaPenn will not consider
competitive offers. The 100% bottle requirements are based
on the sizes listed below.
1
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
o PRICING
Base bare bottle, per 1,000, delivered as of 9/1/97:
Item Gram Weight Price
---- ----------- -----
8 ounce 16 gram [ ]
12 ounce 24 gram [ ]
0.5 liter 24 gram [ ]
20/24.9 liter 27 gram [ ]
1 liter/
40 ounce 37.8 gram [ ]
1.5 liter 41.7 gram [ ]
o PAYMENT TERMS
Net 30 days.
o RESIN
30-day notice for the purpose of establishing adjustments to
base bare bottle pricing, either increases or decreases, due
to a change in the price of resin. The resin
escalator/de-escalator used will be: 2.2 x gram weight of
the bottle x cents per pound change in resin pricing.
o VOLUME - YEAR 1
12 ounce [ ]
0.5 liter [ ]
20 ounce [ ]
1 liter [ ]
1.5 liter [ ]
o MANUFACTURING
Schmalbach-Lubeca will manufacture bottles on-site and
off-line in space supplied by AquaPenn. Bottles will be
palletized for delivery to the filling line. Details will be
finalized when on-site proposal is finalized.
o CONTAINERS
Schmalbach-Lubeca will develop 1 liter and 1.5 liter bottle
designs for the Milesburg, Pennsylvania facility to match
AquaPenn's 20 ounce bottle design. Blow molds for these
containers will be paid for by Schmalbach-Lubeca providing
standard existing preforms can be utilized. Timing will be
discussed.
2
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
o LIGHTWEIGHTING
Efforts will be made to reduce the gram weight of the
containers. The resulting cost savings will be distributed
as follows:
If AquaPenn chooses to pay for [
] savings will be
passed through to AquaPenn.
OR
Resin savings will be shared [
] after Schmalbach-Lubeca
recoups the cost of the tooling.
o [
].
o PARTNERSHIP TEAMS
A formalized process will be developed to establish
partnership teams at both the executive level and the plant
level of our respective companies. These teams will meet
regularly to identify mutual areas where attention should be
focused. They will discuss, among other things, improving
communications, quality, operation enhancements, and
system-wide cost reductions. Cost reductions will be [ ].
o QUALITY AND SERVICE
Schmalbach-Lubeca agrees that it will provide PET containers
to AquaPenn that will be merchantable and fit for the
purchase for which they are intended and will be free from
defects in materials and workmanship.
o FORCE MAJEURE
Neither party shall be liable for failure or delay in
performance under this agreement due in whole or part to
causes such as an act of God, strike, lockout or other labor
dispute, civil commotion, sabotage, fire, flood, explosion,
acts of government, unforeseen shortages or unavailability
of fuel, power, transportation, raw materials or supplies,
inability to obtain or delay in obtaining necessary
equipment or governmental approval, permits, licenses or
allocations, and any other causes which are not within the
reasonable control of the party affected, whether or not of
the kind specifically enumerated above.
3
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Either party affected by such circumstances shall give
written notice thereof to the other party. During any such
period, Schmalbach-Lubeca shall allocate its available
supply among its customers in the same proportion as existed
before the occurrence of any such circumstances. Performance
of this agreement shall be resumed as quickly as reasonably
possible after the party affected by such circumstances has
notified the other party that the condition(s) is/are
remedied.
Please indicate your agreement to the above terms and conditions by signing
in the space provided below and return an originally signed copy.
Sincerely,
SCHMALBACH-LUBECA PLASTIC CONTAINERS USA, INC.
/s/ W.J. O'Connell
William J. O'Connell
Eastern Regional Sales Manager
Schmalbach-Lubeca Plastic
AquaPenn Spring Water Company Containers USA, Inc.
By: /s/Geoffrey F. Feidelberg By: /s/ Thomas C. Hansen
------------------------- --------------------------
Name: Geoffrey F. Feidelberg Name: Thomas C. Hansen
----------------------- ------------------------
Title: Chief Operating Officer Title: Vice President Sales &
---------------------- -----------------------
Marketing
---------
Date: 10/7/97 Date: 9/12/97
----------------------- ------------------------
TH/sc
cc: J. Pell
R. Johnson
4
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT 10.13
AGREEMENT
THIS AGREEMENT entered into this 30th day of July 1997, by and between
AQUAPENN Spring Water Company, hereinafter referred to as "AQUAPENN", and
Seven Springs Water Company, hereinafter referred to as "Seven Springs",
WITNESSETH:
WHEREAS, Seven Springs is the owner and holder of a Suwannee River
Water Management District Water Use Permit No. 2-93-00093 (and any
subsequent modifications and renewals of the above referenced "Permit");
and
WHEREAS, AQUAPENN and Seven Springs are desirous of entering into this
Agreement whereby Seven Springs agrees to deliver and sell spring water
under the above referenced Permit to AQUAPENN.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants contained herein, the sum of Ten Dollars, each to the other paid,
and other good and valuable considerations, the parties agree as follows:
1. TERM: The term of this Agreement shall be Ninety-Nine (99) years
from the effective date.
2. NATURE AND SCOPE OF REAL ESTATE SALE: Seven Springs shall sell to
AQUAPENN the front 40 acres which are presently zoned and permitted for a
spring water bottling plant, said property depicted in Exhibit "A",
attached hereto and made a part hereof by reference. The standards, terms
and conditions shall be in accordance with the Florida Bar-Florida Board of
Realtors contract, where applicable. The sales price shall be $7,500 per
acre for a total purchase price of $300,000.00 and shall be paid in cash,
adjusted by prorations. The Seller, in addition, grants to AQUAPENN, its
successors or assigns, such ingress, egress and public utility and such
other easements as are necessary to carry out the terms and conditions of
this Agreement.
3. OPTION TO PURCHASE ADDITIONAL REAL ESTATE: Seven Springs shall
deliver to AQUAPENN in recordable form an option to purchase the adjacent
Northerly 40 acres for $7,500 per acre, said purchase price to be paid in
cash, adjusted by prorations. Said option to be delivered simultaneously
with the closing of the initial forty acres and shall run for a period of
ten years. This option shall be
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
assignable but shall be required to be for a use of the land which is a
part of or associated with the spring water operation contained in the
initial 40 acres.
4. AGREEMENT FOR CONSTRUCTION OF SPRING WATER BOTTLING PLANT: Within
sixty (60) days of the closing of the purchase of the front 40 acres
described in paragraph 2 AQUAPENN will begin construction of a spring water
bottling plant having a construction cost of plant, improvements and
equipment of not less than [----------] and an operational capacity of
bottling no less than [-----] gallons a day. Said construction will be
completed and the plant operational within [----------] of the date of
closing. In the event AQUAPENN does not begin such construction within
sixty (60) days from the date of closing or fails to pursue said
construction with reasonable diligence once begun, Seven Springs
[--------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- --------]. In addition to the spring water bottling facility, AQUAPENN
will, at its sole cost and expense, provide all pumps, pipes, valves,
meters, etc. necessary for the spring water extraction and for any other
monitoring required by Suwannee River Water Management or other agency and
all operational and maintenance costs associated with said equipment.
5. MINIMUM GUARANTEE PAYMENTS: AQUAPENN agrees to purchase from Seven
Springs at a cost of [-------------] per gallon, payable on a monthly basis
in arrears, all water pumped, extracted, processed or sold by AQUAPENN.
Said water shall be extracted from the spring sources currently covered by
the Suwannee River Water Management water use permit more specifically
described in paragraph 7 and be subject to the minimum and maximum amounts
set forth below. In the second year AQUAPENN shall pay a minimum annual
payment of [------], in the third year and all subsequent years a minimum
annual payment of [------]. There will be no minimum payment in the first
year. For this purpose the first year shall begin 12 months from the date
of closing or when the plant first becomes operational, whichever first
occurs. Beginning the fifth year and continuing each subsequent year,
should any monthly payment by AQUAPENN be less than [-----]
[----------------------] Seven Springs Water Company will have the right to
sell spring water to others on a nonexclusive basis for the ensuing sixty
(60) day period and in addition will have the right to the use of and
access to AQUAPENN's bulk spring water loading facilities on a 24-hour
basis. AQUAPENN will construct and maintain its bulk water loading facility
in such a manner that personnel from AQUAPENN or Seven Springs will not be
required and the bulk spring water customer's driver can reasonably operate
the facility by himself. So long as AQUAPENN's bulk loading facility
functions in such a manner AQUAPENN will have no staffing responsibilities
for users of the bulk loading facility. In no event shall Seven Springs
sell
2
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
water in quantities which would prohibit AQUAPENN from meeting its monthly
minimum. In exchange for said use, AQUAPENN will be paid the sum of
[--------------------------] per gallon for spring water not consumed by
AQUAPENN and sold to others by Seven Springs. AQUAPENN will not be
responsible for the [-------------] fee for spring water acquired by users
of the bulk facility for which AQUAPENN receives the [-------------------]
fee.
The parties acknowledge that AQUAPENN will have a domestic water well
for purposes of rinsing bottles or other containers, cleaning floors,
sprinkler systems and any other domestic use associated with the operation
of the facility. AQUAPENN will be under no obligation to pay a fee to Seven
Springs for this usage but AQUAPENN specifically agrees that only water
purchased from Seven Springs will be used for bottling, distribution or
sale.
6. PRICE PER GALLON ADJUSTMENT: The per gallon price will be adjusted
by [-----------------] of the change in the Consumer Price Index (CPI) or
the equivalent every [------] years. The parties acknowledge that in the
opinion of some the CPI as it is currently constituted overstates the true
overall rate of inflation and it has been proposed that either the current
method of calculating the CPI be changed or it be discontinued and replaced
with a new index. Should either occur, the adjustments referred to will be
made so as to conform as nearly as possible to [-----------------] of the
change in the CPI as currently constituted. An identical CPI increase shall
be applicable to the [--------------------] provided in Paragraph 5 and 11.
7. REPRESENTATION AND WARRANTIES: Seven Springs hereby represents that
it is the owner and holder of an unencumbered Suwannee River Water
Management District Water Use Permit No. 2-93-00093, which permit allows
extraction of 1,152,000.00 gallons per day annual average subject to a
maximum daily amount of 1,728,000.00 gallons. Seven Springs shall make all
necessary applications for renewals of the permit and shall diligently
pursue said renewal applications. Seven Springs shall not jeopardize any
existing or renewed permit. One of the measures used in determining the
amount of gallons available under a water use permit is the number of acres
covered by the application. To this end AQUAPENN agrees that any acreage it
owns or controls in the area may be included in any application for a water
use permit should the applicable regulations allow it an be subject to the
minimum/maximum amount set forth below.
8. RIGHT OF FIRST REFUSAL: AQUAPENN will be granted a reasonable right
of first refusal in the event Seven Springs elects to sell its rights under
this Agreement, or the spring water rights or spring water permits.
3
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
9. COVENANT NOT TO ADVERSELY AFFECT SPRING WATER QUALITY: Seven
Springs shall obtain a written agreement from Barbara Wray Suggs that any
future development of her lands shall not adversely affect the quality of
spring water to be purchased by AQUAPENN to the extent that it does not
meet the quality guidelines established by the EPA or Food and Drug
Administration or the International Bottled Water Association. This
covenant shall not be interpreted to prohibit the construction of
commercial or residential facilities provided same does not impact the
spring water quality to the extent that it does not meet the before
mentioned quality guidelines.
10. QUALITY OF SPRING WATER SUPPLY: All obligations of AQUAPENN shall
be suspended during any period or periods that the spring water quality at
the source does not meet guidelines for drinking spring water established
by the EPA or Food and Drug Administration or International Bottled Water
Association. AQUAPENN will have the right but not the obligation to attempt
to cure quality defects and Seven Springs agrees to assist AQUAPENN in its
efforts to cure such defects. In the event said period of non-compliance
exceeds 15 successive days or 60 cumulative days in a given calendar year
then AQUAPENN may elect to bring or acquire bulk spring water off-site to
supply the plant so long as such condition exists and for 30 days
thereafter or terminate this Agreement and have no further liability
hereunder.
11. GOVERNMENTAL IMPOSITIONS: AQUAPENN will pay to the proper
governmental authority all taxes, if any, due and owing upon any sums
payable to Seven Springs, except income, estate or gift taxes. AQUAPENN
will pay to or on behalf of Seven Springs to the proper governmental
authority all taxes, if any, imposed upon water extracted and delivered to
AQUAPENN or processed by AQUAPENN, such as a severance or consumptive use
tax. In the event said taxes exceed the sum of [-------------------] per
gallon, then and in that event AQUAPENN may terminate this Agreement and
shall have no further liability hereunder.
12. CONTINGENCIES: AQUAPENN will have six months from the date of this
agreement to obtain approval of the Board of Directors of AQUAPENN for this
transaction; to complete all testing and analysis to determine the
necessary quality of the spring water; the suitability of the plant site;
and to obtain all necessary permits for the construction of the spring
water bottling plant and related approvals for removal of the spring water.
On or before the six-month period, AQUAPENN shall satisfy or notify Seven
Springs in writing that it has waived all contingencies, at which time the
closing referenced in Paragraph 2 above shall occur.
13. DESTRUCTION OF SPRING WATER BOTTLING PLANT: In the event the
bottling plant is destroyed in whole or in part by a casualty
4
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
to the extent that operation of the bottling plant must be suspended, then,
and in that event, AQUAPENN may elect to terminate this Agreement or to
repair or restore the plant and shall notify Seven Springs of its election
within 30 days of the casualty. In the event AQUAPENN elects to rebuild the
plant, the minimum payments will be suspended during the reconstruction
period. If AQUAPENN elects to rebuild, it shall begin the rebuilding within
30 days of notifying Seven Springs of its election to do so and diligently
pursue said construction. In the event AQUAPENN elects not to rebuild, it
will grant a right of first refusal to Seven Springs and will agree not to
build another bottling facility nor purchase water from any source within
100 miles of Ginnie Springs within the next seven (7) years.
14. ELECTION TO TERMINATE: Notwithstanding anything contained herein
to the contrary, AQUAPENN may elect to terminate this Agreement at any
time, for any reason, and shall be liable to Seven Springs for payment of a
sum equal to 6 months minimum guarantee from the date of termination.
15. RIGHT OF ENTRY: Seven Springs hereby grants to AQUAPENN and its
authorized agents the right to freely enter upon the lands herein described
for the purpose of inspection and testing the lands and the spring water.
16. OTHER AGREEMENTS: This Agreement constitutes the entire agreement
between the parties, and any changes, amendments or modifications hereof
shall be null and void unless same are reduced to writing and signed by the
parties hereto.
17. PERSONS BOUND: The covenants herein contained shall bind, and the
benefits and advantages shall inure to, the respective heirs, executors,
administrators, successors and assigns of the parties hereto. Whenever
used, the singular number shall include the plural, the singular, and the
use of any gender shall include all genders. Other party may assign their
rights in the Agreement.
18. ATTORNEYS' FEES, COSTS: In the event of any litigation arising out
of this Agreement, the prevailing party shall be entitled to recover from
the non-prevailing party all expenses incurred by the prevailing party in
connection with said litigation including a reasonable attorney's fee.
19. SURVIVAL OF COVENANTS: Any of the representations, warranties,
covenants, and agreements of the parties, as well as any rights and
benefits of the parties pertaining to a period of time following the
closing of the transactions contemplated hereby, shall survive the closing
and shall not be merged therein.
5
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
20. NOTICES: Any notice required or permitted to be delivered
hereunder shall be deemed received when sent by United States mail, postage
prepaid, certified mail, return receipt requested, or by express courier,
addressed to Seller or Buyer, as the case may be, at the address set forth
below:
6
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Seven Springs Water Company
c/o Ginnie Springs, Inc. with copy to W. Langston Holland, Attorney at Law
7300 N.E. Ginnie Springs Road 125 28th Street N., St. Petersburg, FL 33713
High Springs, FL 32643
AQUAPENN Spring Water Company
One AquaPenn Drive
P.O. Box 938
Milesburg, PA 16853
With copy to:
McQuaide, Blasko, Schwartz
811 University Drive
State College, PA 16801
Attn: Thomas Schwartz, Esquire
Daniel E. Bright, Esquire
(814) 238-4926
21. DESCRIPTIVE HEADINGS: The descriptive headings used herein are for
convenience only and are not intended to necessarily refer to the matter in
sections which precede or follow them, and have no effect whatsoever in
determining the rights or obligations of the parties.
22. STOCK OPTION: Simultaneously with the closing AQUAPENN shall grant
to Seven Springs Water Company the option during a [------] period
commencing with the date of closing to purchase [----] shares of AQUAPENN's
common stock as it currently exists at [----------------------------].
23. COVENANTS RUNNING WITH THE LAND: The deed to the property
described in paragraphs 2 and 3 shall contain covenants running with the
land as set forth in the attached Exhibit B.
24. RIGHT OF FIRST REFUSAL: Anything to the contrary in this agreement
notwithstanding, should AQUAPENN terminate this agreement for any reason,
Seven Springs will have the right of first refusal to purchase any real
estate described in paragraphs 2 and 3 which was purchased by AQUAPENN
together with the improvements and fixtures and easements attached to or
used in relation to the transporting, processing or bottling of water. The
terms of such right of first refusal are set forth in attached Exhibit "C".
This right of first refusal will not apply unless and until this agreement
is terminated and will expire five (5) years after the date of termination.
25. SURVIVAL OF OBLIGATIONS: Anything to the contrary in this
agreement notwithstanding, should AQUAPENN terminate this agreement for any
reason, all obligations incurred by AQUAPENN prior to such termination,
including but not limited to water charges (including minimums), and
governmental impositions shall survive such termination.
7
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
26. [--------------------------------------------]: Anything to the
contrary in this agreement notwithstanding, AQUAPENN agrees that any and
all water purchased, processed or sold at its water bottling plant to be
constructed pursuant to paragraph 4 or
[--------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------]. This provision shall survive the termination of this
agreement.
27. INSPECTION MEASUREMENT AND CONFIRMATION: AQUAPENN will provide
copies of its records certified as correct by a company officer covering
all water sales and shipments no less than twice monthly, allow Seven
Springs full access to its pumping facilities and the right to install
measurement devices so that Seven Springs can independently measure the
volume of water extracted. Seven Springs will also have reasonable access
to AQUAPENN's water distribution facilities for the purpose of
independently measuring the volume of water sold or distributed.
28. ADJUSTMENTS TO DESCRIPTIONS AND PURCHASE PRICE OF PROPERTIES
COVERED IN PARAGRAPHS 2 AND 3: The conveyances covered by paragraphs 2 and
3 will exclude the east sixty (60) feet of the described property and
should such exclusion cause the total area of either parcel conveyed to be
less than forty (40) acres, AQUAPENN will receive a credit at closing equal
to $7500 times the number of acres conveyed which is less than forty (40).
For example, should the total area of one parcel conveyed equal 39-1/2
acres, the credit will equal $3750.
Seven Springs Water Company AQUAPENN Spring Water Company
By:/s/ Barbara Wray Suggs By:/s/ Edward J. Lauth, III
------------------------- ----------------------------
As President As President
Attest:/s/ Mark D. Wray Attest:/s/ Dennis B. Nisewonger
--------------------- ------------------------
As Secretary As Secretary
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<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT "A"
THIS QUIT-CLAIM DEED, executed this 31st day of March, 1995, by
MARK D. WRAY, RHONDA WRAY JOHNSON, and RISA WRAY KLEMANS c/o 101 N.E.
Ginnie Springs Blvd., High Springs, FL 32643 First Party, to
SEVEN SPRINGS WATER COMPANY
whose address is 125 28th Street, North, St. Petersburg, FL 33713 and whose
Tax I.D. Number is 59-3243964
(Wherever used herein the terms "First Party" and "Second Party" shall
include singular and plural, heirs, legal representatives, and assigns
of individuals, and the successors and assigns of corporations,
wherever the context so admits or requires.)
WITNESSETH, That the said First Party, for and in consideration of the
sum of Ten and No/100 Dollars ($10.00), in hand paid by the said Second
Party, the receipt (illegible text) hereby acknowledged, does hereby
remise, release and quit claim to the said Second Party forever, all the
right, title, interest,claim and demand which the said first party has in
and to the following described lot, piece or parcel of land, situate, lying
and being in the County of Gilchrist, State of Florida, to wit:
Commence at the SW corner of the NW 1/4 of SW 1/4 of Section 2, TBE,
R16E for a point of reference. Thence run along the South line of said
NW 1/4 of SW 1/4, M88^43'51"E, 18.00 feet to the point of beginning.
Thence run 801^06'24"E, 158.86 feet to the North R/W line of County
Road No. C-340, said point being on a curve; thence run along said R/W
line on curve being concave Northerly (having a central angle of
11^09'22" and a radius of 5679.58 feet) Northeasterly an arc distance
of 1105.88 feet to point of tangency; thence continue along said R/W
line N71^22'11"E, 239.93 feet to the East line of said NW 1/4 of SW
1/4; thence run along said East line, N01^00'16"W, 1155.86 feet;
thence run SSE^43'54"W, 1310.47 feet; thence run 801^06'24"E, 1296.17
feet to the point of beginning, all lying and being in Gilchrist
County, Florida.
THIS IS NOT HOMESTEAD PROPERTY
Tax Parcel # 02-08-16-0000-0003-0010
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
TO HAVE AND TO HOLD the same together with all and singular the
appurtenances thereunto belonging or in anywise appertaining, and all the
estate, right, title, interest, lien, equity and claim whatsoever of the
said First Party, either in law or equity and claim whatsoever of the said
First Party, either in law or equity, to the only proper use, benefit and
behalf of the said Second Party forever.
IN WITNESS WHEREOF, the said First Party has signed and sealed these
presents the day and year first above written.
Signed, sealed and delivered in our presence as witnesses:
/s/ Lynn R. Holyfield /s/ Mark D. Wray L.S.
- -------------------------- --------------------------
Lynn R. Holyfield MARK D. WRAY
/s/ Stephen A. Rappenecker /s/ Rhonda W. Johnson L.S.
- -------------------------- --------------------------
Stephen A. Rappenecker RHONDA WRAY JOHNSON
/s/ Risa Wray Klemens L.S.
--------------------------
RISA WRAY KLEMANS
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT "B"
COVENANT RUNNING WITH THE LAND: Grantee agrees and covenants that the land
and any improvements to it shall be used solely for the bottling,
processing and distribution of potable water and incidental uses associated
with same.
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT "C"
RIGHT OF FIRST REFUSAL: Before AQUAPENN may sell or transfer the property
described in either paragraphs 2 or 3 of this agreement or the improvements
on it, it must first offer it to Seven Springs by giving Seven Springs
written notice of the price, terms and conditions upon which AQUAPENN
proposes to sell or transfer the property. Seven Springs will have 30 days
from receipt of such written notice within in which to notify AQUAPENN that
Seven Springs agrees to purchase the property on the same terms and
conditions stated in the notice and if it does the sale shall be closed 30
days after of such notification. If Seven Springs does not accept the offer
in writing within 30 days after receipt of it AQUAPENN may sell the
property to any other purchaser at and only at the same price, terms and
conditions stated in the notice to Seven Springs provided that such sale
shall be closed within 160 days after the date of the first notice to Seven
Springs. If AQUAPENN has not completed the sale or transfer within said
160-day period, the right of AQUAPENN to sell or transfer the property free
from the right of first refusal held by Seven Springs will terminate and
the provisions of this agreement will apply to any subsequent proposed sale
or transfer of the property by AQUAPENN. The term "transfer" includes but
is not limited to a lease agreement.
EXHIBIT 10.14
WATER AGREEMENT
BETWEEN
AQUAPENN SPRING WATER CO.
AND
BELLEFONTE BOROUGH
<PAGE>
TABLE OF CONTENTS
RECITALS................................................. 1
ARTICLE I - SALE OF WATER................................ 1
ARTICLE II - COMMENCEMENT DATE........................... 2
ARTICLE III - RATES AND PAYMENTS......................... 3
ARTICLE IV - TERMS OF AGREEMENT.......................... 5
ARTICLE V - WATER FACILITIES............................. 6
ARTICLE VI - INSURANCE AND INDEMNIFICATION............... 8
ARTICLE VII - RESTRICTION ON USE OF WATER................ 9
ARTICLE VIII - EXCUSES FOR NON-PERFORMANCE............... 11
ARTICLE IX - RELATIONSHIP OF THE PARTIES................. 12
ARTICLE X - PROHIBITION ON ASSIGNMENT.................... 12
ARTICLE XI - SOURCE IDENTIFICATION....................... 13
ARTICLE XII - NOTICES.................................... 13
ARTICLE XIII - MISCELLANEOUS............................. 14
<PAGE>
WATER AGREEMENT
THIS WATER AGREEMENT, made and entered this 10th day of July,
1995, by and between the AQUAPENN SPRING WATER CO., with its office address
at 3035 Research Drive, State College, Centre County, Pennsylvania, (herein
called "AquaPenn")
AND
THE BOROUGH OF BELLEFONTE, with its office address at 236 West Lamb Street,
Bellefonte, Centre County, Pennsylvania (herein called "Bellefonte").
RECITALS
(a) AquaPenn is interested in securing a source of potable
drinking water for use in its bottled water company, within a reasonable
distance of the production facilities of AquaPenn.
(B) Bellefonte presently has an excess of potable drinking water
which, subject to the terms and conditions of this Agreement, will be made
available to AquaPenn.
NOW, THEREFORE, in consideration of the foregoing recitals and
intending to be legally bound hereby the parties agree as follows:
ARTICLE I
SALE OF WATER
SECTION 1.01. Bellefonte agrees to sell AquaPenn excess
gravity-pressured potable water not to exceed 1,000,000 (1.00 mgd) per day
from a pipe which is a sixteen (16) inch pipe originating
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from a spot in the immediate area of the Big Spring, Bellefonte,
Pennsylvania, subject to and expressly conditioned to the following:
(a) To all the terms and conditions of the Bellefonte's Water
Allocation Permit as issued by the Commonwealth of Pennsylvania,
Department of Environmental Resources, Permit No. WA-23A, as amended,
and, all the Ordinances, Resolutions, Rules, Regulations and Laws of
any Local, State or Federal Governmental Authority having jurisdiction
over the subject and the performance of this Agreement;
(b) That the source of the water, known as the Big Spring,
continues to produce water at a rate which allows all of the water use
demands of the Borough of Bellefonte to be met before there is water
available to AquaPenn; and,
(c) Fulfillment of the needs and requirements of Bellefonte's
inhabitants, existing contracts and agreements for supply of water,
and, the present customers of Bellefonte's water system located within
and beyond the political boundaries of Bellefonte.
(d) That the Big Spring is determined to be a "spring," and not
influenced by surface water, as to be determined by the Surface Water
Influence Testing being currently conducted.
SECTION 1.02. It is expressly understood that Bellefonte makes no
representations, warranties or guarantees as to the source of the water,
its availability or quantity.
ARTICLE II
COMMENCEMENT DATE
SECTION 2.01. Commencement date means the date on which AquaPenn
notifies the Borough of Bellefonte when all applicable permits, licenses
and approvals, with respect to the subject of
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this Agreement, have been obtained, and, that all construction has been
completed to receive the water from the point located in the immediate area
of the Big Spring, Bellefonte, Pennsylvania.
SECTION 2.02. If all the permits, licenses and approvals are not
obtained by AquaPenn or all construction necessary to transfer the water is
not completed prior to the 1st day of May, 1997, this Agreement shall
terminate forthwith and be deemed null and void.
ARTICLE III
RATES AND PAYMENTS
SECTION 3.01 AquaPenn shall pay for the potable water as follows:
(a) During the first five (5) years from the commencement
date of this Agreement as provided in Article II and IV, the
amount of forty ($.40) cents per thousand gallons transferred
each day.
(b) On commencement of the second five (5) years from the
commencement date of this Agreement as provided in Article II and
IV, the amount of fifty ($.50) cents per thousand gallons
transferred each day.
(c) After the tenth (10th) year of the commencement date of
this Agreement as provided in Articles II and IV, and upon sixty
(60) days written notice by Bellefonte to AquaPenn, Bellefonte
may increase the costs of the water by applying the fluctuations
in the Consumer Price Index to the costs per thousand gallons as
set forth in subparagraph (b) as follows:
(i) The Consumer Price Index for the purpose of this
Agreement shall be the Consumer Price Index for "All
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Items for All Urban Customer" published by the Bureau of
Labor Statistics of the United States Department of Labor,
Pittsburgh-Beaver Valley. For All Items 1982-84 equals 100.
If the Consumer Price Index ceases to be published by the
United States Department of Labor, Bureau Statistics, then
the calculations shall be based on the closest Successor
Index as identified by the United States Department of
Labor. If no such Successor exists, the calculations shall
be based on an Index prepared by Bellefonte and submitted to
AquaPenn.
(ii) The base date shall be the first day of the calendar
month preceding the date of this Agreement.
(iii) The adjusted increase for payments for the water shall
be determined by multiplying the cost of the water per
thousand gallons paid during the second five (5) year term
by a fraction, the numerator of which shall be the Consumer
Price Index for the last calendar month at the conclusion of
the second five (5) year term of this Agreement, and, the
denominator which shall be the Consumer Price Index for the
base date. The resulting sum, if greater than the amount set
forth in subparagraph (b) above may be adjusted by
Bellefonte, commencing with the month following the
expiration of ten (10) years from the commencement date of
this Agreement.
SECTION 3.02. Beginning on the commencement date of this
Agreement, and, thereafter, Bellefonte shall monthly invoice AquaPenn for
payment of the water transferred the preceding month.
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AquaPenn shall pay Bellefonte the amount due, and any other amount due,
within ten (10) days of the date of the invoice.
SECTION 3.03. In the event AquaPenn shall fail to pay for the
water as required hereunder for a period of thirty (30) days after receipt
of written notice, then AquaPenn agrees that Bellefonte shall have the
right, at its option, to proceed against AquaPenn in any manner permitted
by law.
SECTION 3.04. If AquaPenn and Bellefonte are unable to resolve
any dispute with respect to any amount owed by AquaPenn hereunder, AquaPenn
shall be obligated to pay all undisputed amounts with respect to such
dispute.
ARTICLE IV
TERMS OF AGREEMENT
SECTION 4.01. Upon receipt of the notice provided in Article II,
this Agreement shall commence for a term of fifty (50) years from the date
of the notice. After the expiration of the term of fifty (50) years, the
Agreement shall automatically renew itself for a term of five (5) years
unless written notice is delivered by either party to the other six (6)
months prior to the expiration of the initial fifty (50) year term of this
Agreement indicating an intent not to renew. Any renewal shall be on the
terms and conditions then mutually agreed upon between AquaPenn and
Bellefonte.
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ARTICLE V
WATER FACILITIES
SECTION 5.01. AquaPenn, at its sole cost and expense, shall
acquire, construct, install, repair and maintain all facilities, pipes,
pipelines, pumps and equipment or other apparatus necessary to transmit the
water from the pipe in the immediate area of the Big Spring to AquaPenn.
All such construction, installation, repairs and maintenance of wells,
pipes and equipment shall be in accordance with engineering standards
acceptable to Bellefonte. Bellefonte, upon reasonable notice, shall provide
AquaPenn with access to the transmission point in the immediate area of the
Big Spring for the purpose of transmitting water to AquaPenn. AquaPenn, at
its sole cost and expense, shall acquire all rights-of-way from AquaPenn to
the Big Spring, and, upon termination of this Agreement, Bellefonte shall
have the right but not the responsibility to have ownership of the
rights-of-way transferred to Bellefonte.
SECTION 5.02. The AquaPenn pipeline shall not intrude into, or in
any other way invade the pond of the Big Spring, but shall terminate at a
point near the Big Spring. A separate and distinct pipeline, being very
short in length, from the AquaPenn pipeline, to the pond of the Big Spring,
shall be constructed by Bellefonte, with all costs of construction to be
paid by AquaPenn. This portion of pipe shall then be immediately turned
over to, and surrendered to, Bellefonte, who shall have sole control of it.
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SECTION 5.03. AquaPenn shall, at its sole cost and expense,
provide a meter at the Big Spring at the point where the water is delivered
to AquaPenn. AquaPenn, at its sole cost and expense, shall cause the meter
to be calibrated every three (3) years after the commencement date of this
Agreement, and, AquaPenn shall be solely responsible for its maintenance
and repair. Should the accuracy of the meter at any time during the term of
this Agreement be challenged, the costs of calibration shall be paid by the
party whose position was changed (plus or minus five percent deviation) as
a result of the re-calibration. Should the meter be inaccurate for a
specified period of time or inoperable for any reason, the usage for such
period will be based on the average daily use for the ten (10) days
following the repair or replacement of the meter or its accurate
re-calibration.
SECTION 5.04. All facilities, pipes, pipeline pumps, equipment
and/or other apparatus installed or constructed by AquaPenn to receive and
distribute the water pursuant to this Agreement shall be and remain the
sole property of AquaPenn, other than that pipeline described in Paragraph
5.02. above. Such facilities may at the termination or expiration of this
Agreement be removed by AquaPenn.
SECTION 5.05. AquaPenn, at its sole cost and expense, shall
comply with all acts, rules, regulations, orders and directives of any
legislative, executive, administrative or judicial body applicable to the
performance of this Agreement, and,
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<PAGE>
to the operation, repair and maintenance of the transmission facilities
from Bellefonte to AquaPenn. Without limiting the foregoing, AquaPenn or
Bellefonte may contest, in good faith, any such laws, ordinances, rules,
regulations, permits, licenses, orders, or directives of any executive,
administrative or judicial body.
ARTICLE VI
INSURANCE AND INDEMNIFICATION
SECTION 6.01. AquaPenn shall insure and keep insured all the
distribution and transmission facilities of its water system which are of a
character usually insured by persons operating properties of a similar
nature by a responsible insurance company or companies authorized and
qualified under the laws of the Commonwealth of Pennsylvania to assume the
risks thereof against loss or damage by fire and any hazards to the extent
that such properties are usually insured by persons operating properties of
similar nature in the same or similar localities. The amount of said
insurance in each case and the provisions of these insurance policies shall
be subject to the approval of Bellefonte.
SECTION 6.02. AquaPenn will maintain public liability insurance,
property damage and worker's compensation insurance in such amounts and
containing such terms and provisions as shall be approved by Bellefonte.
SECTION 6.03. All insurance policies provided herein shall be for
the benefit of Bellefonte, and, Bellefonte shall be
8
<PAGE>
named as an additional insured on all the insurance policies. All insurance
policies shall be filed with Bellefonte, and, no changes shall be made to
the policies of insurance without the prior consent of Bellefonte.
SECTION 6.04. AquaPenn agrees that it shall protect, indemnify
and hold Bellefonte and their respective officers, employees and agents
from and against all liabilities, actions, damages, claims, demands,
judgments, losses, costs, expenses, suits, or actions and reasonable
attorney's fees and shall defend Bellefonte in any suit, including appeals,
for personal injury to, or death of, any person or persons, or for loss of
or damage to, property resulting from the acts or omissions of AquaPenn in
the performance (or non-performance) of AquaPenn's obligations under this
Agreement and for any loss or claim resulting from the performance (or
non-performance) of Bellefonte's obligation under this Agreement, or, the
execution and performance of this Agreement or any other suit filed against
Bellefonte as a result of this Agreement.
ARTICLE VII
RESTRICTION ON USE OF WATER
SECTION 7.01. AquaPenn shall use the water obtained from
Bellefonte for sale in its bottled water business, and is specifically
prohibited from providing, at any price or cost, water from the Big Spring
to any other customer, corporation, or entity without prior written
approval from Bellefonte.
9
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SECTION 7.02. AquaPenn shall not contest or appeal or otherwise
oppose, directly or indirectly, the application for any permit or the
issuance of any permit to Bellefonte concerning its water source or its
transmission or distribution system, and, the delivery of water to any of
Bellefonte's customers.
SECTION 7.03. AquaPenn shall continually operate its water
distribution and transmission system in a sufficient and economic manner
and will keep its system in a state of good repair and will replace all
equipment necessary from time to time so as not to waste any water provided
hereunder.
SECTION 7.04. Should Bellefonte be required to install new
procedures or improve its water system as a result of this Agreement with
AquaPenn, all costs of the same shall be paid by AquaPenn. If the
improvements or new procedures are required as a result of a combination of
this Agreement and the supplying water to Bellefonte customers, then
Bellefonte shall pro-rate the costs thereof based on the number of gallons
of water used within the geographic boundaries of Bellefonte and those
transferred to AquaPenn. The proration shall be based on the highest
average of any amount of water furnished to AquaPenn during the previous
year prior to the necessity for installing such new procedures or making
the improvements.
SECTION 7.05. AquaPenn shall execute any and all documents which
may be required by Bellefonte to modify, alter or amend this Agreement in
order to accommodate any financing which
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<PAGE>
Bellefonte may undertake to improve or which effects its water system.
ARTICLE VIII
EXCUSES FOR NON-PERFORMANCE
SECTION 8.01. The failure of either party to perform any
obligation under this Agreement due to an uncontrollable circumstance shall
operate as an excuse to performance and will not constitute a breach of any
obligation. Uncontrollable circumstance means by act, event or condition,
that has had, or may reasonably be expected to have, a direct material
adverse effect on the rights or obligations of a party under this Agreement
or a direct material adverse effect on the furnishing of water under this
Agreement, if such act, event or condition is beyond the reasonable control
or the party relying thereon has justification for not performing an
obligation or complying with any condition required of such party under
this Agreement. Such acts or events shall include, but shall not be limited
to the following:
(a) An Act of God, hurricanes, tornadoes, epidemic,
landslides, lightening, earthquake, flood, fire or explosion or
similar occurrence; or an act of the public enemy, war, blockade,
insurrection, riot, general unrest, or restraint of government
and people, civil disturbance of similar occurrence;
(b) The order, final actions, injunction and/or judgment of
any federal, commonwealth or local court, administrative agency
or governmental body which has jurisdiction over the performance
of the parties' obligation to this Agreement;
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(c) A change in the law which includes the enactment,
adoption, promulgation, modification or repeal after the date of
this Agreement, of any Federal, commonwealth, county or other
local law, ordinance, code rule, or regulation or other similar
regulation or other similar legislation which establishes
obligation on responsibility affecting the performance under this
Agreement which are more burdensome than those in effect on the
date of this Agreement.
SECTION 8.02. Notwithstanding the foregoing, Bellefonte may
terminate this contract at any time, in its discretion, and at its option,
after written notice from Bellefonte, if AquaPenn shall ever be more than
60 days in default or in delinquency to Bellefonte.
ARTICLE IX
RELATIONSHIP OF THE PARTIES
SECTION 9.01. Neither AquaPenn nor Bellefonte shall have the
responsibility to perform services for or to assume contractual obligations
which are the obligations of the other.
SECTION 9.02. Nothing herein shall constitute either party as a
partner, agent or representative of the other, or be deemed to create any
fiduciary relationship between them.
ARTICLE X
PROHIBITION ON ASSIGNMENT
SECTION 10.01. This Agreement may not be assigned by AquaPenn
without the prior written consent of Bellefonte duly approved by Resolution
of Bellefonte's governing bodies, and, shall
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not be assigned by AquaPenn in connection with the obtaining of financing
for any purpose.
SECTION 10.02. Bellefonte and AquaPenn agree to work for the
assignment of all rights and privileges provided to the Borough of
Milesburg, in Commonwealth of Pennsylvania, Department of Environmental
Resources, Permit No. WA-23A, to AquaPenn.
ARTICLE XI
SOURCE IDENTIFICATION
SECTION 11.01. AquaPenn confirms that all bottled water from the
Big Spring packaged for sale to the public shall prominently display on its
label information which identifies the source of the water as the Big
Spring, Bellefonte, PA. Current regulations from the Pennsylvania
Department of Environmental Resources require such identification. Even
absent that requirement, however, AquaPenn shall continue to list the Big
Spring, Bellefonte, PA, as the source of the water.
ARTICLE XII
NOTICES
SECTION 12.01. All notices, demands, requests and other
communications hereunder shall be deemed sufficient and property given if
in writing and delivered to the following addresses by certified or
registered mail, postage prepaid:
(a) TO: AquaPenn Spring Water Co.
3035 Research Drive
State College, PA 16801
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(b) TO: Bellefonte and Bellefonte Borough
Borough Manager
236 West Lamb Street
Bellefonte, PA 16823
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01. This Agreement shall be authorized and approved by
duly authorized ordinances adopted by Bellefonte, and by corporate
action/resolution by AquaPenn.
SECTION 13.02. Time shall be the essence of the performance of
this Agreement.
SECTION 13.03. This Agreement shall be construed under the laws
of the Commonwealth of Pennsylvania.
SECTION 13.04. This Agreement reflects the understanding and
agreement among the parties and there are no other covenants or agreements
that are not herein contained.
SECTION 13.05. In the event that any provision of this Agreement
shall, for any reason, be determined to be invalid, illegal or
unenforceable in any respect, all other provisions of this Agreement shall
be binding on the parties, and shall remain in full force and effect. If
the provisions on payment are found to be invalid, illegal or
unenforceable, then, in such an event,
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Bellefonte may upon written notice terminate this Agreement forthwith, and,
this Agreement shall be null and void.
IN WITNESS WHEREOF, the parties have signed this Agreement the
day and year first above written.
ATTEST AQUAPENN SPRING WATER CO.
/s/ Tammy S. Hahn By: /s/ Edward J. Lauth, III
- ------------------------- --------------------------------
EDWARD J. LAUTH, III
President
ATTEST BOROUGH OF BELLEFONTE
(Illegible Signature) By: /s/ William C. Schultz
------------------------------------
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT 10.15
AMENDED AND RESTATED LEASE AGREEMENT
THIS AMENDED AND RESTATED LEASE AGREEMENT is made and executed
this 14 day of October, 1997 by and between ROY BRESLER and IDA BRESLER,
husband and wife, of Franklin Township, Huntingdon County, Pennsylvania
(referred to in the singular as "Lessor")
-AND-
AQUAPENN SPRING WATER COMPANY, INC., a Pennsylvania Business Corporation,
with offices at One AquaPenn Drive, Milesburg, Pennsylvania (referred to as
"Lessee").
BACKGROUND
A. Lessor and Edward J. Lauth, III, entered into a Lease Agreement
dated October 28, 1986 (the "Lease Agreement"), whereby Lessor leased to
Lauth certain real estate in Franklin Township, Huntingdon County,
Pennsylvania, as more fully described on Exhibit "A" attached hereto and
made a part hereof by this reference (the "Leased Premises").
B. On May 27, 1988, Lessor and Edward J. Lauth, III entered into a
Memorandum of Lease and Right of First Refusal which was recorded in the
Office of the
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Recorder of Deeds of Huntingdon County, Pennsylvania on June 20, 1988 at
record book 218, page 274.
C. On December 22, 1988, Edward J. Lauth, III, assigned his rights
under the Lease Agreement to Lessee by a certain Assignment and Assumption
Agreement which was recorded in the Office of the Recorder of Deeds of
Huntingdon County, Pennsylvania on March 10, 1989 at record book 232, page
497.
D. Lessor and Lessee mutually desire to amend and restate the Lease
Agreement in the manner set forth herein.
NOW THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:
1. LEASED PREMISES. Lessor for an in consideration of the rents,
covenants and conditions contained in this Lease, does hereby lease to
Lessee, and Lessee leases and accepts from Lessor, the real property
consisting of approximately seventy four (74) acres, upon which are located
three (3) springs, which is more fully described in Exhibit "A" attached
hereto and by this reference made a part hereof, together with the right of
ingress, egress and regress (the "Leased Premises").
2. LESSOR'S WARRANTY OF TITLE. Lessor hereby represents and warrants
that Lessor is the owner in fee simple absolute of the Leased Premises,
subject to
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
the covenants, conditions, restrictions and easements of record, if any,
which matters of record will not unreasonably interfere with Lessee's use
of the Leased Premises. Lessee is aware of water rights previously granted
by predecessors in title to Lessor herein as set forth in Huntingdon County
Deed Book Vol. 64, Page 685, attached hereto as Exhibit "B".
3. LESSOR'S WARRANTY OF QUIET ENJOYMENT. Lessor covenants and agrees
that Lessee, and Lessee exclusively, in paying the rent and other charges
herein provided for the observing and keeping the covenants, conditions and
terms of this Lease on Lessee's part to be kept or performed, shall
lawfully and quietly hold, occupy, use and enjoy the Leased Premises during
the term of this Lease without hindrance or molestation by Lessor or any
person claiming under Lessor, except as set forth herein relating to rights
retained by Lessor.
4. LEASE TERM. The term of this Lease shall end on December 31, 2017,
subject to the terms and conditions set forth herein. Provided, however,
Lesser may, at any time during the term of this Lease Agreement, upon five
(5) year's written notice to Lessor, terminate this Lease Agreement for any
reason whatsoever, provided that any rental due for the last year shall be
prorated to the date of termination of the Lease. The commencement of the
least term is expressly contingent upon Lessee obtaining from the
Pennsylvania Department of Environmental Protection, or any other such
regulatory agency, a permit for the bottling of water from the Leased
Premises or such other premises as Lessee shall pipe, haul or otherwise
transport the water to. If this Lease is terminated by Lessee prior to
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
December 31, 2017 by exercising its five (5) year termination rights
herein, the Lease shall terminate in its entirety on the date of
termination and Lessee shall have no rights under this Lease Agreement and
in particular shall not retain any options set forth in paragraph 18
hereinafter, subsequent to the date of termination.
5. RENT. Lessee shall pay Lessor rent for the use and occupancy of the
Leased Premises in the amounts set forth on Exhibit "C" attached hereto and
made a part hereof by this reference. All rent shall be payable in advance
on or before the first day of each year during the term of this Lease
Agreement. [ ].
6. REAL ESTATE TAXES. Lessee shall pay any real estate taxes levied
and assessed against the Leased Premises during the term hereof. Such taxes
shall be paid either to Lessor or to the appropriate taxing authorities, at
the election of Lessee, prior to such time as such taxes shall become
delinquent.
7. USE OF LEASED PREMISES. Lessor and Lessee hereby acknowledge it is
their intention that the Leased Premises be used by Lessee as a source of
potable water which will be collected by Lessee into a tank or tanks to be
constructed by Lessee on the Leased Premises which tank or tanks will be in
the vicinity of the springs used as a water source by the Lessor. Lessee
agrees that unless otherwise permitted by Lessor he will construct not more
than one (1) tank for each spring on the Leased Premises. The parties
further intend that this Lease specifically includes the right to take,
draw and otherwise use
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
for sale or other commercial purposes water which flows from any and all
springs located on the Leased Premises. Neither party shall do any act that
would disrupt, pollute, impair or otherwise harm the spring water, keeping
in mind that the water is intended to be a source of potable drinking water
for use by Lessors and sale by Lessee. Lessee at its sole discretion, may
drill wells at the spring site, in order to manage the flow of water from
the springs.
8. CONSTRUCTION AND OPERATION BY LESSEE. Lessee shall at its own
expense construct such tank or tanks, spring covers and enclosures, water
lines and non-chemical filtration or purification systems as shall be
necessary or expedient for the operation of Lessee's contemplated business
on the Leased Premises. Prior to commencing any construction (including any
alteration or improvements), Lessee shall submit to Lessor for approval the
plans for the projected construction project. Lessor shall have ten (10)
days from the day the plans are submitted to them to approve or disapprove
the projected construction project, provided that the approval for any
projected construction project shall not be unreasonably withheld. All
construction and operations done by Lessee, its agents or subcontractors
shall be performed in a careful and prudent manner. All operations of
Lessee shall be conducted in conformance with applicable federal, state or
municipal regulations, and Lessee shall be solely responsible for the
manner in which said operations are conducted. Lessee shall be responsible
for obtaining any and all permits which are required for its use, operation
or construction of the Leased Premises. Upon termination of this Lease any
improvements built upon the Leased Property shall become the property of
the Lessor unless Lessor gives Lessee notice to remove any such
improvements, provided that any tank or
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
tanks and any purification or filtration equipment used by Lessee shall
remain the property of Lessee and shall be removed at the termination of
this Lease. In the event Lessee receives notice to remove improvements upon
the termination of this Lease, Lessee shall remove those improvements at
its sole expense within sixty (60) days of such notice.
9. LESSOR'S WATER SUPPLY. The parties acknowledge that drinking water
for Lessor's use is being provided by the springs where Lessee will be
conducting its operations. Lessee shall use its best efforts to ensure that
the Lessor shall have a sufficient supply of water to Lessor's farmhouse
for personal domestic purposes. In the event that Lessor's drinking water
is materially disturbed through the fault of the operations of Lessee, upon
written notice thereof given by Lessor to Lessee, Lessee shall halt
construction or operations on the Leased Premises until such time as Lessor
shall be provided a sufficient supply of water as aforesaid.
10. OTHER USE OF WATER AND LEASED PREMISES. In addition to the
Lessor's supply of water referred to in Paragraph 9 hereof, Lessee agrees
that it shall use its best efforts to ensure that the home formerly owned
by Derwood Behrer shall have a sufficient supply of water as required by
the agreement recorded in Huntingdon County Deed Book Vol. 64 at page 685.
In addition, Lessor shall be entitled to provide a sufficient supply of
water for personal domestic purposes to two (2) additional homes, which may
be hereinafter constructed for members of Lessor's immediate family. The
water right for those two (2) homes, which hereinafter may be constructed,
shall be perpetual enabling them to use water from the spring serving the
Lessor's home for domestic purposes in perpetuity.
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Lessee shall have the right to approve and supervise the installation of
the water line from the spring to the two (2) new houses which Lessor is
permitted to build during the term of this agreement. Lessor shall be
entitled to use the cabin by the large spring so long as its use does not
pollute the springs to any extent nor interfere with Lessee's operations.
11. FISHING AND HUNTING RIGHTS. Lessor retains the fishing rights to
Spruce Creek on the Leased Premises and further retains the right to hunt
on the Leased Premises. Lessee acknowledges that Lessor intends to continue
to exercise fishing rights on behalf of members of his family and retains
the right to lease his fishing rights to the Tyrone Fishing Club in
accordance with previous practice over decades. The parties have hereto
agreed that such fishing rights and lease of fishing rights shall continue
subject to such reasonable restrictions as may be necessary so that the
Lessor, Lessor's heirs and assigns and/or the members of the Tyrone Fishing
Club do not interfere with the operations of the Lessee or pollute the
water source on the Leased Premises. Any payments for such leases are the
property of the Lessor.
12. RIGHT-OF-WAY. The parties acknowledge that a roadway or
right-of-way currently exists over the Leased Premises. Lessor for Lessor,
Lessor's heirs, and assigns and for Lessor's fishing and hunting licensees
and/or lessee, retains an easement over the said roadway for purposes of
ingress, egress and regress to exercise all rights consistent with and
permitted under this agreement. Lessee shall be responsible for the cost of
maintenance and improvement to said roadway, however no maintenance or
improvements shall be
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
conducted on the said roadway without the prior consent of Lessor, which
consent shall not be unreasonably withheld.
13. TREE OPERATIONS. Lessor shall have the right to conduct timbering
operations on the Leased Property which shall be limited to the cutting of
individual dead trees and individual live saw grade trees. Provided,
however, Lessor shall not have the right to perform any clear cutting nor
shall Lessor's timbering operations interfere in any way with Lessee's use
of the Leased Premises. Lessor shall provide prior notice to Lessee of any
proposed timbering on the Leased Premises, which notice shall describe the
number and location of any trees to be cut. Lessor shall be permitted to
grow Christmas trees on two fields that are currently planted and to
harvest such trees at maturity provided that Lessor's Christmas Tree
growing activity shall not make use of fertilizers, pesticides or other
chemicals and shall not unreasonably interfere with Lessee's use and
occupancy of the Leased Premises.
14. ASSIGNMENT OF LEASE. Lessee may, at any time or from time to time
during the term hereof, encumber by mortgage or other security instrument,
by way of collateral assignment or otherwise, Lessee's interest under this
Lease and the leasehold estate hereby created for any purpose, without the
consent of Lessor. Lessee shall have the right to assign its estate and
interest in this lease to any entity to which the Lessee owns an interest,
subject, however, to the understanding that the obligations of Lessee
hereunder shall not be released as to Lessee individually unless Lessor
herein, Lessor's heirs, administrators, successors or assigns agree to
release Lessee from Lessee's obligations hereunder; otherwise,
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
this Lease shall not be assignable or the Leased Premises sublet without
the express written consent of the Lessor.
15. LIABILITY INSURANCE. Lessee shall acquire and keep in effect
during the term hereof a policy or policies of liability insurance in an
amount of not less than [ ] which shall name Lessor as insured parties
thereon.
16. INDEMNITY OF LESSEE. The Lessee shall indemnify and save harmless
the Lessors from any and all loss and of and from any and all causes of
action, claims, reckonings or accounts whatsoever relating to the work and
business of the Lessee as set forth in this Lease, whether such claims be
made by or caused by an governmental agency, Lessee, invitees of Lessee,
Lessee's agents, servants or workmen, or any other person acting by or
through Lessee.
17. INDEMNITY OF LESSOR. Lessor hereby agrees to indemnify and to hold
Lessee harmless against any loss, cost, damage or expense, including
reasonable attorney's fees, which Lessee should sustain by virtue of
Lessor's violation of any term hereof.
18. RIGHT OF FIRST REFUSAL. Lessor hereby grants to Lessee a right of
first refusal to purchase or lease the Leased Premises, (herein called "the
property") to be exercised in the following manner. If the Lessor shall
receive a bona fide offer from another person or entity to purchase or
lease the property, or any portion thereof, the Lessor shall send to the
Lessee a copy of the proposed contract, and shall further notify the Lessee
of the
9
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
intention of the Lessor to accept the same. The Lessee shall then have the
right within thirty (30) days to accept the terms of the said contract in
its own name for the gross purchase price or rental and on the terms
specified in the same contract, and shall enter into a contract with Lessor
setting forth those same terms and conditions. If the Lessee shall not so
elect within the same period, the Lessor may then sell or lease the
property to the said buyer or lessee, provided that such sale or lease is
on the same terms and conditions and for the price set forth in the same
contract submitted to the Lessee. This right of first refusal shall
continue during the term of this lease agreement and for ten (10) years
thereafter. This right of first refusal shall not prohibit any transfer of
the property between the current owners, nor shall it prohibit the gift or
devise of the property by a current owner to spouse or issue, provided that
the terms of this right of first refusal shall be binding upon said spouse
or issue.
19. SURVEY: TITLE SEARCH. Lessee shall arrange for and obtain, at its
sole cost and expense, a survey and title search of the Leased Premises for
the purpose of establishing agreement on the correct boundary between the
upper twelve (12) acre field on the Leased Premises and adjacent land owned
by R. Wayne Harpster.
20. DEMOLITION OF COTTAGES. Lessee shall, at its sole cost and
expense, demolish the two (2) cottages on the Leased Premises known as the
"Sills" and "McAllister" cottages following january 1, 1998. Prior to the
demolition, Lessor shall be permitted to remove any salvageable items from
these cottages.
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
21. RESTORATION OF FOOTBRIDGES; PEIFFER COTTAGE. If appropriate
regulatory approvals are received (including, without limitation, the
Commonwealth of Pennsylvania, Department of Environmental Protection),
Lessee shall, at its sole cost and expense, restore the two footbridges
that cross the creek to the lower cabin by the big spring. In the event
such footbridges are restored by Lessee, Lessee shall, during the lease
term, keep the approaches to such footbridges clear of brush and weeds.
Lessee shall also evaluate the feasibility and expense of restoring and
providing electrical service to the Peiffer cottage. Lessee shall, within a
reasonable time, inform Lessor of its findings on this subject. Provided,
however, that notwithstanding any restoration of the Peiffer cottage,
Lessee shall continue to be permitted to obtain water from the Peiffer
spring.
22. REPAIR OF RESIDENTIAL WATER LINE. Lessee shall, within sixty (60)
days of the full execution of this Lease, at its sole cost and expense,
repair and/or replace the water line to Lessor's residence.
23. ISSUANCE OF STOCK; OPTION. Lessee shall, within thirty (30) days
of the execution of this Lease Agreement, [ ]. Further, within thirty (30)
days of the execution of this Lease Agreement, Lessee [ ].
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
24. PARTIAL INVALIDITY. If any term, covenant, condition or provision
of this Lease is held by a court of competent jurisdiction to be invalid,
void, or unenforceable, the remainder of the provisions shall remain in
full force and effect and shall in no way be affected, impaired, or
invalidated.
25. AGENCY. Nothing contained in this Lease shall be deemed or
construed by the parties or by any third person to create the relationship
of principal and agent or of partnership or of joint venture or of any
association between Lessor and Lessee, and neither the method of
computation of rent nor any other provisions contained in this Lease nor
any acts of the parties shall be deemed to create any relationship between
Lessor and Lessee, other than the relationship of Lessor and Lessee.
26. NUMBER AND GENDER. In this Lease the neuter gender includes the
feminine and masculine, and the singular number includes the plural, and
the word "Person" includes corporation, partnership, firm, or association
wherever the context so requires.
27. CAPTIONS. Captions of the articles, sections, and paragraphs of
this Lease are for convenience and reference only, and the words contained
therein shall in no way be held to explain, modify, amplify, or aid in the
interpretation, construction, or meaning of the provisions of this Lease.
28. RECORDING. A Memorandum of this Lease and Right of First Refusal
contained therein may be recorded at the option and expense of Lessee.
Lessor shall execute and acknowledge any such Memorandum upon request of
Lessee.
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
29. NOTICES. All notices to be sent shall be addressed as follows:
If to Lessor: Mr. and Mrs. Roy Bresler
HC-01 Box 16
Pennsylvania Furnace, PA 16865
with a copy to: John R. Gates, Esquire
Henry, Corcelius, Gates, Gill & Ody, P.C.
200 Penn Street, P.O. Box 383
Huntingdon, PA 16652
if to Lessee: AquaPenn Spring Water Company, Inc.
One AquaPenn Drive
P.O. Box 938
Milesburg, PA 16853
with a copy to: Daniel E. Bright, Esquire
McQuaide Blasko
811 University Drive
State College, PA 16801-6699
30. BINDING EFFECT. The agreement shall be binding upon and inure to
the benefit of the heirs, personal representatives, successors and assigns
of the parties hereto.
31. ENTIRE AGREEMENT. This Lease contains the entire agreement of the
parties with respect to the matters covered by or related to this Lease,
and no other agreement, statement, or promise made by any party, or to any
employee, officer, or agent of any party, which is not contained in this
Lease shall be binding or valid.
IN WITNESS WHEREOF, the undersigned Lessor and Lessee hereto execute
this Agreement as of the day and year first above written.
WITNESSES: LESSOR:
(Illegible signature) /s/ Roy Bresler
- --------------------------- -------------------------------
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Roy Bresler
(Illegible signature) /s/ Ida Bresler
- --------------------------- ------------------------------
Ida Bresler
ATTEST: LESSEE: AQUAPENN SPRING WATER
COMPANY, INC.
/s/ Scott E. Bresler By: /s/ Edward J. Lauth, III
- --------------------------- -----------------------------
Edward J. Lauth
By: President
-----------------------------
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
COMMONWEALTH OF PENNSYLVANIA :
: SS.
COUNTY OF CENTRE :
On this 14 day of October , 1997, before me a notary public, the
undersigned officer, personally appeared ROY BRESLER, known to me (or
satisfactorily proven) to be the person whose name is subscribed to the
within instrument, and acknowledged that he executed the same for the
purpose therein contained.
IN WITNESS THEREOF, I have hereunto set my hand and notarial
seal.
My commission expires:
/S/ Michael L. Schmoke (SEAL)
-------------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA :
: SS.
COUNTY OF CENTRE :
On this 14 day of October , 1997, before me a notary public, the
undersigned officer, personally appeared IDA BRESLER, known to me (or
satisfactorily proven) to be the person whose name is subscribed to the
within instrument, and acknowledged that she executed the same for the
purpose therein contained.
IN WITNESS THEREOF, I have hereunto set my hand and notarial
seal.
My commission expires:
/S/ Michael L. Schmoke (SEAL)
-----------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA :
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TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
: SS.
COUNTY OF CENTRE :
On this 14 day of October , 1997, before me a notary public, the
undersigned officer, personally appeared EDWARD J. LAUTH III, the PRESIDENT
of AQUAPENN SPRING WATER COMPANY, INC., known to me (or satisfactorily
proven) to be the person whose name is subscribed to the within instrument,
and acknowledged that he executed the same for the purpose therein
contained.
IN WITNESS THEREOF, I have hereunto set my hand and notarial
seal.
My commission expires:
/S/ Michael L. Schmoke (SEAL)
-----------------------------
Notary Public
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TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT "A"
(See Attached)
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TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
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Page 685
THIS DEED,
Made (illegible text)
Between George I. Rodgers (illegible text) the City of Williamsport,
County of Lycoming and Commonwealth of Pennsylvania
Grantor
and Sheldon D. Behrer and Janet A. Behrer, his wife, both of
Franklin Township, Huntingdon County, Pennsylvania, as
tenants by the entireties,
Grantees
Witnesseth, that in consideration of
- ---------------Twenty-six Hundred ($2600.00)------------Dollars
in hand paid, the receipt whereof is hereby acknowledged, the said grantor
does hereby grant
and convey to the said grantees, survivor of them, their
heirs and assigns
All that certain parcel or lot of ground with buildings erected thereon
situate in the Village of Graysville, Franklin Township, Huntingdon County,
Pennsylvania, described as follows:
Beginning at a point at a walled spring marked by an iron axle at
lands of E. K. Woomer near the left bank of the Spruce Creek, thence by
lands of said E. K. Woomer North one (1) degree fifty-six (56) minutes West
three hundred-four and ninety-four hundredths (304.94) feet to a point
marked by an iron axle in an abandoned road at lands of John F. Johnston,
thence by said lands and abandoned road North seventy-nine (79) degrees
East two hundred twenty-three (223) feet to a point marked by an iron pin
at the edge of a private lane; thence along the boundary of the private
lane and crossing Fowler's Run South six (6) degrees thirty-one (31)
minutes East three hundred thirty-three and seventy-nine hundredths
(333.79) feet to a point in the center line of State Highway Route No. 45
marked by a nail; thence South eleven (11) degrees thirty-four and one-half
(34 1/2) minutes East one hundred seventy-nine and eighty-two hundredths
(179.82) feet along Lands of Chester W. Behrer to a point marked by a stake
near a white pine witness at lands of Edna P. Ellenberger; thence by lands
of Ellenberger North sixty (60) degrees twenty-four and one
18
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
- -half (24 1/2) minutes West and crossing State Highway Route No. 45 a
distance of three hundred twenty-four and ninety-five hundredths (324.95)
feet to a point marked by an iron axle in the place of beginning.
Containing two and twenty-six hundredths (2.26) acres according to the
survey by Heine and Simpson dated April 21, 1965, a copy of which is
attached hereto.
Being the same parcel of ground title to which vested in the
Grantor by deed of George I. Rodgers and Margeurite J. Rodgers
dated January 21, 1964 and recorded in Deed Book
No. 61 page 664 and by deed of Edmund K. Woomer to George I. Rodgers and
Margeurite J. Rodgers, his wife, dated May 29, 1961 and recorded in Deed
Book 49, page 27. And the said Rodgers were divorced March 18, 1963 by
Decree of the Common Pleas Court of Lycoming County to No. 304- November
Term, 1962.
Also a certain right to use water from a spring located on lands
of E. K. Woomer and to enter upon the grounds of E. K. Woomer for the
purposes of maintaining water lines to use the said water for domestic use
of the house which water right is created in the deed last above recited,
which deed was given to correct the mistake of failing to include the
rights to the spring described above made by E. K. Woomer to George
Rodgers, et ux, dated September 11, 1956 and recorded in Deed Book 34 page
136 in this that by mistake the parties to the said deed did not include
the rights to agreement for the use of water from the said spring.
19
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT "B"
(See Attached)
20
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
[LETTERHEAD OF SWEETLAND ENGINEERING & ASSOCIATES, INC.]
900 West College Avenue
State College, Pennsylvania 16801
(814) 237-6518
December 4, 1997
JOB NO. 01273
ENGINEER'S DESCRIPTION OF LAND TO BE LEASED
FROM ROY M. BRESSLER TO EDWARD LAUTH
ALL THAT CERTAIN PARCEL OF LAND situated in Franklin Township,
Buntingdon County, PA, being shown as Total Lease Area on plans entitled
"Survey of Lands of Roy M. Bressler and a Portion of Lands of Jeffery B.
Herr for Edward Lauth Franklin Township Huntingdon County, PA, prepared by
Sweetland Engineering & Associates, Inc., drawing numbers D-1019, D-1020
and D-1021, dated June 12, 1987 and is not intended to be recorded at the
Huntingdon County Courthouse, bounded and described as follows:
BEGINNING at an existing 36" Pine at the common southeastern
corner of Land N/F of Donald R. & Lorenali M. Greenland and a northeastern
corner of Land N/F of Roy M. & Ida W. Bressler: Thence along said Land N/F
of Donald R. & Lorenah M. Greenland N 24" 09" 57" W. 1243.95 feet to an
existing 3/4" re-bar at the common northeastern corner of said Land N/F of
Donald R. & Lorenah M. Greenland and the northwestern corner of the herein
described Lease Area and along Land N/F of Robert W. Harpster Tract No. 2
the following six (6) courses and distances: (1) N 81" 44" 08" E, 357.14
feet to a 3/4" re-bar set; Thence (2) N 61" 20" 17" E, 307.70 feet to an
existing 3/4" re-bar; Thence (3) S 89" 56' 59" E. 600.38 feet to an
existing 3/4 re-bar; Thence (4) N 80' 13' 09" E, 504.59 feet to an existing
3/4 re-bar; Thence (5), passing through an existing 3/4" re-bar, 88'54 39"
E, 207.82 feet to a 3/4" re-bar set; Thence (6) N 81' 44" 08" E, 1166.64
feet to a 3/4" re-bar set at the common northwestern corner of land N/F of
R. Wayne Harpster and at the northeastern corner of the herein described
Lease area and along said Land N/F of Robert W. Harpster Tract No. 2;
Thence along said Land N/F of R. Wayne Harpster S 48" 51' 48" E, 446 06
feet to a 3/4" re-bar set along Land N/F of Robert W. harpster Tract no. 5
Second Parcel; Thence along said Land N/F of Robert W. Harpster Tract No. 5
Second Parcel S 22" 22" 39" E, 238.17 feet to a 3/4" re-bar set al, the
southwestern corner of said Land N/F of Robert W. Harpster Tract No. 5
Second Parcel and a northwestern corner of Land N/F of Robert W. Harpster,
Tract No. 5 First Parcel; Thence along said land N/F of Robert W. Harpster
Tract No. 5 First Parcel the following two (2) courses and distances: (1) S
21' 11" 41" E, 491.46 feet to an existing 3/4" re-bar at the
21
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
southeastern corner of the herein described Lease Area; Thence (2) S
62(degree) 03' 49" W. 574.79 feet to a 3/4" re-bar set along Land N/F of
Robert W. Harpster Parcel No. 2 the following fourteen (14) courses and
distances: (1) N 26(degree) 54' 41" W. 237.34 feet to an existing stone at
a fence corner; Thence (2) S 88(degree) 12' 57" W, 37.16 feet to a 3/4"
re-bar set; Thence (3) S 84(degree) 24' 31" W, 273.90 feet to a 3/4/"
re-bar set; Thence (4) N 73(degree) 50' 29" W, 364.65 feet to a 3/4" re-bar
set; Thence (5) N 68(degree) 35' 29" W. 178.20 feet to a 3/4" re-bar set;
Thence (6) N 59(degree) 26' 07" W. 143.55 feet to a 3/4" re-bar set; Thence
(7) N 69(degree) 09' 20" W. 211.20 feet to a 3/4" re-bar set; Thence (8) N
82(degree) 23' 14" W. 271.46 feet to a 3/4" re- bar set; in stones; Thence
(9) N 84(degree) 14' 21" W. 66.42 feet to a 3/4" re-bar set; Thence (10) S
88(degree) 42' 17" W. 313.50 feet to a 3/4" re-bar set; Thence (11) S
0(degree) 47' 43" E. 36.30 feet to a 3/4" re-bar set; Thence (12) S
80(degree) 57' 17" W. 148.85 feet to a 3/4" re-bar set; Thence (13) S
11(degree) 32' 43" E. 204.60 feet to an existing 3" axle; Thence (14) along
Parcel No. 3 S 15(degree) 36' 34" E. 74.15 feet to an existing 1" iron pin
along Land N/F of R. Wayne Harpster - Parcel No. 1 S 66(degree) 36' 21" W.
322.61 feet to an existing 1" iron pin at the northwestern corner of said
Land N/F of R. Wayne Harpster - Parcel No. ( ) and along Land N/F of John
F. Johnston the following eight (8) courses and distances: (1) N 14(degree)
35' 11" W. 188.56 feet to an existing 1" iron pin; Thence (2) S 80(degree)
53' 39" W. 215.54 feet to an existing 1" iron pin; Thence (3) S 36(degree)
55' 31" E. 207.70 feet to an existing 1 iron pin; Thence (4) S 5(degree)
29' 04" E, 260.29 feet to an existing 1" iron pin; Thence (5) N 76(degree)
16' 37" E. 33.00 feet to a 3/4" re-bar set; Thence (6) S 18(degree) 09' 06"
E. 234.30 feet an existing 1" iron pin; Thence (7) S 53(degree) 31' 03" W.
57.67 feet to an existing 1" iron pin; Thence (8) S 9(degree) 55' 05" E.
81.18 feet to a 3/4" re-bar set at northeastern corner of Land N/F of Roy
M. & Ida W. Bressler; Thence crossing through said Land N/F of Roy M. & Ida
W. Bressler the following two (2) courses and distances: (1) S 68(degree)
35' 28" W. 299.93 feet to a 3/4" re-bar set; Thence (2) N 13(degree) 19"
37" W. 307.34 feet to the point of beginning.
BEING A PORTION OF Deed Book 147, Page 114 - N/F of Roy M. & Ida
W. Bressler.
UNDER AND SUBJECT, NEVERTHELESS, to all existing easements,
conditions, restrictions and covenants of record.
22
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT "C"
Spring Site Lease Payment Schedule
Lease
Calendar Amount Per
Year Contract
-------- ----------
1998 [
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017 ]
23
EXHIBIT 10.16
WATER CONTRACT
THIS AGREEMENT, made and entered the 8th day of Aug., 1990, by
and between CITY OF DUNSMUIR, a California municipality (hereinafter called
"City"), and DUNSMUIR BOTTLING COMPANY, a California corporation
(hereinafter called "Company").
WITNESSETH:
WHEREAS, City is the owner of certain water rights and entitled
to the use and disposition of water pursuant to such rights; and
WHEREAS, Company desires to purchase water from the City for
bottling and sale;
NOW, THEREFORE, the parties agree:
1. Sale of Water. City hereby agrees to sell and Company agrees
to purchase water from City delivered through the main pipeline which is
owned and operated by City for the taking and transmission of spring water
from the sources known as Mossbrae Springs No. 2, B, C and D in Siskiyou
County, California, under the terms and conditions set forth herein.
2. Terms of the Agreement. This agreement shall be and remain in
effect for a period of twenty-five (25) years from its effective date, and
shall be renewable for an additional twenty-five (25) years pursuant to the
option set forth in paragraph 15.
1
<PAGE>
3. Purchase Price.
a. City agrees to sell and Company agrees to purchase not
more than fifty million (50,000,000) gallons per year, provided that the
amount required by Company in any single day shall not interfere with or
require any curtailment of domestic water supplied by City to its existing
users or future residential users.
b. The amount of water received by Company hereunder shall
be measured by a meter which shall be installed by City, the cost of the
meter will be at the Company's expense, on Company's transmission line near
the place of attachment to the City's main transmission line.
c. City shall invoice Company in advance for the first year
beginning January 1, 1991, in the amount of $25,000, which is the minimum
annual fee applicable in the price schedule set forth below in paragraph
3d. The first annual minimum payment of $25,000 is due and payable within 5
days of successful completion of the validation action set forth in
paragraph 6b. Thereafter, the annual period will commence on January 1,
1992, whereby Company will make the annual minimum payment of $25,000 in
four equal quarterly installments. In the event that the execution of this
contract delays or interferes in any way with Company's plant completion,
thereby delaying Company's ability to utilize water, City shall waive a pro
rata portion of the first year's minimum annual payment corresponding to
the entire period of time until Company commences water usage. This period
of
2
<PAGE>
initial delay shall be limited to no more than three (3) months, whereby
any pro rated portion for the first year shall be credited to the annual
minimum payment for year two.
d. City shall invoice Company for water received by Company
from City based on the following rates:
0 - 2.5 million gallons $.010 per gallon
Over 2.5 million gallons $.005 per gallon.
Annual consumption in excess of 2.5 million gallons by Company shall be
invoiced to Company by City at conclusion of year, December 31st, and shall
be payable within 30 days of invoice date.
e. In the event that City is unable for any cause whatsoever
to permit Company to take water in the amounts permitted hereunder for any
period of time in excess of one (1) day, City shall waive a pro rata
portion of the minimum payment corresponding to the entire period of time
during which Company is not permitted to take water continually.
f. On the fifth, tenth, fifteenth, twentieth, and
twenty-fifth anniversaries of the effective date of this Agreement, the
rates per gallon which Company is obliged to pay City shall be increased in
the same proportion as any increase, or the aggregate of increases, during
the preceding five-year period in charges for water service by City to its
residential users, provided that this increase at the end of any five-year
period shall not exceed ten percent (10%).
3
<PAGE>
4. Representations and Warranties of City. City represents and
warrants as follows:
a. It is the legal and beneficial owner of the right to take
and use not more than one and 97/100ths cubic feet per second of water
diverted from the sources known as Spring 2, Spring B, Spring C, and Spring
D of Mossbrae Springs, whose respective locations are described as follows:
Spring No. 2 - North two degrees twenty-three minutes east (N2 23'E) one
thousand three hundred five and one-tenth (1305.1) feet from E1/4 corner of
Section 13, T39N, R4W, MDB&M, being within SW1/4 of NW1/4 of Section 7,
T39N, R3W, MDB&M.
Spring B - North two degrees fifty minutes east (N2 50'E) one thousand
three hundred ninety-two and three-tenths (1392.3) feet from E1/4 corner of
Section 13, T39N, R4W, MDB&M, being within SW1/4 of NW1/4 of Section 7,
T39N, R3W, MDB&M.
Spring C - North two degrees forty-six minutes east (N2 46'E) one thousand
three hundred ninety-six and five-tenth (1396.5) feet from E1/4 corner of
Section 13, T39N, R4W, MDB&M, being within SW1/4 of NW of Section 7, T39N,
R3W, MDB&M.
Spring D - North three degrees five minutes east (N3 05'E) one thousand
four hundred nine and four-tenth (1409.4) feet from E1/4 corner of Section
13, T39N, R4W, MDB&M, being within SW1/4 of NW1/4 of Section 7, T39N, R3W,
MDB&M.
b. City has the right to sell to Company water pursuant to the
above-mentioned rights.
c. City shall promptly, if necessary and to the extent necessary,
obtain at its own expense the consent or permission of any other person or
entity, whether private, commercial or governmental, for its performance
and fulfillment of its obligations under this Agreement, except as provided
in paragraph 6b.
4
<PAGE>
5. City Covenants.
City covenants and agrees:
a. Water shall be provided by City to Company in its natural
state without the addition of chlorine or other chemicals.
b. City shall install and maintain such devices as may be
necessary to prevent any back flow from its water treatment plant into the
water purchased by Company.
c. Company is hereby licensed to occupy and use, to the
extent reasonably necessary to install and maintain its water line for
delivery of water from City's main line, the real property which is subject
to an easement of the City for its maintenance and operation of its
transmission line or lines.
d. City shall not object to Company using for sales purposes
the slogan "Dunsmuir Home of the Best Water on Earth," or any derivative
thereof.
e. City will provide water in such quantities as Company may
desire, subject to a limitation of fifty million (50,000,000) gallons per
year; provided, however, that in the event of a drought or other natural
disaster which causes a decrease in the natural flow from the above
described springs to an amount approximately equal to or less than the City
needs for its existing users or future residential users, City shall
promptly notify Company of the decrease in the natural flow and, until such
time as the flow enables City to provide water in excess of the
requirements of its current users or future
5
<PAGE>
residential users, City shall be excused from providing water to Company
and Company shall be excused from its minimum payment obligation on a pro
rata basis.
f. City hereby consents to the installation by Company, at
Company's expense, of dual lines at any point beyond the City meter located
near the outlet from its main transmission line to the Company line and
Company is authorized to use such dual lines to supply both a bulk outlet
and its bottling facilities.
g. City shall refrain during the term of this agreement from
selling or providing "spring" water, as defined by the State of California,
Department of Health Services, to any other bottler or bulk user of water
for resale.
h. The services provided by the City are subject to
regulation by the State of California, Department of Health Services. The
City shall not be held responsible for any changes in regulation or
legislation which may affect its ability to provide water pursuant to this
Agreement.
i. City will make service available to Company to access
City's main water transmission line, at a point to be reasonably designated
between the said springs and the point at which City performs any treatment
of said water or adds anything to it, for installation and maintenance by
Company of a pipeline through which company may draw or pump water pursuant
to this Agreement.
6
<PAGE>
6. Indemnity by City.
a. City shall indemnify Company and hold it harmless from
any and all claims, demands, actions, causes of action or other challenges,
whether at law in equity, or in administrative proceedings, asserted by any
other person, firm, corporation or entity, whether private, commercial or
governmental, relating to or arising out of the agreement herein by City to
sell water to Company under the terms of this agreement and to permit
Company to connect its transmission line to the main transmission line
owned and maintained by City at the point described above and to take, use
and sell water purchased hereunder. In the event of any claim, demand,
action, cause of action or other challenge by any person or entity to the
right or power of City to sell water to Company or otherwise to perform
pursuant to the terms of this agreement, City will pay or reimburse to
Company any costs, losses and expenses, including attorney fees, which are
incurred by Company as a result of any defect or limitation in such rights
and powers of City which prevents, delays or materially interferes with the
rights granted herein to Company.
b. Upon signing this agreement, City and Company will file a
validation action, at equal expense to City and Company, in accordance with
and as specified in the Code of Civil Procedures. This agreement will
become effective upon the successful completion of this validation
proceeding or upon the mutual agreement of both City and Company.
7
<PAGE>
7. Representations and Warranties by Company. Company warrants
and agrees as follows:
a. Company is a corporation duly organized and existing
under and by virtue of the laws of California.
b. Company will, at its own cost and expense, connect its
pipelines for receiving water from the main transmission line of City on
its main transmission line at or near the City's pump house; provided that,
in the event City institutes use of a water treatment facility, Company
will be permitted to connect its pipelines at a point reasonably designated
between the source of water at the said springs and the said treatment
plant. Company will make its connection without any unreasonable
interference with or delay in transmission of water through said main
transmission line for other purposes by City.
8. Company Covenants.
Company covenants and agrees that:
a. The establishment by Company of its connection for
receiving water from the City's main transmission line shall be made
without any unreasonable interference with or delay in transmission of
water through said transmission line for other purposes by City.
b. Company shall accept water at the point of connection of
its transmission line with City's main transmission line in the natural
state of the water without any warranty or guarantee by City of its
chemical or physical content for the
8
<PAGE>
condition of the water, except that City will provide the water in the same
state as it does to its own treatment plant.
c. Company shall at its own cost and expense receive and
treat and sell the water purchased from City without cost or expense to
City.
d. Company shall install, maintain and operate its
transmission line and facilities in accordance with applicable laws and
regulations.
e. Company will construct and maintain a bottling facility
in the City of Dunsmuir within twelve (12) months after approval of this
contract by City and the issuance to Company of all permits and licenses
which may be required by any local, state, or federal regulatory agency.
9. Indemnity by Company.
Company warrants and agrees that it will indemnify and hold City
harmless from any claims, demands, actions or causes of action related to
or arising from the processing, bottling, handling or shipping of water by
Company, from the establishment and operation by Company of a water
treatment and bottling plant to which water acquired from City is
transmitted by Company, and from death or injury to any person arising from
his or her ingestion or use of water provided or sold by Company, excepting
only City's liability for its own gross negligence or wilful misconduct. In
the event of any claim, demand, action or cause of action related to or
arising from the processing, bottling, handling or shipping of water by
Company, from the establishment
9
<PAGE>
and operation by Company of a water treatment and bottling plant to which
water acquired from City is transmitted by Company, or from death or injury
to any person arising from his or her ingestion or use of water provided or
sold by Company, Company will pay or reimburse to City any costs, losses
and expenses, including attorney fees, which are incurred by City as a
result of any such claim, demand, action or cause of action.
10. Additional Documents.
Each party shall execute and deliver to the other such additional
documents as may be reasonably necessary to carry out the intent of the
parties to this agreement.
11. Notices.
Any notice to be given either party hereunder shall be given in
writing and shall be sufficient if sent by certified mail, return receipt
requested, or by:
a. If to City: Jim Arata, City Manager, 5915 Dunsmuir
Avenue, Dunsmuir, CA 96025, with a required copy to Chris Stromsness, Esq.,
City Attorney, P.O. Box 587, Dunsmuir, CA 96025.
b. If to Company: Dunsmuir Bottling Company, P.O. Box 15,
Dunsmuir, CA 96025, with a required copy to Samuel L. Holmes, Esq.,
Rochester & Lea, 44 Montgomery Street, Suite 3600, San Francisco,
California 94104.
10
<PAGE>
12. Rights of Parties.
This agreement shall not be construed to create any right, power
or privilege in favor of anyone except the parties hereto.
13. Section Headings.
All section headings are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
14. Counterparts.
This agreement may be executed in several counterparts, each of
which is an original; provided that the original and each executed
counterpart shall be deemed to be one and the same instrument, which shall
constitute proof of the agreement without the necessity of production or
accounting for any other counterpart.
15. Renewal Option.
Company is hereby granted an option to renew this agreement for a
further term of twenty-five (25) years from the effective date, on the same
terms and conditions, except, if on each of the preceding five-year
anniversaries the rate increase to the City's residential users equaled or
exceeded ten percent (10%), whereby City may at its option renegotiate
future five-year increases provided that the increase in any five-year
period shall not exceed fifteen percent (15%). Company shall give City
written notice of the exercise of the option not less than one (1) year
prior to the end of the primary term.
11
<PAGE>
16. Effective Date.
The effective date of this agreement shall be the next business
day following final approval of the terms and conditions, including those
provided in 6b, and by such formalities as may be required by the
ordinances of City and the execution of this agreement on behalf of the
City and on behalf of the Company promptly following such formal approval.
DATED: August 8, 1990
CITY OF DUNSMUIR
By: /s/ (signature illegible)
----------------------------
City Manager
Attested by: /s/ (signature illegible)
-------------------------
DUNSMUIR BOTTLING COMPANY
By: /s/ Paul A. Kassis
----------------------------
President
By: /s/ Scott E. Lidster
----------------------------
Secretary
12
EXHIBIT 10.17
- ----------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
Dated as of October 15, 1997
Effective as of 9:00 a.m. EST on October 15, 1997
by and among
AquaPenn Spring Water Company, Inc.
Castle Rock Spring Water Company, Inc.
Dunsmuir Bottling Company
doing business as
Castle Rock Spring Water Company
and
Certain Shareholders of Dunsmuir Bottling Company
- ----------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER
SECTION 1.1 The Merger........................ 1
SECTION 1.2 Effective Time of the Merger...... 1
ARTICLE II
THE SURVIVING AND PARENT CORPORATIONS
SECTION 2.1 Certificate of Incorporation...... 2
SECTION 2.2 Bylaws............................ 2
SECTION 2.3 Directors and Officers............ 2
ARTICLE III
MERGER CONSIDERATION
SECTION 3.1 Consideration..................... 2
SECTION 3.2 Conversion of Subsidiary Shares... 5
SECTION 3.3 Exchange of Certificates.......... 5
SECTION 3.4 Closing........................... 6
SECTION 3.5 Closing of the Company's Transfer Books 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUBSIDIARY
SECTION 4.1 Organization and Qualification.... 6
SECTION 4.2 Capitalization.................... 7
SECTION 4.3 Authority; Non-Contravention; Approvals 7
SECTION 4.4 Litigation........................ 8
SECTION 4.5 No Violation of Law............... 8
SECTION 4.6 Financial Statements.............. 9
SECTION 4.7 Brokers........................... 9
SECTION 4.8 Employment Agreements............. 9
i
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE COMPANY SHAREHOLDERS
SECTION 5.1 Organization and Qualification.... 9
SECTION 5.2 Capitalization.................... 10
SECTION 5.3 [Intentionally left blank]........ 10
SECTION 5.4 Subsidiaries...................... 10
SECTION 5.5 Authority; Non-Contravention; Approvals 11
SECTION 5.6 Financial Statements.............. 12
SECTION 5.7 Books of Account.................. 12
SECTION 5.8 Absence of Certain Changes of Events 12
SECTION 5.9 Absence of Undisclosed Liabilities 12
SECTION 5.10 Taxes............................ 13
SECTION 5.11 Title to Assets.................. 13
SECTION 5.12 Assets and Properties Complete... 14
SECTION 5.13 Access to Spring................. 14
SECTION 5.14 Water Quality.................... 14
SECTION 5.15 Contracts........................ 15
SECTION 5.16 Compliance with Agreements....... 15
SECTION 5.17 No Violation of Law.............. 15
SECTION 5.18 Litigation....................... 16
SECTION 5.19 Employee Benefit Plans; ERISA.... 16
SECTION 5.20 Labor Matters.................... 18
SECTION 5.21 Environmental Matters............ 19
SECTION 5.22 Trademarks and Intellectual
Property Compliance............ 20
SECTION 5.23 Insurance........................ 20
SECTION 5.24 Year 2000 Compliance............. 21
SECTION 5.25 Bank Accounts.................... 21
SECTION 5.26 Business Relations............... 21
SECTION 5.27 Potential Conflicts of Interest.. 22
SECTION 5.28 Disclosure....................... 22
SECTION 5.29 Brokers.......................... 22
SECTION 5.30 Resignation of Directors and
Officers....................... 22
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY SHAREHOLDERS
SECTION 6.1 Authority; Non-Contravention;
Approvals........................ 23
SECTION 6.2 Approval of Merger................ 23
SECTION 6.3 Title to Shares................... 23
SECTION 6.4 Tax-Free Reorganization........... 23
SECTION 6.5 Investment; No registration....... 24
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ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1 Expenses and Fees.................. 24
SECTION 7.2 Confidentiality.................... 24
SECTION 7.3 Parent Stock....................... 24
SECTION 7.4 Payment of Obligations............. 25
SECTION 7.5 No Checks, Wires or Withdrawals.... 25
ARTICLE VIII
CONDITIONS
SECTION 8.1 Condition to Parent's Obligation
to Effect the Merger............ 25
SECTION 8.2 Conditions to the Company's
Obligation to Effect the Merger. 25
ARTICLE IX
POST-CLOSING OBLIGATIONS
SECTION 9.1 Agreement to Cooperate............ 26
SECTION 9.2 Public Statements................. 26
SECTION 9.3 Transition........................ 26
SECTION 9.4 Directors and Officers of Surviving
Corporation..................... 26
SECTION 9.5 Lock-up Agreements................ 26
SECTION 9.6 Completion of Minutes............. 26
SECTION 9.7 Execution of Further Documents.... 27
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 Survival of Representations and
Warranties..................... 27
SECTION 10.2 Validity......................... 27
SECTION 10.3 Indemnification.................. 27
SECTION 10.4 Notices.......................... 28
SECTION 10.5 Interpretation................... 29
SECTION 10.6 Miscellaneous.................... 29
SECTION 10.7 Counterparts..................... 29
SECTION 10.8 Parties In Interest.............. 29
SECTION 10.9 Exhibits and Schedules........... 29
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EXHIBITS
- --------
Exhibit A Shareholders of Castle Rock
Exhibit 4.8 Form of Employment Agreement
Exhibit 8.1 Form of Opinion of Company's Counsel
Exhibit 8.2 Form of Opinion of Parent's Counsel
SCHEDULES
- ---------
Schedule 4.2 Capitalization (Parent)
Schedule 4.4 Litigation (Parent, Sub)
Schedule 5.2 Capitalization (Castle Rock)
Schedule 5.4 Subsidiaries (Castle Rock)
Schedule 5.5(b) Debt, etc. affected by Merger (Castle Rock)
Schedule 5.8 Absence of Certain Changes of Events (Castle Rock)
Schedule 5.9 Absence of Undisclosed Liabilities (Castle Rock)
Schedule 5.11 Title to Assets (Castle Rock)
Schedule 5.12 Assets and Properties Complete (Castle Rock)
Schedule 5.14 Water Quality (Castle Rock)
Schedule 5.15 Contracts (Castle Rock)
Schedule 5.17 No Violation of Law (Castle Rock)
Schedule 5.18 Litigation (Castle Rock)
Schedule 5.19 Employee Benefits Plans; ERISA (Castle Rock)
Schedule 5.20 Labor Matters (Castle Rock)
Schedule 5.22 Trademarks and Intellectual Property Compliance
(Castle Rock)
Schedule 5.23 Insurance (Castle Rock)
Schedule 5.24 Year 2000 Compliance (Castle Rock)
Schedule 5.25 Bank Accounts (Castle Rock)
Schedule 5.27 Conflicts of Interest (Castle Rock)
Schedule 7.4 Payment of Obligations (Castle Rock)
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of October 15, 1997
and effective as of 9:00 a.m. EST on October 15, 1997 (the
"Agreement"), is by and among AquaPenn Spring Water Company, Inc., a
Pennsylvania corporation ("Parent"), Castle Rock Spring Water Company,
Inc., a California corporation and a wholly owned subsidiary of Parent
("Subsidiary"), Dunsmuir Bottling Company, doing business as Castle
Rock Spring Water Company, a California corporation (the "Company")
and the shareholders of the Company listed in Exhibit A (the "Company
Shareholders").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Parent and the Company have
determined that the merger of Company with and into Subsidiary (the
"Merger") is consistent with and in furtherance of the long-term
business strategy of Parent and the Company, and is fair to and in the
best interests of Parent and the Company and their respective
shareholders; and
WHEREAS, Parent, Subsidiary and the Company intend the Merger to
qualify as a tax-free reorganization under the provisions of Section
368 of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein
and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto, intending to be
legally bound hereby, agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the
conditions of this Agreement, at the Effective Time (as defined in
Section 1.2) in accordance with the California Corporations Code (the
"CCC"), Company shall be merged with and into Subsidiary and the
separate existence of Company shall thereupon cease. Subsidiary shall
be the surviving corporation in the Merger and is hereinafter
sometimes referred to as the "Surviving Corporation."
SECTION 1.2 Effective Time of the Merger. The Merger shall become
effective at such time (the "Effective Time") as shall be stated in
Articles of Merger, in a form mutually acceptable to Parent and the
Company, to be filed with the Secretary of State of the State of
California in accordance with the CCC (the "Merger Filing"). The
Merger Filing shall be made simultaneously with or as soon as
practicable after the closing of the transactions contemplated by this
Agreement in accordance with Section 3.5.
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ARTICLE II
THE SURVIVING AND PARENT CORPORATIONS
SECTION 2.1 Certificate of Incorporation. The Articles of
Incorporation of Subsidiary at and as of the Effective Time shall be
the Articles of Incorporation of the Surviving Corporation following
the Effective Time, and the name of the Surviving Corporation shall be
Castle Rock Spring Water Company, Inc.
SECTION 2.2 Bylaws. The Bylaws of Subsidiary at and as of the
Effective Time shall be the Bylaws of the Surviving Corporation
following the Effective Time, and the name of the Surviving
Corporation shall be Castle Rock Spring Water Company, Inc.
SECTION 2.3 Directors and Officers. The directors and officers of
the Surviving Corporation following the Merger shall not change at the
Effective Time, and such directors and officers shall serve in
accordance with the Bylaws of the Surviving Corporation until their
respective successors are duly elected or appointed and qualified
pursuant to Section 9.4.
ARTICLE III
MERGER CONSIDERATION
SECTION 3.1 Consideration.
(a) Cash Consideration and Adjustments. (i) On the Closing Date,
each Company Shareholder shall be entitled to receive cash
consideration in the amount set forth beside such Shareholder's name
on Exhibit A, such cash consideration to be, in the aggregate, an
amount equal to $1,450,712 (the "Cash Consideration"). One-half of
each Company Shareholder's proportional share of the Cash
Consideration shall be paid to each Company Shareholder on the Closing
Date and the balance of the Cash Consideration for each Company
Shareholder (in the aggregate, the "Escrow Cash") shall be placed in
escrow with Ballard Spahr Andrews & Ingersoll, as Escrow Agent
("Escrow Agent") pursuant to that certain Escrow Agreement dated
October 15, 1997 (the "Escrow Agreement"), and released as described
in (iii), (iv) and (v) below.
(ii) Within 120 days of the date hereof, Parent shall satisfy or
identify all debts, payables, liabilities and other obligations of the
Company, as of the date hereof, identified in accordance with
Generally Accepted Accounting Principles (the "Liabilities"); provided
that "Liabilities" shall include all allowances and bill-backs to the
Company's customers.
(iii) Upon completion by Parent of the satisfaction or
identification of all Liabilities, and if the Liabilities, both
satisfied and identified, exceed in the aggregate $4,650,000, then the
cash, if any, to be released to the Company Shareholders shall be
calculated as follows:
Escrow Cash - [Liabilities - $4,650,000].
The balance of the Escrow Cash shall be promptly returned to the
Parent.
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If the amount by which the Liabilities exceed $4,650,000 is
greater than the Escrow Cash, then the number of Escrow Shares to be
returned to Parent shall be calculated as follows ("IPO", "IPO Price"
and "Escrow Shares" shall have the meanings set forth in Section
3.1(b) below):
If the IPO has been consummated:
[(Liabilities - 4,650,000) - Escrow Cash] / (75% x IPO
Price)
If the IPO has not been consummated:
[(Liabilities - 4,650,000) - Escrow Cash] / 5
If the IPO has been consummated the balance of the Escrow
Shares, if any, shall be released to the Company Shareholders after an
adjustment, if any, pursuant to Section 3.1(b) below. If the IPO has
not been consummated by February 15, 1998, the balance of the Escrow
Shares shall be released to the Company Shareholders after an
adjustment, if any, pursuant to Section 3.1(b) below.
If the amount by which the Liabilities exceed $4,650,000 is
equal to or less than the Escrow Cash, the Escrow Shares shall be
released to the Company Shareholders upon adjustment, if any, pursuant
to and at the time stipulated in Section 3.1(b) below.
(iv) Upon completion by Parent of the satisfaction or
identification of all Liabilities, and if the Liabilities, both
satisfied and identified, are less than $4,650,000, then the Escrow
Cash shall be released to the Company Shareholders, the Escrow Shares
shall be released to the Company Shareholders upon adjustment, if any,
pursuant to and at the time stipulated in Section 3.1(b) below and
Parent shall promptly pay to the Company Shareholders an amount in the
aggregate equal to the difference between $4,650,000 minus the
Liabilities, both satisfied and identified.
(v) Upon completion by Parent of the satisfaction or
identification of all Liabilities, and if the Liabilities, both
satisfied and identified, equal $4,650,000, then the Escrow Cash shall
be released to the Company Shareholders and the Escrow Shares shall be
released to the Company Shareholders upon adjustment, if any, pursuant
to and at the time stipulated in Section 3.1(b) below.
(vi) Parent shall regularly update the Company Shareholders
regarding the identification of Liabilities and the Company
Shareholders shall have the opportunity to contest the validity or
amount of any Liability identified by Parent, provided that Parent
shall resolve any dispute regarding the validity or amount of any
Liability.
(b) Share Consideration and Adjustments. (i) On or promptly after
the Closing Date, the Company Shareholders shall receive, in the
aggregate, the number of shares of common stock of Parent ("Parent
Stock") equal to one-half the number of shares obtained by dividing by
$5.00 the result of subtracting the aggregate amount of Cash
Consideration received by the Company Shareholders in (a) above from
$3,000,002 ("Base Shares"). The balance of such shares of Parent
Common Stock ("Escrow Shares") shall be placed in escrow with the
Escrow Agent pursuant to the Escrow Agreement and adjusted as
described in (ii), (iii), (iv) and (v) below. For the purposes of
these provisions, "Total Shares" means the sum of Base Shares plus
Escrow Shares.
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(ii) If 75% of the per share price (the "IPO Price") at
which the Parent Stock is sold pursuant to an initial public offering
of the Parent Stock, not including any over-allotment option, (the
"IPO") is $5.00 per share, the number of Escrow Shares shall remain
the same pending release pursuant to Section 3.1(a).
(iii) If 75% of the IPO Price is greater than $5.00, then
the number of Escrow Shares to be released to the Company Shareholders
pursuant to Section 3.1(a) shall be calculated as follows:
Escrow Shares - [Total Shares - [(Total Shares x 5) / (.75 x
IPO Price)]].
The balance of the Escrow Shares shall be promptly returned to the
Parent. If the IPO Price is such that the number of shares to be
returned to the Parent is greater than the number of Escrow Shares,
then the Company Shareholders shall sell such excess to the Parent at
a price equal to $5.00 per share. To the extent that Base Shares plus
Escrow Shares released to Company Shareholders ("Adjusted Shares") is
less than Total Shares, Parent shall issue options to Company
Shareholders for the difference between Total Shares and Adjusted
Shares to be exercisable at the IPO Price for an exercise period of
five years from the date of issuance.
(iv) If 75% of the IPO Price is less than $5.00, then the
Escrow Shares will be released to the Company Shareholders pursuant to
Section 3.1(a) and the number of additional shares the Parent Company
shall issue to the Company Shareholders and place in escrow to be
released pursuant to Section 3.1(a) shall be calculated as follows:
[(Total Shares x 5) / (.75 x IPO Price)] - Total Shares
(v) If the Parent has not made an initial public offering of
its common shares by February 15, 1998, then, after completion by
Parent of the satisfaction or identification of all Liabilities as set
forth under Section 3(a)(iii), the Escrow Shares, as adjusted pursuant
to Section 3.1(a)(iii), if appropriate, shall be released to the
Company Shareholders.
(vi) The Company Shareholders shall be deemed, for federal
income tax purposes and otherwise, to be the owners of the Escrow
Shares while such shares are held by Escrow Agent. The Company
Shareholders shall receive any regular or liquidating dividends paid
on the Escrow Shares and shall be entitled to vote the Escrow Shares,
while such shares are held by Escrow Agent.
(c) Each Company Shareholder shall receive the number of shares
of Parent Stock set forth beside such Shareholder's name on Exhibit A.
(d) No share of Company Common Stock outstanding immediately
prior to the Effective Time shall be deemed to be outstanding or to
have any rights other than those set forth in this Section 3.1 after
the Effective Time.
(e) Shares of Company Common Stock held by shareholders of the
Company who have, prior to the taking of the vote of the Company's
shareholders on the Merger, filed with the Company written demand for
the appraisal of their shares of Company Common Stock in accordance
with the applicable provisions of the CCC, shall not be deemed to be
converted into the right to receive the Merger Consideration unless,
and until such time as, such shareholders shall have withdrawn, failed
to perfect,
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or shall have effectively lost, their right to appraisal of or payment
for their shares of Company Common Stock under the CCC, at which time
such shares shall be converted into the right to receive the Merger
Consideration as provided in this Section 3.1. The Company shall give
Parent prompt notice of any demand received by the Company for payment
of shares of Company Common Stock from a Dissenting Shareholder, and
Parent shall have the right to participate in all negotiations and
proceedings with respect to such demand. The Company agrees that it
will not, except with the prior written consent of Parent, make any
payment with respect to, or settle or offer to settle, any such demand
for payment. Each Dissenting Shareholder who becomes entitled,
pursuant to the provisions of the CCC, to the payment of the value of
his, her or its shares shall receive payment therefor from Parent or
Subsidiary (but only after the value thereof shall have been agreed
upon or finally determined pursuant to the terms of this Agreement and
as provided under the CCC). In the event that any Dissenting
Shareholder shall have withdrawn, failed to perfect, or shall have
effectively lost, his right to appraisal of and payment for his, her
or its shares, Parent shall issue and deliver, upon surrender by such
Dissenting Shareholder of his, her or its certificate or certificates
representing shares of Company Common Stock, the Merger Consideration
to which such Dissenting Shareholder may then be entitled under and
pursuant to this Section 3.1.
(f) In the event that the Parent Stock is combined into a smaller
number of shares, then all shares of Parent Stock owned by the Company
Shareholders, including the Escrow Shares, and shares of Parent Stock
to which the Company Shareholders are or may be entitled, shall be
combined and the Company Shareholders shall be entitled to receive the
same number of shares of Parent Stock as if Company Shareholders
currently owned and held all of the shares held in escrow or to which
Company Shareholders are or may be entitled.
SECTION 3.2 Conversion of Subsidiary Shares. At the Effective
Time, by virtue of the Merger and without any action on the part of
Parent as the sole shareholder of Subsidiary, each issued and
outstanding share of common stock, no par value, of Subsidiary
("Subsidiary Common Stock") shall be converted into one share of
common stock, no par value, of the Surviving Corporation.
SECTION 3.3 Exchange of Certificates.
(a) At the Effective Time:
(i) each holder of a certificate representing shares of
Company Common Stock shall surrender such certificates (the "Company
Certificates") for cancellation to the Secretary of Parent, together
with a duly executed letter of transmittal and such other documents as
the Secretary shall reasonably require;
(ii) upon surrender of the Company Certificates, the holder
of such Company Certificates shall be entitled to receive, subject to
the terms of Section 3.1 and the Escrow Agreement, in exchange
therefor (A) a certificate representing that number of whole shares of
Parent Common Stock and (B) a check for that portion of the Cash
Consideration, into which the shares of Company Common Stock
theretofore represented by the Company Certificates so surrendered
shall have been converted pursuant to the provisions of Section 3.1,
and the Company Certificates so surrendered shall be cancelled.
Neither Parent nor Subsidiary shall be liable to a holder of shares of
Company Common Stock for any shares of Parent Common Stock or
dividends or distributions thereon delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
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(b) Notwithstanding any other provision of this Agreement, no
certificates or scrip for fractional shares of Parent Common Stock
shall be issued in the Merger and no Parent Common Stock dividend,
stock split or interest shall relate to any fractional security, and
such fractional interests shall not entitle the owner thereof to vote
or to any other rights of a security holder. In lieu of any such
fractional shares, each holder of Company Common Stock who would
otherwise have been entitled to receive a fraction of a share of
Parent Common Stock upon surrender of Company Certificates for
exchange pursuant to this Article III shall be entitled to receive
from the Exchange Agent a cash payment.
(c) From and after the Effective Time, all Company Common Stock
shall no longer be outstanding and shall automatically be cancelled
and retired and shall cease to exist, and each holder of a certificate
representing shares of Company Common Stock shall cease to have any
rights with respect thereto, except the right to receive in exchange
therefor, upon surrender thereof at Closing, the Merger Consideration
into which the aggregate number of shares of Company Common Stock
represented by such certificate or certificate surrendered shall have
been converted pursuant to this Agreement. Notwithstanding any other
provision of this Agreement, (i) until holders or transferees of
certificates theretofore representing shares of Company Common Stock
have surrendered them for exchange as provided herein, no dividends
shall be paid with respect to any shares of Parent Common Stock
represented by such certificates and no payment for fractional shares
shall be made and (ii) without regard to when such certificates
representing shares of Company Common Stock are surrendered for
exchange as provided herein, no interest shall be paid on any Parent
Common Stock dividends or any payment for fractional shares. Upon
surrender of a certificate which immediately prior to the Effective
Time represented shares of Company Common Stock, there shall be paid
to the holder of such certificate the amount of any dividends which
became payable after the Effective Time, but which were not paid by
reason of the foregoing, with respect to the number of whole shares of
Parent Common Stock represented by the certificate or certificates
issued upon such surrender.
(d) If any certificate for shares of Parent Common Stock is to be
issued in a name other than that in which the certificate for shares
of Company Common Stock surrendered in exchange therefor is
registered, it shall be a condition of such exchange that the
certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer and the person requesting such exchange shall
have paid to Parent or its transfer agent any applicable transfer or
other taxes required by reason of such issuance.
(e) In the event any Company Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Company Certificate to be lost, stolen or
destroyed, the Surviving Corporation shall issue in exchange for such
lost, stolen or destroyed Company Certificate the Parent Common Stock
deliverable in respect thereof determined in accordance with this
Section 3.4. When authorizing such payment in exchange therefor, the
Board of Directors of Parent may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed Company Certificate to give Parent such indemnity
as it may reasonably direct as protection against any claim that may
be made against Parent or the Surviving Corporation with respect to
the Company Certificate alleged to have been lost, stolen or
destroyed.
SECTION 3.4 Closing. The closing (the "Closing") of the
transactions contemplated by this Agreement shall take place at a
location mutually agreeable to Parent and the Company on the date
hereof (the date on which the Closing occurs is referred to in this
Agreement as the "Closing Date").
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SECTION 3.5 Closing of the Company's Transfer Books. At the
Effective Time, the stock transfer books of the Company shall be
closed and no transfer of shares of Company Common Stock which were
outstanding immediately prior to the Effective Time shall thereafter
be made. If, after the Effective Time, subject to the terms and
conditions of this Agreement, Company Certificates formerly
representing Company Common Stock are presented to Parent or the
Surviving Corporation, they shall be cancelled and exchanged for
Parent Common Stock in accordance with this Article III.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUBSIDIARY
Parent and Subsidiary each represent and warrant to the Company
as of the date hereof as follows:
SECTION 4.1 Organization and Qualification. Each of Parent and
Subsidiary is a corporation duly organized, validly existing and in
good standing or local equivalent thereof under the laws of the state
of its incorporation and has the requisite power and authority to own,
lease and operate its assets and properties and to carry on its
business as it is now being conducted. True, accurate and complete
copies of Parent's Articles of Incorporation and Bylaws and
Subsidiary's Articles of Incorporation and Bylaws, in each case as in
effect on the date hereof, including all amendments thereto, have been
or in the case of Subsidiary, will promptly be delivered to the
Company.
SECTION 4.2 Capitalization.
(a) The authorized capital stock of Parent consists of (i)
100,000,000 shares of Parent Common Stock, of which 7,358,239 shares
were issued and outstanding as of September 30, 1997, and (ii)
2,000,000 shares of non-voting convertible preferred stock, par value
$1.00 per share, of which 1,702,500 shares are issued and outstanding
as of September 30, 1997. All of the issued and outstanding shares of
Parent Common Stock are validly issued and are fully paid,
nonassessable and free of preemptive rights.
(b) (i) Except as set forth in Schedule 4.2 attached hereto, as
of the date hereof, (A) there were no outstanding subscriptions,
options, calls, contracts, commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of conversion or
exchange under any outstanding security, instrument or other agreement
and also including any rights plan or other anti-takeover agreement,
obligating Parent or any subsidiary of Parent to issue, deliver or
sell, or cause to be issued, delivered or sold or otherwise to become
outstanding, additional shares of the capital stock of Parent or
obligating Parent or any subsidiary of Parent to grant, extend or
enter into any such agreement or commitment. (B) Except as set forth
in Schedule 4.2 and except as contemplated hereby, there are no voting
trusts other than, proxies or other agreements or understandings to
which Parent or any subsidiary of the Parent is a party or is bound
with respect to the voting of any shares of capital stock of Parent or
any subsidiary and there are no such trusts, proxies, agreements or
understandings by, between or among any of Parent's shareholders with
respect to Parent Common Stock. There are no outstanding or authorized
stock appreciation rights, phantom stock, profit participation or
similar rights with respect to Parent.
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(c) The authorized capital stock of Subsidiary consists of 100
shares of Subsidiary Common Stock, of which 100 shares are issued and
outstanding, which shares are owned beneficially and of record by
Parent.
(d) The shares of Parent Common Stock to be issued to
shareholders of the Company in the Merger will be at the Effective
Time duly authorized, validly issued, fully paid and nonassessable and
free of preemptive rights and will be delivered to each Company
Shareholder free and clear of all liens, encumbrances, restrictions
and claims of every kind; provided that a portion of such shares will
be placed in escrow pursuant to Article III hereof.
SECTION 4.3 Authority; Non-Contravention; Approvals.
(a) Parent and Subsidiary each have all necessary corporate power
and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The Parent Common Stock issued
pursuant to Article III will, when issued, be duly authorized, validly
issued, fully paid and nonassessable, and no shareholder of Parent
will have any preemptive right of subscription or purchase in respect
thereof. This Agreement has been approved by the Boards of Directors
of Parent and Subsidiary, and no other corporate proceedings on the
part of Parent or Subsidiary are necessary to authorize the execution
and delivery of this Agreement or the consummation by Parent and
Subsidiary of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by each of Parent and Subsidiary,
and, assuming the due authorization, execution and delivery hereof by
the Company and the Company Shareholders, constitutes a valid and
legally binding agreement of each of Parent and Subsidiary enforceable
against each of them in accordance with its terms, except that such
enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating
to enforcement of creditors' rights generally and (ii) general
equitable principles.
(b) Except for requirements to notify creditors of the occurrence
of the transactions contemplated hereby, the execution and delivery of
this Agreement by each of Parent and Subsidiary do not violate,
conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the
properties or assets of Parent or any of its subsidiaries under any of
the terms, conditions or provisions of (i) the respective charters or
by-laws of Parent or any of its subsidiaries, (ii) any statute, law,
ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority
applicable to Parent or any of its subsidiaries or any of their
respective properties or assets or (iii) any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession,
contract, lease or other instrument, obligation or agreement of any
kind to which Parent or any of its subsidiaries is now a party or by
which Parent or any of its subsidiaries or any of their respective
properties or assets may be bound or affected, excluding those
violations, conflicts, breaches, defaults, terminations, accelerations
or creations of liens, security interests, charges or encumbrances
that would not, in the aggregate, have a material adverse effect on
the business, operations, properties, assets, condition (financial or
other), results of operations or prospects of the Parent and its
subsidiaries taken as a whole (a "Parent Material Adverse Effect").
8
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(c) Except for the making of the Merger Filing, no declaration,
filing or registration with, or notice to, or authorization, consent
or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by Parent
or Subsidiary or the consummation by Parent or Subsidiary of the
transactions contemplated hereby.
SECTION 4.4 Litigation. Except as disclosed in Schedule 4.4
attached hereto, there are no claims, suits, actions or proceedings
pending or, to the knowledge of Parent, threatened against or relating
to Parent or any of its subsidiaries, before any court, governmental
department, commission, agency, instrumentality or authority, or any
arbitrator which could reasonably be expected, either alone or in the
aggregate with all such claims, actions or proceedings, to cause a
Parent Material Adverse Effect. Except as set forth in Schedule 4.4
attached hereto, neither Parent nor any of its subsidiaries is subject
to any judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality,
authority or arbitrator which prohibits or restricts the consummation
of the transactions contemplated hereby or would reasonably be
expected, either alone or in the aggregate, to have a Parent Material
Adverse Effect.
SECTION 4.5 No Violation of Law. Neither Parent nor any of its
subsidiaries is in violation of, or has been given notice or been
charged with any violation of, any law, statute, order, rule,
regulation, ordinance, or judgment (including, without limitation, any
applicable environmental law, ordinance or regulation) of any
governmental or regulatory body or authority, except for violations
which, in the aggregate, could not reasonably be expected to have a
Parent Material Adverse Effect. As of the date of this Agreement, to
the knowledge of Parent, no investigation or review by any
governmental or regulatory body or authority is pending or threatened,
nor has any governmental or regulatory body or authority indicated to
Parent an intention to conduct the same, other than, in each case,
those the outcome of which, as far as reasonably can be foreseen, will
not have a Parent Material Adverse Effect. Parent and its subsidiaries
have all permits, licenses, franchises, variances, exemptions, orders
and other governmental authorizations, consents and approvals
necessary to conduct their businesses as presently conducted
(collectively, the "Parent Permits"), except for permits, licenses,
franchises, variances, exemptions, orders, authorizations, consents
and approvals the absence of which, alone or in the aggregate, would
not have a Parent Material Adverse Effect. Parent and its subsidiaries
are not in violation of the terms of any Parent Permit, except for
delays in filing reports or violations which, alone or in the
aggregate, would not have a Parent Material Adverse Effect.
SECTION 4.6 Financial Statements. Parent has previously delivered
to Company copies of its audited financial statements for the years
ending September 30, 1994, 1995 and 1996 and interim unaudited
financial statements for the period ended June 30, 1997. The audited
and unaudited interim financial statements of Parent (collectively,
the "Parent Financial Statements") have been prepared in accordance
with generally accepted accounting principles applied on a consistent
basis (except as may be indicated therein or in the notes thereto) and
fairly present the financial position of Parent and its subsidiaries
as of the dates thereof and the results of their operations and
changes in financial position for the periods then ended, subject, in
the case of the unaudited interim financial statements, to normal
year-end and audit adjustments and any other adjustments described
therein and to the omission of notes thereto.
SECTION 4.7 Brokers. Parent has not engaged, or caused to be
incurred, any liability to any finder, broker or sales agent in
connection with the origin, negotiation, execution, delivery, or
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performance of this Agreement and the transactions contemplated
hereby, other than Henry R. Hidell of Henry Hidell, Eyster
Technological Services, Inc. to whom Parent has paid $100,000.
SECTION 4.8 Employment Agreements. Parent and Subsidiary have
entered into employment agreements effective as of the Closing with
Paul Kassis, Scott Lidster and Clark Wright, substantially in the form
of Exhibit 4.8.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE COMPANY SHAREHOLDERS
The Company and each of Paul Kassis, Scott Lidster and Clark
Wright (the "Principal Shareholders"), jointly and severally,
represent and warrant to Parent and Subsidiary as of the date hereof
as follows:
SECTION 5.1 Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing
under the laws of the state of its incorporation and has the requisite
corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted.
The Company is qualified to do business and is in good standing in
each jurisdiction in which the properties owned, leased or operated by
it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to be so qualified
and in good standing will not, when taken together with all other such
failures, have a material adverse effect on the business, operations,
properties, assets, condition (financial or other), results of
operations or prospects of the Company and its subsidiaries, taken as
a whole (a "Company Material Adverse Effect"). True, accurate and
complete copies of the Company's Certificate of Incorporation and
By-laws, in each case as in effect on the date hereof, including all
amendments thereto, have been delivered to Parent.
SECTION 5.2 Capitalization.
(a) The authorized capital stock of the Company consists of (i)
10,000 shares of Series A Common Stock, of which 750 shares were
issued and outstanding as of the date hereof, and (ii) 10,000 shares
of non-voting Series B Common Stock, of which 92 shares were issued
and outstanding as of the date hereof. All of such issued and
outstanding shares are duly authorized, validly issued and are fully
paid, nonassessable and free of preemptive rights and are owned of
record and beneficially, free and clear of any liens, by the persons
set forth on Schedule 5.2. (No subsidiary of the Company holds any
shares of the capital stock of the Company.)
(b) There are no outstanding subscriptions, options, calls,
contracts, commitments, understandings, restrictions, arrangements,
rights or warrants, including any right of conversion or exchange
under any outstanding security, instrument or other agreement and also
including any rights plan or other anti-takeover agreement, obligating
the Company or any subsidiary of the Company to issue, deliver or
sell, or cause to be issued, delivered or sold or otherwise to become
outstanding, additional shares of the capital stock of the Company or
obligating the Company or any subsidiary of the Company to grant,
extend or enter into any such agreement or commitment and (ii) except
for that certain Buy-Sell Agreement dated July 24, 1990 among the
Company and the Principal Shareholders (the "Buy-
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Sell Agreement"), which will be terminated on the date hereof, and as
contemplated hereby, there are no voting trusts, proxies or other
agreements or understandings to which the Company or any subsidiary of
the Company is a party or is bound with respect to the voting of any
shares of capital stock of the Company and there are no such trusts,
proxies, agreements or understandings by, between or among any of the
Company's shareholders with respect to Company Common Stock. There are
no outstanding or authorized stock appreciation rights, phantom stock,
profit participation or similar rights with respect to the Company.
SECTION 5.3 [Intentionally left blank]
SECTION 5.4 Subsidiaries. Schedule 5.4 sets forth the name and
state of incorporation of each direct and indirect subsidiary of the
Company. Each direct and indirect subsidiary of the Company is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization and has the requisite
corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted.
Each subsidiary of the Company is qualified to do business, and is in
good standing, in each jurisdiction in which the properties owned,
leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so
qualified and in good standing will not, when taken together with all
such other failures, have a Company Material Adverse Effect. All of
the outstanding shares of capital stock of each subsidiary of the
Company are validly issued, fully paid, nonassessable and free of
preemptive rights and are owned directly or indirectly by the Company
free and clear of any liens, claims, encumbrances, security interests,
equities, charges and options of any nature whatsoever except as set
forth in Schedule 5.4 attached hereto. There are no subscriptions,
options, warrants, rights, calls, contracts, voting trusts, proxies or
other commitments, understandings, restrictions or arrangements
relating to the issuance, sale, voting, transfer, ownership or other
rights with respect to any shares of capital stock of any subsidiary
of the Company, including any right of conversion or exchange under
any outstanding security, instrument or agreement.
SECTION 5.5 Authority; Non-Contravention; Approvals.
(a) The Company has full corporate power and authority to enter
into this Agreement to consummate the transactions contemplated
hereby. This Agreement has been approved by the Board of Directors and
the Company Shareholders of the Company, and no other corporate
proceedings on the part of the Company are necessary to authorize the
execution and delivery of this Agreement or the consummation by the
Company of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by the Company, and, assuming the due
authorization, execution and delivery hereof by Parent and Subsidiary,
constitutes a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except
that such enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating
to enforcement of creditors' rights generally and (ii) general
equitable principles.
(b) The execution and delivery of this Agreement by the Company
do not violate, conflict with or result in a breach of any provision
of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result
in a right of termination or acceleration under, or result in the
creation of any lien, security interest, charge or encumbrance upon
any of the properties or assets of the Company or any of its
subsidiaries under any of the terms, conditions or provisions of (i)
the respective charters
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or by-laws of the Company or any of its subsidiaries, (ii) any
statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any court or governmental
authority applicable to the Company or any of its subsidiaries or any
of their respective properties or assets or (iii) except as disclosed
in Schedule 5.5(b), any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, concession, contract, lease or
other instrument, obligation or agreement of any kind to which the
Company or any of its subsidiaries is now a party or by which the
Company or any of its subsidiaries or any of their respective
properties or assets may be bound or affected, excluding those
violations, conflicts, breaches, defaults, terminations, accelerations
or creations of liens, security interests, charges or encumbrances
that would not, in the aggregate, have a Company Material Adverse
Effect.
(c) Except for the making of the Merger Filing, no declaration,
filing or registration with, or notice to, or authorization, consent
or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by the
Company or the consummation by the Company of the transactions
contemplated hereby, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals which,
if not made or obtained, as the case may be, would not, in the
aggregate, have a Company Material Adverse Effect.
(d) All governmental waivers, consents, orders and approvals
legally required for the consummation of the Merger and the
transactions contemplated hereby, and all consents from lenders
required to consummate the Merger, have been obtained and are in
effect at the Effective Time.
SECTION 5.6 Financial Statements. The Company has previously
delivered to Parent copies of its compiled financial statements for
the years ended December 31, 1992, 1993 and 1994, and its reviewed
financial statements for the years ended December 31, 1995 and 1996
and interim unaudited financial statements for the period ended July
31, 1997. The reviewed consolidated financial statements and unaudited
interim financial statements of the Company (collectively, the
"Company Financial Statements") have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
(except as may be indicated therein or in the notes thereto) and
fairly present the financial position of the Company and its
subsidiaries as of the dates thereof and the results of their
operations, cash flows and changes in financial position for the
periods then ended, subject, in the case of the unaudited interim
financial statements, to normal year-end and audit adjustments and any
other adjustments described therein and to the omission of notes
thereto.
SECTION 5.7 Books of Account. The books of account of the Company
accurately and fairly reflect, in reasonable detail and in all
material respects, the Company's transactions and the disposition of
its assets. All notes and accounts receivable of the Company are
reflected in accordance with generally accepted accounting principles
on its books and records, are valid receivables subject to no material
setoffs or counterclaims, are current and collectible and will be
collected in accordance with their terms at their recorded amounts
subject only to normal adjustments in the ordinary course of business
and the reserves for contractual allowances and bad debts set forth on
the face of the balance sheet contained in the most recent Company
Financial Statements as adjusted for the passage of time through the
Closing Date in accordance with past custom and practice of the
Company and its subsidiaries. The Company and the Company Subsidiaries
have filed all reports and returns required by any material law or
regulation to be filed by them, and have paid all taxes, duties and
charges due on the basis of such reports and returns.
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SECTION 5.8 Absence of Certain Changes of Events. Except as set
forth in Schedule 5.8, since July 31, 1997, there has not been any
change in the business, operations, properties, assets, liabilities,
condition (financial or other) or results of operations of the Company
and its subsidiaries, taken as a whole, including as a result of any
change in capital structure, employee compensation (including
severance rights and benefit plans), accounting method or applicable
law, other than changes that were both in the ordinary course of
business and which in the aggregate would not have a Company Material
Adverse Effect. Also except as set forth in Schedule 5.8, since July
31, 1997, there have been no dividends or other distributions to
Company Shareholders declared or paid.
SECTION 5.9 Absence of Undisclosed Liabilities. Except as
disclosed in Schedule 5.9 attached hereto, neither the Company nor any
of its subsidiaries had at July 31, 1997, or has incurred since that
date, any liabilities or obligations (whether absolute, accrued,
contingent or otherwise) of any nature, except: (a) liabilities,
obligations or contingencies (i) which are accrued or reserved against
in the Company Financial Statements or reflected in the notes thereto
or (ii) which were incurred after July 31, 1997 and in the ordinary
course of business and consistent with past practices, (b)
liabilities, obligations or contingencies which (i) would not, in the
aggregate, have a Company Material Adverse Effect or (ii) have been
discharged or paid in full prior to the date hereof and (c)
performance obligations with respect to contracts which are of a
nature not required to be reflected or reserved against in the
consolidated financial statements of the Company and its subsidiaries
prepared in accordance with generally accepted accounting principles
consistently applied and which were incurred in the ordinary course of
business.
SECTION 5.10 Taxes. (a) The Company and its subsidiaries have (i)
duly filed with the appropriate governmental authorities all Tax
Returns (as defined in 5.10(c)) required to be filed by them for all
periods ending on or prior to the Effective Time, other than those Tax
Returns the failure of which to file would not have a Company Material
Adverse Effect, and such Tax Returns are true, correct and complete in
all material respects and (ii) duly paid in full or made adequate
provision in the Company Financial Statements for the payment of all
Taxes (as defined in Section 5.10(b)) due for all periods ending at or
prior to the Effective Time. The liabilities and reserves for Taxes
reflected in the Company balance sheet are adequate to cover all
unpaid Taxes for all periods ending at or prior to the Effective Time
and there are no material liens for Taxes upon any property or asset
of the Company or any subsidiary thereof, except for liens for Taxes
not yet due. There are no unresolved issues of law or fact arising out
of a notice of deficiency, proposed deficiency or assessment from the
IRS or any other governmental taxing authority with respect to Taxes
of the Company or any of its subsidiaries which, if decided adversely,
singly or in the aggregate, would have a Company Material Adverse
Effect. Neither the Company nor any of its subsidiaries is a party to
any agreement providing for the allocation or sharing of Taxes with
any entity that is not, directly or indirectly, a wholly owned
corporate subsidiary of Company. Neither the Company nor any of its
corporate subsidiaries has, with regard to any assets or property
held, acquired or to be acquired by any of them, filed a consent to
the application of Section 341(f) of the Code.
(b) For purposes of this Agreement, the term "Taxes" shall mean
all taxes, including, without limitation, income, gross receipts,
excise, property, sales, withholding, social security, occupation,
use, service, service use, license, payroll, franchise, transfer and
recording taxes, fees and charges, windfall profits, severance,
customs, import, export, employment or similar taxes, charges, fees,
levies or other assessments imposed by the United States, or any
state, local or foreign government or subdivision or agency thereof,
whether computed on a separate, consolidated, unitary, combined or any
other basis, and
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such term shall include any interest, fines, penalties or additional
amounts and any interest in respect of any additions, fines or
penalties attributable or imposed or with respect to any such taxes,
charges, fees, levies or other assessments.
(c) For purposes of this Agreement, the term "Tax Return" shall
mean any return, report or other document or information required to
be supplied to a taxing authority in connection with Taxes.
(d) The Company duly elected to be taxed as an S corporation
under Subchapter S of the Code and under comparable provisions of the
tax laws of the state of California (each an "S Election") effective
from the inception of the Company. The S Elections have been in effect
continuously since their inception and have not been denied, revoked
voluntarily or involuntarily, challenged or contested by any taxing
authority.
SECTION 5.11 Title to Assets. Schedule 5.11 sets forth a list of
all real property leased or owned by the Company and its subsidiaries.
The Company and each of its subsidiaries has good and marketable title
in fee simple to all its real property and good title to all its
leasehold interests and other properties, as reflected in the most
recent balance sheet included in the Company Financial Statements,
except for properties and assets that have been disposed of in the
ordinary course of business since the date of such balance sheet, free
and clear of all mortgages, liens, pledges, charges or encumbrances of
any nature whatsoever, except (i) the lien of current taxes, payments
of which are not yet delinquent, (ii) such imperfections in title and
easements and encumbrances, if any, as are not substantial in
character, amount or extent and do not materially detract from the
value, or interfere with the present use of the property subject
thereto or affected thereby, or otherwise materially impair the
Company's business operations (in the manner presently carried on by
the Company) or (iii) mortgages or security interests incurred in the
ordinary course of business and except for such matters which in the
aggregate could not reasonably be expected to cause a Company Material
Adverse Effect. All leases under which the Company leases real or
personal property have been delivered to Parent and are in good
standing, valid and effective in accordance with their respective
terms, and there is not, under any of such leases, any existing
default or event which with notice or lapse of time or both would
become a default other than defaults under such leases which in the
aggregate will not have a Company Material Adverse Effect.
SECTION 5.12 Assets and Properties Complete. The assets and
properties of the Company and each of its subsidiaries, whether owned
or leased, are and as of the Closing Date shall be adequate and
sufficient to conduct the business of the Company as currently
conducted. Except as disclosed on Schedule 5.12, the Company has
unrestricted rights and access to all present sources of water,
including fully transferable leases, title in fee simple to land,
rights in all resources on such land or within the leasehold, with no
restrictions on quantity, time, use, quality or which would otherwise
affect the ongoing business of the Company.
SECTION 5.13 Access to Spring. To the best of the Company's
knowledge, the Company has the legal right to draw water from the
water transmission main of the City of Dunsmuir (the "City"), which
draws spring water from the source known as Mossbrae Springs No. 2, B,
C and D in Siskiyou County, California (the "Source") pursuant to a
Water Contract, dated August 8, 1990, between the City and the Company
(the "Water Contract"). The City and the Company filed and
successfully completed a validation action in accordance with the Code
of Civil Procedures as required by Section 6.b. of the Water Contract.
There are no permits, orders, or other authorizing regulations or
certificates required by the Company in order to draw water in the
quantities permitted under the Water Contract from
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the Source described above or the City's main, or to use such water in
the manner in which the Company is using the water so drawn. To the
knowledge of the Company, the City has the legal right to draw water
from the Source described above and to enter into the Water Contract
with the Company. The Company does not use any other water source for
water that it bottles or sells.
SECTION 5.14 Water Quality. There are no results of laboratory
tests conducted by or for the Company analyzing the water obtained
under the Water Contract which would preclude the use of such water as
bottled spring water to be sold to the public as spring water; and the
Company is not aware of results of any such tests conducted by others
which would preclude the use of such water as bottled water to be sold
to the public. The Company knows of no condition, including, but not
limited to, the actual or threatened presence at, in or near the
Source of hazardous substances (as defined in Section 5.21), which
could preclude the use of water obtained under the Water Contract as
bottled spring water to be sold to the public. Except as set forth in
Schedule 5.14, the Company knows of no civil, criminal or
administrative actions, suits, demands, claims, hearings,
investigations or proceedings pending or threatened, against the
Company, any of its subsidiaries, or the City which, if successful,
could preclude, in whole or in part, the use of the water obtained
under the Water Contract as bottled spring water to be sold to the
public. The Company knows of no past or present private or public
activity, including, but not limited to, mining, silvicultural,
manufacturing, or agricultural operations, that has occurred or is
occurring near the Source which had or has the potential to cause
conditions, including the actual or threatened presence at, in or near
the Source of hazardous substances (as defined in Section 5.21).
SECTION 5.15 Contracts. Schedule 5.15 sets forth a complete and
accurate list of all contracts to which the Company or any of its
subsidiaries is a party or by or to which any of them or any of their
respective assets or properties is bound or subject except contracts
(and related correspondence and other documents) for the sale or
purchase of goods and/or services by the Company and/or any of its
subsidiaries, entered into with customers or suppliers in the ordinary
course of business. All of the contracts listed in Schedule 5.15 are
in full force and effect, and neither the Company nor any of its
subsidiaries is in default under, or material breach of, any of them,
nor to the knowledge of the Company and the Company Shareholders is
any other party to any such contract in default thereunder; nor does
any event or condition exist that after notice or lapse of time or
both could constitute a default thereunder or material breach thereof
on the part of the Company or any of its subsidiaries, or to the
knowledge of the Company and the Company Shareholders, any other party
thereto. The Company has delivered to Parent or its counsel true,
correct, and complete copies of all contracts listed in Schedule 5.15,
together with copies of all modifications and supplements thereto.
SECTION 5.16 Compliance with Agreements. The Company and each of
its subsidiaries are not in breach or violation of or in default in
the performance or observance of any term or provision of, and no
event has occurred which, with notice or lapse of time or action by a
third party, could result in a default under, (a) the respective
charters, By-laws or similar organizational instruments of the Company
or any of its subsidiaries, or (b) any contract, commitment,
agreement, indenture, mortgage, loan agreement, note, lease, bond,
license, approval or other instrument to which the Company or any of
its subsidiaries is a party or by which any of them is bound or to
which any of their property is subject, which breaches, violations and
defaults, in the case of clause (b) of this Section 5.16, would have,
in the aggregate, a Company Material Adverse Effect.
SECTION 5.17 No Violation of Law. Except as disclosed in Schedule
5.17 attached hereto, neither the Company nor any of its subsidiaries
is in violation of or has been given notice or been charged
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with any violation of, any law, statute, order, rule, regulation,
ordinance or judgment (including, without limitation, any applicable
safety or environmental law, ordinance or regulation) of any
governmental or regulatory body or authority, except for violations
which, in the aggregate, could not reasonably be expected to have a
Company Material Adverse Effect. To the knowledge of the Company, no
investigation or review by any governmental or regulatory body or
authority is pending or threatened, nor has any governmental or
regulatory body or authority indicated to the Company an intention to
conduct the same, other than, in each case, those the outcome of
which, as far as reasonably can be foreseen, will not have a Company
Material Adverse Effect. The Company and its subsidiaries have all
permits, licenses, franchises, variances, exemptions, orders and other
governmental authorizations, consents and approvals necessary to
conduct their businesses as presently conducted (collectively, the
"Company Permits"), except for permits, licenses, franchises,
variances, exemptions, orders, authorizations, consents and approvals
the absence of which, alone or in the aggregate, would not have a
Company Material Adverse Effect. Schedule 5.17 sets forth a complete
list of all Company Permits. The Company and its subsidiaries are not
in violation of the terms of any Company Permit, except for delays in
filing reports or violations which, alone or in the aggregate, would
not have a Company Material Adverse Effect. To the best of the
Company's knowledge, upon consummation of the Merger and the other
transactions contemplated by this Agreement, all Company Permits will
continue to be valid and in full force and effect.
SECTION 5.18 Litigation. Except as referred to in Schedule 5.18
attached hereto, there are no claims, suits, actions or proceedings
pending or, to the knowledge of the Company, threatened against or
relating to the Company or any of its subsidiaries, before any court,
governmental department, commission, agency, instrumentality,
authority or arbitrator that seek to restrain the consummation of the
Merger or which could reasonably be expected, either alone or in the
aggregate with all such claims, actions or proceedings, to cause a
Company Material Adverse Effect. Except as referred to in Schedule
5.18 attached hereto, neither the Company nor any of its subsidiaries
is subject to any judgment, decree, injunction, rule or order of any
court, governmental department, commission, agency, instrumentality or
authority, or any arbitrator which prohibits or restricts the
consummation of the transactions contemplated hereby or would have any
Company Material Adverse Effect.
SECTION 5.19 Employee Benefit Plans; ERISA.
(a) Schedule 5.19 sets forth a list of all plans, whether oral or
written, in which any employee of the Company ("Employee")
participates (individually a "Plan" and collectively the "Plans"). The
term Plans shall include (i) any "employee benefit plan" within the
meaning of Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), (ii) any profit sharing, pension,
deferred compensation, bonus, stock option, stock purchase, severance,
retainer, consulting, health, welfare or incentive plan or agreement
whether legally binding or not, (iii) any plan or policy providing for
"fringe benefits" to the Employees, including but not limited to
vacation, paid holidays, personal leave, employee discount,
educational benefit or similar programs, and (iv) any employment
agreement, or each oral or written contract, commitment and
understanding with each current or former director, officer, employee
or stockholder or any associate or relative of any thereof, which is
not immediately terminable without cost or other liability to the
Company.
(b) Neither Company nor any member of the Company's group or
affiliated service group, as defined in Section 414 of the Internal
Revenue Code ("Members of the Group") is, or has at any time
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been, a party to any multiemployer plan as defined under Section 3(37)
of ERISA ("Multiemployer Plan"), or is, or has at any time been,
required to contribute to any such Multiemployer Plan.
(c) Neither Company nor any Members of the Group has at any time
sponsored or maintained, directly or indirectly, an employee pension
benefit plan that was subject to the minimum funding requirements of
ERISA or is subject to Title IV of ERISA.
(d) Each Plan has been administered in all material respects in
accordance with its terms. Each Plan which is an "employee benefit
plan", as defined in Section 3(3) of ERISA, complies in all material
respects by its terms and in operation with the requirements provided
by any and all statutes, orders or governmental rules or regulations
currently in effect and applicable to the Plan, including but not
limited to ERISA and the Internal Revenue Code.
(e) The Company has filed or caused to be filed on a timely basis
and distributed to employees and/or participants in the Plans on a
timely basis, each and every return, report, statement, notice,
declaration and other documents required by any federal, state or
local government agency (including, without limitation, the Internal
Revenue Service, the Department of Labor, the Pension Benefit Guaranty
Corporation and the Securities and Exchange Commission), with respect
to each Plan sponsored or maintained by the Company. Furthermore, the
Company has withheld and remitted to the proper depository all income
taxes and wage taxes on benefits derived under the Plans, to the
extent such withholding and remittance is required by law.
(f) Each Plan intended to qualify under Section 401(a) of the
Internal Revenue Code is the subject of a favorable unrevoked
determination letter issued by the Internal Revenue Service as to its
qualified status, the Internal Revenue Service has not threatened to
revoke any favorable determination letter or opinion letter with
respect to each Plan, and nothing has occurred since the date of the
most recent determination letter to cause the loss of any Plan's
qualification.
(g) All contributions for all periods ending prior to the Closing
Date (including periods from the first day of the current plan year to
the Closing Date) have been made prior to the Closing Date by the
Company.
(h) All insurance premiums have been paid in full, subject only
to normal retrospective adjustments in the ordinary course, with
regard to the Plans for plan years ending on or before the Closing
Date. With respect to periods from the close of the most recent plan
year through the Closing Date with respect to the Plans, all insurance
premiums due or payable through the Closing Date have been or will be
paid in full, and no such premium is overdue or in a grace period for
late payment.
(i) With respect to each Plan:
(1) no prohibited transactions (as defined in Section 406 of
ERISA or Section 4975 of the Internal Revenue Code) have occurred;
(2) no action or claim (other than routine claims for
benefits made in the ordinary course of Plan administration for which
Plan administrative review procedures have not been exhausted) is
pending, or to Company's knowledge, threatened or imminent against or
with respect to the Plan, any
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employer who is participating (or who has participated) in any Plan or
any fiduciary (as defined in Section 21(A) of ERISA) of the Plan; and
(3) Neither the Company nor, to Company's knowledge, any
fiduciary of any Plan has any knowledge of any facts which could give
rise to any action or claim against or with respect to any Plan, any
employer who is participating (or who has participated) in any Plan or
any fiduciary (as defined in Section 3(21)(A) of ERISA), of any Plan.
(j) Neither the Company nor, to the Company's knowledge, any
fiduciary with respect to any Plan has any liability or is threatened
with any liability (whether joint or several) (i) for the termination
of any single employer plan under Sections 4062 or 4064 of ERISA or
any multiple employer plan under Section 4063 of ERISA, (ii) for any
interest payments required under Section 302(e) of ERISA or Section
412(m) of the Internal Revenue Code, (iii) for any excise tax imposed
by Sections 4971, 4972, 4975, 4976, 4977, 4979, 4980, 4980A or 4980B
of the Internal Revenue Code, or (iv) to a fine under Section 502 of
ERISA.
(k) Neither Company nor any of the Members of the Group have
incurred any withdrawal liability with respect to any Multiemployer
Plan within the meaning of Sections 4201 and 4204 of ERISA, and no
liabilities exist with respect to withdrawals from any Multiemployer
Plans which could subject Company or any Members of the Group to any
controlled group liability under ERISA.
(l) None of the Plans that are welfare benefit plans within the
meaning of Section 3(1) of ERISA provide for benefits or coverage for
any former or retired employee or their beneficiaries, except to the
extent required by Section 4980B of the Internal Revenue Code or
Sections 601 through 608, inclusive, of ERISA. There is no VEBA
maintained with respect to any such welfare plan.
(m) Each Plan which is a "group health plan" (as such term is
defined in Section 5000(b)(1) of the Code), complies and has complied
with the continuation of group health coverage provisions contained in
Section 4980B of the Internal Revenue Code and Sections 601 through
608, inclusive, of ERISA.
(n) True, correct and complete copies of all documents creating
or evidencing any Plan have been provided to Parent, and true, correct
and complete copies of all reports, forms and other documents required
to be filed with any governmental entity or distributed to Plan
participants or employees (including, without limitation, summary plan
descriptions, Forms 5500 and summary annual reports for the past three
(3) years for all Plans subject to ERISA) have been provided to
Parent. A true, correct and accurate summary of any oral agreement or
unwritten Plan described in subsection (a) hereof has been provided to
Parent. True, correct and complete copies of employee confidentiality
or other agreements protecting proprietary processes or information
have been provided to Parent.
(o) All expenses and liabilities relating to all of the Plans
have been, and will on the Closing Date be fully and properly accrued
on Company's books and records and disclosed in accordance with
generally accepted accounting principles and in Plan financial
statements.
(p) Any fidelity bond required to be obtained by Company under
ERISA with respect to any Plan has been obtained and is in full force
and effect.
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(q) the Company has to the extent applicable with respect to each
Plan, made available to Parent copies of the three most recent
attorney's responses to an auditor's request for information.
(r) There are no pending investigations, proceedings or other
matters concerning any Plan before the Internal Revenue Service,
Department of Labor, Pension Benefit Guaranty Corporation, or any
other governmental agency, other than determination letter
applications filed with the Internal Revenue Service.
(s) There are no leased employees employed by the Company (as
such term is defined in Section 414(n) of the Internal Revenue Code)
that must be taken into account with respect to the requirements of
the Plan set forth under Section 414(n)(3) of the Internal Revenue
Code.
(t) The execution of this Agreement by the Company and the
consummation of the transactions contemplated hereunder will not,
except as set forth in Schedule 5.19, result in any obligation or
liability (with respect to accrued benefits or otherwise) to any Plan,
or to any Employee or former Employee of the Company or Members of the
Group.
SECTION 5.20 Labor Matters. Except as set forth in Schedule 5.20,
(a) there are no material controversies pending or, to the knowledge
of the Company, threatened between the Company or its subsidiaries and
any representatives of any of their employees, (b) none of the
employees of the Company or its subsidiaries is covered by any
collective bargaining agreement, (c) no one has petitioned within the
last five years or is now petitioning for union representation of any
of the employees of the Company or its subsidiaries, (d) to the
knowledge of the Company, there are no material organizational efforts
presently being made involving any of the employees of the Company or
its subsidiaries and there have been no work stoppages or other
material labor difficulties, (e) the Company and its subsidiaries
have, to the knowledge of the Company, complied in all material
respects with all laws relating to the employment of labor, including,
without limitation, any provisions thereof relating to wages, hours,
collective bargaining, and the payment of social security and
similar taxes and (f) no person has, to the knowledge of the
Company, asserted that the Company or any of its subsidiaries is
liable in any material amount for any arrears of wages or any
taxes or penalties for failure to comply with any of the
foregoing.
SECTION 5.21 Environmental Matters. (a)(i) the Company and its
subsidiaries have conducted their respective businesses in compliance
with all applicable Environmental Laws (as defined below), including,
without limitation, having all permits, licenses and other approvals
and authorizations necessary for the operation of their respective
businesses as presently conducted, (ii) none of the properties owned
by the Company or any of its subsidiaries contain any Hazardous
Substance (as defined below) as a result of any activity of the
Company or any of its subsidiaries in amounts exceeding the levels
permitted by applicable Environmental Laws, (iii) neither the Company
nor any of its subsidiaries has received any notices, demand letters
or requests for information from any Federal, state, local or foreign
governmental entity or third party indicating that the Company or any
of its subsidiaries may be in violation of, or liable under, any
Environmental Law in connection with the ownership or operation of
their businesses, (iv) there are no civil, criminal or administrative
actions, suits, demands, claims, hearings, investigations or
proceedings pending or threatened, against the Company or any of its
subsidiaries relating to any violation, or alleged violation, of any
Environmental Law, (v) no reports have been filed, or are required to
be filed, by the Company or any of its subsidiaries concerning the
release of any Hazardous Substance or the threatened or actual
violation of any Environmental Law, (vi) no Hazardous Substance has
been treated, disposed of, released or transported in violation of any
applicable Environmental Law from any
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properties owned by the Company or any of its subsidiaries as a result
of any activity of the Company or any of its subsidiaries during the
time such properties were owned, leased or operated by the Company or
any of its subsidiaries, (vii) there have been no environmental
investigations, studies, audits, tests, reviews or other analyses
regarding compliance or noncompliance with any applicable
Environmental Law conducted by or which are in the possession of the
Company or its subsidiaries relating to the activities of the Company
or its subsidiaries, (viii) there are no underground storage tanks on,
in or under any properties owned by the Company or any of its
subsidiaries and no underground storage tanks have been closed or
removed from any of such properties during the time such properties
were owned, leased or operated by the Company or any of its
subsidiaries, (ix) there is no asbestos or asbestos containing
material present in any of the properties owned by the Company and its
subsidiaries, and no asbestos has been removed from any of such
properties during the time such properties were owned, leased or
operated by the Company or any of its subsidiaries, (x) none of the
properties owned by the Company or any of its subsidiaries contains
environmentally sensitive areas, including, without limitation,
wetlands as defined in the federal Clean Water Act of 1970, and
amendments thereto, which would adversely effect the ability of the
Company or any of its subsidiaries to engage in future development of
said properties, and (xi) neither the Company, its subsidiaries nor
any of their respective properties are subject to any material
liabilities or expenditures (fixed or contingent) relating to any
suit, settlement, court order, administrative order, regulatory
requirement, judgment or claim asserted or arising under any
Environmental Law, except for violations of the foregoing clauses (i)
through (xi) that, singly or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect.
(b) As used herein, "Environmental Law" means any Federal, state,
local or foreign law, statute, ordinance, rule, regulation, code,
license, permit, authorization, approval, consent, order, judgment,
decree, injunction, requirement or agreement with any governmental
entity relating to (x) the protection, preservation or restoration of
the environment (including, without limitation, air, water vapor,
surface water, groundwater, drinking water supply, surface land,
subsurface land, plant and animal life or any other natural resource)
or to human health or safety or (y) the exposure to, or the use,
storage, recycling, treatment, generation, transportation, processing,
handling, labeling, production, release or disposal of Hazardous
Substances, in each case as amended and as in effect on the Closing
Date. The term Environmental Law includes, without limitation, (i) the
Federal Comprehensive Environmental Response Compensation and
Liability Act of 1980, the Superfund Amendments and Reauthorization
Act, the Federal Water Pollution Control Act of 1972, the Federal
Clean Air Act, the Federal Clean Water Act, the Federal Resource
Conservation and Recovery Act of 1976 (including the Hazardous and
Solid Waste Amendments thereto), the Federal Solid Waste Disposal and
the Federal Toxic Substances Control Act, the Federal Insecticide,
Fungicide and Rodenticide Act, the Federal Occupational Safety and
Health Act of 1970, each as amended and as in effect on the Closing
Date, or any state counterpart thereof, and (ii) any common law or
equitable doctrine (including, without limitation, injunctive relief
and tort doctrines such as negligence, nuisance, trespass and strict
liability) that may impose liability or obligations for injuries,
damages or penalties due to, or threatened as a result of, the
presence of, effects of or exposure to any Hazardous Substance.
(c) As used herein, "Hazardous Substance" means any substance
presently or hereafter listed, defined, designated or classified as
hazardous, toxic, radioactive, or dangerous, or otherwise regulated,
under any Environmental Law. Hazardous Substance includes any
substance to which exposure is regulated by any government authority
or any Environmental Law including, without limitation, any toxic
waste, pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste,
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industrial substance or petroleum or any derivative or by-product
thereof, radon, radioactive material, asbestos containing material,
urea formaldehyde foam insulation, lead or polychlorinated biphenyls.
SECTION 5.22 Trademarks and Intellectual Property Compliance. The
Company and its subsidiaries own or have the right to use, without any
material payment to any other party, all of their patents, trademarks
(registered or unregistered), trade names, service marks, copyrights,
technology, know-how and applications as set forth in Schedule 5.22
("Intellectual Property Rights"), and the consummation of the
transactions contemplated hereby will not alter or impair such rights
in any material respect. Other than the Intellectual Property Rights,
no other intellectual property rights, privileges, licenses, contracts
or other agreements are necessary to or used in the conduct of
business of the Company or any of its subsidiaries. To the knowledge
of the Company, no claims are pending by any person with respect to
the ownership, validity, enforceability or use of any such
Intellectual Property Rights which claims could reasonably be expected
to have a Company Material Adverse Effect. Neither the Company nor any
of its subsidiaries, nor to the knowledge of the Company, any of the
employees of the Company or any of its subsidiaries, has infringed or
made unlawful use of, or is infringing or making unlawful use of, any
proprietary or confidential information of any person or entity.
SECTION 5.23 Insurance. Schedule 5.23 sets forth all of the
insurance policies of the Company. Except to the extent there would be
no Company Material Adverse Effect, all of the Company's and its
subsidiaries' liability, theft, life, health, fire, title, worker's
compensation and other forms of insurance, surety bonds and umbrella
policies, insuring the Company and its subsidiaries and their
directors, officers, employees, independent contractors, properties,
assets and business, are valid and in full force and effect and
without any premium past due or pending notice of cancellation, and
are, in the reasonable judgment of the Company, adequate for the
business of the Company and its subsidiaries as now conducted, and
there are no claims, singly or in the aggregate, under such policies
in excess of $50,000, which, in any event, are not in excess of the
limitations of coverage set forth in such policies. The Company and
its subsidiaries have taken all actions reasonably necessary to insure
that their independent contractors obtain and maintain adequate
insurance coverage. All of the insurance policies referred to in this
Section 5.23 are "occurrence" policies and no such policies are
"claims made" policies. Neither the Company nor any of its
subsidiaries has knowledge of any fact indicating that such policies
will not continue to be available to the Company and its subsidiaries
upon substantially similar terms subsequent to the Effective Time. The
provision and/or reserves in the Company Financial Statements are
adequate for any and all self insurance programs maintained by the
Company or its subsidiaries.
SECTION 5.24 Year 2000 Compliance. Each production system which
includes software, hardware, databases or embedded control systems
(microprocessor controlled, robotic or other device) (collectively, a
"System"), that constitutes any part of, or is used in connection with
the use, operation or enjoyment of, any material tangible or
intangible asset or real property of the Company and its subsidiaries
(i) is designed (or has been modified) to be used prior to and after
January 1, 2000, (ii) will operate without error arising from the
creation, recognition, acceptance, calculation, display, storage,
retrieval, accessing, comparison, sorting, manipulation, processing or
other use of dates or date-based, date-dependent or date-related data,
including but not limited to century recognition, day-of-the-week
recognition, leap years, date values and interfaces of date
functionalities, and (iii) will not be adversely affected by the
advent of the year 2000, the advent of the twenty-first century or the
transition from the twentieth century through the year 2000 and into
the twenty-first century (collectively, items (i) through (iii) are
referred to herein as "Year 2000 Compliant"). No System that is
material to the business,
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finances or operations of the Company or any subsidiary receives data
from or communicates with any component or system external to itself
(whether or not such external component or system is the Company's,
any subsidiary's or any third party's) that is not itself Year 2000
Compliant. All licenses for the use of any system-related software,
hardware, databases or embedded control system permit the Company or
its subsidiaries or a third party to make all modifications, bypasses,
de-bugging, work-arounds, repairs, replacements, conversions or
corrections necessary to permit the System to operate compatibly, in
conformance with their respective specifications, and to be Year 2000
Compliant. Except as set forth in Schedule 5.24, neither the Company
nor any of its subsidiaries has any reason to believe that it may
incur material expenses arising from or relating to the failure of any
of its Systems as a result of not being Year 2000 Compliant.
SECTION 5.25 Bank Accounts. Schedule 5.25 sets forth all banks or
other financial institutions with which the Company has an account or
maintains a safe deposit box, showing the type and account number of
each such account and safe deposit box and the names of the persons
authorized as signatories thereon or to act or deal in connection
therewith.
SECTION 5.26 Business Relations. Neither the Company nor the
Company Shareholders know or have any reason to believe that any
customer or supplier of the Company or the subsidiaries of the Company
will cease to do business with the Company or the subsidiaries of the
Company after the consummation of the transactions contemplated hereby
in the same manner and at the same levels as previously conducted with
the Company or the subsidiaries of the Company as the case may be.
SECTION 5.27 Potential Conflicts of Interest. Except as set forth
on Schedule 5.27, (a) No officer, director, or shareholder of the
Company or any of its subsidiaries (a) owns, directly or indirectly,
any interest (excepting not more than 1% stock holdings for investment
purposes in securities of publicly held and traded companies) in, or
is an officer, director, employee, or consultant of, any person or
entity that is a competitor, lessor, lessee, customer, or supplier of
the Company or any of its subsidiaries; (b) owns, directly or
indirectly, in whole or in part, any tangible or intangible property
that the Company or any of its subsidiaries is using or the use of
which is necessary for the business of the Company or any of its
subsidiaries; or (c) has any cause of action or other claim whatsoever
against, or owes any amount to, the Company or any of its
subsidiaries, except for claims in the ordinary course of business,
such as for accrued vacation pay, accrued benefits under employee
benefit plans, and similar matters and agreements.
(b) To the knowledge of the Company, no officer, director,
employee, or consultant of the Company or any of its subsidiaries is
presently obligated under or bound by any agreement or instrument, or
any judgment, decree, or order of any court of administrative agency,
that (i) conflicts or may conflict with his or her agreements and
obligations to use his or her best efforts to promote the interests of
the Company or any of its subsidiaries, (ii) conflicts or may conflict
with the business or operations of the Company or any of its
subsidiaries as presently conducted or as proposed to be conducted in
the short term, or (iii) restricts or may restrict the use or
disclosure of any information that may be useful to the Company or any
of its subsidiaries.
SECTION 5.28 Disclosure. No representation or warranty of the
Company or any of the Company Shareholders in this Agreement
(including the exhibits and schedules hereto), or any of the other
Agreements to be executed and delivered by any of them as contemplated
hereby, or any statement made or document presented by the Company or
any of the Company Shareholders in connection
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therewith or herewith, contains or shall contain any untrue statement
of a material fact or omits or shall omit to state a material fact
required to be stated therein or necessary to make the statements
contained therein not false or misleading. There is no fact that the
Company has not disclosed to Parent in writing that materially
adversely affects the business or condition (financial or otherwise)
of the Company or the ability of the Company or any of the Company
Shareholders to perform their respective obligations under this
Agreement or to consummate any of the transactions contemplated
hereby.
SECTION 5.29 Brokers. Neither the Company nor the Company
Shareholders have engaged, or caused to be incurred, any liability to
any finder, broker or sales agent in connection with the origin,
negotiation, execution, delivery, or performance of this Agreement and
the transactions contemplated hereby.
SECTION 5.30 Resignation of Directors and Officers. Parent has
received the written resignation, effective as of Closing, of each
director and officer of the Company and its subsidiaries.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY SHAREHOLDERS
Each of the Company Shareholders represents and warrants to
Parent and Subsidiary as of the date hereof as follows:
SECTION 6.1 Authority; Non-Contravention; Approvals. (a) Such
Company Shareholder has full legal right, power and authority to enter
into, execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly
executed and delivered by, and assuming the due authorization,
execution and delivery hereof by Parent, and Subsidiary and the
Company, constitutes a valid and legally binding agreement of such
Company Shareholder, enforceable against such Company Shareholder in
accordance with its terms, except that such enforcement may be subject
to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to enforcement of creditors' rights
generally and (ii) general equitable principles.
(b) The execution and delivery of this Agreement by each Company
Shareholder do not violate, conflict with or result in a breach of any
provision of or constitute a default (or an event which, with notice
or lapse of time or both, would constitute a default) under, or result
in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in
the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of such Company Shareholder under
any of the terms, conditions or provisions of (i) any statute, law,
ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority
applicable to such Company Shareholder or any of such Company
Shareholder's respective properties or assets or (ii) any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or
agreement of any kind to which such Company Shareholder is now a party
or by which such Company Shareholder or any of such Company
Shareholder's respective properties or assets may be bound.
(c) No declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory
body or authority is necessary for the execution and delivery
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of this Agreement by each Company Shareholder or the consummation by
each Company Shareholder of the transactions contemplated hereby.
SECTION 6.2 Approval of Merger. The Company Shareholders have
adopted and approved the Merger and this Agreement by executing a
written consent of the shareholders of the Company.
SECTION 6.3 Title to Shares. Each Company Shareholder has good
and marketable title to and is the lawful owner, of record and
beneficially, of the Company Common Stock set forth next to such
Company Shareholder's name in Schedule 5.2. Such Company Common Stock
constitutes all of the shares of Company Common Stock owned by such
Company Shareholder, either directly or indirectly. The Company Common
Stock owned by such Company Shareholder is not or will not be subject
to any lien, claim, encumbrance or restriction of any type, kind or
nature in favor of any third party or any third party interests.
SECTION 6.4 Tax-Free Reorganization. In order to preserve the
tax-free treatment of the Merger under Sections 368(a)(1)(A) and
368(a)(2)(D) of the Code, each Company Shareholder agrees that such
Company Shareholder has no plan or intention to sell or otherwise
dispose of any shares of Parent Common Stock received by such Company
Shareholder as Merger Consideration, which sale or disposition would
have the effect of reducing the aggregate number of shares of Parent
Common Stock received by all Company Shareholders in the Merger to an
amount that would be equal in value as of the date of the Merger to
less than 51% of the fair market value of all the shares of Company
Common Stock outstanding immediately prior to the Merger.
SECTION 6.5 Investment; No registration. Each Company Shareholder
(i) understands that Parent Common Stock received by such Company
Shareholder as Merger Consideration has not been, and will not be,
registered under the Securities Act, or under any state securities
laws, and is being offered and sold in reliance upon federal and state
exemptions for transactions not involving any public offering, (ii) is
acquiring such Parent Common Stock solely for such Company
Shareholder's own account for investment purposes, and not with a view
to the distribution thereof, (iii) is a sophisticated investor with
knowledge and experience in business and financial matters, (iv) has
received sufficient information concerning Parent and has had the
opportunity to obtain additional information as desired in order to
evaluate the merits and the risks inherent in holding Parent Common
Stock, and (v) is able to bear the economic risk and lack of liquidity
inherent in holding Parent Common Stock.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1 Expenses and Fees. Each party hereto agrees to bear
its own expenses, including reasonable and customary fees and expenses
payable to attorneys and accountants in connection with the
transactions contemplated hereby, provided, however, that any fees and
expenses payable to Reese, Smalley, Wiseman & Schweitzer, LLP shall be
payable solely by the Company Shareholders.
SECTION 7.2 Confidentiality. Each of Parent, Subsidiary, the
Company and the Company Shareholders will hold in strict confidence
all documents and information concerning any party hereto furnished to
them and their representatives in connection with the transactions
contemplated by this
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Agreement and will not release or disclose such information to any
other person, except as required by law, with the same undertaking
from such accountants, attorneys, financial advisors and other
representatives of each party. Regardless of whether the transactions
contemplated by this Agreement shall be consummated, such confidence
shall be maintained and such information shall not be used in
competition with any party hereto. Notwithstanding the foregoing, such
information shall not be considered confidential if it (i) is or
becomes generally available to the public other than as a result of
disclosure by any other party hereto, (ii) becomes available to any
party from a public source, or (iii) is independently developed by any
party hereto through persons who have not had, directly or indirectly,
access to non-public information.
SECTION 7.3 Parent Stock. Each certificate representing
restricted Parent Stock received by Company Shareholders as Merger
Consideration will be imprinted with a legend substantially in the
following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE
DISPOSED OF UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND SUCH LAWS COVERING SUCH
SECURITIES OF AQUAPENN SPRING WATER COMPANY, INC. OR AN
OPINION OF COUNSEL SATISFACTORY TO AQUAPENN SPRING WATER
COMPANY, INC. STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT,
OFFER, PLEDGE OR OTHER DISTRIBUTION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH
ACT AND SUCH LAWS."
SECTION 7.4 Payment of Obligations. On the Closing Date or after
the Closing Date and promptly upon verification of the proper pay-off
amounts, Parent will pay all obligations of the Company, including
obligations to related parties and obligations for which personal
guarantees were given by shareholders, disclosed in Schedule 7.4.
SECTION 7.5 No Checks, Wires or Withdrawals. The Principal
Shareholders agree not to issue any checks, authorize any account or
wire transfers or otherwise withdraw any funds from the Company's or
the Surviving Corporation's bank account(s) on or after the Closing
Date, without the prior written consent of the chief financial officer
of Parent.
ARTICLE VIII
CONDITIONS
SECTION 8.1 Condition to Parent's Obligation to Effect the
Merger. Unless waived by Parent, its obligation to effect the Merger
shall be subject to (a) the receipt of an opinion from Reese, Smalley,
Wiseman & Schweitzer, LLP, counsel to the Company, dated as of the
Closing Date, substantially in the form set forth in Exhibit 8.1
attached hereto; (b) the receipt of resignations from
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the Principal Shareholders as officers and directors of the Company;
and (c) the termination of the Buy-Sell Agreement.
SECTION 8.2 Conditions to the Company's Obligation to Effect the
Merger. Unless waived by Company, its obligation to effect the Merger
shall be subject to the receipt of an opinion from McQuaide, Blasko,
Schwartz, counsel to Parent, dated as of the Closing Date,
substantially in the form set forth in Exhibit 8.2 attached hereto.
ARTICLE IX
POST-CLOSING OBLIGATIONS
SECTION 9.1 Agreement to Cooperate. Subject to the terms and
conditions herein provided, each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all action and to
do, or cause to be done, all things necessary, proper or advisable
pursuant to all agreements, contracts, indentures or other instruments
to which the parties hereto are a party, or under any applicable laws
and regulations to consummate and make effective the transactions
contemplated by this Agreement, including using its reasonable efforts
(i) to obtain all necessary or appropriate waivers, consents and
approvals from lenders, landlords, security holders or other parties
whose waiver, consent or approval is required in connection with the
Merger, (ii) to effect all necessary registrations, filings and
submissions and (iii) to lift any injunction or other legal bar to the
Merger, the transactions contemplated hereby and all post-closing
actions necessary or required hereunder. By way of clarification and
not limitation of the foregoing, the Principal Shareholders agree to
use their best efforts to fully cooperate with Parent and the
Surviving Corporation in their efforts to identify all Liabilities of
the Company and to complete an audit of the Company's Financial
Statements as quickly as possible following the Closing.
SECTION 9.2 Public Statements. Unless required by law, the
parties (i) shall consult with each other prior to issuing any press
release or any written public statement with respect to this Agreement
or the transactions contemplated hereby, and (ii) shall not issue any
such press release or written public statement prior to such
consultation.
SECTION 9.3 Transition. The Company Shareholders shall not take
any action that is designed or intended to have the effect of
discouraging any employee, lessor, licensor, customer, supplier or
other business associate of the Company or of Parent from maintaining
the same business relationships with the Company after the Closing as
it maintained with the Company or with Parent prior to the Closing
unless such action is taken in accordance with prudent business
practices.
SECTION 9.4 Directors and Officers of Surviving Corporation. As
soon as practicable after closing, Parent shall cause the Shareholder
of the Surviving Corporation to elect Paul Kassis and Scott Lidster as
additional directors of Surviving Corporation, and Paul Kassis; Scott
Lidster; and Clark Wright to be appointed as President; Vice President
and Secretary; and Vice President and Treasurer, respectively, of
Surviving Corporation each to serve at the pleasure of the shareholder
of Surviving Corporation and directors of Parent. Paul Kassis, Scott
Lidster and Clark Wright each agree to resign as directors and
officers of the Surviving Corporation immediately upon request of
Parent.
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SECTION 9.5 Lock-up Agreements. Each Company Shareholder shall
execute a lock-up agreement in relation to the IPO in the same form as
lock-up agreements executed by the shareholders of Parent. Each
Company Shareholder agrees to cooperate fully with Parent in the IPO,
including without limitation assistance with the preparation of
financial statements and the audit of the financial statements
required in connection with the IPO.
SECTION 9.6 Completion of Minutes. Scott Lidster and Paul Kassis
agree to draft and execute minutes to any and all board meetings and
shareholders meetings for which no minutes currently exist.
SECTION 9.7 Execution of Further Documents. Promptly upon request
by another party to this Agreement, each party shall execute whatever
certificates and documents, and will file, record and publish such
certificates and documents which are required to complete all
transactions contemplated by this Merger Agreement.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 Survival of Representations and Warranties. All of
the representations and warranties of Parent, Subsidiary, the Company
and the Company Shareholders contained in this Agreement shall survive
the Closing and continue in full force and effect for a period of
twenty-four (24) months thereafter.
SECTION 10.2 Validity. If any provision of this Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable, the remainder of this Agreement and the application of
such provision to other persons or circumstances shall not be affected
thereby and to such end the provisions of this Agreement are agreed to
be severable.
SECTION 10.3 Indemnification. (a) The Principal Shareholders
jointly and severally agree to defend, indemnify and hold Parent and
Subsidiary and their respective officers, directors, shareholders,
affiliates, employees and agents, and their respective successors and
assigns, harmless from and against any and all claims, actions,
damages, obligations, losses, liabilities, costs and expenses
(including attorneys' fees, costs of collection, other costs of
defense and all other fees and costs incurred by Parent and
Subsidiary) resulting from: (i) any misrepresentation or omission from
or breach of warranty by the Company or the Company Shareholders made
in Articles V and VI of this Agreement or in any certificate or
document delivered to Parent or Subsidiary by the Company or the
Company Shareholders under or in connection with this Agreement; (ii)
any breach of any agreement, covenant or commitment of the Company or
the Company Shareholders made or contained in this Agreement; (iii)
any claim or liability which arises from events or conditions
occurring prior to the Closing Date, other than those reflected on the
Company Financial Statements or the Schedules to this Agreement; and
(iv) tax liabilities incurred by the Company prior to the Closing
Date.
(b) Parent agrees to defend, indemnify and hold the Company
Shareholders and their respective heirs, executors and personal
representatives and the Company harmless from and against any and all
claims, actions, damages, obligations, losses, liabilities, costs and
expenses (including attorneys' fees, costs of collection, other costs
of defense and all other fees and costs incurred by the Company or
27
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the Company Shareholders resulting from (i) any misrepresentation or
omission from or by Parent or Subsidiary made in Article IV of this
Agreement or in any certificate or document delivered to the Company
or the Company Shareholders by Parent or Subsidiary under or in
connection with this Agreement (except for any Private Placement
Memorandum), and (ii) any breach of any covenant, agreement or
commitment of Parent or Subsidiary made or contained in this
Agreement.
(c) Any person seeking indemnity under this Section 10.3 (an
"Indemnified Person") shall be entitled to make a claim for indemnity
under Section 10.3(a) or Section 10.3(b) hereof, as the case may be,
only if written notice, specifying in reasonable detail the basis of
the claims shall have been provided to the party from which indemnity
may be sought (the "Indemnifying Party") (a) within ninety days after
the Indemnified Person shall have become aware of facts constituting
the basis for such a claim or (b) if earlier, in the case of any
action or proceeding by a third party, not more than fifteen days
after the commencement of such action or proceeding. In the case of
any such action or proceeding by a third party, if the Indemnifying
Party so elects or is requested by the Indemnified Person, the
Indemnifying Party will assume the defense of such action or
proceeding, including the employment of counsel reasonably
satisfactory to the Indemnified Person and the payment of the fees and
disbursements of such counsel. In the event, however, that such
counsel reasonably determines that its representation of both the
Indemnifying Party and one or more Indemnified Persons would present
such counsel with a conflict of interest or if the Indemnifying Party
fails to assume the defense of the action or proceeding in a timely
manner after receiving notice, then such Indemnified Person may employ
separate counsel to represent or defend it in any such action or
proceeding and the Indemnifying Party will pay the fees and
disbursement of such counsel; provided, however, that the Indemnifying
Party will not be required to pay the fees and disbursements of more
than one separate law firm for all Indemnified Persons in any
jurisdiction in any single action or proceeding.
(d) So long as the Indemnifying Party is conducting the defense
of the Indemnified Party in accordance with this Section 10.3(a), the
Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the claim; (b) the
Indemnified Party will not consent to the entry of any judgment or
enter into any settlement with respect to any claim without the prior
written consent of the Indemnifying Party (not to be withheld
unreasonably), and (c) the Indemnifying Party will not consent to the
entry of any judgment or enter into any settlement with respect to any
claim without the prior written consent of the Indemnified Party (not
to be withheld unreasonably).
SECTION 10.4 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, mailed by registered or certified mail (return receipt
requested) or sent via facsimile to the parties at the following
addresses (or at such other address for a party as shall be specified
by like notice):
(a) If to Parent or Subsidiary to:
AquaPenn Spring Water Company, Inc.
P.O. Box 938
1 AquaPenn Drive
Milesburg, PA 16853
Attention: Edward J. Lauth
Facsimile Number: (814) 353-9108
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with a copy to:
Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19103
Attention: Brian D. Doerner, Esq.
Facsimile Number: (215) 864-8999
(b) If to the Company, to:
Dunsmuir Bottling Company
d/b/a Castle Rock Spring Water Company
4900 Mountain Lakes Blvd.
Redding, CA 96003
Attention: President
Facsimile Number: 916-243-8415
with a copy to:
Reese, Smalley, Wiseman & Schweitzer, LLP
1265 Willis Street
Redding, CA 96001
Attention: Howard Schweitzer
Facsimile Number: (916) 241-5106
SECTION 10.5 Interpretation. The headings contained in this
Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. In this
Agreement, unless a contrary intention appears, (i) the words
"herein", "hereof" and "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular Article,
Section or other subdivision and (ii) reference to any Article or
Section means such Article or Section hereof. No provision of this
Agreement shall be interpreted or construed against any party hereto
solely because such party or its legal representative drafted such
provision.
SECTION 10.6 Miscellaneous. This Agreement (including the
documents and instruments referred to herein) (a) constitutes the
entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties, or any of
them, with respect to the subject matter hereof, (b) is not intended
to confer upon any other person any rights or remedies hereunder,
except for rights of indemnified Parties under Section 10.2 and (c)
shall not be assigned by operation of law or otherwise, except that
Subsidiary may assign this Agreement to any other wholly owned
subsidiary of Parent. THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS
OF THE COMMONWEALTH OF PENNSYLVANIA APPLICABLE TO CONTRACTS EXECUTED
AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
SECTION 10.7 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same agreement. Each of
the parties agrees to accept and be bound by facsimile signatures
hereto.
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SECTION 10.8 Parties In Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and except
as set forth in the exception to Section 10.3, nothing in this
Agreement, express or implied, is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by
reason of this Agreement.
SECTION 10.9 Exhibits and Schedules. All Exhibits and
Schedules referred to in this Agreement shall be attached hereto
and are incorporated by reference herein.
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IN WITNESS WHEREOF, Parent, Subsidiary and the Company have
caused this Agreement to be signed by their respective officers
as of the date first written above.
ATTEST: AQUAPENN SPRING WATER COMPANY, INC.
By: /s/ Geoffrey F. Feidelberg By: /s/ Edward J. Lauth, III
-------------------------- ------------------------
Name: Geoffrey F. Feidelberg Name: Edward J. Lauth, III
Title: COO Title: President
ATTEST: CASTLE ROCK SPRING WATER COMPANY, INC.
By: /s/ Geoffrey F. Feidelberg By: /s/ Edward J. Lauth, III
-------------------------- ------------------------
Name: Geoffrey F. Feidelberg Name: Edward J. Lauth, III
Title: Secretary Title: President
ATTEST: DUNSMUIR BOTTLING COMPANY
By: /s/ Scott E. Lidster By: /s/ Paul A. Kassis
-------------------- ------------------
Name: Scott E. Lidster Name: Paul A. Kassis
Title: Secretary Title: President
/s/ Paul A. Kassis
------------------
Paul Kassis
/s/ Scott E. Lidster
--------------------
Scott Lidster
/s/ Clark Wright
----------------
Clark Wright
/s/ Raymond C. Kassis TTEF
--------------------------
Ray Kassis, Trustee
Ray and Sharon Kassis
Trust dtd July 15, 1993
31
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/s/ Sharon K. Kassis, Trustee
-----------------------------
Sharon Kassis, Trustee
Ray and Sharon Kassis
Trust dtd July 15, 1993
/s/ Donald K. Lidster Trustee
-----------------------------
Donald K. Lidster, Trustee
The Lidster Trust dtd July 1, 1983
and amended June 25, 1987
/s/ Gernith L. M. Lidster - Trustee
-----------------------------------
Gernith L. Lidster, Trustee
The Lidster Trust dtd July 1, 1983
and amended June 25, 1987
32
<PAGE>
EXHIBIT A
Total
Stock Shares Cash Value
----- ------ ---- -----
.2969121 Paul Kassis 250 ($ 525,000) 105,000 $ 365,736 $ 890,736
.2969121 Scott Lidster 250 ($ 525,000) 105,000 365,736 890,736
.2969121 Clark Wright 250 ($ 200,000) 40,000 690,736 890,736
.0498812 R & S, 42 ($ 149,645) 29,929 0 149,645
Kassis Trust
.0498812 D & G, 42 ($ 149,645) 29,929 0 149,645
Lidster Trust
.0095011 Clark Wright 8 28,504 28,504
842 ($1,549,290) 309,858 $1,450,712 $3,000,002
EXHIBIT 10.18
AQUAPENN SPRING WATER COMPANY, INC.
1992 STOCK OPTION PLAN
1. Purpose. The purpose of this Stock Incentive Plan (the "Plan") is
to advance the development, growth and financial condition of AquaPenn
Spring Water Company, Inc. (the "Corporation") by providing incentives
through participation in the appreciation of capital stock of the
Corporation so as to secure, retain and motivate personnel who may be
responsible for or involved in the management and operation of the affairs
of the Corporation.
2. Term. The Plan shall become effective as of the date it is adopted
by the Corporation's Board of Directors (the"Board"), so long as the
Corporation's stockholders duly approve the Plan within twelve (12) months
either before or after the date of the Board's adoption of the Plan. Any
and all options and rights awarded under the Plan ("Awards") before it is
so approved by the Corporation's stockholders shall be conditional upon and
may not be exercised before timely obtainment of such approval, and shall
lapse upon the failure thereof. If the Plan is so approved, it shall
continue in effect until all Awards either have lapsed or been exercised or
cancelled according to their terms under the Plan.
3. Stock. The shares of stock that may be issued under the Plan shall
not exceed in the aggregate 500,000 shares of the Corporation's no par
value common stock (the "Stock"), as may be adjusted pursuant to paragraph
17 hereof. Such shares of Stock may
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be either authorized and unissued shares of Stock, or authorized shares of
Stock issued by the Corporation and subsequently reacquired by it as
treasury stock. Under no circumstances shall any fractional shares of Stock
be issued or sold under the Plan or any Award. Except as may be otherwise
provided in the Plan, any Stock subject to an Award that for any reason
lapses or terminates prior to its exercise as to such Stock shall become
and again be available under the Plan. The Corporation shall reserve and
keep available, and shall duly apply for any requisite governmental
authority to issue or sell the number of shares of Stock needed to satisfy
the requirements of the Plan while in effect. The Corporation's failure to
obtain any such governmental authority deemed necessary by the
Corporation's legal counsel for the lawful issuance and sale of Stock under
the Plan shall relieve the Corporation of any duty, or liability for the
failure to issue or sell such Stock as to which such authority has not been
obtained.
4. Administration. The Plan shall be administered by a committee (the
"Committee") consisting of not fewer than three (3) persons serving for
such terms as determined, selected and appointed by the Board. The Board
shall fill all vacancies occurring in the Committee's membership, and at
any time and for any reason may add additional members to the Committee or
may remove members from the Committee and appoint their successors. The
members of the Committee may, but need not be members of the Board, but no
person shall be a member of the Committee unless he or she is ineligible
while serving on the Committee and has been
2
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ineligible for at least one (1) year prior to his or her appointment to the
Committee to receive any Awards, allocations or other options or rights of
or with respect to Stock or any other capital stock of the Corporation or
its affiliates under the Plan or any other plan of the Corporation or its
affiliates. A majority of the Committee's membership shall constitute a
quorum for the transaction of all business of the Committee, and all
decisions and actions taken by the Committee shall be determined by a
majority of the members of the Committee attending a meeting at which a
quorum of the Committee is present.
The Committee shall be responsible for the management and operation of
the Plan and, subject to its provisions, shall have full, absolute and
final power and authority, exercisable in its sole discretion: to interpret
and construe the provisions of the Plan, adopt, revise and rescind rules
and regulations relating to the Plan and its administration, and decide all
questions of fact arising in the application thereof; except as may be
required pursuant to any employment agreement of the Corporation, to
determine what, to whom, when and under what facts and circumstances Awards
shall be made, and the form, number, terms, conditions and duration
thereof, including but not limited to when exercisable, the number of
shares of Stock subject thereto, and Stock option purchase prices; to
adopt, revise and rescind procedural rules for the transaction of the
Committee's business, subject to any directives of the Board not
inconsistent with the provisions or intent of the Plan or applicable
provisions of law;
3
<PAGE>
and to make all other determinations and decisions, take all actions and do
all things necessary or appropriate in and for the administration of the
Plan. The Committee's determinations, decisions and actions under the Plan,
including but not limited to those described above, need not be uniform or
consistent, but may be different and selectively made and applied, even in
similar circumstances and among similarly situated persons. Unless contrary
to the provisions of the Plan, all decisions, determinations and actions
made or taken by the Committee shall be final and binding upon the
Corporation and all interested persons, and their heirs, personal and legal
representatives, successors, assigns and beneficiaries. No member of the
Committee or of the Board shall be liable for any decision, determination
or action made or taken in good faith by such person under or with respect
to the Plan or its administration.
5. Awards. Awards may be made under the Plan in the form of (a)
"Qualified Options" to purchase Stock that are intended to qualify for
certain tax treatment as incentive stock options under Sections 421 and 422
of the Internal Revenue Code of 1986, as amended (the "Code"), or (b)
"Non-Qualified Options" to purchase Stock that do not qualify under
Sections 421-424 of the Code. All Awards and the terms and conditions
thereof shall be set forth in written agreements, in such form and content
as approved by the Committee from time to time, and shall be subject to the
provisions of the Plan whether or not contained in such agreements. Every
Award made to a person (a "Recipient") shall be exercisable during
4
<PAGE>
his or her lifetime only by the Recipient, and shall not be salable,
transferable or assignable by the Recipient except by his or her Will or
pursuant to applicable laws of descent and distribution.
6. Eligibility. Persons eligible to receive Awards shall be those key
officers and other employees of the Corporation as determined by the
Committee. In no case, however, shall any current member of the Committee
be eligible to receive any Awards. A person's eligibility to receive Awards
shall not confer upon him or her any right to receive any Awards; rather,
the Committee shall have the sole authority, exercisable in its discretion
consistent with the provisions of the Plan, to select when, to whom and
under what facts and circumstances Awards will be made. Except as otherwise
provided, a person's eligibility to receive, or actual receipt of Awards
under the Plan shall not limit or affect his or her benefits under or
eligibility to participate in any other incentive or benefit plan or
program of the Corporation or its affiliates.
7. Grant of Award. On the first business day immediately following the
adoption of the Plan by the Corporation's Board of Directors, an Award for
450,000 shares of the Stock shall be granted under the Plan to Patrick
Cresci, the Vice President of Operations of the Corporation, as set forth
in the Stock Option Agreement that is attached hereto as Exhibit "A".
8. Qualified Options. In addition to other applicable provisions of
the Plan, all Qualified Options and Awards thereof
5
<PAGE>
shall be under and subject to the following terms and conditions:
(a) No Qualified Option shall be awarded more than ten (10) years
after the date the Plan is adopted by the Board or the date the Plan
is approved by the Corporation's stockholders, whichever date is
earlier;
(b) The time period during which any Qualified Option is
exercisable, as determined by the Committee, shall not commence before
the expiration of six (6) months or continue beyond the expiration of
ten (10) years after the date such Option is awarded; and
(c) The purchase price of a share of Stock subject to any
Qualified Option, as determined by the Committee, shall not be less
than the Stock's fair market value at the time such Option is awarded.
9. Non-Qualified Options. In addition to other applicable provisions
of the Plan, all Non-Qualified Options and Awards thereof shall be under
and subject to the following terms and conditions:
(a) The time period during which any Non-Qualified Option is
exercisable, as determined by the Committee, shall not commence before
the expiration of six (6) months or continue beyond the expiration of
ten (10) years after the date such Option is awarded;
(b) If a Recipient of a Non-Qualified Option, before its lapse or
full exercise, ceases to be eligible under the Plan, the Committee may
permit the Recipient thereafter to exercise
6
<PAGE>
such Option during its remaining term, to the extent that the Option
was then and remains exercisable, for such time period and under such
terms and conditions as may be prescribed by the Committee; and
(c) The purchase price of a share of Stock subject to any
Non-Qualified Option shall be determined by the Committee.
10. Exercise. Except as otherwise provided in the Plan or specified in
an individual award, Awards may be exercised in whole or in part by giving
written notice thereof to the Secretary of the Corporation, or his or her
designee, identifying the Award being exercised, the number of shares of
Stock with respect thereto, and other information pertinent to exercise of
the Award. The purchase price of the shares of Stock with respect to which
an Award is exercised shall be fully payable with the written notice of
exercise, either in cash or in Stock at its then current fair market value,
or in any combination thereof, as the Committee shall determine. Funds
received by the Corporation from the exercise of any Award shall be used
for its general corporate purposes. The number of shares of Stock subject
to an Award shall be reduced by the number of shares of Stock with respect
to which the Recipient has exercised rights under the Award.
The Committee may permit an acceleration of previously established
exercise terms of any Awards as, when, under such facts and circumstances,
and subject to such other or further requirements and conditions as the
Committee may deem necessary or appropriate. In addition: (a) if the
Corporation or its
7
<PAGE>
stockholders execute an agreement to dispose of all or substantially all of
the Corporation's assets or capital stock by means of sale, merger,
consolidation, reorganization, liquidation or otherwise, as a result of
which the Corporation's stockholders as of immediately before such
transaction will not own more than forty-nine percent (49%) of the total
combined voting power of all classes of voting capital stock of the
surviving entity (be it the Corporation or otherwise) immediately after the
consummation of such transaction, thereupon any and all Awards immediately
shall become and remain exercisable with respect to the total number of
shares of Stock still subject thereto for the remainder of their respective
terms until the consummation of such transaction, or if not consummated,
until the agreement therefor expires or is terminated, in which case
thereafter all Awards shall be treated as if said agreement never had been
executed; or (b) if there is a change in the ownership of fifty-one percent
(51%) or more of all classes of voting capital stock of the Corporation
through the acquisition of, or an offer to acquire such percentage of the
Corporation's voting capital stock by any person or entity, or persons or
entities acting in concert or as a group, and such acquisition or offer has
not been duly approved by the Board, thereupon any and all Awards
immediately shall become and remain exercisable with respect to the total
number of shares of Stock still subject thereto for the remainder of their
respective terms.
11. Withholding. Whenever the Corporation is about to issue Stock
pursuant to any Award, the Corporation may require the
8
<PAGE>
Recipient to remit to the Corporation an amount sufficient to satisfy fully
any federal, state and other jurisdictions' income and other tax
withholding requirements prior to the delivery of any certificates for such
shares of Stock. Whenever payments are to be made in cash to any Recipient
pursuant to his or her exercise of an Award, such payments shall be made
net after deduction of all amounts sufficient to satisfy fully any federal,
state and other jurisdictions' income and other tax withholding
requirements.
12. Value. Where used in the Plan, the "fair market value" of Stock or
any options or rights with respect thereto, including Awards, shall mean
and be determined by (a) the average of the highest and lowest reported
sales prices thereof on the principal established domestic securities
exchange on which listed, and if not listed, then (b) the average of the
dealer "bid" and "ask" prices thereof on the New York over-the-counter
market as reported by the National Association of Securities Dealers, Inc.,
in either case as of the specified or otherwise required or relevant time,
or if not traded as of such specified, required or relevant time, then
based upon such reported sales or "bid" and "ask" prices before and/or
after such time in accordance with pertinent provisions of and principles
under the Code and the regulations promulgated thereunder.
13. Amendment. The Committee may amend or terminate the Plan at any
time, but may not without the approval of the Corporation's stockholders:
(a) increase the maximum number of shares of Stock that may be issued under
the Plan (other than adjustments pursuant
9
<PAGE>
to paragraph 17 hereof), (b) extend the time period during which any Award
is exercisable, (c) extend the term of the Plan, or (d) change the minimum
Stock purchase price under any Qualified Option. In no event shall any such
termination or amendment limit or affect any outstanding Award, or the
rights of a Recipient thereunder, without such Recipient's consent.
In addition, the Committee may prescribe other or additional terms,
conditions and provisions with respect to the grant or exercise of any or
all Awards as the Committee may determine necessary or appropriate for such
Awards and the Stock subject thereto to qualify under and comply with all
applicable laws, rules and regulations, and changes therein, including but
not limited to the provisions of Sections 421 and 422 of the Code, Section
16 of the Securities Exchange Act of 1934, as amended, and Rule 16b-3
promulgated by the Securities and Exchange Commission. Without limiting the
generality of the preceding sentence, each Qualified Option, shall be
subject to such other and additional terms, conditions and provisions as
the Committee may deem necessary or appropriate in order to qualify such
Option, or connected Option, as an incentive stock option under Section 422
of the Code, including but not limited to the following provisions:
(i) the aggregate fair market value, at the time such Option is
awarded, of the Stock subject thereto and of any Stock or other
capital stock with respect to which incentive stock options qualifying
under Sections 421 and 422 of the Code are exercisable for the first
time by the Recipient
10
<PAGE>
during any calendar year under the Plan and any other plans of the
Corporation or its affiliates, shall not exceed $100,000.00;
(ii) No Qualified Option shall be awarded to any person if at the
time of such Award, such person owns Stock possessing more than ten
percent (10%) of the total combined voting power of all classes of
capital stock of the Corporation or its affiliates, unless at the time
such Option is awarded the Stock purchase price under such Option is
at least one hundred and ten percent (110%) of the fair market value
of the Stock subject to such Option and the Option by its terms is not
exercisable after the expiration of five (5) years from the date it is
awarded; and
(iii) If the Recipient of a Qualified Option ceases to be
employed by the Corporation or any Subsidiary for any reason other
than his or her death, the Committee may permit the Recipient
thereafter to exercise such Option during its remaining term for a
period of not more than three (3) months after such cessation of
employment to the extent that the Option was then and remains
exercisable, unless such employment cessation was due to the
Recipient's disability as defined in Section 22(e)(3) of the Code, in
which case such three (3) month period shall be twelve (12) months; if
the Recipient dies while employed by the Corporation, the Committee
may permit the Recipient's qualified personal representatives, or any
persons who acquire the Qualified
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Option pursuant to his or her Will or laws of descent and
distribution, thereafter to exercise such Option during its remaining
term for a period of not more than one (1) year after the Recipient's
death to the extent that the Option was then and remains exercisable;
the Committee may impose terms and conditions upon and for said
exercise of such Qualified Option after such cessation of the
Recipient's employment or his or her death.
From time to time, the Committee may rescind, revise and add to any of such
terms, conditions and provisions as may be necessary or appropriate to have
any Awards be or remain qualified and in compliance with all applicable
laws, rules and regulations, and may delete, omit or waive any of such
terms, conditions or provisions that are no longer required by reason of
changes in applicable laws, rules or regulations.
14. Continued Employment. Nothing in the Plan or any Award shall
confer upon any Recipient or other persons any right to continue in the
employment of, or maintain any particular relationship with the Corporation
or its affiliates, or limit or affect any rights, powers or privileges that
the Corporation or its affiliates may have to supervise, discipline and
terminate such Recipient or other persons, and the employment and other
relationships thereof. However, the Committee may require as a condition of
making and/or exercising any Award that its Recipient agree to, and in fact
provide services, either as an employee or in another capacity, to or for
the Corporation for such time period
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following the date the Award is made and/or exercised as the Committee may
prescribe. The immediately preceding sentence shall not apply to any
Qualified Option to the extent such application would result in
disqualification of said Option as an incentive stock option under Sections
421 and 422 of the Code.
15. General Restrictions. Each Award shall be subject to the
requirement and provision that if at any time the Committee determines it
necessary or desirable as a condition of or in consideration of making such
Award, or the purchase or issuance or Stock thereunder, (a) the listing,
registration or qualification of the Stock subject to the Award, or the
Award itself, upon any securities exchange or under any federal or state
securities or other laws, (b) the approval of any governmental authority,
or (c) an agreement by the Recipient with respect to disposition of any
Stock (including without limitation that at the time of the Recipient's
exercise of the Award, any Stock thereby acquired is being and will be
acquired solely for investment purposes and without any intention to sell
or distribute such Stock), then such Award shall not be consummated in
whole or in part unless such listing, registration, qualification, approval
or agreement shall have been appropriately effected or obtained to the
satisfaction of the Committee and legal counsel for the Corporation.
16. Rights. Except as otherwise provided in the Plan, the Recipient of
any Award shall have no rights as a holder of the Stock subject thereto
unless and until one or more certificates for the shares of such Stock are
issued and delivered to the Recipient.
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No adjustments shall be made for dividends, either ordinary or
extraordinary, or any other distributions with respect to Stock, whether
made in cash, securities or other property, or any rights with respect
thereto, for which the record date is prior to the date that any
certificates for Stock subject to an Award are issued to the Recipient
pursuant to his or her exercise thereof. No Award, or the grant thereof,
shall limit or affect the right or power of the Corporation or its
affiliates to adjust, reclassify, recapitalize, reorganize or otherwise
change its or their capital or business structure, or to merge,
consolidate, dissolve, liquidate or sell any or all of its or their
business, property or assets.
17. Adjustments. Except as otherwise provided in the Plan, no
Recipient of any Award shall have any rights, powers or privileges or be
entitled to any adjustments of or with respect to his or her Award by
reason of any stock split, dividend, distribution or division,
recapitalization, merger, consolidation, reorganization, liquidation,
dissolution, issuance, sale or exchange of shares of Stock or any other
capital stock or any rights thereto, increase or decrease in the authorized
number of shares of Stock or any other capital stock, sale, transfer or
other disposition of any assets of any kind, or any other similar action or
transaction by, of or with respect to the Corporation or its affiliates.
In the event of a change in the Stock as presently constituted, which
change is limited to a change of all of the authorized shares thereof into
the same number of shares with a
14
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different par value, the shares resulting from such change shall be deemed
to be Stock within the meaning and for purposes of the Plan without further
action.
The aggregate number of shares of Stock available for Awards under the
Plan, and the shares of Stock subject to any and all outstanding Awards and
the option purchase price for each share of Stock thereunder all shall be
adjusted proportionately for and on account of any increase or decrease in
the number of issued shares of Stock after the effective date of the Plan
resulting from (a) a split, division or consolidation of, or any other
capital change or adjustment with respect to shares of Stock, (b) the
payment of any Stock dividend with respect to shares of Stock, or (c) any
other increase or decrease in the number of issued shares of Stock effected
without the receipt of consideration by the Corporation.
In the event the Corporation is the surviving corporation of any
merger, consolidation or other reorganization, any and all outstanding
Awards shall apply and relate to the securities to which a holder of Stock
is entitled after such merger, consolidation or other reorganization. Upon
any liquidation or dissolution of the Corporation, or any merger,
consolidation or other reorganization of which the Corporation is not the
surviving corporation, any and all outstanding Awards shall terminate upon
consummation of such merger, consolidation or other reorganization, but
prior to such consummation shall be exercisable to the extent that the same
otherwise are exercisable under the Plan.
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18. Forfeiture. Notwithstanding anything to the contrary in this Plan,
if the Committee finds after full consideration of the facts presented on
behalf of the Corporation and the involved Recipient, that he or she has
been engaged in fraud, embezzlement, theft, commission of a felony, or
dishonesty in the course of his or her employment by the Corporation that
has damaged it, or that the Recipient has disclosed trade secrets of the
Corporation or its affiliates, the Recipient shall forfeit all rights under
and to unexercised Awards, and all exercised Awards under which the
Corporation yet has not delivered the certificates for shares of Stock, all
of which Awards and rights shall be automatically cancelled. The decision
of the Committee as to the cause of the Recipient's discharge from
employment with the Corporation and the damage thereby suffered shall be
final for purposes of the Plan, but shall not affect the finality of the
Recipient's discharge by the Corporation for any other purposes. The
preceding provisions of this paragraph shall not apply to any Qualified
Option to the extent such application would result in disqualification of
said Option as an incentive stock option under Sections 421 and 422 of the
Code.
19. Indemnification. In and with respect to the administration of the
Plan, the Corporation shall indemnify each present and future member of the
Committee and/or of the Board, who shall be entitled without further action
on his or her part to indemnity from the Corporation for all damages,
losses, judgments, settlement amounts, punitive damages, excise taxes,
fines,
16
<PAGE>
penalties, costs and expenses (including without limitation attorneys' fees
and disbursements) incurred by such member in connection with any
threatened, pending or completed action, suit or other proceedings of any
nature, whether civil, administrative, investigative or criminal, whether
formal or informal, and whether by or in the right or name of the
Corporation, any class of its security holders, or otherwise, in which such
member may be or have been involved, as a party or otherwise, by reason of
his or her being or having been a member of the Committee and/or of the
Board, whether or not he or she continues to be such a member. The
provisions, protection and benefits of this paragraph shall apply and exist
to the fullest extent permitted by applicable law to and for the benefit of
all present and future members of the Committee and/or of the Board, and
their respective heirs, personal and legal representatives, successors and
assigns, in addition to all other rights that they may have as a matter of
law, by contract, or otherwise, except (a) as may not be allowed by
applicable law, (b) to the extent there is entitlement to insurance
proceeds under insurance coverage provided by the Corporation on account of
the same matter or proceeding for which indemnification hereunder is
claimed, or (c) to the extent there is entitlement to indemnification from
the Corporation, other than under this paragraph, on account of the same
matter or proceeding for which indemnification hereunder is claimed.
17
<PAGE>
20. Miscellaneous. Any reference contained in this Plan to a
particular section or provision of law, rule or regulation, including but
not limited to the Internal Revenue Code of 1986 and the Securities
Exchange Act of 1934, both as amended, shall include any subsequently
enacted or promulgated section or provision of law, rule or regulation, as
the case may be, of similar import. Where used in this Plan: the plural
shall include the singular, and unless the context otherwise clearly
requires, the singular shall include the plural; and, the term "affiliates"
shall mean each and every subsidiary (as defined in Section 425 of the
Code) and any parent of the Corporation. The captions of the numbered
paragraphs contained in this Plan are for convenience only, and shall not
limit or affect the meaning, interpretation or construction of any of the
provisions of the Plan.
-------------
END
-------------
18
<PAGE>
AQUAPENN SPRING WATER COMPANY, INC.
1992 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Pursuant to the AquaPenn Spring Water Company, Inc. 1992 Stock Option
Plan (the "Plan"), an option and right to purchase not more than a total of
four hundred and fifty thousand (450,000) shares of no par value common
stock (the "Stock") of AquaPenn Spring Water Company, Inc., a Pennsylvania
business corporation ("AquaPenn"), is hereby granted to Patrick Cresci (the
"Optionee") under and subject to the following terms and conditions:
1. After a twelve (12) month time period after the date of the
adoption by AquaPenn of the 1992 Stock Option Plan, (the "Effective Date"),
the Optionee may purchase up to fifty thousand (50,000) shares of Stock;
however, the Optionee may not exercise such purchase right before the
expiration of six (6) months after the date of this Agreement. In addition,
on each of the succeeding eight (8) anniversaries of the Effective Date, an
additional fifty thousand (50,000) shares of Stock shall become available
for the Optionee's purchase hereunder. The Optionee's right to purchase up
to four hundred fifty thousand (450,000) shares of Stock as above provided
in this paragraph shall be cumulative; for example, if the Optionee
purchases 50,000 shares of the 150,000 shares of Stock available for
purchase as of the fourth anniversary of the Effective Date, the Optionee
would be entitled to purchase up to 100,000 shares of Stock until the
fourth anniversary of the Effective Date, and upon the
EXHIBIT "A"
19
<PAGE>
fourth anniversary, the Optionee would be entitled to purchase 200,000
shares of Stock.
2. This Agreement and the option and right to purchase Stock hereunder
shall terminate at 11:59 o'clock p.m. on the tenth year after adoption of
the 1992 Stock Option Plan, or at such earlier time as may be provided in
this Agreement, or if earlier, when the option to purchase Stock hereunder
has lapsed or been exercised or canceled under the provisions of this
Agreement or the provisions of the Plan; upon termination of this
Agreement, any unexercised option or right to purchase Stock hereunder
shall expire and the Optionee shall have no further rights under this
Agreement. Provided however, that a termination of this Agreement or lapse
or cancellation of the option hereunder shall not terminate, limit or
affect AquaPenn's right of repurchase under paragraph 4(b) of this
Agreement, which right of repurchase shall survive as provided in said
paragraph 4(b).
3. If at any time while this Agreement is in effect, the Optionee's
employment with AquaPenn is terminated by AquaPenn without cause under the
provisions of paragraph 2(b) of the Employment Agreement, the Optionee (or
the duly qualified personal representative of his estate, to the extent
permitted by applicable law) then may purchase up to four hundred and fifty
thousand (450,000) shares of Stock, minus the number of shares of Stock
previously purchased by the Optionee under this Agreement. Such option to
purchase shall expire on the third (3rd) anniversary of the effective date
of such termination of the Optionee's employment
20
<PAGE>
and if not exercised by that time, such option and this Agreement shall
lapse and terminate.
4. (a) If at any time while this Agreement is in effect, the
Optionee's employment with AquaPenn terminates for any reason other than by
AquaPenn without case (including without limitation a termination of
employment due to the Optionee's death), the Optionee (or the duly
qualified personal representative of his estate, to the extent permitted by
applicable law) then may purchase under this Agreement up to that number of
shares of Stock that is equal to thirty thousand (30,000) shares of Stock
multiplied by the number of twelve (12) month time periods (including any
part of a twelve-month period) beginning with the Effective Date and ending
with the effective date of such termination of the Optionee's employment,
but in no event more than three hundred thousand (300,000) shares of Stock,
minus the number of shares of Stock previously purchased by the Optionee
under this Agreement. Such option to purchase shall expire on the sixtieth
(60th) day after the effective date of such termination of the Optionee's
employment and if not exercised by that time, such option and this
Agreement shall lapse and terminate. For example, if the Optionee
terminates his employment nine weeks after the third anniversary of the
Effective Date, the Optionee then would be entitled to purchase within the
next 60 days 90,000 shares of Stock less what he already had purchased
under this Agreement.
(b) If prior to such a termination of the Optionee's employment with
AquaPenn for any reason other than by AquaPenn
21
<PAGE>
without cause (including without limitation a termination of employment due
to the Optionee's death), the Optionee has purchased more shares of Stock
than he would be entitled to purchase under paragraph 4(a) above, AquaPenn
shall have the right to purchase from the Optionee (and his purchasers,
transferees, assignees and any other persons to whom the Optionee may have
disposed of his shares of Stock in any manner, and the Optionee's personal
and legal representatives, estate, heirs and testamentary beneficiaries)
any or all of the shares of Stock purchased by the Optionee under this
Agreement in excess of the number of shares of Stock that the Optionee is
entitled to purchase under paragraph 4(a) above. Such right to repurchase
by AquaPenn shall be at the same per share purchase price as was paid by
the Optionee for each such excess share of Stock, and shall expire on the
sixtieth (60th) day after the effective date of such termination of the
Optionee's employment (and if not exercised by that time, shall be of no
further force or effect).
5. Notwithstanding the preceding provisions hereof, if while this
Agreement is in effect: (a) AquaPenn or its stockholders execute an
agreement to dispose of all or substantially all of AquaPenn's assets or
capital stock by means of sale, merger, consolidation, reorganization,
liquidation or otherwise, as a result of which AquaPenn's stockholders as
of immediately before such transaction will not own more than forty-nine
percent (49%) of the total combined voting power of all classes of voting
capital stock of the surviving entity (be it AquaPenn or otherwise)
22
<PAGE>
immediately after the confirmation of such transaction, or (b) there is a
change in the ownership of fifty-one percent (51%) or more of all classes
of voting capital stock of AquaPenn through the acquisition of, or an offer
to acquire such percentage of AquaPenn's voting capital stock by any person
or entity, or persons or entities acting in concert or as a group, and such
acquisition or offer has not been duly approved by the Board, or (c) there
is a public offering of the common stock of AquaPenn, and in any such case
(a, b or c above) the employment of the Optionee with AquaPenn continues
and then is in effect under that certain Employment Agreement between
AquaPenn and the Optionee dated ---------------- (the "Employment
Agreement"), the Optionee's right to purchase Stock under paragraph 1 above
shall be accelerated (without further action) so that the Optionee may
purchase immediately under this Agreement up to four hundred fifty thousand
(450,000) shares of Stock, minus the number of shares of Stock previously
purchased by the Optionee under this Agreement. Provided, that if while
this Agreement is in effect, the Optionee's employment with AquaPenn for
any reason terminates at any time subsequent to any of the events described
in (a, b or c) in the immediately preceding sentence, the Optionee's option
to purchase Stock under this paragraph 5 shall remain in effect only until:
(a) three months after the effective date of such termination of the
Optionee's employment, if such termination of employment is by AquaPenn
without cause under the provisions of paragraph 2(b) of
23
<PAGE>
the Employment Agreement, and if not exercised by that time, such option
and this Agreement shall lapse and terminate; or
(b) the sixtieth (60th) day after the effective date of such
termination of the Optionee's employment, if such termination of employment
occurs for any reason other than by AquaPenn without cause (including
without limitation a termination of employment due to the Optionee's
death), and if not exercised by that time, such option and this Agreement
shall lapse and terminate.
Any shares of Stock actually purchased by the Optionee pursuant to his
exercise of the accelerated rights above provided in this paragraph 5 shall
not be subject to AquaPenn's right of repurchase under paragraph 4(b) of
this Agreement.
6. All share certificates for Stock issued pursuant to the exercise of
the option to purchase under paragraph 1 above shall be conspicuously
endorsed with a legend providing notice of AquaPenn's right of repurchase
under paragraph 4(b) above.
7. The option price for each share of Stock purchased under this
Agreement, regardless of when purchased, shall be $1.75 per share, the fair
market value of the Stock as of the date of this Agreement. Any exercise of
the option to purchase Stock under this Agreement and payment of such
option price for the Stock being purchased shall be made in the manner
provided in paragraph 10 of the Plan.
8. The option and right granted to the Optionee under this Agreement
shall be exercisable during the Optionee's lifetime only by the Optionee,
and shall not be salable, transferable or
24
<PAGE>
assignable in any manner by the Optionee except by his or her Will or
pursuant to applicable laws of descent and distribution.
9. It is intended that the Optionee's option and right to purchase
Stock under this Agreement shall be an incentive stock option qualified
under Sections 421 and 422 of the Internal Revenue Code of 1986, as
amended, to the fullest extent permitted by said Sections and the rules and
regulations promulgated thereunder.
10. Except as otherwise hereinbefore provided, this Agreement and the
option to purchase Stock hereunder are subject to all of the terms,
conditions and provisions of the Plan, a copy of which has been furnished
to and received by the Optionee. The provisions of this Agreement shall be
construed under and enforced in accordance with the laws of the
Commonwealth of Pennsylvania. Where used in this Agreement, the words
"hereunder", "herein" and other similar compounds of the word "here" shall
mean and refer to this entire Agreement and not to any particular paragraph
or provision of this Agreement.
25
<PAGE>
IN WITNESS WHEREOF, pursuant to the Plan, AquaPenn Spring Water
Company, Inc. and Patrick Cresci, each intending to be legally bound
hereby, have duly executed this Agreement as of the ---------- day of
- ----------, 19--.
ATTEST: AQUAPENN SPRING WATER COMPANY, INC.
- -------------------- ------------------------------
Secretary Edward J. Lauth, III
President
WITNESS: OPTIONEE:
- -------------------- ------------------------------
Patrick Cresci
26
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
AquaPenn Spring Water Company South, Inc. (Pennsylvania
Corporation) (Formerly known as Great American Spring Water Ice
Company, Inc.)
Pure American, Inc. (Pennsylvania Corporation) (Formerly S C
Acquisition Company, Inc.)
AquaPenn Spring Water Industries, Inc. (Pennsylvania Corporation)
The Eight (8) Ounce Company, Inc. (Pennsylvania Corporation)
IAPSW, Inc. (Delaware Corporation)
RAPSW, Inc., a wholly owned subsidiary of IAPSW, Inc. (Delaware
Corporation)
Castle Rock Spring Water Company, Inc. (California
Corporation)
Exhibit 23.1
Accountants' Consent
The Board of Directors
AquaPenn Spring Water Co., Inc.
We consent to the use of our report dated October 21, 1997, except for note
15 which is as of October 24, 1997, included in this Registration Statement
on Form S-1 of AquaPenn Spring Water Co., Inc. and to the reference to
our firm under the headings "Experts" and "Selected Consolidated Financial
Data."
/s/ KPMG Peat Marwick LLP
- ---------------------------
State College, Pennsylvania
October 24, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE FINANCIAL STATEMENTS OF AQUAPENN SPRING WATER COMPANY, INC. FOR
THE YEAR ENDED SEPTEMBER 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> 0.00
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1.000
<CASH> 687
<SECURITIES> 0
<RECEIVABLES> 3,705
<ALLOWANCES> (100)
<INVENTORY> 1,534
<CURRENT-ASSETS> 6,494
<PP&E> 26,392
<DEPRECIATION> (6,361)
<TOTAL-ASSETS> 26,580
<CURRENT-LIABILITIES> 3,398
<BONDS> 0
0
1,714
<COMMON> 0
<OTHER-SE> 16,351
<TOTAL-LIABILITY-AND-EQUITY> 26,580
<SALES> 37,526
<TOTAL-REVENUES> 38,015
<CGS> 28,317
<TOTAL-COSTS> 33,444
<OTHER-EXPENSES> (328)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 208
<INCOME-PRETAX> 4,692
<INCOME-TAX> 1,905
<INCOME-CONTINUING> 2,787
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,787
<EPS-PRIMARY> .47
<EPS-DILUTED> .47
</TABLE>
